Why Growth Investors Ruined the Venture Market

Thank you so much. I’m thrilled to be here.

I always hear that Blossom is long in the making and short in the making. Long in the making in that, I think I always knew that I wanted to have my own company or build my own thing. My parents taught me in the early days of paying your own way, and I started with a side hustle trying to wash car windows near our house before my mom put a stop to that. And then the big idea when I was a teenager was that I wanted to be a restaurant owning DJ.

Again, my parents put a stop to that. Right off to university, and when I started my MBA, I thought that was finally my journey into being an entrepreneur. And then I realized I had this pattern of bad ideas. And the latest one that I was working on was a peer to peer car sharing startup, like Zipcar without the assets. I was beaten to market, and I thought, okay, we’ve gotta stop this. And I started thinking about venture, thinking, if I’m gonna build something, I may as well learn the investment side and hopefully come up with a much better idea next time.

I was very fortunate to get a job at Index in their London office. And I just fell in love with the investing side. I just loved enabling entrepreneurs, working with them, and I realized that I was much better suited to that than building a company. But the passion to start something never really left, and that’s why I say Blossom was short in the making and that I returned to being an entrepreneur and decided to raise awareness.

When I want something to happen, I just focus on making that thing happening. And so when it comes to working with an entrepreneur or wanting to support them or partnering with them, it’s just relentless focus on achieving that. Bluntly, I don’t think I hear the word no. And I think probably the passion and the commitment and the dedication that comes across, I think it’s real. It’s genuine.

I think about this a lot, and I think during a meeting, if there was like a radar of I’m in, I’m out, I’m in, I’m out, I’m constantly trying to test myself. Okay. I’ve fallen in love within the first five but is this love real? Are they just too much of a salesperson? Am I caught up in the pitch? Or should I be more cynical here? And the constant questions of going through my mind. I hate pitches. Right? Whenever I meet with a founder, I’m always telling me your journey, and I want to understand why you’re doing this and what your ambition is and what your drive is.

I think I come with a lot of questions because I’m just trying to understand. I would say within the first meeting, I come out with a decision of go, no go.

I think it’s a balancing act, actually. I don’t love moving super fast. I think that actually becomes perpetuating myth in the marketplace. I Blossom signed a term sheet within forty eight hours. But, actually, for a first meeting to forty eight hours, that’s not a reality. So I did the analysis. Now we’re a few years in. I think we normally know founders for six to eight months pre investment because I love to get to know them, how they work, how they execute, how they hire. The investment thesis and decision whether or not to invest is actually made pretty early, and then there’s a period of time.

I get it from a founder’s point of view. I’ve got better things to focus on, but you and I know this from fundraising ourselves. There was so much to be said for the relationship that you built. I don’t know how people would decide on a VC that they want to work with within, you know, forty eight hours or a week. You want to know how that person’s going to be able to support you, how they’re gonna work with you, challenge you, open doors. And so I try and explain that to a founder whose head’s down.

It’s okay. I would like thirty minutes of your time. I’m not gonna come with the bog standard questions. I’m actually gonna use this to show how Blossom can bring value or how we can help. I’m my seat at the table for the next four, six, eight months. And most of the time that works. There is also a flip side, which I think has become more prevalent in the market recently, where founders have raised a lot of capital very early on and actually realized that they do need to build some product and execute for a bit before they have more investor conversations.

So it’s also understanding where they are on that journey, whether you are six, eight months off a fundraise or you’re whether you’re eighteen months off a fundraise and what the right time to engage is.

We’re going deep.

it’s like hard guys and valor going, but the deeply philosophical ones. So I actually did study a lot of philosophy when I was at university. It was part of my undergraduate degree. And I say that because it teaches you enough to know that from what you’re running from or everything about your life is basically trying to escape from the very reality of mortality, Life is finite. So that’s why we busy ourselves. That’s why we seek enjoyment in things is because if you are paralyzed with nothing to do, you would then end up worrying about that.

Not sure. It’s the best.

Wow. We went we went deep. I was not expecting that. Went to mortality.

Which is more about an enjoyment of life. I’m trying to take every minute that I can and make the most of it. I love that.

