What have been your biggest learnings whilst being a Board member/observer at Toqio, Zift, Phrasee, Solidatus, and Clear Review?
My experience from over 20 years of investing at Series A and partnering with founders is that almost every successful company goes through a period when things don’t go to plan. This makes the clarity and alignment of objectives absolutely paramount. Firstly, the exec team and investors should spend time agreeing what the key strategic objectives are, what the short and medium term targets are to achieve these objectives, agree how to measure progress and assign clear responsibilities. We do this every time we back a new company, in a systematic way. Then the investors need to make sure they speak with a unified voice. How they achieve that depends on the size of the investor syndicate, but founders should not have to deal with disparate investor priorities. Another key lesson is that founders should not waste time in building a high calibre C level team as soon as they take on investment. It takes time to find the right people, bring them on board and allow them time to make a material contribution. In the context of a 24 month period between funding rounds, there really isn’t time to waste. Lastly, we operate in fast moving markets and those who win embrace agility and speed of execution and we overindex on founders with these qualities.
“I think the best case is so good that it’s hard to imagine…I think the good case is just so unbelievably good that you sound like a crazy person talking about it…I think the worst case is lights out for all of us” Sam Altman,Co Founder and CEO of Open AI (Fortune Magazine Feb/March 2023)
Is CHATGPT and the future both awesome and terrifying?
ChatGPT, and more generally generative AI, has the potential to become a transformational technology, one of those that only comes about once in a generation. It has already disrupted many companies and shown great results in a wide range of use cases. But there is still a long way to go to make it universally applicable. ChatGPT is based on probabilistic models, which can produce woefully inaccurate and misleading results in a number of complex and specialised areas. Therefore, where fault tolerances are low, it is still unreliable. But it is constantly improving and as a tool augmenting existing capabilities, or automating certain tasks, it has massive potential. Is it terrifying? That depends on how we, humans, decide to use it and in that sense it is no different from other, past transformational technologies. I am optimistic that humanity can put the right checks and balances in place to ensure we avoid any major pitfalls.
‘In the US tech sector, hiring the best employees requires more than just competitive base pay and free snacks…One of the more prized rewards is generous share-based renumeration…’(FT 22.02.23)
What advice do you have for founders to counter staff quitting when confronted with real terms pay cuts as tech shares have slumped and the value of staff payouts has accordingly dropped?
In times like these founders’ leadership skills are more important than ever. If you are a founder of a company that has set out to tackle big, important problems, with a compelling mission and a clear vision, and you have recruited staff that buy into it and are energised by it, then that’s a powerful motivation to stay on. So keep communicating and over-communicating the vision. My second piece of advice is to identity those key staff that are absolutely critical to your company and make sure they are fully engaged, whether through enhanced options packages or by other means.
On Jan 31st 2023 Tom Loverro,General Partner at IVP wrote on twitter…’PREDICTION ; There’s a mass extinction event coming for early & mid stage companied.Late ’23 and ’24 will make the ’08 financial crisis look quaint for startups’
Do you believe a storm is coming where less capital and a much pickier investment environment could be devastating for startups?
Actually, the tech sector recovered fairly quickly after the financial crisis, unlike the dot.com crash, which took several years to recover from. We are in a period of transition from nearly “free money” to more normal funding conditions. As a result, there is increased focus on capital efficiency, which is healthy in the longer term. Yes, there are companies that do not have viable business models but got funded at silly valuations, and they are likely to struggle. But we are not seeing the type of tech recession we saw after the dot.com bust and good businesses will continue to attract a lot of interest from VC funds. Capital is looking for better quality opportunities, but there is still plenty of it.
What do you consider the most important factors in building a great relationship between a venture partner and founder?
It sounds like a cliché, but the key thing is trust and openness. We see our role as partners to the founding team and we are here to help in any way we can, but we can only do so if we can have open and honest conversations around the challenges the founders face, whatever they are, and if we are given an unvarnished version of the truth. This starts from the very first interactions, during the fundraising process, which is a mindset that some founders find hard to adopt, given they are in selling mode.