Full transcript: Carlos Espinal on London Real
0:20 All right, guys. Podcast, here we go. Guys, let’s do this. This is Silicon Real, the video podcast dedicated to the people of the London technology startup scene. I am Brian Rose.
0:30 I also host London Real, which is a similar three-person trialogue format. We just had Bruce Perry from the BBC series Tribe on here last week. He was talking about jungles and drinking IA and all sorts of crazy stuff. We’ve had Tim Ferriss from The 4-Hour Workweek. We had drug smuggler Howard Marks sitting in that chair.
0:46 Carlos, so you’re in good company. But today we’re talking about Silicon Real. My co-host, say, is my man, Mr Bryce Keane, good founder and director of Al Beond Drive. He is also a member and co-founder of the Three Beards. Indeed.
0:58 Um, it’s a good-looking beard. I’m not going to say it’s the best beard. It’s all the best beard. Um, but three of us, yeah, you all have equally best beards. Um, if you don’t know the Three Beards, they run the weekly Silicon Drinkabout, which is usually right near this very office in the Silicon Roundabout.
1:15 It’s free. It’s fun. It’s casual. You can show up and have a good conversation, so those are always awesome. You also have your Digital Sizzles, which are quarterly, Don’t Pitch Me Bros, which are monthly, and Chew the Fat.
1:25 Number three is coming up next month, right? Yes, it is mid-November with a. Okay, everyone’s saying great things about Chew the Fat. So, so um, awesome. Man, thanks for being here.
1:31 Thanks for having me back. It’s good to be back. Cool. Dude. Our guest today is Mr Carlos Eduardo Espinal, who is a partner at SeedCamp.
1:39 Sexy name, that is a good name. Um, which is uh, SeedCamp is Europe’s leading micro-seed investment and mentoring program, as far as I understand. You started in 2007, and you now include over 90, I think, of Europe’s most promising startups. I think your standard investment is 50,000, or pounds, for about 8 to 10% of a company. Is that about right?
2:00 It’s about right. And you sign about 20 new startups every year. It’s about right. Yeah, about right. Okay, cool.
2:04 I do a little bit of research, so uh, before that you were a venture capitalist, and then before that you were an engineer, I think, working for New York Stock Exchange, Euronext. That’s right. It’s quite a history. Welcome to Silicon Real. Thanks for being here, Carlos.
2:15 Thank you. Awesome, man. You know, I’m curious if you guys are familiar with the term OG. Have you heard of this? It’s a term in the hood.
2:22 If you put, if you put an M in it, I’m MOG. OMG, OMG, that’s good. OG is a term in the hood for, or gangster. It’s like a term of respect shown to, like, the guys back in the day, you know, the gang bangers that made it all happen. And, you know, I thought of that when I thought of SeedCamp.
2:37 These guys have been here with since ’07, you know. I mean, that’s a long time, you know, that’s back in the day when the roundabout probably had, you know, tumbleweeds and gunfights and stuff. And so I wanted to ask, you know, Carlos, is that the first time you’ve been referred to as Original Gangster? Carlos, I’m Latin American, called a gangster. It’s got other repercussions.
2:55 Yeah, okay, fair enough. There could be some lawsuits. I love that lawsuit. But, you know, we hear incubation and acceleration. We’ve had lots of people through here, but we haven’t had a lot of people that have been doing this for six years.
3:07 So I was wondering if you could tell us, you know, from what you’ve seen over the last six years, what’s the state of the union when it comes to seed investing in London? How has it changed, and what’s going on right now? Yeah, no, it’s a good question. The evolution of all this. Um, there’s actually two evolutions, if you want to talk about them.
3:24 There’s one is kind of the overall ecosystem, and another one is of stuff like what SeedCamp is, right? Because people sometimes throw this term accelerator or incubator, and they kind of use them interchangeably, but they’re actually not the same thing, and the incubator wave had its roots, you know, in the late ’90s, and that’s a whole different thing. We can talk about it if you want. Yes, I would like that, because we do lump them together all the time, and I don’t think, especially newbies like myself, we don’t know the exact differences.
3:50 But then, but then, sort of, your original question was like, sort of in 2007, what was things like? And, you know, if you look back, at the cost of starting a startup back in, let’s say, early, early 2000s, you know, it was really high, right? You had to buy your own infrastructure, your own hardware. You had a huge amount of sort of build before you can even test it put it out there, and you could argue that the economy of scale of the cloud services coming online, late 2007 and 2006, you really started having the context in which you could have these startups start, test things out, see if there’s a customer base, and then scale it if there is one.
4:35 And on that basis, you started having a whole bunch of startups popping up that just didn’t have the capital to make it happen, and that’s kind of where SeedCamp was born. So here, there was a lot of, um, obviously there was, there were investors, and they were looking for deals, and there were deals to be had, but they tended to gravitate towards the sort of more established kind of company that already had some level of traction, that already had some level of monetization. There was a clear business plan and a business strategy.
5:05 There wasn’t that much of, like, I have an awesome idea, I can bang out, put it together and test out whether or not customers really want it, and then look for a certain amount of money just to get me to that next phase. That didn’t exist. And so, two, in 2007, um, Rashma and Saul had this sort of idea of, well, let’s bring together all the investors from the community and provide that support in the way of a SeedCamp. Uh, it was a one-off event, a year at that time.
5:37 It was just designed to bring everybody into the room. So the original one had pretty much the entire ecosystem show up, and it was around basically how do we support these young guys that want to have some cash to, like, test it out, see how it goes? And, um, it’s amazing to see kind of how those companies are different from the ones that are today. You know, they were really the pioneers, because they were testing things out very lean before lean was cool, and they were testing these things out with very low cash and getting it to the market, and sometimes before their time.
6:12 If you look at one of our companies that we sold recently was called Rent Mine Online, which we sold to RealPage. It was collaborative consumption before collaborative consumption was cool. You know, Airbnb made that cool, but it was stuff that didn’t exist, but we enabled it to happen. So I wouldn’t say it was like the Wild West. It is just the cost basis globally to build a startup on the cheap, or cheapish, was just not possible technologically until that time started coming around, and then from that point onwards SeedCamp was, whereas in the US you had YC and maybe a few other organizations that were doing this in every state.
