S2E12 - Sitar Teli, Managing Partner @ Connect Ventures

Sitar Teli is a founder and Managing Partner at Connect Ventures, a thesis-led, pan-European, seed stage VC. With over 14 years experience in early-stage investments in both consumer and B2B companies, Sitar has become an expert on growth, culture, building high performance teams and finance strategy. Most notably Sitar led the Series A round for SoundCloud when working for Doughty Hanson Technology Ventures. 

The product and design specialist sat down with Riding Unicorns to discuss how she transitioned from investment banking into venture capital, the future of the remote workplace and the different approaches the US and Europe take to product.

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Transcript

[00:00:00] James: Hello, and welcome to this week's episode of writing unicorns, the podcast about growth startups. I'm James Pringle and my co-host is Hector Mason from episode one ventures. This week we have Sitar Teli Managing Partner at Connect Ventures.

[00:00:27] Sitar is a very successful investor. Having invested in companies like packed coffee, Charlie, HR, Kieren, medical fit. Settled and many others.

[00:00:37] Hector: Hi Sitar. Great to have you on the show. Thanks for coming.

[00:00:41] Sitar: Thanks for having me.

[00:00:42] Hector: So I wonder if we could start off with a bit about your background and career?

[00:00:46] Sitar: Sure. So I was born in the U S two, Indian immigrant parents, raised in New Jersey. Then I went to duke university, which is a broad liberal arts university that also has engineering. And [00:01:00] there I studied engineering and economics. Which I then proceeded to do neither of them after I graduated, I really wanted responsibility right away. And just, the idea of working like in a lab or in, in as like someone's assistance, wasn't really that interesting. And then like a lot of people, I think, the graduate university, I couldn't figure out what I wanted to do. So I went into investment banking, I think investment banking and consulting or what you do when you don't know what you want to do..

[00:01:24] Hector: It's a common theme amongst our guests.

[00:01:26] Sitar: Yeah, I knew I didn't want to stay in investment banking, but I also thought I could learn a lot right away. And, that's the model of investment banking is to really push responsibility down as much as you can. I can create a lot of leverage, which I really liked. So the bank that I joined it was called Broadview and it was a boutique that focused on tech. so a lot of their clients were backed by, these magical things called venture capital firms. That's the first time I heard about venture capital, I didn't know what it was before that I had no idea how companies actually started. it's never something that I thought about actually. [00:02:00] And I particularly never thought about how technology companies started before that. but anyway, so a lot of our clients were backed by venture capital firms. And that's where I learned about that. And. After a few years at the bank, I knew for sure, I didn't want to be a banker and you, I want you to move on. I thought it would join a startup, but actually, I realized that when I was a banker, like the venture capitalists were pretty involved. And so I thought maybe I should learn the finance side of it first, because if I was ever gonna do a startup, like they were going to be important. that was my, conclusion about that. And so she applied to a bunch of different firms, mostly in the U S and then splice in London called daddy Henson. And I didn't know anything about them. But I really wanted to live abroad. I'd done it briefly. after university I'd lived in, South Korea for a year. I really enjoyed that. And so the deciding factor in my decision criteria was I could live in London for a couple of years, which is what it's supposed to be. So 2005, I moved to London where to daddy Henson, it was a venture fund within a private equity. And the venture team that I worked [00:03:00] with was great. And I learned a ton from them. And number of them have gone on to do their own thing. So Carlos from seed camp, for example, was it was someone who we recruited while I was there. And Yvonne for Nettie who runs five seasons, which is a venture firm focused on food tech. We actually have on the show, was one of the partners that I worked with a lot there. So I worked with great people. and I also got to do a few deals. Mostly in the consumer space, probably most notably SoundCloud series a, but then after a few years it was clear, like the venture market was changing Dowdy, Henson, wasn't going to change. And I thought there was an opportunity to build a new venture firm, which wasn't something I'd ever thought about doing before, but I don't know when opportunity presents itself. I think you should really, really grab it. So, so that's what I said too. And that's how can I.

[00:03:47] Hector: Awesome. I mean, interested to hear, how you go about setting up a venture fund when you don't have much of a track record as a, relatively young, VC and how therefore you start getting deal [00:04:00] flow and all of the things that come with that and winning deals, all the hard stuff that comes with it. Yeah.

