The Exchanges

Q And having such successful LPs, do they also provide their value add to your portfolio companies?

A That's exactly the idea. Yep, indeed. So they help us, you know, the great thing about having founders as investors is, listen, they get asked to invest all the time so they can funnel that deal flow through to the pro founders fund. Um, they can help us choose the right deals, because we can use them for due diligence in companies. They can help us win the deals. Um, so the ability to say, hey, listen, why don't you talk to Michael, who's been, you know, has written books on viral loops and viral, um, coefficients, and speak to Brent, who's built, uh, you know, multi-billion dollar business in the travel space. That helps us actually win those deals. And then, most importantly, after we have invested, Their advice, um, can be helpful, and we've seen it make a big difference to companies in their, uh, in their growth trajectory.

AI assessment note: “That's exactly the idea. Yep, indeed. So they help us”

Q And then I'd love to talk about crowdfunding, and we've seen an explosion of crowdfunding in the UK market, uh, and it's really something that I'm very passionate about, and we saw eCarClub, the first crowdfunded company, exiting to EuropeCar, and Crowdcube and Seeders have raised large rounds in the last few weeks. What's your perspective on crowdfunding?

A Yes, so, um, it's interesting. So I, uh, started paying attention probably It's called three years ago, the crowdfunding platform. I've known Jeff Flynn at Cedars, um, for a very long time and have huge amounts of respect for, um, the way he's built that company. And, um, when they first started, I thought, oh, look at that. It's cute. This company's raising 15 to a 100,000 dollars, uh, a 100,000 pounds on, uh, on Cedars. And I thought, huh, you know, if I'm an angel investor, you got to kind of watch out a little bit. And then, um, more recently I've seen the size of The rounds that have taken place on these platforms grow and grow and grow, and I remember sitting there three months ago going, ah, look at this, um, company's raising two to three million pounds. Gosh, if I was a VC, I'd be worried. I thought, oh my god, I am a VC. I should be worried about, uh, what's taking place, or I should pay attention to it, because frankly, um, it's a competitor to, to what we're doing, and, um, it's got its pros and cons to the way that it operates. So, you know, the way I think about it is, um, Uh, the, the benefits to entrepreneurs, and I'm not going to talk about it from my perspective, but from a, from an entrepreneur perspective, um, a, the, they can skip all the annoying meetings with VCs and the thousands of questions that we like to throw at them. Um, and, uh, just the way I see…

AI assessment note: “it's a competitor to, to what we're doing, and, um, it's got its pros and cons”

Q And then moving to the kind of Broader current funding environment that we've seen recently. Large US VCs have been entering the European tech market, so Lead Edge Ventures funding Katawiki recently. Why do you think we're seeing this sudden influx of US capital to Europe?

A Yeah, so it is, um, it's not necessarily sudden, uh, right now. This has been a trend we've been noticing over the last few years, actually. Um, and part of it is, um, uh, Kind of structural. So, if you're in the US now, um, it gets very expensive to invest in some of these high-growth companies. There's a little bit of an arbitrage play for these people to come over to Europe. Um, there's less capital available in Europe, and so the prices are a little bit cheaper. Um, but the bigger component, actually, is that Europe is now producing what can be global leaders. And I'm very adamant about this. I think Europe's incredibly well-positioned Going forward to create the next, not billion, but ten billion dollar companies. Um, and we have all the right resources now to be able to do that. The one thing we have been lacking, um, or a couple things, I think one of them has been the capital, but for the U.S. investors now, um, at the early, at the early stages, It's still local. So when you're investing in the first two rounds of a company, you need to be close by, and the U.S. funds are just too far away to do that. But frankly, for a New York-based large fund, if they're writing a 20, 30, forty million dollar check, to hop on a flight, uh, once every two months, uh, quick four, five, six hour flight to London is not, uh, is not, not tough to do. Um, and if you look back, it's been, …

AI assessment note: “There's a little bit of an arbitrage play for these people to come over”

Q And why should founders then choose UK investors over US? What's your kind of sales pitch to the competitive rounds and to the founders?