6:48 Maybe to some extent we were the only ones in Europe, which obviously is indicative of maybe the state of things in those days. And then, yeah, then we helped scale that. And of course SeedCamp has evolved over the years, and we’ve gone from one event a year to 12 events a year. To, you know, I think this year we’ve, we’ve probably going to hit 20 or so. Um, and in each one of those, you know, we meet tons of new companies.
7:12 We meet about, we get about 2,000 plus applicants a year, 200, which we’ll meet in person, and about 20 or 30 that we’ll invest in. So that just kind of gives you a feeling for that evolution. But the origins, back in 2007? Okay. And if, can you just set the record straight for the difference between incubator and an accelerator, and maybe that definition has changed over time too?
7:34 Yeah. So the original idea behind an incubator, like in the late ’90s, was like, let’s create a co-working space of sorts, and I’m going to provide you some assets around that. And the subtlety of why there was this implosion of incubators back then, um, was really clarified for me recently when I was at the Turing Festival in Scotland. And somebody gave, I forget who it was, but basically had studied why the failure of the startups in incubators, and it turned out that it had to do with a psychological issue, which was that you tend to gravitate towards staying within a close-knit group, especially when you’re going through a lot of stress.
8:15 And what was happening was that incubators were creating a nest where nobody had to leave, and that nest allowed for companies to necessarily expand out of that nest, so they gravitated towards staying in that nest, because it was a comfortable environment. You had your friends, you had the water cooler, you’d have conversation, and it was a study that he had done of a lot of the cases of startups during that period. The accelerator is slightly different beast, in the sense that it is designed to literally get you out of the nest, and so yes, there is a period when you are, in effect, incubated, but it’s only for a very short period of time, but the intent isn’t to keep you there indefinitely.
8:54 The intent isn’t to provide a nest, a warm place for you to stay indefinitely. The point is to get you out, to grow, to scale, to push the limits, to learn everything you need to learn to scale your company, to get you to product-market fit, and push you out. And so that’s kind of what we focus on. And there is, there is then probably fracturing of what the term accelerator means these days, because there’s a lot of people that call themselves accelerators, and then maybe they’re more of an incubator, and stuff, but that’s probably the closest you can come to the differentiation between incubator and accelerator.
9:22 Is there a time limit, roughly, that makes an accelerator? Is it like, so people that don’t know, is it three months? Is it six months, that would make some more of an accelerator than an incubator? Yeah, I, I think if you look at a lot of the cross-section of accelerator programs, for some odd reason, three months seems to be that happy number. Okay.
9:39 Um, which isn’t a lot of time. It isn’t. No. Um, it is enough to, like, sort of know what you need to know and maybe do a few potential key hires before you go and venture out on your own. Okay, um, our program structure is a little differently than that, but you know, the dynamics of it tend to reflect that, which is there is a substantial amount of growth that happens beyond three, and usually it involves, one of them is expansion outside of the environment that we provide.
10:04 You know, you mentioned the implosion, the great incubator implosion. I wasn’t familiar with this. Was there a certain kind of time frame, as far as in London, where we saw kind of that market implode? You know, what I wish I could give you the names um, and I should have maybe come with a list if I had known that I was going to go through it with you. But, um, yeah, there was probably a few, a few names that you might have heard of, and, um, what kind of time period?
10:29 Like ’09, ’10, or like ’05, or no, like the late ’90s, early 2000s. You know, there was, I remember, I’m trying to remember the names right now. Maybe they’ll come to me later, but it was like a few sort of co-working SL incubator spaces that just didn’t, nothing really notable came out of them, and they just seemed to go away. Okay, so when you created SeedCamp, you were well aware of that phenomenon? Yeah, I mean, it’s something that, it, the thing is, remember, SeedCamp didn’t start on the basis of this is an accelerator.
10:57 It wasn’t like you know, sometimes people in hindsight will attribute a certain thing to the origins, but SeedCamp started as a way to provide capital and advice, uh, and validation and sort of mentoring to startups. There was no, there was no venue. For 2007, 2008, 2009, 2010, we had no venue. There was no space. SeedCamp did not have a space for the startups.
11:25 It was entirely, but you made investments. We made investments, we gave mentoring, um, we gave advice. You know, like there was this the concept of the acceleration was there, and most of that acceleration happened relatively early in the life of a company, but the real estate wasn’t there. So I mean, that just goes to prove the point of the differentiation between like a real estate play versus a sort of know-how play. Like, what I would say highly differentiates an accelerator is this, this is about the know-how.
11:54 This is about getting you the right commercial resources, the right mental mindset resources, to get you to where you need to get to, rather than providing a nice space for you, and that’s a bonus. It’s just, that’s not the objective. Okay. Understood. Understood.
12:07 There’s one thing we always ask everyone that sits down, whether they be a startup guy or a VC guy, it’s just, like, basically to get an idea of your business model. But, you know, we always ask, like, what have you done, and what are you going to do, and why, why will SeedCamp win in this space? You know, like you said, a lot of people, it’s quite trendy these days, for even these huge corporations to start their accelerator programs. And, I mean, we just had, um, in here from WeTelica.
12:30 We just had Roxanne Varza in here from Microsoft BizSpark. You know, everyone’s getting into this, right? But you guys have been out there early, but what makes SeedCamp different, and why do you, why will you win in this space? Yeah, it’s a good question, and actually it’s a question that I think is increasingly important, but it’s also one that seems to gravitate outside of proxies of other industries and how they have evolved. So let’s play with the VC industry, right?
12:56 There was the initial funds that sort of existed first, the Sequoia of the world. And then there was all the funds that exist today, which, some of them are the first in the geography, some of them are the first in a sector. Like you might say, this fund is well known for financial technologies. You know, like Anthemis, for example, might be known for financial investments in Europe. So when you have that kind of differentiation that starts occurring in any kind of evolving ecosystem, the question is, where do you, where is that you plan on being in that ecosystem?