[00:04:04] Sitar: Yeah, sure. So we started connect in 2012, but we started raising for it in 2011. but actually I think when you think about a venture firm, you have to first ask yourself a bunch of questions that are really important, right? What is a venture firm you want to build? What is a sector you want to focus on? Maybe what's your advantage there? What's your hypothesis or thesis on the market and you want to partnership. And for me that the last one, wasn't a question I always knew I wanted to be in a partnership. I didn't want to be a solo GP. And I think that's, those are two flavors are from right. Still GP or partnership. And so for me, step one was finding partners that I really wanted to work with. and that's where Pietro comes in. And so, when we started with Pietro bill and I, and Pietro and I are the managing partners, now of connect. It also relates to how you actually get the funding. So it's a very good question. How do you get money when you don't have a track record, et cetera. And especially, I have to [00:05:00] say in 2012, BBC or, you know, the ECF program wasn't really around. and, it's a little bit restrictive and It wasn't as into the micro seed area, the sub a hundred million fund range. And so it was really, really hard actually to raise our first fund. Luckily, partner Pietro he's an Italian entrepreneur and he'd had an exit in Italy and was really well connected there. The firm that he sold his company to actually wanted him to start a venture fund. they went to him to start a corporate venture fund and he was like, well, that's nice, but I want to start my own venture fund. And so why don't we just back that instead? and he's a really persuasive guy, so he, got them to it. And then once they invested in it actually. Social proof is a really, really powerful thing. So a number of other Italian family offices and angels kind of came into the fund as well. And that was connect one, you know, almost, almost entirely money from, the Italian [00:06:00] market. And so it was a 21 million pound fund, which now seems like, I guess, a really tiny, tiny fund, in today's market. But in 2012 it was, a decent size fund, not great for three partners. but we weren't in it. To make the salaries. We were in it to really create a new type of venture fund. And that was really our, mission then. And it's still our mission. Now,

[00:06:21] Hector: I think your, your unique insight really is kind of around product and certainty that that's how to peers. why is that and why do you think that is a useful, focus for a VC fund?

[00:06:32] Sitar Teli: Yeah, sure. And so, our thesis is the, biggest companies in the world are product companies. The biggest software companies in the world put product at the center of what they do. Right. So they think first and foremost about the user of what they're building, which is, I think what our product company fundamentally does, right? It thinks about the problem you're solving, how you build a solution for that problem. And who's going to be using this product. And if you look at, the outlier in the venture space or companies that start off venture [00:07:00] funding and have ended the 10 billion, 20 billion plus companies. They're all extremely product centric, especially in the last 20 years where, you know, arguably in the past, you were able to build sort of terrible software, especially for the business side, and get away with it because it was very top down. That's really changing and has been changing I think for 20 years and definitely for the past 10. And it's accelerating now in the last few years. And when you put a product at the center of what you do, you build software that people want to use. That they genuinely want to use that they talk about that they enjoy using, and that has lots of consequences for the business itself. So one of my favorite examples of this is Typeform, which is, I don't think I can say how much revenue it is, but it's doing really, really well. It's raised a relatively little money is raised less than $50 million. it's grown incredibly. It has raised 50 million. It has about 30 million in. So it's done extremely well, very capital efficient. And you know, one of the reasons is they just haven't built a phenomenal product. So they [00:08:00] have less customer service issues. It sort of grows virally. People like to talk about the product. it's not sort of a philosophical thing. And there's really strong business impact on building a product centric and product first company that has to do with, A lot of KPI's moved into rock right direction, but also a lot of capital efficiency that you gain. And then also it's, it's I think really fun to tobacco products that people love to use. And especially tobacco products that tens of millions and eventually hundreds of millions, people like to use

[00:08:33] James: that's all, you're a seed and early stage investor. So in that early stage, you know, the products might be quite early as well. So what are you looking for in the team? That means that you, you know, or you feel that this company is going to end up with that kind of market or sector dominating product where it solves something in a different way.