A Yeah, from my perspective, um, Location doesn't matter. Although, sorry, in the early stages, it does matter. Because, uh, as much as we like to use Skype and Google Hangouts and all this sort of stuff, um, the ability to meet face-to-face on a regular basis with someone is, um, is just hugely valuable. And so, in the early days, when founders are going through the crucible, they're hiring their first proper employees that expect real paychecks, they're signing their first business development deals, um, Uh, they're really on the, the early stages of that exponential growth. Having someone to basically just converse with, someone to, to get advice, act as a sounding board, especially for the, the top level kind of CEO and, uh, key management is important because frankly, there's not many other people they can interact with on a, on a daily basis and share the frustrations and the concerns and so forth. And so we try to be a confidant. Now, as far as Pro founders specifically, um, we are also structured, and our unique selling point, if you will, is that all of the money in our fund comes from entrepreneurs who have actually built and exited companies. So people like Brent Toberman from lastminute.com, or Michael Birch from Bebo, or Karen Hanson from Top Table, and they've been through the tough times. I mean, they've been through the point where you're worried about having to s…

AI assessment note: “the ability to meet face-to-face on a regular basis with someone is, um, is just hugely valuable.”

Q And do you think anything more could be done infrastructure and support wise to, uh, enhance the entrepreneurial community in London?

A So my pet topic, um, kind of side project that I constantly think about is, um, is talent recruitment. Um, and I think if you look at what's potentially, you know, sorry, sorry, that people have said, uh, Europe doesn't have any of the mega unicorns, the platform type businesses, the Googles, the Facebooks, et cetera, uh, Salesforce, Oracle, all these kind of companies. And I think what's, what's held back Europe a little bit is, um, it's the access to the company scaling talent, um, I think Europe's got great founders. It's got the capital now. It's got the great technical expertise as well. But what we don't have, we haven't had people that have been through big companies multiple times and can take companies from fifty million in revenue to five hundred million in revenue. And I'm thinking someone that went through Google early, then jumped over to Facebook and is now, you know, maybe been at Twitter. Um, this kind of senior management talent that are, that are business development, sales, operations, And can, can help rapidly scale companies to the next level. And, um, this kind of leads into the immigration policy, which is a, a pet peeve, a pet area of mine, like I said, where I think, um, a lot of times in the current environment, we're throwing the baby out with the bathwater, uh, and making it tougher for companies to really recruit that global talent. Uh, and I think,…

AI assessment note: “this kind of leads into the immigration policy... making it tougher for companies to really recruit”

Q And does it not concern you as a VC, though, that with the increasing supply of capital, the valuations will increase with it?

A Um, yes and no. So I invest in the very early stages. So we're looking to invest when companies are raising their first proper round of capital. So generally it's a team of seven, eight, nine. They've got an early product that's in market. They're raising, call it in sterling, kind of one to three million pounds. Um, and at that stage, uh, relative to four years ago, absolutely. There's a lot more capital coming into these businesses, um, which is You know, self-servingly, maybe it's not great for me because there's more competition, but hey, I don't mind competing against everyone else and trying to prove my value to the founders. So, broadly, from a founder perspective, it's absolutely fantastic, um, that there's more capital available. However, what it's done is it's actually raised the bar for the follow-on rounds of financing. So now when you need to raise that Series B or Series C, there hasn't been the commensurate growth in capital available at those stages, which means the bar is higher. You need to prove more With your money as an entrepreneur. And that's where we want to spend our time, actually, is helping those companies allocate those precious resources to be able to prove real value for the next round of financing. Um, and at those stages, listen, there are, um, you have to be good to get funded. Honestly, when you're raising 20, 30, forty million dollars, it doe…

AI assessment note: “Um, yes and no. So I invest in the very early stages.”

Q And talking of successful entrepreneurs there, you mentioned the possibility of Europe producing a series of very successful, uh, companies and European entrepreneurs in the future. What do you think are the key drivers to this production of entrepreneurs in the future? Is there anything that's changed to affect this?