13:29 What is the role that you intend on having? And so SeedCamp has always been about finding the best founders and backing the best founders. It will always be about finding the best founders and backing the best founders. Does that mean that sometimes we’ll invest in a health care company or a financial services company? Yeah, probably.
13:48 Right. My future is to find the best founders and back the best founders and provide them the support to get to where they need to get. That’s it. Other programs will start probably sort of going from a different angle, which is they specialize in software-as-a-service, or they might specialize in internet things, they might specialize in healthcare, and in many ways, like, the support that they will be able to offer in that will be no different than the way that the VC funds have specialized.
14:15 Right? You have VC funds that specialize in certain industrial sectors or in pharma or whatever, and the evolution of the market as a whole will be around founders choosing what they feel like they need the most. In some cases, you want to have, um, access to the network that SeedCamp has. You know, we have 104 startups now, like, that provides a valuable alumni base of people that have experience and can help you far more than sometimes, uh, sort of, um, outside parties can.
14:44 So if you look at the evolution of that, you as a founder will be like, what do I want? You know, like, I might have now the luxury, because of all the programs that are out there, to pick and choose and say, well, look, my choices are, I’d either want to go to, um, SeedCamp, or I want to go to this other program that specializes in the sector that I’m applying to, and maybe in other proxy universities. Right? Everyone, we all know that universities have a ranking, and there’s a Harvard, and there’s a Stanford, and there’s a, you know, Yale, whatever, and those schools, people will apply to that, or they’ll apply to, let’s say, the best engineering school for mechanical engineering, and, you know, whichever one they’ll get into based upon what they need.
15:24 That will go to that. So that’s kind of how I see us the whole ecosystem evolving, but in terms of us, definitely pushing for, promoting, and helping, and finding, and supporting the best founders. Okay. You know, Bryce, you’ve been in this space a lot longer than I have. When, when, when you hear the word SeedCamp, like, what are the things that you think of right away that differentiate them from the rest of the crew?
15:46 So for me, it’s always been about, and, but don’t know, this might not be true, but the word on the street, what the kids are saying, that’s what I want to hear. What the kids are saying. Take a step back. Are you a kid anymore? Not really.
15:57 Not with this beard. Um, I scare kids with this beard. That’s what I do. Uh, what the, what is SeedCamp is always kind of, I think, is always quite associated with, um, being the first of this, um, the first people to be around, invest in what I kind of call the new wave of startup culture in London. So after the original, uh, crash and the originals went out, it wasn’t until around 2007, 2008 that was about when what we are now here talking about began to really emerge, and that was when some of those bigger companies, the companies that are still around today, that, you know, the Huddle and the Mind Candy and, you know, Moo, those sorts of companies started to emerge.
16:41 And, um, SeedCamp was always, uh, was the original program, I suppose, before anyone was willing to do that early-stage investment piece. Um, I was always curious, actually. Well, I never asked this, but Rashma, who’s the founder of SeedCamp? So SeedCamp started by Rashma and Saul Klein, who’s from Index Ventures. I’m sure we’ll have Saul in here at some point soon.
17:02 We’ll have to organize that, but, um, how did they meet, and where did the idea come from? Saul’s, Index obviously is a VC, and he does a lot of, he obviously does a lot of early-stage seed investments as a VC, and I was always curious about how they met. Yeah, and, and where that, the idea came from? Cool. He’s got a fairly, um, hefty black book.
17:20 It might be fair to say, um, so I suspect he pulled in a lot of what was happening in that ecosystem in the beginning to do This. Yeah, um, it’s a good question. Um, if you look at the evolution of any industries, sort of, um, peer groups Rashma and I are in the same peer group, meaning we were both kind of in our same stage of our careers, um, and Rashma was working at 3i, and I was working at Dowy Hansen, and, um, and Rashma had a conversation with Saul, uh, in, in sort of the context of when she was at 3i, around how to help this.
18:00 It was an idea that Saul had in a conversation with Rashma, and basically the two of them worked together to organize that. Obviously, um, whenever you have two or three different people, different age groups, and different sort of cohorts of friends, you can organize across that. So I was involved early on as a mentor, because obviously being a friend with Rashma, and you know, she knew me, and obviously, uh, you know, Sit Artelli, and, like, you know, that’s kind of our vintage, if you want to think of it, but we all knew each other, and obviously we all wanted to support the initiative, and obviously Saul had a lot of his peers and cohorts in the same sort of initiative, and trying to bring that together.
18:39 So that’s kind of how the two of them collaborated and then brought the whole ecosystem together, which is really interesting, actually, because yeah, it was, it is one of those ones that, um, a lot of, a lot, a lot of the sort of, not what we would now sort of refer to as the notable founders, have have been involved in some way, either as companies or as mentors in the program. Um, it does have that, um, pedigree, I think is the right word, um, because, because it was, it was the first thing, and it was the first thing where they asked, they said we need the community to get involved in this initiative. It’s not just about us investing in companies.
19:12 It’s about all of you guys giving something back, which was at the time, I think there wasn’t really anyone else doing it at the time. Am I right? No, no, there wasn’t anything like that. No, it’s like I said, OG. Basically, o, well, we’ll have Saul on at some point.
19:25 It’s definitely an invite out to him. Um, you, you know, we have a section of the show where it’s like, we usually hit some Devil’s advocate questions, so I’m going to hit you with a real question. When can incubation hurt a company? I mean, have you guys ever looked back at your history and you’re like, yeah, we really screwed that up, as in, like, it would have been better? Acceleration, accelerator, sorry, accelerate, as if it would have been better if they would have missed us, or would have been better if they did something else?
19:50 I’m just curious if you’ve seen that. Yeah, look, having worked with 104 companies, there’s a lot of things you see, and one of the things that I’ve seen, and, you know, hasn’t happened very often, but is sometimes you can accelerate something that isn’t quite there. Um, sometimes there is this drive when you’re in a program that you just want to perform, you want to perform, and you might go down a particular path as fast as you can without taking a step back.
