Venture capital provides financing for entrepreneurs seeking to grow. So, IP Foundry sat down with Operating Partner, Jerome Misso from Balderton Capital to discuss the ins and outs of gaining and holding onto good venture capital.
We’re a European Venture Capital fund focused on early-stage tech investments. This could be in any part of tech e.g. social media, ecommerce, mobile, SAAS, AI, fintech etc. We look for the best entrepreneurs in Europe with large – usually global – ambitions. We have been lucky to back many teams that have built billion dollar businesses.
We have been doing this for 17 years and have extensive company-building experience within the Partnership. Some of our partners have built billion dollar businesses as entrepreneurs themselves. So we’re not the sort of investors who just passively turn up to a quarterly board meeting; we roll-up our sleeves and help build the company. We don’t try to run the companies; we help them to grow.
It’s not just a great entrepreneur; it’s not just a great business opportunity: we want both. For us, it’s less about trying to spot a sector and locate a company within it, and more about finding the right entrepreneur who presents a great opportunity.
So we have to look for a business that is addressing a large market segment. Often this means the company is going to be disruptive. It’s got to be able to have the potential for massive penetration, in terms of usage, revenues or whatever the KPI is.
We’re also looking for someone who is going to attract talent and build successful teams. They need to have the drive and vision to see a way of getting from a fledgling business to something that can dominate a space.
When we find great entrepreneurs with a compelling opportunity, then we know it’s worth rolling the dice and taking the risk.
Well, we’ve been fortunate enough to be involved in a few that have become very successful. The best thing we can do is to help entrepreneurs fulfil their ambitions and their goals. It would be hard to select one of those stories, and I would upset some others if I only named one of them! It’s not really our success story; it’s about the company’s success story. If you are a <25% shareholder you always have to work as part of a team and therefore it is a team effort led by the entrepreneur/management that will define success.
Intellectual Property has many facets. The spectrum ranges from a company’s url and trademark, through to a whole portfolio of patents, and everything in between. What is important to us will vary by company and business.
If you’re talking about a company in AI/machine learning, I would expect there to be some sort of leaning towards building a patent portfolio. Of course, this requires careful thought and a balanced strategy, because it involves going public with what you are doing.
Conversely in say ecommerce it’s often completely different. There, the key IP could be protection of trademark and brand, so a different approach is needed.
It is undoubtedly useful to get plugged in through angel investors, your friends, other entrepreneurs, incubators, advisers etc. Keep in mind a VC firm will see thousands of proposals every year, so a vetted approach from a trusted connection will help stand out above the crowd.
Equally, don’t be put off if you can’t find that easy pathway. If you have a stunning idea and you present it clearly, then you have a chance of catching someone’s attention. Cold calls/emails are imperfect, but there are enough investing forums, conferences, etc. to use as a platform. Often the magic is to keep the pitch engaging and succinct, and very quickly convey why the idea and you represent a big, disruptive opportunity. When time is limited don’t be gimmicky, instead be memorable which could mean pithily presenting the core of what you do with minimum slides.
Correct. Our deals come from many different channels: so don’t give up, the good news is there are many ways in! I remember we once read a piece in the Economist, so made a cold-call to introduce ourselves. The young company took our investment, and a few years later we had a large shareholding in a multi-billion $ public company. So, if something jumps out at us from the page or during a conference, then we may just knock on their door.
If you ‘re in the situation where you have multiple offers on the table, think really carefully about the investor you choose and what they are bringing beyond just the provision of capital.
It’s about what the VC can bring in terms of company building, experience, support, mentoring, skills within the Partnership, their resources, their ability to make introductions to commercial partners to help you grow a successful team.
Do your reference checks, speak to entrepreneurs they have worked with, speak to their successes, speak to their failures. DD absolutely cuts both ways.
In terms of getting your story across and presenting, be clear and simple. At the offsites we hold for our companies, we sometimes get the entrepreneurs to stand up and explain their business within 60 seconds. Clarity is key. So don’t over sell, but of course put your best foot forward. Be open and address the things that are important to VCs, like the size of the market and your USP; convey your vision; and explain strength of your team. And finally, be transparent from day one, without that you are going to set the relationship off on the wrong footing.