What inspired you to become a VC and was there a particular ‘lightbulb’ moment?
Interestingly I didn’t even know what a VC was when I finished college. I always just wanted to start my own company. I originally joined investment banking at Lehman Brothers, I figured working there I could learn a lot, meet some great contacts and hopefully build enough saving to start my own company. That lasted only a few months before they went bankrupt. My boss at the time started his own company and asked me to join him as one of the first employees. We went from 4 people in a Starbucks to over 70 people in London, New York and Paris in 18 months. It was an amazing learning experience being in a company that grew so fast. It was here that I first learnt about VCs as the company met with several of them. I left after 2 years to start my own e-commerce company called Osmoda and also help run an entrepreneur network called Sandbox. My experience with VCs in Europe and what I kept hearing from the Sandbox members led me to be very critical of Venture Capital scene in Europe. I felt they didn’t actually take proper risks, they didn’t support their entrepreneurs properly, they didn’t have good enough networks into the US and most of the time focused on minimising downside vs optimising for the upside. Shay and Will (the other two Founders of Frontline) came to the same conclusions as I but from inside separate funds. Those reasons led us to start Frontline, a fund that would be much more focused on investing early, supporting entrepreneurs, and guiding the companies on international expansion. So while no one single lightbulb moment, it was a series of failings we saw in the European Ecosystem that led us to start Frontline back in 2012.
Many entrepreneurs are overly optimistic when it comes to a pitch deck! How do you decide if the team can genuinely execute on the idea?
Everyone has ideas, but the execution is definitely the hard part. At Frontline over 80% of the investments we make are pre-revenue, so the companies usually have no traction. That means so much of our decision is based on our thoughts of the Founder(s). We look for a number of qualities in the entrepreneurs we invest in. Firstly you have to be really ambitious. VCs require our companies to have large outcomes to be successful as a fund, that means our entrepreneurs will need to say no to lots of acquisitions offers and keep striving to build the company bigger, and that requires a lot of ambition and passion to keep going. Secondly, we look for people who have experienced the problem they are trying to solve, those people will have a depth of knowledge on what the customer needs and understand how to solve it. We also look for people who have strong self-awareness. If you have poor self-awareness, you tend to hire people who are like you and agree with you, rather than complimentary to you. Building a world-class team is crucial to building a world-class company. Without strong levels of self-awareness, you will not be able to do that. Finally, we look for people who have a history of achievement. For a lot of people, they assume we meet 20 years of work experience or sold three companies. In reality, we look for any types of achievement, whether it is academic, personal or professional as a sign that this person or these people have the competitiveness and drive to want to excel at something. So ambition, passion, understanding of the customer, self-awareness and signs of greatness or past achievement.
What were the key lessons taken from your experiences with Sandbox and Osmoda?
Both were very different experiences. Osmoda was a company I founded with two friends, we built and launched a product, got partners, customers and raised capital from investors. It didn’t work out as well as we had hoped but it was a great learning experience for me. It has greatly educated me in what I look for (and what not to look for) in the founders that I invest in now. Sandbox was a community of innovators and entrepreneurs under 30 all around the world. I started out managing the London hub and then eventually became one of the global trustees managing the whole community. What I learnt from Sandbox was the power of community and peer to peer learning. Frontline very much leverages this to help our founders constantly learn as much from each other as they do from us.
Where do you see the biggest opportunities for disruption post Covid?
I think there are plenty of obvious ones like online communication, remote working that get mentioned in every blog all the time. The two lesser talked about trends that are particularly exciting for Frontline as a B2B investor are firstly the enormous shift from on-premise software to cloud-based. All of our portfolio companies are cloud-based and frequently the larger enterprise clients have been slow to switch to newer players because they are reluctant to give up on-premise software. Companies have needed to do that en masse this year and many of our portfolio have benefitted from this. Basically, it is now easier to disrupt many of the on-premise focused incumbents. b) The second trend we’re excited about is the digitisation of SMEs. Many SMEs have run most of their business in a paper-based way from their premise. During Covid they realised how difficult it is to manage most of this remotely. It encouraged many of the to look for alternative options to digitise their business. We see this as being a huge opportunity for startups. Every aspect of SMEs from Pharmacies, and Nurseries, to corner shops and barbers, has been transitioning to digital. Covid19 has sped up the pace of this trend.
‘In (Sam) Altman’s view, the unfolding AI revolution may well be more consequential for humanity than the preceding agricultural, industrial and computer revolutions combined…’ (FT 14/15.11.20)
Do you agree and why?
I hesitate to answer this question as I see my job more as a talent scout than someone who predicts the future. I take bets supporting amazing people and then back them and their vision. The entrepreneurs are the ones predicting the future. I’d pick an amazing founder with a half baked idea over an amazing idea with an average founder any day of the week. I know you did want my views on each question so I’ll give my very high-level view. The different ‘revolutions’ mentioned in the quote were ones where over a relatively short period of time, humans saw enormous gains in efficiency which allowed us as a race to put more resources towards other areas, in particular education, which in turn has led to more discoveries towards more efficiencies. I honestly don’t know how much efficiencies AI will lead us to have, and how much resources that will free up for humanity. I think the reason people have this opinion is simply that the potential for it to create efficiencies and reduce human labour is enormous. It is already doing this to a smaller extent in almost every industry. Frontline has over two dozen companies in our portfolio that are using machine learning to create these efficiencies and we see hundreds of others pitching to us each year. So while I can’t say for certain I agree with the statement, the possibility and potential for it to be true is definitely there.