20:23 Now we have learned from those experiences, so a lot of what the SeedCamp program is today is already, it sort of has a certain set of checks and balances so that nobody finds themselves, but in a few instances earlier on, in sort of the SeedCamp’s learning process, because in a way we’re a startup as well, and we’re iterating and learning from our customers, and the founders are our customers, and they tell us, hey, look, you know, going down this path of, like, building out my, you know, in this case it was that they were really pushing hard on getting adoption from a specific user group, but they had a high cost, a cost of acquisition for that user group. They were going down that path in hopes to get traction, but frankly they hadn’t thought through the entire process of whether it was a scalable cost of acquisition process.
21:05 And so we’ve now sort of amended how it is that we introduce certain topics, so that the teams have a feeling for, actually, wait a second, is this a scalable process that I can test out? Because you obviously, you’re not going to go and build it, uh, just monolithically before you you’ve had any kind of validation, but at the same time, not running towards a wall and hitting it and then finding yourself out of cash and being like, wait a second, what happened there? You know, yes, I received all this great advice from all these people, but I implemented it on something that I had yet to really test out and validate.
21:37 And a lot of this stuff, like, you look at the evolution of the ecosystem over the last six, seven years, there’s a lot of know-how that’s been put into it in the last three, um, just from a lot of people taking that, learnings from the first three, and then sort of quantifying it, putting a framework around it, writing books on it, and stuff like that, and that’s also helped quite a bit. So yeah, there’s definitely moments like that where you’re like, well, it’s hard to accelerate something that isn’t quite there yet. Right?
22:06 I was looking through your blog, and it seems like you really fine-tune this, and, like, you, it seems like you really want to get the company to think about, like, exactly how they’re providing value to the customer, because, like, if you can’t provide that, then you can’t quantify that and scale that, as opposed to someone coming in that’s like, I’m going to make a ton of money, or we’re going to do what those guys are doing, but better. It seems like the more you get down to, like, the spirit of what you’re building, the more success rate you have. Is that right, or is it not that simple?
22:34 No. I mean, obviously, look, it’s never simple, right? There’s always tons of things that throw it off. Like, it could be you could be going down really well, then all of a sudden your developer quits. I mean, there’s all sorts of things that happen.
22:45 It’s always a very fluid situation, but if you don’t have clear in your mind who your customer is, and therefore what it is that you’re building, and how you’re communicating to that customer, what it is that you’ve built, then clearly you’re going to go sideways. As an example, I think early on sometimes startups get traction from two or three different types of customer segments, and they might be, uh, confusing, not the right word, but you’re, uh, tempted to go after two or three different things, because you’re hedging your bets, right? But if you look at most things that deliver value, it’s like you kind of have to put a certain level of momentum behind the one that you truly believe, because otherwise you’re wasting resources on things that might not necessarily go anywhere.
23:31 And so, you know, we, I remember one case where companies were, yeah, they were doing that. They were kind of going through two or three different things all at the same time and inefficiently, so versus sort of going after one group of customers that they really truly understand, that were really passionate about what they were doing, and that you could really build something for that user group, rather than trying to be everything for everyone. Right?
23:51 Put all your eggs in one basket. That’s what you guys want them to do. Right, basically you have to be something for someone. You know, like, I mean, that’s putting Exile bass is, I guess, one way of looking at it, but it basically has to be something for someone versus everything for everyone. You just can’t do that with limited resources.
24:05 Okay, Bryce, you’ve had experience seeing, you know, companies accelerated and incubated over the years. I mean, what what you know, what question do you have as far as the process, or what goes on in there? Actually, I was thinking about, like, the 50,000 or Euros. If you had to go back and do all the accounting on, like, where that money went for each company. I mean, if you had to roughly break it down by thirds or something, I’m curious what it goes to, you know, because it’s not to space or Sal or everything.
24:28 I’ve wondered about this, because, like, you think about, like, say in London, you know, and most of these companies average teams of maybe two to four, average being three. I would say usually, on the sort of, when you go into the accelerator program, usually three or four. It’s like that’s not going to, that’s not going to go very far. Like, that, you know, that’s not a lot of money. It’s like one person’s salary.
24:47 Where does it go? Usually, I mean, so I’ll, I’ll answer that question, um, but I’ll comment on something you said earlier, um, which is around sort of the blog pieces that I’ve written. Each blog piece I’ve written has been a function of certain stories or certain things that have happened, and that I’ve witnessed, and therefore these things are designed. These blog posts are designed to avoid those things in the future. Um, mistakes cost money, so therefore making that money go further involves you making fewer mistakes.
25:19 And then there’s certain kinds of mistakes that are totally normal as part of the company’s evolution. Right? Is this customer segment interested? Is this marketing channel appropriate, or is this one? Now, all those things are kind of normal.
25:30 What’s not normal is, did you have to pay a ridiculously high legal fee because you screwed up the way that you set up your company? Like, that’s why some of the blog posts have been around that. So assume for a second that you get everything in terms of, uh, company formation, founder agreements, and all that kind of stuff set up. Right? Then all you’re doing is focusing money on building out a team or maintaining a team until you can get your next round of financing.
25:55 So the, the 50,000 um, is really designed mostly in getting that market traction, that product-market fit, required to go and raise an additional round of capital. It’s not designed to hold you off for, like, another year or so. Um, obviously, if you’re just one guy, it goes further than if you’re four guys, but increasingly, um, founders are telling us that it’s not really about the money as much as it is about the mentoring and the advice and the network.
26:23 So the money definitely is a factor for, for, for some. 50,000 definitely can help, for several companies, that, you know, maybe it’s a young founding team and they need to move to London, and they need to, like, do, do a lot of, um, sort of setup costs. But we do provide them with some space at, at, uh, at our offices. We also have a €150,000 Founders Pack which we offer to companies, so that reduces their cash burn as well. That includes stuff like accounting services, legal services, hosting services.