[00:08:56] Sitar: We're so early sometimes that there isn't even a product. So [00:09:00] sometimes there's actually nothing to look at. as in there's a product actually to look at yet, but even when there is, I mean, the reality is when you're really focused on product investing, one thing that you have to know is that whatever you're backing is going to look completely different in a year, right? Like the, the nature of product is that it's never done. You're always sort of like, what is that saying? Like you're always one person. Of the way there and product is, is constantly evolving. So even what you see, it's not like that's it. but what we use to evaluate, so there's a few different things I've used to evaluate. So one is. Which is opinionated products crafted with love and loved by many. And each piece of that, you can actually independently evaluate a company on red. So if you take the first piece opinionated products, so first, what are their opinions? What are their insights into the market? What are their insights into the problems they're trying to solve? This is a big driver of actually the product you're going to be buying. Sometimes insights can be really generic. In which case you get a product that is actually quite generic. And sometimes you meet [00:10:00] founders that have really strong insights and really compelling insights. And the product reflects that. So ultimately a product is a reflection of what the founders insights and opinions are. And then there's the word product itself. You know, their product is not binary and it really reflects itself in gross. Sounded like a very boring VC thing to say, but if you're a pure software company, you're going to have like 90% gross from origins released 85% plus, whereas if you have a mix of software and services or some non-scalable parts of what you're providing your gross margin might be like 50 to 60%. And so we look at that as well, right? Like, are you actually building a product company or are you building a product on top of a services layer? And then if you are, how much of that can you productize in the future? Which is, an evaluation that we have to make. And then the other is crafted with love, which I really love. So craft, I think people think product is magic and anyone who builds product knows it's not it's like a lot of blood, sweat, and tears. There's a lot of [00:11:00] craft, and artistry to building product, right? So there is, there's a balance of intuition and then it's hard to graft in kind of attacking problems and continually iterating until you get to the solution you want. And then love. I don't think you can build a product unless you love the problem you're working with. Unless you love the users and unless you love the product itself, right? If you are, they have a founder who thinks like, oh, the techies will build it. You're definitely not someone who loves product. Right. You're someone who thinks of technology and product as a service recognition. Not as the core and the heart of what you do. And so we're looking for people that really think and speak that way and then find a loved by many years, so if, if you have a product life, we get to see if people love it, because it expresses itself in things like engagement rates and churn. And how many daily active users do you have? how often are people using it? How often do they talk about it? If it's pre-launch or pre-product? we think about the petition. if [00:12:00] you're building a product that will be used a few times a year, it's actually really hard to love that product. You're more likely to forget about it than you are to use it again. Or if it's something that is, let's say it's compliance, oriented, depending on how you approach that problem, it could be something you love, or it could be something that gets in the way of your day to day. And then the, by many is for me, the most VCU part of it, which is ultimately, we're a VC and we're looking for venture scale returns. And so we need to know that there's a big market that you're going in. And so I think the thesis is the most important thing to use, to evaluate products. We've been through a couple of iterations and this one is by far my favorite, obviously, because it's the most recent one, but it's also a hundred percent focused on product. And it really helps us put a lens on companies across the entire spectrum. Right. When they're pre everything and just founders with an idea right up to when they're generating revenue. It actually works across that spectrum, which is why I find it so powerful, even though it sounds very compact.[00:13:00]

[00:13:00] James: Yeah. I'd say, how much has your own products evolved in that time? The thesis is obviously well crafted and so interesting to dissect it and go through each of the bits. And I'm sure lots of people. VC criteria, but they don't fit into a nice thesis statement like that. So how much has your own process and thesis evolved since you started out?