I love Mickey. Mickey’s one of the people that I respect the most. The one thing that really resonated or I took away from was that he told you you have to really follow your own judgment and believe in you and do things your way. I think that serves a lot. In beginning, when you’re starting something, you’re so unsure of what’s right, what’s wrong, or whether you do it one way or whether you build for one LP, etcetera. But he was very fixed on you just do it like that.

And my big thing was whether I started as a single GP, and obviously, Mickey is a single GP. His piece of advice that I couldn’t quite follow, which hats off to anyone in venture if they achieve this, to one and done close as a first time fund.

So this is where we differentiated the model quite a bit. We said we wanted to build a new fund specifically for early stage in Europe. Our general view is that Europe is a growing ecosystem, and there’s a lot of promise here, but it’s not the size of Silicon Valley. Sure. So that means there’s going to be a finite number of companies that are built every year in Europe, and we just want to be the best possible partner to those companies. And so rather than try and build a fund of thirty, forty companies, and then build that over two, three years, We said the number of quality companies that we can be great partners to is actually probably smaller than that, and that’s be super concentrated.

So fifteen, twenty companies per fund and try and be the best possible partner.

Yeah. So the four seven five will be more like 20 companies rather than 15. So fund one was 10 companies, fund two is 15 companies, and fund three will target.

So that kind of grows in line with the growth of the European ecosystem.

So we actually don’t reserve the standard, and this is something I think I learned from previous venture experience when I was working for other funds is that I think actually the follow on can really damage fund returns in that you should buy your ownership at the lowest possible cost, which is the initial cost of seed or Series A. And then especially in the growth market that we’ve been on where the follow on is done at four or five x, and not a lot. You’re somewhat derisked, but you’re definitely not completely derisked to the point of both investments.

So you could be spending an additional year. Say your initial cost was 5 or 10,000,000, and you were spending an additional 5 or more in pro rata, but at a much higher valuation, then your blended average suddenly looks a lot worse than having just bought your ownership at a lower cost. So we said we’re just going to do initial investment with a very small amount of follow on if our companies need help getting to an exit or struggle to raise. So 95% of our investment will be for initial.

No. We’ve always said to founders, be in control of your own destiny, Manage your runway and your burn, and don’t expect that a raise is just automatically twelve months out. You have to be able to control how fast you go or not. And when we fund them at Series A, we said, here’s enough capital over twenty four, thirty six months post our investment. And let’s be honest, if you can’t raise capital after that point, you probably aren’t building a viable business. And we feel that’s enough runway for you to really give it your best shot, and we’ll work with you for all efforts beyond that.

But if you can’t after that and you’ve run out of cash, we shouldn’t be investing more to extend your runway. We just have to be honest at that point. There wasn’t a viable business.

But the reality is even for a multistage fund when they could theoretically do the b c they’re still underwriting that new investment. It’s not like they blanket just give you the BCD. You have to perform in order to get that capital. And actually, by us not investing at that stage, we are so aligned with the founder and trying to get them the best possible raise at the next round. It’s actually never been an issue with a founder when we’re talking about investing.

I think the founders themselves normally know when it’s working or not working. It’s not coming as a surprise. We’re working through there’s a budget. There’s a business plan. These are the KPIs that we’re working towards. Every month, we’re talking about what’s working, what’s not working, if not beyond more frequently than that. It should never come to a founder as surprised as what you’re thinking. That’s my philosophy. Then you’ve misled them somehow.

A lot of funds have earned a really bad reputation that way, where founders have come back and thought this whole pitch. Oh, they underwrite all of the next rounds, and then they turn up at these investment committees where a bunch of partners also have no idea what’s going on in the company. And then, like, I turned up at this partnership meeting, and no one knew what we were doing or how we’re performing, and suddenly I don’t have a term sheet.

That’s why we did away with the ICE at Blossom. It just didn’t make sense from what I saw before is that there would be a subsection of the team or one partner or two partners that spent an incredible amount of time with a company, built a thesis, and then, as you say, a lot of other partners come to it fresh for forty five minutes. How can you judge from that time? Sure. So much goes into building a business. I feel like the IC formed a very political environment.

There is signaling, but a good investor doesn’t necessarily pay attention to this. Shouldn’t be worried about whether x is investing or not investing or this or that. You should have the courage of your own conviction. You have to decide whether or not you want to make that investment. You have to decide what the inputs are that you place value on. The rest of the signaling, don’t worry about it. And think about how many great outcomes have been where the journey has not been straightforward.