26:53 So the net-net effect is you’re basically using 50,000 for living expenses, really. Okay, so goes to salaries, really, and living. The, the program itself is designed to try to reduce the amount of costs, and then provide you with services that further reduce your operational cost, and then you’re left with, yeah, food, lodging. So it doesn’t go into customer acquisition, or it doesn’t go into a developer or coding or marketing or any of that stuff. It could, it could, some of it could.
27:19 Right? I mean, it’s up to them how they choose to use it. Um, but the, the objective is that hopefully with a lot of the, um, uh, packages that we have within our Founders Pack, that a lot of that could be offset by that. So the Founders Pack is an additional $150,000 of value you give them through agreements you have with other service companies. That’s right.
27:39 Okay, so it’s more than just the 50, ‘cuz that seems like it would go quick. That’s, yeah, that’s interesting. Is that, I didn’t know that, actually, that you had the extra package? Was that widely known? That’s, yeah, it’s on our website.
27:49 I actually, I think we also have a few listings of the people that provide us stuff. I mean, you know, we have some great partners, um, that provide us, you know, like, I’ll give you an example, like Rackspace, you know, like hosting, you know, that kind of stuff, where you’ll, you know, Amazon, you know, where, like, you’re going to have to use that, you’re going to have to pay some Amazon Web Services credits at some point. So it’s great if you get some sponsorship there.
28:11 So it’s great for the companies not to have to use that money to test out, for example, other forms of customer acquisition, rather than worrying about necessarily covering certain sort of fundamental costs of operation. Okay, I’m curious if you just walk me through, like, two scenarios. Like, if a company just signed with you, and you’re going to accelerate them for the next three months, like, what would be the most ideal way to part company, and what would be, like, the worst way to part company?
28:34 Like, what’s, like, the dream scenario, and then, like, what’s the worst thing that happens, as in, like, you have to call the police to get them out of your space, or what are those two extremes? ‘Cuz I don’t know, they show up at your house in the middle of the night, you know, tucking you into bed. Yeah, I mean, look, the best one is the easy one, right? Like, um, we’ve had some companies that are doing amazingly well, and then they get, you know, backed by a seed investor, angel, or VC within a month or two months, and then, you know, they’ll go and they’ll scale their team, whether it’s in a different office here in the roundabout, or if it’s in the US, that’s awesome, right?
29:06 That’s, like, okay, that’s what you’re looking for. Yeah, and then the worst, really, actually, um, there isn’t really, there hasn’t been a case like that. I mean, it’s funny, because, uh, some of the guys that do come back and, like, kind of hang out and, uh, they’re usually, I mean, you, you like everybody, so it’s not like you, you mind too much, but at the same time, most of the time the companies do evolve out of it. So there’s never, there’s never, I can’t think of a single case where I’ve had to say, hey, guys, come on, your time’s up, please get out.
29:35 I mind you that we only started having physical space, as I mentioned earlier, since 2010, so a lot of the older companies already had their space anyway. So there hasn’t been that kind of situation. Now, maybe a darker side, or maybe kind of, sort of, subset of your question was, well, what happens if a company isn’t doing well? Well, I mean, there are companies that have, you know, obviously shut down, or that they couldn’t hit, uh, a product-market fit, and then they just close shop, and then that’s, you know, we’ll have a postmortem, and, you know, they’ll share their thoughts and learnings with the other SeedCamp teams.
30:06 But it is what it is, and nine times out of 10 they’ll start another startup, and they’re just as adamant about getting involved again. So, you know, um, so you’re very clear with them. You’re like, here’s 50 grand, here’s three months, that’s it. You can’t come back for another 50. You can’t come back for more time.
30:22 The three months, I think, as I mentioned that number earlier, it’s actually, I said our program was slightly different, so I’ll just give you kind of a feel for how our program is different. The three months is something that is kind of a construct from the industry. People think that three months is kind of the thing. Um, three months is indicative of like the largest portion of growth, so that’s when, like, a lot of the mentoring, a lot of the advice, and all that kind of stuff happens, but it doesn’t stop there.
30:47 It just tends to sort of level off. So we have, kind of think about it as, like, a rolling university. We have, for the rest of the lifetime of the startup, we offer them to attend any of our monthly sessions. So the equivalent of what they went through on the first three months, they can continue to attend over the course of the lifetime of their company. There is no stop date.
31:09 What ends up happening is that the more mature the company gets, they tend to send, like, their VP of sales or whatever, so the, the founders may not necessarily go anymore, but they’ll send their employee who would benefit from the specific session. So there is an evolution there, but the good thing is that sometimes those founders that become more senior come and share their thoughts with the younger companies. So it becomes an evolution. The next milestone is usually around the six-month mark, when we take our companies on the trip of the United States, which I just came back from.
31:37 So we’ll go to New York, we’ll go to Boston, we’ll go to San Francisco, we’ll go to Silicon Valley, we’ll meet with, uh, VCs, with corporates, with other startups, and usually at that point, like, the startup, that our startup that has been in the program for about six months kind of gets what they need to be doing, kind of understands what they need to do, and then they can really take full advantage of the US trip. Post-US trip, they tend to kind of already grow into the maturity stage, at which point they either continue coming to the sessions that they want to come to, um, or they send somebody from their team to go to it. You know, like, when we had Eric Ries attend, uh, one of our sessions, pretty much everybody, whether they were a 2007 company or, you know, a 2012, I think it was, uh, company, just, they all came.
32:22 They wanted to listen to them. So there is no artificial cut-off point. It just happens to be that the most learned learnings and growth happen within the first three months. But do you physically kick them out of the space at some point? Are you, are you, um, usually the new, yeah, usually the new company say, hey guys, I need desk space, but, um, usually they grow out of it before then.
32:39 Okay, so it’s, it’s, because we invest on a quarterly basis, so basically by the end of the quarter, which is, you obviously, the companies that were already in there already started having more than three or four employees, five employees, then the space that we have allocated for them tends to be too small anyway, so they move out on their own. Okay, I think one team, and if you’re listening, you know who you are, get out, get out. Um, but they did get out.