A Yeah, absolutely. And so, listen, I've been in Europe now for, for 10 years. I came over in 2005, um, to London, and it's one of the things I originally thought I'd spend a year here or so, and travel on the weekends, then head back to the U.S. But, uh, I've decided to build a, a career and build a venture fund here in Europe, because I'm so passionate about the opportunities that are here for all the founders. And, and for me, it's because, and the reason for this is that the web has shifted Away from an infrastructure-led, ah, play, um, to what you do on top of the, the, the platforms that are already there. It's about the creative, the design-led, the services-led businesses that you can build on top of what is there. And so I think there are a number of verticals where Europe is incredibly well positioned, um, because they have a history and a legacy and a knowledge base in that space. And let me give you just a couple of examples, right? So think about, think about music. Just music broadly. And so if you go back in time, whether it's, uh, Beethoven, Mozart, or even like the Beatles and the Rolling Stones and Led Zeppelin, Europe and the UK were always leading players in the global music scene. Uh, and there's, there's a history and a knowledge and expertise in that area. And now if you look at where the new, the new generation of music companies, global leading music comp…

AI assessment note: “the reason for this is that the web has shifted Away from an infrastructure-led”

Q And what was your biggest takeaway then from those tough times?

A Yeah, it is, um, it's, and it continues to be today. It's all about laser focus. So I think where companies get things wrong is when they try to bite off more than they can chew. Um, and when you're a young company and you're really growing well, you, you keep saying to yourself, well, we should also do this. We should also do this. And you expand the, the product set, the reach of the business, um, and you try to do too much. And if you look at the great companies, They were laser focused on delivering one product incredibly well. And listen, when you, during the tough times, when you have to consolidate down, um, and save cash and just try to survive, you could only do one thing. And, and I still, I don't say preach, but I still counsel every company I meet. You've got to have one thing that you do much better than anyone else out there. And that is what you live or die by.

AI assessment note: “It's all about laser focus.”

Q And does it not concern you as a VC, though, that with the increasing supply of capital, the valuations will increase with it?

A Um, yes and no. So I invest in the very early stages. So we're looking to invest when companies are raising their first proper round of capital. So generally it's a team of seven, eight, nine. They've got an early product that's in market. They're raising, call it in sterling, kind of one to three million pounds. Um, and at that stage, uh, relative to four years ago, absolutely. There's a lot more capital coming into these businesses, um, which is You know, self-servingly, maybe it's not great for me because there's more competition, but hey, I don't mind competing against everyone else and trying to prove my value to the founders. So, broadly, from a founder perspective, it's absolutely fantastic, um, that there's more capital available. However, what it's done is it's actually raised the bar for the follow-on rounds of financing. So now when you need to raise that Series B or Series C, there hasn't been the commensurate growth in capital available at those stages, which means the bar is higher. You need to prove more With your money as an entrepreneur. And that's where we want to spend our time, actually, is helping those companies allocate those precious resources to be able to prove real value for the next round of financing. Um, and at those stages, listen, there are, um, you have to be good to get funded. Honestly, when you're raising 20, 30, forty million dollars, it doe…

AI assessment note: “Um, yes and no. So I invest in the very early stages.”

Q Now, can you take us back to your early days and entering the industry, and how did you make your move into the VC industry?

A Indeed. I would say I'm a grizzled veteran with gray hair, but actually don't have any hair at all, and haven't had hair since I was about 19 years old. Um, but actually, I actually joined the venture world in January of 2000. So if you go back in the history books and, uh, remember what things were like back then, this was the peak of the first bubble. Um, and actually I'd been a consultant and engineer before that, and, uh, what I realized was that In any of the consulting projects I've had, what I loved were the smaller companies. I really loved working with very tiny companies, um, where you could actually make a difference. Um, and so I, I also loved investing. I had some investing experience, and I thought, where could I tie together, um, investing and working with early stage companies, and venture kind of hit the spot. So I, I'm one of those traditional lifer VCs, right? I joined as an analyst at a venture fund in 2000, And it was, uh, it was an amazing first six months, right? We had dinners to celebrate IPOs and acquisitions and champagnes, uh, corks popping. And then, uh, and then things kind of came to a crashing halt in, uh, June or July of 2000. And the next three years were really, uh, a slog. And actually I learned the most I've ever learned during that time, because that was when companies couldn't get funded. They were failing. You were consolidating departmen…

AI assessment note: “I joined as an analyst at a venture fund in 2000”

Q And having such successful LPs, do they also provide their value add to your portfolio companies?