Definitely speed of execution. There’s courage and the conviction of ideas and how to move on things. There’s no analysis paralysis. The best founders, there’s something a bit difficult about them.

No. You

It’s an incredibly hard being an entrepreneur. You have to make a 100 decisions a day. Some of them are not gonna be favorable. Some of them are gonna be difficult. And sometimes if you decide to go down one path, you can’t be fazed by every decision.

have

Absolutely. I remember one of the first investments that I made when I was at Index, and Neil asked me, so what’s your learning from that? That really struck me as that you must take something away from a bad investment. It wasn’t just bad picking. Something happened afterwards as well. So what did you learn? And I do fundamentally believe and never make the same mistake twice. So there’s always things to be learned.

So I think investors can get fooled into thinking something is a great investment thesis and ignore the practicalities of execution and execution risk, etcetera. I think a lot about that. You can build a beautiful investment thesis around why a piece of software might work. But if the team isn’t right or the geography isn’t right or there’s something wrong with the market, then you’ll still be wrong.

I’d take away a lot from was it team? Was it market?

I think biggest mistake is team, always. It comes back to execution speed. And this is why I love to know teams before investing. I think the other thing is and I learned this earlier on is that suppose that you are going to do the building. So you can throw a lot of ideas at a founder and say, oh, but if you do this, then do this. But they have to want to do it. The ambition, the drive, the ideas, so that I learned very early.

We were really trying to innovate on this concept of scout program, and Blossom wasn’t during pre seed or seed. And there were lots of founders that we thought deserved to raise capital that they just weren’t for us. As on one hand, enabled them to be successful in their fundraising. And on the other hand, there were loads of operators in Europe that were starting to think about angel investing. They might have deal flow, but they wouldn’t have time in terms of judgment, or they didn’t have the capital, etcetera.

So we said, we’ll create an angel program where I think it was 15 angels operators. There’s some really great names. And we said, we already have the deal flow. We’re gonna bring you the ideas. You, as a group, form the IC and decide whether or not you want to invest, and then we’ll facilitate the administration and the capital, etcetera. It was meant to be 250,000 per investment. It was a great idea, but as I said, all these operators were starting to be angels. And actually, what founders wanted was a 10 k check from one angel and a 10 k check from another angel.

They didn’t want to group at $2.50. So it just didn’t work for the market.

We actually pulled out of seed. I do worry. Actually, when I look at all of the deal activity in Europe that it’s all at seed stage at the moment, and it’s the multistage funds, new seed funds, etcetera. And we said, no. We’re just going to stay to our swim lane and just do Series A. And I think it was a combination of things. For a seed fund, you need diversification because there were things outside of your control. The loss ratio at seed is just much higher, and you probably do need that diversification, whereas it doesn’t suit so much and really concentrate this time.

And the other thing is where we feel that we can add value as partners is really at that inflection point when you come to a where you have some initial signs of product market fit, and you want the capital to help you scale to that predictable and repeatable revenue stage. That’s where we feel that as our expertise, we can really help companies. And at seed, it’s much more about finding PMF. We didn’t feel as VCs. That was so much of our where we could help. I think there are some VCs that are really good at that.

But also a lot of finding PMF is within the founder’s control. You started the company because you have an idea of something that needs solving or a product that has to be in the market. So what can we tell you from a product perspective? Probably not much at that point. I also think when it comes to hiring at seed, a lot of the hiring is from your network. It’s not where you’re thinking about that. The first hire that’s out of your reach where my investor really helped me get that incredible VP sales or incredible VP talent.

Do you take board c’s? Not at the a stage. Because we only make five investments a year, coming back to the concentrated approach, we have three partners, and we say all of us support you at that stage. When it comes to the point of appointing a board, you a, know the Boston partnership really well, so you can decide which three of us you want as your board member. But also the support that you need at the a stage is different from the board governance and the role of a board.

We’re just very much here to help you in the build stage. So we meet regularly. We have on sites with all of our teams every month. We have WhatsApp groups. We’re very regular in contact, but it’s not a board forum. It’s much more, we’re with you as partners. We’re an extension of your team. Let’s think about how the business is tracking. Have these strategic discussions. You’re not quite ready for that board format.