33:02 What’s been, what’s been some of your, um, some of your biggest uh, success stories, and then to come out of the program, uh, company was, and what have been, so, of, you mentioned 104, 104, and how many of those are still going? Of that 104? Yeah, uh, good question. Um, so we have, um, if you really want to get the full breakdown, on our website, we have an infographic, and it’s broken down. I don’t have it fully memorized, so I’m going to basically give you the rough numbers, but in terms of, sort of, the companies that kind of stand out, um, obviously we’ve had two that, that, that I mentioned.
33:39 I mentioned one of them, uh, one was Mobclix, which we sold to Velti, and one was RealPage, which, sorry, um, Rent Mine Online, which we sold to RealPage, and I mentioned that Rent Mine Online was kind of like an early form of collaborative consumption, and the story of Ed Spiegel, who’s the founder of it, is actually quite a cool story. He was a DC at DFJ, and, uh, ended up being a founder, and then having the company basically go to the ground, him having to move in with his mom, and then basically having a slight sort of pivot into a different sector, and then it took off. And so, you know, those are the kinds of stories where, you know, they obviously it was a successful exit, and it did well for everyone, but the story there is the kind of story that you know, really inspires a lot of, a lot of startups.
34:28 Um, on the flip side, there’s companies that, um, you know, are still sort of operational, are going, and are doing really well. Um, that, in terms of when people say, well, you know, what’s a success? Well, success is that they’re serving a need in the marketplace. I was, um, uh, in the tube the other day, and I, there was one company, um, which, uh, you might have heard of, TransferWise. Yeah, they were here, ss ago, sat in that chair.
34:56 So I’m, I’m sitting there in the tube, uh, at Bank station, and I see, you know, like daylight robbery, there’s this poster, and it says TransferWise, you know, don’t get, don’t get, be, don’t be a victim of daylight robbery or something like that, and I’m thinking, wow, like, a SeedCamp company’s advertising on the Metro. That’s amazing. You know, it’s like, it’s that much value to the end user that it becomes a mass-market thing, like you can’t help but be proud of that and be, like, amazed by that, and that progress.
35:22 Right? Um, another one of them is Farmeron, which is, um, a company that measures the success by cows in the cloud. It’s software as a service for farms, and effectively it allows farmers to track performance of their livestock and you know how it is that you need to sell livestock based upon whether or not they’ve been vaccinated or not, weight, etc. So it’s a very sort of yield-management, uh, yield-optimization software as a service. And you think, you know, this is the kind of thing that, you know, seems obvious now, but it’s, it’s this kind of thing that was started by somebody in Croatia that we met when we were at the Slovenia event.
36:02 Founder is a farmer himself, and, you know, built something that was a need for himself, and then now, you know, he’s backed by the likes of 500 Startups, SoftTech, you know, uh, Index, and so you’re thinking, like, wow, this is, you know, this is amazing, this is really changing a whole industry. Um, and so, you know, those are the kinds of companies where you’re proud of, and, you know, they’re going to do well regardless. You know, okay, you, there was an article today in the New York Times International Edition called Technology on TS, and it was talking about the London tech scene, and apparently Mayor Bloomberg recently said that there’s going to be more competition coming from London than there is from Silicon Valley when it comes to, you know, the Alley in New York.
36:40 But, you know, everyone keeps talking about the big exit. There’s talk now of King.com, you know, filing their IPO in the US, potential billion dollars. Carlos, do you think we need a big exit in London, or do you think that whole line of thinking is wrong, especially from the stage you start? I mean, you start these, these, these guys early. Yeah, so the, the big exit has two implications.
37:05 Um, the big exit has one implication, which is the psychological implication. Right? We can do it. Like, this is something that has been done. Here’s a big one, and obviously there’s been, um, big stories that you have in in in Europe, you know, Skype, etc., and you have some that are teeing up to be that way, you know, SoundCloud, for example.
37:26 Um, I think that the psych, the psychological impact of a big success can’t be undermined. Like, that is clearly there, but it’s entirely there for the purposes of inspiring others and being like, hey, this person can do it. Um, then there’s a second one, which is a cultural shift, right, that makes it acceptable. Like, once that success happens, it then has a knock-on effect, which makes it acceptable, because all of a sudden everyone’s chasing after the dream.
37:52 And then the third one is the unlocking of capital, right? Right now that one only happens when there’s enough of those. That then there’s a volume of that. Now they happen kind of in that order, and they don’t happen overnight, so even if you have one success, there’s still a lag period behind when you’re going to have the mindset change, and then there’s a lag further when those that have, whose mindsets have been changed, who then have been successful, then pump money back into the ecosystem, right?
38:20 So there’s a knock-on effect there. It can, you can sometimes circumvent that, meaning you can have, uh, enough money that is surfacing from other sources that then provide the capital for you to have a multiplicity of sort of medium exits, and which in turn can yield almost the same outcome. Like, you could in theory call them two equations. You can, you can either have the same thing by having something big, which has a trickle-down effect, or a series of middle things that pop up and sort of yield an overall lifting of all the boats, so to speak.
38:49 Each one of those could potentially work fine. Um, I think that, uh, having a large exit would be amazing, but I think it would, like, a lot of the initiatives that you’re seeing in the UK with SEIS tax relief is enabling for that money to surface up, therefore enabling more startups to exist, and therefore probably having a lot more experienced founders, and that has the knock-on effect of supporting that ecosystem just as fast as having one dude who does it really well and then has that sort of knock-on effect, which can take, you know, five, six years to develop. But how many years do you think we’re talking till we get that PayPal effect, you know, until we get that Facebook effect, where people actually invest those profits, you know, into the next startups?