[00:13:23] Sitar: So our thesis has evolved to become more laser focused on product R. original thesis looked at product company, founders market, and ended up being a thesis that like any firm could head, frankly, like the only part that was different about it was the bid on product, but it was just so, so broad that it did help us evaluate companies, but actually. It wasn't that useful a tool because you had so many different angles to evaluate that, some companies were really strong in some, but really poor in others. And what we decided is ultimately if, if we are, product fund and we're trying to find the best product companies, our thesis needed to reflect that. [00:14:00] And it needed to be a tool that the partners could use to evaluate companies from that lens and solely from that lens. Obviously, we also look at all of the other things. We look at market size and we look at business model and you look and go to market strategy, but we don't want our thesis to try to capture all of that as well. In terms of process, we've actually changed that quite a bit as well. So, what we used to do is we'd meet with a company, that, you know, some of the champions. They come in, no preread. You're just like, Hey, I have a company that I like, here's their deck. You'd fix it in deck beforehand. They'd come in pitch. And then immediately we talked about it and decide if you want you to do it. And then we went to this event that, um, mosaic ventures put together and it was for seed funds. And first round capital was there and Josh Kopelman and talked about how they did their investment process. And you know, one of the parts that was really interesting about it. After a company presented, they didn't talk. What they did was they took 45 minutes and they [00:15:00] wrote up their thoughts. And then everyone had to contribute in the discussion and everyone had written up God's servant had something to contribute. And he said, w one of the things it prevented was uh, so one partner speaks and then partner number two speaks. And then part number three is like, I agree with you where you guys said. And is now no longer contributing, but also might not be saying something that they think is a risk or even a great opportunity because you have maybe two people that are really excited about it. And you don't want to say like, wow, this actually really concerns me. Cause you know, it's going to go through anyway. And the problem with that process is that you don't actually identify risks. Even if you want to do the deal, you should still really identify risks and helps the champion figure out what to focus on. So we changed our process, in a number of ways. One there's a preread just like structured. And one thing that, that, helps with is, you know, as partners, everyone has the thing they love more. And the thing that they love less. you might, for example, care less about go-to-market stress. The problem with [00:16:00] that is if you don't have like a structured preread, you just may not spend time on go to market strategy and you might dump in. You might end up in a situation where thunders are presenting to the partners and all of a sudden you realize they go to market strategies. Right. And now you have to, and you have to decide now in an investment and why maybe it was a waste of time because actually it's so bad. You don't want to do the deal, but also, it may have been something you would work on with them beforehand so that when the time it gets to the partnership meeting, actually it's evolved. So it's something you could have gotten feedback on. So kind of forces every partner to evaluate all parts of the business. You're still going to evaluate some parts better than others because that's, you know, kind of where your strengths are. But it does provide a more complete view of the company So we do that. That's should be done, ideally at least 24 hours before company presents, then we don't talk about it. And we actually do is answer a set of questions, written questions. ideally like the ideal scenario is by the next day, but you know, if it has to be in an hour, then it's. [00:17:00] But we always take the time to write down our thoughts first. And that's, you know, for the reason that I said earlier with, with that first one capital identified it, it gives everyone an equal share of voice. It allows people who maybe are less articulate verbally to demonstrate their strength in a written form because everyone's sometimes. you know, sometimes founders are so compelling that you come out of the meeting and you're like, let me write him a check. And you don't think about maybe some of the problems, like some of the potentially fundamental problems with that deal. And so it gives you a kind of a pause, you get to step back and actually think through these things. And then we discuss. And even in that, write-up, there's no voting. So we don't really talk about whether we want to do the deal until the very end. And then we talked about what the deal is, what the terms are and what we want to offer it. So it sounds like a really long process. It's actually, well, for the champion starts much earlier because they have to do their period. It can be like three, four hours, right. From meeting to term sheet.

[00:17:57] Hector: Interesting.

[00:17:57] Sitar: Yeah.

[00:17:58] Hector: Yeah. I [00:18:00] just want to jump back to the product bit just briefly because I have a really strong belief that empathy is important. Particularly early stage. And I think the product P. Is almost a proxy for that, because I think so much of early stage investing when there isn't much evidence is just thinking, putting yourself in the customer's shoes, thinking how much are these people going to want this product? As you say, loved by many, like how many people are going to want to use it. and how strong is the pain point basis? I wonder if you, whether you have found that empathy is like a common trait amongst your product focused founders and therefore it's probably quite nice meeting with these people. Interesting people getting to know them.

[00:18:42] Sitar: when we are in our thesis that middle bit crafted with love the, with love pieces where we kind of think about the founder's empathy, but it's three different parts, right? There's the problem. And then there's the users and then there's product itself. So we put product aside, you've got problem in users and[00:19:00] most times, product founders have empathy for users and problem, but you do sometimes find, founders that are just in love with the process. and they, they maybe haven't done as much user research. They just have this really strong insight or a really strong point of view. They see a problem. There's like, why is this? They're like, let me just fix this problem. Let me just, where there's an opportunity, let me capture this opportunity. And then people will see that they have a problem. Right. So they don't even they don't even do a lot of user research, sometimes none. but ultimately if you're going to design product, well, I think empathy has to be at the core of product. And I think all product teams should have a product designer. and if you are a great product designer, I think you're, you're sort of the heart and soul of that product team, because you're the one really thinking through the user journey and thinking about. What might the user be experiencing at that point? or what could the user have just come from? And now they're using your product, right? You have to really think through not just the problem you're solving, but also the user situation and the [00:20:00] context of that. They might be in I think it's, it's at the core of great product development, but founders don't always have it, when we pitched, but I think they, they absolutely put it into the core of how they develop.