So that I agree with, But that’s why the structure of our support and also, you can get all of the governance rights, etcetera, and the shareholders’ agreement doesn’t have to be at the board level. What you would need to facilitate is what you’re saying is you want regular communication. You want insights into what’s going on. We always say we want to know the bad news as quickly as possible because that’s how we help you figure it out.

And it’s true. I feel that after the investment, you work so hard at building that relationship with the founder to make sure that they feel comfortable giving you the bad news because that’s how you support. As we said, not everything is gonna go up into the right. There are going to be all kinds of problems. But if you feel comfortable sharing just so you know, we worked so hard to win the investment and win being your partner. We worked really hard to help you solve that.

FOMO investing has never quite made sense to me. If at the early stage, it’s all about seeing something that someone else doesn’t, then there shouldn’t be 15 timesheets for a deal because that means everyone’s seeing the same thing. I actually try and stay away from those kind of deals

That’s not thoughtful of

The last five deals that we’ve done, there has been no single competing term sheet. I mean, we could be doing something horribly wrong, but you’re with me in one of the last investments.

And suddenly, is, like, a competitive one. Suddenly

That that feels very integral to, you know, signed the term sheet and they got called up by a competitor fund that same day being like, don’t sign. We’re coming to take you out for dinner. Don’t sign. How can you, like, interject on a deal so late in the process?

It comes back to the philosophy of there are only finite number of outcomes that are gonna matter each year, and you just want to be the best possible partner to them. And for our fund model, we’re pretty explicit that we want 20% ownership because if you’re going to be one of 15 or 20 companies, we really want you to matter in the portfolio, and we’re gonna work incredibly hard to help build value, etcetera. And a function of, therefore, price is how much capital do you need to scale your business the next twenty four months in your evaluation.

If you’re, like, plus or minus around the margin and you’ve decided that one of five businesses you want to partner with that year, it doesn’t matter that much. If you are moving away so far in price that you can’t believe that this company can be material to you and therefore to your LPs, I believe that’s stretched too far.

No. I don’t worry about adverse selection.

Not all the time. But it actually becomes easier the more proof points you have of how we can support.

We lead. We don’t work with other VCs. So we might work with occasional angels that want to be alongside with us. That’s a founder’s choice. We obviously make introductions to people that we think are gonna be relevant, but the founder will choose. But it’s not like seed. There’s not room for more than one investor.

it? We do. And I would challenge that if you started with 15% by the time of exit, you’re left with 10%.

How many more rounds the option pulls to only suffer 5% dilution from the Series A to exit would be pretty impressive.

Venture is a very transparently competitive sport where the founders ultimately choose who deserves to be in the ring, which is quite an exciting industry to be in. Like, you constantly have to earn your place. I think what’s exciting about Europe especially is ten years ago, European founders felt that they had to go to the valley to raise capital because there wasn’t sufficient capital in Europe. Now a founder does not have to leave. Everyone’s here for them to choose. The nature of the conversations and the way that they’ve risen to that and wizened up is actually incredible to see.

Founders are getting better support, better information, because they have suddenly realized that they are in control of who they get to choose to be on their cap table.

So I find this really interesting, And I think, like, European VC has an image problem. You can help with

So if we look back at the history of European unicorns and look at who supported them in seeds and series a, it wasn’t US multistage facts. So there is something to be said for the European firms at the early stage who have the understanding, the network, etcetera, who support these companies. But there’s obviously a lot of prestige with US venture and these brand names. And I think for some founders, that’s really important. But I think that if European VCs did a better job from a PR perspective of how they’ve helped build these companies at the early stage, founders wouldn’t have this kind of they feel like it’s a lesser to pick from a European VC.

But it’s the ones on the ground who understand who are going to be able to help you.

Americans are very good at selling. Where do you

I think over the years, I’ve come to realize so many different ways of looking at something. You really have to focus on broadening the mind. Narrow does not necessarily lead you to good places. You’ve got to have the courage of your conviction. You’ve got to be able to have judgment, etcetera, and you should be able to pay attention to what’s important or not. But it really does take thinking, oh, I wouldn’t have looked at it that way or not assuming that someone just thinks like you.