A That's exactly the idea. Yep, indeed. So they help us, you know, the great thing about having founders as investors is, listen, they get asked to invest all the time so they can funnel that deal flow through to the pro founders fund. Um, they can help us choose the right deals, because we can use them for due diligence in companies. They can help us win the deals. Um, so the ability to say, hey, listen, why don't you talk to Michael, who's been, you know, has written books on viral loops and viral, um, coefficients, and speak to Brent, who's built, uh, you know, multi-billion dollar business in the travel space. That helps us actually win those deals. And then, most importantly, after we have invested, Their advice, um, can be helpful, and we've seen it make a big difference to companies in their, uh, in their growth trajectory.

AI assessment note: “That's exactly the idea. Yep, indeed.”

Q And then moving to the kind of Broader current funding environment that we've seen recently. Large US VCs have been entering the European tech market, so Lead Edge Ventures funding Katawiki recently. Why do you think we're seeing this sudden influx of US capital to Europe?

A Yeah, so it is, um, it's not necessarily sudden, uh, right now. This has been a trend we've been noticing over the last few years, actually. Um, and part of it is, um, uh, Kind of structural. So, if you're in the US now, um, it gets very expensive to invest in some of these high-growth companies. There's a little bit of an arbitrage play for these people to come over to Europe. Um, there's less capital available in Europe, and so the prices are a little bit cheaper. Um, but the bigger component, actually, is that Europe is now producing what can be global leaders. And I'm very adamant about this. I think Europe's incredibly well-positioned Going forward to create the next, not billion, but ten billion dollar companies. Um, and we have all the right resources now to be able to do that. The one thing we have been lacking, um, or a couple things, I think one of them has been the capital, but for the U.S. investors now, um, at the early, at the early stages, It's still local. So when you're investing in the first two rounds of a company, you need to be close by, and the U.S. funds are just too far away to do that. But frankly, for a New York-based large fund, if they're writing a 20, 30, forty million dollar check, to hop on a flight, uh, once every two months, uh, quick four, five, six hour flight to London is not, uh, is not, not tough to do. Um, and if you look back, it's been, …

AI assessment note: “There's a little bit of an arbitrage play for these people to come over to Europe.”

Q And what was your biggest takeaway then from those tough times?

A Yeah, it is, um, it's, and it continues to be today. It's all about laser focus. So I think where companies get things wrong is when they try to bite off more than they can chew. Um, and when you're a young company and you're really growing well, you, you keep saying to yourself, well, we should also do this. We should also do this. And you expand the, the product set, the reach of the business, um, and you try to do too much. And if you look at the great companies, They were laser focused on delivering one product incredibly well. And listen, when you, during the tough times, when you have to consolidate down, um, and save cash and just try to survive, you could only do one thing. And, and I still, I don't say preach, but I still counsel every company I meet. You've got to have one thing that you do much better than anyone else out there. And that is what you live or die by.

AI assessment note: “It's all about laser focus.”

Q And then I'd love to talk about crowdfunding, and we've seen an explosion of crowdfunding in the UK market, uh, and it's really something that I'm very passionate about, and we saw eCarClub, the first crowdfunded company, exiting to EuropeCar, and Crowdcube and Seeders have raised large rounds in the last few weeks. What's your perspective on crowdfunding?

A Yes, so, um, it's interesting. So I, uh, started paying attention probably It's called three years ago, the crowdfunding platform. I've known Jeff Flynn at Cedars, um, for a very long time and have huge amounts of respect for, um, the way he's built that company. And, um, when they first started, I thought, oh, look at that. It's cute. This company's raising 15 to a 100,000 dollars, uh, a 100,000 pounds on, uh, on Cedars. And I thought, huh, you know, if I'm an angel investor, you got to kind of watch out a little bit. And then, um, more recently I've seen the size of The rounds that have taken place on these platforms grow and grow and grow, and I remember sitting there three months ago going, ah, look at this, um, company's raising two to three million pounds. Gosh, if I was a VC, I'd be worried. I thought, oh my god, I am a VC. I should be worried about, uh, what's taking place, or I should pay attention to it, because frankly, um, it's a competitor to, to what we're doing, and, um, it's got its pros and cons to the way that it operates. So, you know, the way I think about it is, um, Uh, the, the benefits to entrepreneurs, and I'm not going to talk about it from my perspective, but from a, from an entrepreneur perspective, um, a, the, they can skip all the annoying meetings with VCs and the thousands of questions that we like to throw at them. Um, and, uh, just the way I see…

AI assessment note: “frankly, um, it's a competitor to, to what we're doing”

Q And why should founders then choose UK investors over US? What's your kind of sales pitch to the competitive rounds and to the founders?