39:26 Yeah, so that’s kind of the, if you look at both paths, one you could potentially take, um, an engineer around, the one where you enable money to be unlocked, which is kind of what the UK is doing right now, enabling all this money to be unlocked from different sources, enable a whole bunch of people to be successful, and then if they’re successful, even if it’s not a huge success, but it’s sufficient success, they’re going to reinvest it back into the ecosystem in some way, shape, or form, and then you have an overall lifting of everything. Right? The alternative is, and your question was a time one, was how long till you have a huge-type thing, like a PayPal-type thing, then you’re looking for the gestation period of any one of these massive hits to then have that person redistributed across, and I would say that’s like a five- or six-year period.
40:10 So this one could be engineered, maybe within the scope of one or two, three years. This one could be potentially not engineered, but you just have to wait for it, within five years or so. So potentially different outcomes, but numerically they might end up in the same place. Okay, fair enough. I’m going to go a bit on a personal tip and hit Carlos with a couple of questions.
40:28 We always ask people that sit here, um, Carlos, if you can make a phone call to the 20-year-old Carlos Eduardo and give that young man some advice, what would you tell him to do differently? I love this question. What would I do different? When was I, when was I doing when I was 20? Um, you know, one thing I really loved when I was 20, but, um, being from a Latin American family was kind of highly discouraged.
40:52 I really liked design, and, um, yeah, like design, like, you know, I guess now it’s UI and UX. And why was that discouraged? Well, you know, traditional Latin American family, you’re a doctor, lawyer, you know, uh, or engineer. You’re not a designer. Is not really kind of an option.
41:09 Um, and so I think when you look at the impact that design has today on just people’s understanding of a product, I, I feel like, you know, within SeedCamp I’m, I’m really lucky to have other team members who have this as a skill set, and therefore it’s useful for the teams to be able to ask different people in the team different opinions. But, man, you know, like, I remember visiting a friend of mine who was an industrial designer, and being like, this is so awesome, how do you do this, like, how do you conceive this, how do you design this? And you see the impact that software design and even just UI changes drastically change the way people interact with their software, and the yield that that has on conversion and user satisfaction.
41:51 And I’m like, man, I wish I had done more of that. Wish you had fostered that design more in yourself. Yeah, yeah, okay, all right, that’s good. I rebelled against my family, and been like, they should have studied more design. On that same note, what, um, what’s the best advice you’ve ever received?
42:07 Um, the best advice I ever received actually was from um, a friend of mine, his name is Walter Urbanc, and, uh, he was one of the guys that worked at, uh, Bolt Beranek and Newman, which were the guys that created ARPANET, the first sort of Internet in the US, and he, and his colleagues kind of came up with the first protocols and stuff. Um, and one time, remember, I was stuck in, in, um, in trying to figure out a problem when we were working together, and he, uh, basically made me go through every single little step that a TCP packet goes through to get from one computer to the next, and every time I got stuck, he would kind of make me backtrack and figure out, like, what the probable things were that led it to the next step, so if I could bridge the gap between two steps.
42:54 And that sort of way of thinking has been probably the biggest helpful thing for me in terms of advice. It’s not like a little statement like, you know, do what you love or anything like that. It was more of, like, a way of structured thinking that really, really helped in solving a lot of things, where you half the time don’t even know what the answer is, but provided you can break it down into small chunks, you can almost deal with the chunks themselves rather than feeling completely overwhelmed by the main problem.
43:23 So, like, logically go from A to B, from B to C, from C to D, not make the jump and not make assumptions. Right? Okay, that’s good advice. We haven’t heard that before. Last one is, you know, for the 20-year-old that’s listening to this on iTunes or watching us on YouTube, you, what kind of advice do you give to them?
43:37 You know, if they want to someday, you know, be funded by SeedCamp or want to be part of this whole ecosystem, what do you tell them at that age? Yeah, um, if we look at, if I look at some of the founders that we have, they’re very young. Um, they tend to definitely be bold. They usually, in some cases, self-reference customers, meaning that there’s a pain that they’re solving that they have, and therefore they’re building something to solve that. Um, but they definitely are not afraid to be self-taught and also to experiment and not necessarily, um, feel like they have to go down the prescribed path.
44:16 And so if I look at the founders that sort of stick in my head that are young, in, in sort of the SeedCamp family, they’re all very much self-taught individuals. Like, they’ve gone out of the structure of the schooling. So don’t limit yourself to what you’re being given as part of your curriculum at school or whatever. Go and explore all these other things that are out there, and, um, also pursue things that you think are actually, that you have a hunch that are actually a pain for you or for your friends or for whatever.
44:44 Just come up with something, test it out, learn about how to supplement it, and you’ll probably find, stumble upon something that’s meaningful. Good advice. What did I miss? Pry oh God, did I miss anything? He’s a mysterious man.
45:00 Okay, there’s just so many things we, we, this could be like a two-hour show. There’s a lot, we’re just basically scratching the surface. One last question then before we go. What’s the biggest mistake you see startups making, like, across the board? I mean, I know it’s very general, but you must see it happen all the time, not to mention the companies you don’t invest in.
45:17 If there’s something that you see, what is it? I think, okay, there’s different kinds of mistakes, right? There’s recoverable mistakes, and there’s mistakes that are unrecoverable. The recoverable ones are like, okay, I spent 100 bucks on AdSense, didn’t go anywhere. Okay, well, we only have 100 bucks left.
45:33 You can sometimes scrape by on another 100, 200, or 300 to fix that kind of mistake. It is a recoverable mistake. The unrecoverable mistakes and the ones that tend to screw things up catastrophically are founder-on-founder type mistakes. For example, um, two people get into an argument. Oh, who’s the one that makes the final call?
45:53 Uh, two founders get into an argument. Sounds like the beginning of some sort of, like, bar joke. Doesn’t, like, two founders get into an argument, but it, it, it really is. It’s, it’s a big problem. It’s, it’s a big problem, because sometimes you don’t necessarily know what the roles and responsibilities are between a group of people, especially, like, a team of three or four, and what to do about it.