I spend a lot of time focusing on that, and that’s really why I like a diverse partnership.

So a lot of discussion and debate. It’s very iterative. We won’t just have a company come meet us present for forty five minutes. We spend a lot of time thinking about challenging each other on the investment thesis, the market size, whether the team strengths are, whether it aren’t. And the more you go along, you come to realize, like, where you stand on different parts of the investment. Once we decide to invest, even if we’ve disagreed over points, because we all support together, we’re all committed to this company being successful.

Absolutely. This comes back to you’ve got to believe that some something that someone else doesn’t at the early stage, and so you have to give partners a place where they feel that they can articulate. I see that you don’t see that, but I very strongly do. And then if a company is gonna be one of our fifteen, twenty companies be committed.

Price and round. So I think that it comes back to the how many venture firms are there in the marketplace and what does brand really mean? Actually, this comes from the hard boon. You are a new fund. When Blossom started, we didn’t have the brand of a 20 BC, and we were no brand firm. We really had to earn our right at the table, and some of the hardest fought deals were, do I go with a brand firm, or do I go with this unproven start up Blossom?

And we had to show this is what you get if you work with us. And I think the value that you get is more important than a brand. I think there used to be a thinking that brand will help me hire. Brand will help build publicity, but so many deals are done. When an engineer is choosing to work for company x or company y, they’re going for the mission and the product and the team. Great if you raise money from a brand name investor, but brand name investors also done 40 other deals that year.

I would like to see those as companies scale, and we have fewer companies going from the Series C beyond to exit. I feel like there should be more shared learnings amongst that community. The the founders are very scared of reaching out to other founders because the founders are busy or whatever. But I feel like The US is much more like collaboration between helping people. And you’re part of a lot of these communities, etcetera, networks. Europe’s growing in those, but I think we could help push that forward.

I think distinction of investing versus helping build is very different. So I think angels have one place, but I think operating networks where it’s not just about supporting the founders, it’s about CMOs, CEOs, etcetera, really enabling them to be successful.

I’m very glad that I was quite naive coming into the fundraise process. So I’d been at Index. I’d been at LocalGlobe.

thought that’s how it would go. It was I mean, fundraising as a solo GP for Europe was brutal. There are two ways about it.

I mean, there were reasons that people would say no that I could understand, like, SoloGP. When people would tell you, I just don’t believe in Europe, and I found that no heart. This is the career that I just built, and this is the market that I really believe in. There’s not much I can do with that feedback.

I mean, that’s one thing that I learned about the LP market is that everyone will take a meeting. So I remember when people would ask for the data room at the end of the meeting. And so if you’re a VC and you ask for a data room, it means that you really want to consider investing. And then I realized that we were sharing this data room, and no one was doing anything with it.

And so all this money that I thought I was so close to raising. Why

for the data room

then? I guess there was this data inside it. It was interesting. There were stats in the European market.

It was just, why not data collect?

have is That’s never gonna happen.

I do. We were using Dropbox, which is also probably not that.

I mean, there were a lot of bad meetings. What’s the French equivalent of EAF?

BPI. They asked me where my older male partner was.

I was like, I don’t have one.

Actually, it wasn’t something that I’d change. But when I came into market with the first founder, was like, we’re closing in thanks, Mickey, for the advice. We’re closing in three months. One and done, etcetera. And then I realized that, actually, this is a really long term relationship.

I had a couple of existing

Exactly. And then I was like, okay. I actually really understand why this takes time. I understand why you’d want to see our performance and our execution over some months.

So we did a first close within I think it was six months from beginning to the first close.

So the advice that I was given was get to 50%. Yeah. I don’t know whether that’s Halt’s, but that’s the advice that I was given. So that would be my

Yeah. Yeah. I mean, we would have closed on anything. We just wanted to be in business, but we got halfway. And then there’s a provision in the LPA that says you have twelve months. And so after our first close, people took a lot of meetings with us. I think, to figure out how did that manage to get to our first close, what’s going on here. And I realized after those meetings, actually, they were never gonna invest. They were just, again, curious. And because we had the twelve months break the provision in the LPA to do the final close, people wanted to wait to see what investments we did.

Yeah.