[00:20:12] James: And then I was wondering if you had a thesis on or an opinion on what employee number you should move from. Found the lead product management to hiring a director of product or a head of products an add-on to that is if there are founders listening, where is the best place to hire product people?

[00:20:32] Sitar: Ooh, second, one's a really tough one. I'll start with the first one. That is a very hard question to answer. you know, oftentimes you see founders lead product for a really long time, but I think there's a difference between owning product vision and leading on product, vision, and strategy, and having a head of product. And this is what we always try to tell founders, like having someone whose job day and night is product is really [00:21:00] important. As you scale as a CEO, oftentimes it's the same. that owns product, vision, strategy, and has also sometimes the initial product manager, but especially as companies scale, you definitely have more management. as in you have to do more management, you have more fundraising, you have just other stuff that you need to be doing. And it's really important that you focus your time and attention on that. And if you don't get a head of product, your product will sell. Right, because you don't have someone who is thinking about it night and day. So you have a collection of product managers, but no one who's really organizing that, function. So that wasn't a quantitative answer. But I think it's more something where, you, you start realizing that you can't focus on it sort of as your primary focus is the right time to bring in a head of product. But I think the mistake founders make is they think that means they're now handing off product. Or product strategy. And I don't think that's true. I think product companies that are led by product founders, like they're always, always owning the product, [00:22:00] vision and product strategy, right? it's in partnership with your head of product or CPO, not, you're just on the sidelines, not involved in it. And then where do you find product people? This is actually something where we're working on. I think there's a problem in Europe that you don't have enough great product managers. In the U S you have these incredible training schools are like huge, like scale tech companies, like Facebook and Google, et cetera, like Google, basically trained product managers. And kind of spits them out with Ryan by the hundreds, which is great. we haven't had that in Europe, right? So we're now starting to see some really large tech companies that have developed huge product organizations. And what I'd love to do is get more scaled product management. Within Europe. Right? Because I think otherwise we're just, you can't wait for companies to scale up and more product managers to be trained at, come up for them. I mean, you can wait, but I think it's a bad idea to, so think there need to be more, product schools, and more ways to train product managers and bring people into the [00:23:00] discipline of product management. There are things like Silicon valley, product groups, chorus, which I've been through and actually Pietro Rory. And I took it together because we just, you know, we were like, well, we're really committed to product, but we're not going to build product, but we should really learn, best in class product management. But you can just see, like when you took that course, it's, really built for much larger, larger organizations. There isn't really something forced. I think we're starting to see some things now with like a wrench, a great product management newsletter. He's starting a course, but I think there needs to be more of that. because if software is a future that I think product is a future, and if product is a future, you need more product managers

[00:23:38] Hector: what do you think about all of the, sort of no code, low code movement? Because I think talking about this, it kind of makes me think. The job of a product manager is kind of becoming more accessible because anyone. is able to experiment with ideas and, release MVP is using low code, no code. and I think maybe that kind of feeds into what you're saying. Maybe this is the training. Maybe people [00:24:00] sat at home like hacking things away, like building little fun things outside their day-to-day job. Maybe that is sort of the training and people iterating and getting those skills, just using tools that are like.