46:16 Um, fairness in terms of equity distribution, that sort of game that can sometimes play out between people, when they’re, whether they want more, they want less, and they feel really kind of stressed about it, and whether they’re being fairly treated. All that stuff can really break apart a company. If, if, if you start having games between founders, it can really, really catastrophically fail a company. So, um, for example, one of the things that we prepared as part of trying to resolve that, in very, very, very early-stage companies before they even come to SeedCamp, we created this document called the Founders Collaboration Agreement.
46:49 It’s available for download for free on the internet. And basically it’s kind of like a, um, it’s not a contract, in the sense that it’s a shareholders’ agreement or something that you’d file at Companies House. It’s like, literally, an agreement between founders to say, look, guys, if one of us leaves, this is what we’re going to leave with. Is that fair for everyone? Great.
47:09 This is what we all are going to have. Is that fair for everyone? Great. Anything we work on here is going to be assigned to the company, so that nobody walks away with it and creates another startup. Are we all all right on that?
47:19 Okay, we’re going to assign all the intellectual property. We cool with that? And if you just tackle those two, three, four major issues, you tend to just park that in your mind, and then that’s it. You don’t have to worry about that anymore. But if you don’t, what ends up happening is that somebody’s like, well, you know, I’m putting more time than you, and you know, you’re not doing as much, and you know, you’re not doing what you need to do.
47:39 You need to leave, and then, no, but do I get to keep my 30 or not? And a lot of the most difficult sort of devolutions of companies have been around these sort of founders’ issues. That’s good. I always wondered if there was, like, a document that you could get everyone to sign, like you said, whether it’s legal or not, but it gets everyone in the right mindframe, because, like, everyone’s always playing their own scenario in their head. You know, I’m working more than him, or I’m not.
48:02 And, like, without communication, people don’t know what’s going on, and who’s to say, at the end of the day, and you have no, like, you know, ombudsman, or you’ve got no, like, chairman of the board to say, stop doing that? So yeah, it’s three-person, four-person teams. It’s that sort of stuff will kill you. And you can get that document on SeedCamp. Yeah, you can just type in Founders Collaboration Agreement.
48:20 Okay, um, it’s funny, because I, you know, you put it up there, and then obviously people are going to be like, well, you know, this document isn’t legally binding, blah, blah. I’m like, look, guys, it’s a conversation starter. If you want to sign it, and you want to use it as a template for you guys to then go back to, fine. If you want to amend it, go amend it. We’ve open sourced it.
48:38 It’s Creative Commons. Feel free to download it and edit as you wish. Um, if you have a friend who’s a lawyer who wants to take a look at it, make some amendments, go ahead. So we just made it available there, but it’s, it’s, I think it’s not meant to be like this monolithic thing that you have to follow directly. It is a suggestion that encompasses the major things that I’ve seen be a problem for the community.
48:55 Good, that’s a good tip for list. Yeah, I like that. Download that file, definitely. Um, Carlos, how do people get in touch with you? Do you have a SeedCamp event coming up where people can attend?
49:04 What’s the info? Yeah, I know, if if people want to get in touch with me, I’m at atce on Twitter. When did you get that Twitter handle? When did I get that Twitter handle? That was one of the first ones, I guess.
49:16 Um, yeah, CE. And, um, we have Vienna coming up. We have Helsinki coming up. Uh, we have SeedCamp Week Berlin coming up, so if, if, if you want to come, uh, Helsinki is probably the next one that, uh, you should attend or apply for. Um, and then yeah, we hope to have some great news coming out of Vienna, and, um, Berlin, which are the next two events that are going to be coming up.
49:39 Are you there? Is it, is that happening as part of Pioneers Festival? Yes. Cool. So I will be there.
49:45 I will be at, in, at Pioneers Festival. I shall keep my eyes peeled. Awesome. Well, contact Carlos if you want to get involved in, uh, in fun with seeds, and Bryce, what’s going on with beards, and you next month or so? Yeah, so, um, all sorts of bits and bobs.
49:58 We got some exciting announcements to make very soon, which I can’t reveal, but there are some, but there are some new things coming. We’re, uh, we’re, uh, going after ever broader horizons, but I’m going to be at Pioneers Festival next week in Vienna at the Royal Palace, uh, which would be great, uh, hearing all about future technology and startups. Carlos will be there with SeedCamp, or Philip, I think, from SeedCamp’s going to be there. There’s going to be all sorts of wonderful things going on there, including apparently NASA going to be speaking, which would be quite interesting.
50:24 Um, and then I am back, and then I’m off again in November. We have some more news on that soon. Okay, good. But there’ll, there’ll still be weekly drinkabouts, Fridays, right? Every Friday, I’ll be there.
50:34 This Friday at Silicon Drinkabout. I don’t know where we are this week, actually. I should know that. Check the, check the web. Definitely check the web.
50:40 It’s, uh, silicondrinkabout.com, London. Cool. If you enjoyed this show, please, uh, tell, tell your friends and co-workers about it, share it if you’re, uh, listening to us on iTunes, come check our beautiful faces out, uh, on YouTube. Um, everyone included today. Um, it’s, uh, episode 18.
50:55 It’s been lots of fun Bryce, we’re going to keep going. We got another four weeks booked. Uh, it’s about the people, as we say. I’m learning see, I’m getting better, right? You’re getting there, getting, when it started off, when Bryce was here on London Real, I said what’s a Moshi monster?
51:08 That’s what I said. We still got to get Michael on the agenda, so Michael and Saul have both been called out here today, so hopefully we’ll see them soon. Um, gentlemen, thanks for being here. Fantastic discussion. We could talk to you more for like an hour, but we’ll cut it off here.
51:21 And, um, thanks, guys. It’s about the people, and best of luck. Thank you. All right, thanks. Take care.
51:28 I potentially failed to do in my situation was really sit down and hash out what is our vision, what are our different roles, kind of what’s expected from each person, and I think, uh, those are things that can make or break a company or a project. That’s good advice. We haven’t heard that one before. Absolutely, yeah, definitely. Yeah, the co-founder stuff is, I, and you even see it, you know, the Twitter co-founders had in early days, and a lot of people think are saying Blackberry.
51:55 Mhm
