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Today the super-important topic of “What VCs don’t know about Entrepreneurs; and what Entrepreneurs don’t know about VCs”. Steve Findlay is a great guest to have to discuss this as he has been a long-time VC and now founder/CEO (Bond Mason and AAA Reserve). How can this culture divide, objective divide be best managed? How can the tribes get along better? For sure having a successful board is definitely a win-win proposition.
There can be considerable “challenges” in Fintechs between these two tribes – investors and founders/management. This challenge of “two tribes” is centuries old. In my interviews with now over 60 folk on the management of the unlisted board the most vitriol by far has come from founders/CEOs about VCs. Equally as you might imagine VCs biggest pain can be the management of a firm.
Steve spent 12 years investing and advising in technology VC and mid-market private equity, including co-founding Fidelity’s $500M technology buyout fund. He had a coding sabbatical in 2012-13, is an angel investor, along with BondMason who enable clients to invest in loans secured against UK property he has cofounded a stablecoin startup.
So as well as our topic du jour we also have a dive into #StableCoin – a first on the show.
Topics discussed include:
- the new global censor MasterCard blocking various death metal bands – wrong kind of music I guess
- Financial Deplatforming
- the potential importance of I2P in fighting #TechTyranny and the over-concentration of power
- Bitcoin, next generation digital currencies in particular #StableCoins and AAA Reserve coin – design, history (the first ever regulated cryptocurrency) and performance
- what you can do with AAA Reserve Coin and how it works
- “inflation linking”
- the over-busy life in Private Equity and Steve’s career journey
- social media and the #ThoughtForTheYear – “spend more time creating than reacting”
- Private Equity cf VCs – former are owners, latter are minority investors
- PE buys secondary shares, VCs new issues
- differences in behaviour of PE vs VC esp re CEO and the C-suite – Steve’s experience in PE was that they changed about 70% of all the C-suite executives across all their portfolio firms; and changed CEO around 1 in 2 to 1 in 3 businesses
- “for VCs changing the CEO is the nuclear button”
- “with private equity if you [the CEO] are out you are out”
- “with VC more often than not there isn’t a CEO succession which leads to a successful exit”
- survivorship bias
- “sadly there isn’t as much humility as you would want to see in the PE/VC industry”
- the importance of consistency in capital providers and making decisions and thence admitting when one was wrong
- Steve’s personal motivation to change tribes – “they are very very different things”
- “a Founder CEO is a very isolated and lonely place”
- why one would do it
- the importance of support as well as challenge for CEOs; honesty and reserve re Board
- “the challenge with making the VC/CEO relationship working is to ensure the VC remains engaged”
- “if a VC backs 15 businesses they need 2 to be successful, 2 to return the money and they don’t care if the rest are write-offs”
- the non-exec Chairman as translator
- sitting on PE boards as a twenty-something
- PE/VC as being professional Board attenders vs CEOs for whom its a tiny percentage of their job
- broking cf PE
- “it is a weird situation where you get 20-somethings telling 40-somethings what they should be doing”
- Good Capital Providers – consistent, engaged, ideally market/domain experts (insights, networking, recruitment), champion your business and do everything they can within their power to make it a success
- seek references on capital providers from both their investment successes and their failures; get a feel from their online blogs, social media etc
- in the UK there are only 5 VCs you can go to if you are looking to raise $5m and above
- not just the firm but the individual VC matters – and everything changes, people change firms etc
- Good Entrepreneurs – naturally market/product/team work well, motivations, expertise, how hard are they going to work, how will they work, approach, flavour – ability to build and execute on their plan
- “a CEO can transition across 1, 2, maybe three of the five stages” – startup, scaleup, profitability, exit, listing – an S-curve of revenue
- BondMason are an investment manager in the property investment space; returns around 6% p.a.
- assets are loans, 90% residential, small-scale, development, some 700 loans in their portfolio
- £20m in AUM ranging from £5,000 to £3m average £25,000 – 90% UK based investors
And much much more 🙂
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