[00:24:11] Sitar: I think being able to kind of get stuck in and build things is becoming a lot easier. But when you look at the craft of product development, there's a lot around, for example, user research or how to design a great experiment, and what you should be experimenting with and what, what kind of risk to take, how to define what a great experiment is I could give you all the no-code tools in the world, but you still won't learn. Or you might learn, but like, it'll take you a really long time by making a bunch of mistakes. And so I think there's just a lot of easy wins there. Like we've backed some funders that just, they don't experiment. They just go and build things. you know, engineering is the most expensive resource within a company. Why would you ever build anything without testing it first? And you gotta have all the intuition insight in the world, but really it's some of the basic, basic testing before you start putting things into code can save you a ton. [00:25:00] Or, or they do in a different direction than what you thought was the right answer. I think the craft of product management is still something that people should learn. I don't think it's particularly hard necessarily. Right. I mean, there is, there's just really good kind of guidelines and knowledge about, about what you should be doing. There's a lot of noise, but I think we can kind of filter through that. And so one of the things we're doing at connected, so we, we've just hired a product. So I can't say who it is yet. but it's someone who has a ton of experience at a number of scale startups within Europe. and one of his role is internally is to, help us source more great product founders, to super excited about tell us a valuable. evaluate companies as we're kind of getting close to championing them, but his lens will be around product mindset, product skills. How are they thinking about the product or if they've hired a people in Germany already within the organization, evaluating them, but then also working with each of our portfolio companies, because even, if you're an experienced [00:26:00] product, founder scaling a product company is probably something you haven't. And so your question James, about when do you bring in a head of product? A great question for our product partner to be working with our phone on. And one of the reasons we wanted to bring in someone versus us do it is one is knowledge and experience. And two, I think product founders are more likely to listen to someone who has the knowledge experience and frankly, And so that was a really important hire, I think he's starting August 9th. so we're really excited about that. And it will be exactly something that I have some portfolio companies where I've been pushing them to get a CPO in for awhile. And I'm like, I don't think I'll ever win this fight, but I think like our product partner might be able to help me out a bit on this one. And I think rather than me push that Boulder up hill anymore, I'm just going to let, I can't say the name, but I'm just going to let him do it, and it'll probably be more successful as it is.

[00:26:55] James: Yeah, absolutely. That's a great hire. I think, there's a couple of [00:27:00] firms that have started to have a sort of head of product on the team, which is really cool. what's your opinion on, access to talent in the UK and offshoring as a strategy, whether it be a hybrid model or complete offshore product team, How do you see that what's your kind of gut feeling as an investor when you realize that the team's not in the UK, what's your kind of opinion on that?

[00:27:27] Sitar: So what we look for an it company to be back is to have in-house development, but in-house development doesn't mean they're co-located with you. So we have a number of companies that are distributed actually in the portfolio. Started over the last year plus. And so they just took advantage of the fact that everyone was remote anyway, and others kind of did it by design. So they've been remote first. They've been distributed for years and they've distributed from the beginning. and I actually think the question now is not whether you offshore or not. [00:28:00] It's really do you have in-house development or not? And then what's the structure of your company? Is it distributed? Is it co located or is it whatever hybrid is going to end up being, which I think no one actually knows. and we have a number of companies now that are distributed and we have one company in particular called oyster that actually helps you hire people from around the world, wherever they are. a lot of the headache around hiring people in other geographies is the admin payroll, HR bureaucracy oyster takes all of that away in terms of into software. And so you can hire anyone in a number of countries around the world and they're increasing, which country is going have every, every month. so I think increasingly it will be that it will be, if you choose to use outsource developers, I think you, you can't really be a product company, or it's very hard to argue that you are a product company. Unless what you've chosen to do is to say we have a fully dedicated team they're just based in X country. [00:29:00] And we actually have a couple of companies that have done that as well. They have a fully dedicated engineering team just based in another country. So coming to invest in recently Wolf founders in San Francisco, and there was a couple of people in Boston. The engineering team is in Ukraine, but the CTO is a full-time employee of, of Wolf. And the engineering team are full-time employees of Wolf. And I have not, no problem with that, with that, situation. I think talent is evenly distributed around the world. Opportunity is not. I don't think it makes sense to just hire people in London all the time for your company, because actually you're probably not hiring the best. And even if you are, you're paying through the nose, But you should, find the best talent for your company if you are okay with a distributed team. And I know not all founders are, I used to be really uncomfortable with that because I like some of the magic that comes from being co-located. But I think there's increasing software that actually helps you recreate some of that. Some of the spontaneous conversations, I think when you're going to see more investment in that [00:30:00] area. So when you're going to see more and more remote companies, And there is definitely a future where remote distributed companies are much stronger, then co-located companies a long winding answer. But like, if I were just entering your question of offshore development, if you're a tech and product team is not part on a full-time part of your company, I wouldn't consider it.