It’s the toughest thing. Yeah. I think finding talent, the right talent, building a culture, that is the hardest thing. And not necessarily something that comes naturally to an investor, like a founder. I think some people will really thrive in one workplace culture and not in another. And so trying to figure out dynamics between people and how people work in a certain environment, I think that’s what you go through at the beginning of the company’s journey is that some people are really good for that stage, don’t enjoy that stage.

Some people think that they will really enjoy a concentrated strategy, but actually won’t, etcetera. So there’s a lot of learning.

That goes to my earlier point. You’ve got to understand that people aren’t necessarily like you. Things that you can remind yourself that it is a Sunday morning, perhaps that message doesn’t need to be sent at that hour. But trying to tell yourself that you’re not intense, you’re not gonna act in an intense way or do certain things because that’s who you are. I don’t think you can fundamentally change yourself. You can improve yourself and definitely respect the other person and be conscious of how they are not like you.

But you’re an intense person that’s got you where you are, and there are parts of it you should really own.

Some people, they don’t. I

But it

Uh-huh. Who’s the crap?

I definitely care. I think there’s ways that I come across that I don’t think people necessarily understand. Like, the abrasive thing, I peep think people don’t know that I’m actually much sire than you would think. When we’re at university or when we’re doing our MBA, there would be always a group of people getting drinks in the bar and being really social, and I’d be like, I’m gonna go and eat my work. And I’m actually more comfortable in a one to one setting than a group setting, but people think that means I’m a bracelet.

I really do care what other people think, but also that doesn’t prevent me from trying to be honest and be truthful and direct. So if I need to say something because I think it’s important that you hear it, as long as that message is delivered in the right way, I feel that’s how I should be. But I’ve never tried to be rude or etcetera. The whole she’s aggressive, she’s sharp elbowed. Do you think you’d say that if you’re a man? I don’t think people would say that if I was a man.

I think that’s a comment that people level up a woman all the time. And one of our favorite LPs when they were taking the references and they said, people say you’re aggressive, but I like it because I’m teaching my daughter to be precisely like that. Venture is a competitive sport. If you want to lead deals and you want to be a great partner to your founders, then you are going to inevitably be a bit sharper.

I don’t like the hype. I would love to go back to the art of deal making.

you think that’s possible?

I think it is a product. So I think it depends how this cycle ends.

The early days. Again, it goes back. They were brutal. Sometimes a no’s came out of places you didn’t expect to.

This is what I would say to any founder or any person building a fund. 99% of it is sheer determination and perseverance. There was just no option not to get to a first close.

But I think also a lot of that’s also what I learned, and this comes from my husband who actually raised a fund before me, and I owe a lot of my success to him. He was like, it takes eight meetings to close an LP. That was his rust all of them. I was like, why so many meetings? And he was like, they just don’t expect you to come back.

That rumors be rumors that the myths per veteran. Anything to get a deal done. That’s

I know. Who’s even doing early stage crypto right now?

We go full circle, do anything to win an investment.

I went to Paris.

I was allowed. I have a lot of thanks to my partner, Rimer, who went to the details of how you could get into another country. And if you were traveling from your primary residence to your other residence, so I e, if my Estonian husband could go from London to Estonia via Paris with me, then you could get to Paris.

I would never reveal a secret.

If they were cold emailing Neil,

just be genuine. The number of cold emails that you get where you’re like, there’s no thought behind this. You know, that it’s like a copy paste or edit the name or it’s very generic. You’re trying to in one email, grab someone’s attention. Because you know how they say first impressions matter when you meet someone in person. Yeah. Think about that from an email perspective.

Nothing. It’s all learning.

No. It was in Dublin. It was for Tines.

I wish I could remember.

It’s been incredibly conscientious about how you spend time, what matters, what’s important.

It’s funny that before I became the mother, everyone was like, oh, you become so much more efficient when you become a parent. And I was like, I’m already pretty efficient. Okay.

Not worried about that one.

Not sure I can draw more that way. But what it really opened up is everything is just a choice, whether I spend time on x or I spend time on y. And if I want to make x number of investments this year, I better be very deliberate in which teams I spend time with, where I say yes, where I say no, where I can add value, where I can’t. And that has been incredibly quite generous. I’m also very fortunate that my husband is the one person who will just call bullshit.

Best performing fund at least in Europe, if not the world.

Not sticking to squid. That’s it.