On the surface, The Million Pound Startup looks like a great piece of promotion for London: a global talent competition for startup businesses, aimed at drawing talent into the British capital and promising a reward of £1 million ($1.54 million) to whichever idea gets picked out from the crowd.
But although the competition — which the organizers say takes “the X-Factor approach” to startups — is now accepting entrants, it turns out that the details of precisely what victory involves are far more complicated than they may first appear.
In fact, the million pound carrot being dangled in front of potential entrants is not actually a prize, but a cash-for-equity investment — on terms that are yet to be decided, and from an individual whose identity is currently undisclosed.
I questioned Kam Star, the head of London’s Digital Shoreditch group, which is behind the competition, about the lack of clarity, and he confirmed that the winner would be asked to hand over an as-yet undetermined amount of equity to the individual funding the project. He refused, however, to divulge the backer’s identity.
“Yes, this is a private equity investment, not a gift,” he said in an email, before adding that the precise terms on which the victorious idea would be asked to accept the money was “to be discussed with the winner” and “really depends on circumstance.”
Later, in a phone call, he said that the competition had only had a “soft launch” and explained that more details of the process and those involved would become public over time, ahead of the closing date next year.
“This only got sent to a very small group of contacts and close friends,” he said, despite the fact that he gave an interview to a globally read news website on the topic. “We’re keeping our cards close to our chest, but there will be a public process.”
When asked why this information about the nature of the investment was not made clear on the competition’s website, or during the applications process — including the terms and conditions that entrants must agree to — Star said that some changes would be made.
The site has now altered its About page to refer to the prize as an “equity investment.”
However, it remains the case that the identity of the private investor and the terms they may demand are still a secret to anyone who signs up. This comes despite the fact that Digital Shoreditch is already promising anyone who introduces the winning startup to the competition that they will receive one percent equity as a finder’s fee if the company subsequently exits for at least £100 million.
It seems obvious that these are vitally important details that any serious entrant would need to consider — after all there’s a big difference between handing over 10 percent of your business to an experienced investor with entrepreneurial experience in the same sector, and giving a majority share to any old person with deep pockets.
Star responded to further questions about the lack of clarity by reiterating the fact that the competition had still not launched properly.
“This is good feedback,” he told me.