[00:30:22] Hector: That's super interesting in the edit. We'll just go back and scratch out oyster and replace it with omnipresent, but that's absolutely fine. That's good. I wonder what, what excites you about the next five or 10 years in VC and maybe in, life in general in the world?

[00:30:39] Sitar: so in venture, I think casinos last 10, if I'm the last 10 years in venture in Europe, really dynamic. Really exciting. If I think back to I'm going to date myself now, I moved to London in 2005. you wouldn't recognize the intimacy as it was, then it was all closed doors. Everyone wore suits all the [00:31:00] time. people were kind of standoffish a little bit snobby. It was really hard to get in front of a VC. I had a shocking number of meetings with people that were just friends of a party. So they were like kids that were friends of a partner. And I was like, so this is how you get in front of a VC. You know, it was like the worst possible companies you were looking at, but you had to do it because there was a relationship there. And yeah, like people that were genuinely good funders really struggled to get funding. I mean, I've known some of these guys for like 15, 15, 16 years, and they really struggled to get funding. And meanwhile, there is this new generation of VCs, which at the time. Rushma was that I think 3i and Carlos and I were at Dowdy Henson. And at the time Chris Morton, who now runs list was that Boulder tin. And there's a number of us. And we worked in a completely different way than everyone else. and for a while there was sort of like this, this kind of double venture market where we would see where the exciting stuff, and then it couldn't get. You know, and it was, so it was a little bit [00:32:00] depressing, but then after a few years, I think the U S example really changed people's mindsets. I mean initially, like European venture funds were really hesitant to invest in internet businesses. Like sounds crazy just to say it, but they weren't the fund I worked at didn't understand SAS. They just thought software should be like on-premise and you know, they weren't dumb. It just they'd worked in technology for 20 years and they just weren't seeing the market shift. If I would get venture now, I think it's far more, open-minded far more diverse. For a younger and that's not ages. it just, it is younger. There's a, there's a much greater spread, I think. Or, you know, the standard deviation of VCs is just a much, much higher. It wasn't as high when I started. and it's easier to get into venture, which I think is great because it brings different people in different backgrounds, into venture. and there's way more venture products. And people don't think about this, but before you were like, Raising friends and family, which isn't a thing most people can [00:33:00] do. And it really privileges some people over others. And then you went to go and speak to a VC who wanted, I mean, back then a series a, it was like two and a half or 3 million. So that part of the market's really changed. Uh, but they wanted to see, you know, a lot of traction, they would oftentimes put in a CEO. On like the founders would be founders, but they would immediately bring in a professional CEO even at the really early stage. and so I, you know, I think a lot of that stuff has changed for the better, there is, way more money available all along the spectrum. The U S takes a European venture a lot more seriously. And I think for the next 10 years, that's only going to keep going. Right. I think we're going to see more and more ways to finance a company. I think we're going to see. More exits or IPO's. Oh, I hope IPO's. And not just exits that lead to more angels and more people becoming a millionaire millionaires through joining a startup. So joining a startup will be more and more, attractive, but I think there's only going to be [00:34:00] more big opportunities to tackle and because the roads have become quite flat, especially during Corona. I think you're going to see more of these big companies built out of. even more than in the past 10 years, which has actually been quite impressive. if you think, like what was there, in the previous 10 years versus the last 10 years?

[00:34:19] Hector: Yeah, I think that's an interesting one. The whole exit founders becoming Asian investors, because I think there is going to be. Shake up and the sort of early stage ecosystem is going to become far more distributed with kind of almost X operators acting as microphones. And I'm sure over time, if you just extrapolate out from that and perhaps they start replacing the seed buttons, the series that he finds it, and maybe, you know, this is probably looking way into the future, but I think things will look very good.

[00:34:44] Sitar: Yeah, it's true. And know, one thing that is interesting is you look at the U S as like, it used to be U S was like 20 years ahead. I think we've closed that gap a bit, but it's definitely still a few years ahead. I think, particularly on this point where you see founder and operator. You know, in the [00:35:00] hundreds, in the UFS, everyone has a fund and sometimes it's their own money, but oftentimes they're also raising LP money and really competing with LPs as a venture fund. and I think that's going to happen in Europe as well. And, I think it's good for VCs, right? Cause it, it keeps the market competitive. It keeps you on your, on your toes. and I think that's a, that's a good thing because otherwise you become stagnant and you don't innovate and that's not a good friend.