A Yeah, from my perspective, um, Location doesn't matter. Although, sorry, in the early stages, it does matter. Because, uh, as much as we like to use Skype and Google Hangouts and all this sort of stuff, um, the ability to meet face-to-face on a regular basis with someone is, um, is just hugely valuable. And so, in the early days, when founders are going through the crucible, they're hiring their first proper employees that expect real paychecks, they're signing their first business development deals, um, Uh, they're really on the, the early stages of that exponential growth. Having someone to basically just converse with, someone to, to get advice, act as a sounding board, especially for the, the top level kind of CEO and, uh, key management is important because frankly, there's not many other people they can interact with on a, on a daily basis and share the frustrations and the concerns and so forth. And so we try to be a confidant. Now, as far as Pro founders specifically, um, we are also structured, and our unique selling point, if you will, is that all of the money in our fund comes from entrepreneurs who have actually built and exited companies. So people like Brent Toberman from lastminute.com, or Michael Birch from Bebo, or Karen Hanson from Top Table, and they've been through the tough times. I mean, they've been through the point where you're worried about having to s…

AI assessment note: “our unique selling point, if you will, is that all of the money in our fund comes from entrepreneurs”

Q And do you think anything more could be done infrastructure and support wise to, uh, enhance the entrepreneurial community in London?

A So my pet topic, um, kind of side project that I constantly think about is, um, is talent recruitment. Um, and I think if you look at what's potentially, you know, sorry, sorry, that people have said, uh, Europe doesn't have any of the mega unicorns, the platform type businesses, the Googles, the Facebooks, et cetera, uh, Salesforce, Oracle, all these kind of companies. And I think what's, what's held back Europe a little bit is, um, it's the access to the company scaling talent, um, I think Europe's got great founders. It's got the capital now. It's got the great technical expertise as well. But what we don't have, we haven't had people that have been through big companies multiple times and can take companies from fifty million in revenue to five hundred million in revenue. And I'm thinking someone that went through Google early, then jumped over to Facebook and is now, you know, maybe been at Twitter. Um, this kind of senior management talent that are, that are business development, sales, operations, And can, can help rapidly scale companies to the next level. And, um, this kind of leads into the immigration policy, which is a, a pet peeve, a pet area of mine, like I said, where I think, um, a lot of times in the current environment, we're throwing the baby out with the bathwater, uh, and making it tougher for companies to really recruit that global talent. Uh, and I think,…

AI assessment note: “making it tougher for companies to really recruit that global talent”

Q And talking of successful entrepreneurs there, you mentioned the possibility of Europe producing a series of very successful, uh, companies and European entrepreneurs in the future. What do you think are the key drivers to this production of entrepreneurs in the future? Is there anything that's changed to affect this?

A Yeah, absolutely. And so, listen, I've been in Europe now for, for 10 years. I came over in 2005, um, to London, and it's one of the things I originally thought I'd spend a year here or so, and travel on the weekends, then head back to the U.S. But, uh, I've decided to build a, a career and build a venture fund here in Europe, because I'm so passionate about the opportunities that are here for all the founders. And, and for me, it's because, and the reason for this is that the web has shifted Away from an infrastructure-led, ah, play, um, to what you do on top of the, the, the platforms that are already there. It's about the creative, the design-led, the services-led businesses that you can build on top of what is there. And so I think there are a number of verticals where Europe is incredibly well positioned, um, because they have a history and a legacy and a knowledge base in that space. And let me give you just a couple of examples, right? So think about, think about music. Just music broadly. And so if you go back in time, whether it's, uh, Beethoven, Mozart, or even like the Beatles and the Rolling Stones and Led Zeppelin, Europe and the UK were always leading players in the global music scene. Uh, and there's, there's a history and a knowledge and expertise in that area. And now if you look at where the new, the new generation of music companies, global leading music comp…

AI assessment note: “the web has shifted Away from an infrastructure-led, ah, play, um, to what you do”