[00:35:23] James: Yeah, absolutely. And I wondered if you had an opinion on, angels sitting on boards we did a recording recently with a sort of super angel. He feels that kind of first time founder experience is really valuable to the founders, but increasingly we're seeing kind of VC. The edging, those people out and kind of dominating boards. how do you guys approach that and what do you see as like a good board makeup up to series a level?

[00:35:53] Sitar: the term board is also like quite a heavy word to be using at seed. I think of it more as you're kind of getting [00:36:00] together with founders. Once every month to talk about the big strategic problems the company has to deal with. And what are the problems that we could maybe unfuck sooner rather than later, there's very little like governance or kind of stuff that you actually have to do at the seed stage with the board. So there's not often you're taking board level decisions. So I think it would be more as like who are the smart people that are really involved with the company that we could get her on the team. You know, they're really, really interested in and have the time and the commitment to do it. so there's the technical question of what is a board to makeup? I think it tends to be your lead seed investor. And if you have two founders or three, if it's the founders, right, and a board should reflect shareholding in the company. And if a board is really is ultimately going to be governance, it should reflect shareholding in the company and founder. What obviously control shareholding at seed stage. And so they should control the board. but the question of who is in the room and who should be there, I actually think it should be, the [00:37:00] smallest group of people you can get that also the most interested in committed. If it gets too big, it becomes exponentially harder to organize and maybe less useful because everyone kind of has to say something. But I think there's definitely an optimal number of them. From a practical standpoint, we have a number of companies that have an angel investor and experienced operator angel investor on the board. We love them. Like we have a great experience with that actually. And I, generally like either any DS, or an experienced operator to be on the board. I think it's really, really helpful. what it doesn't do is, is give someone who's, maybe financially distracted. Our voice on the board because in angel is usually a pretty significant shareholder as well. but we haven't seen what you're seeing, which is like an angel kind of getting, pushed out of the board or shut out of the company. But I will say we also don't have many, companies where from a technical board seat standpoint, it's anyone other than the lead investor or the.

[00:37:59] Hector: Brilliant. I think [00:38:00] we could talk for hours, but we have to keep it to time, unfortunately. but we told you a little bit about it earlier, but we, we do like to play the business lunch game, with our guests. So, I wonder which three people, if you have three people you would invite to a business lunch,

[00:38:15] Sitar: yeah. I'm really glad you actually told me this in advance. Cause I would have really struggled with this on the spot. This is actually the one that I spent the most time. so three, I would, I just realized they all start with D so Daniel Conaman, who were thinking fast and slow at and over other books about decision-making. And I think decision-making is the core of the VC's job and he's written brilliantly on it. And so I'd love to talk to him more about that, Dieter wrongs, who is a designer. I think he's the best designer of all time. his 10 commandments of good design are timeless and they apply to all products, whether it's hardware or software or service, like just his 10 kimonos of good designer are, are excellent. And then David Ogilvy, who [00:39:00] is like the father of modern advertising, think tech companies in general. And I know I'm guilty of this. I in particular don't appreciate sales, marketing and brand nearly enough. And I actually think product. Don't appreciate sales, marketing, and brand nearly enough. You know, they just think like build it and they will come and that's not actually how companies are built. And so, reading him has really helped me appreciate and understand the role of, marketing brand and sales a lot more.

[00:39:27] James: well, that's really interesting. We definitely haven't had David over B, so that's a, that's a good one. and yeah, I mean, again, as I said, I'm sure we could dive into a whole conversation or I'm frowning unappetizing. but there's no really interesting people.

[00:39:43] Hector: Brilliant. Thank you so much. So we've absolutely loved having on, it's been a pleasure and super insightful hearing about all the. Paul's of your career and insights into product, et cetera, et cetera. So, yeah, really enjoyed it. And thank you for coming on.

[00:39:55] Sitar: It's been my pleasure. I really enjoyed it as well. Thanks. [00:40:00]

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