Raj Ramanandi - Get Dat Paper (GDP)

Full transcript: Raj Ramanandi on London Real

0:20 Are you guys ready? Yeah. Okay, let’s do this. This is Silicone Real, the video podcast dedicated to the people of the London technology startup scene. I am Brian Rose. I also host London Real, which is a similar but longer trial log format that has guests like writers, politicians, drug smugglers, cage fighters. Drug users? Drug users probably. I don’t even know about it.

0:43 That they don’t use on the show, without that I know of. My co-host today is Mr. Colin Pyle, who I met on London Real. He comes to London via Toronto, China, and India. He’s got all sorts of crazy stories about motorcycle rides and world records.

0:59 He’s also an entrepreneur here in London. You’re here to stay, is that right? Here to stay. Just got back from Toronto and here to stay. Nice to have you back, by the way.

1:07 Awesome, and this was really Colin’s idea to do Silicon Real. This is episode five, we’re really pumped to do it. The silent partner is not here, is Bryce Keene with the three beards. If you don’t know these guys, they run the silicone drink abouts, which I’m sure you’ve been to. It’s every Friday night in the roundabout area.

1:25 It’s drinks, it’s pretty much no reservations. You hang out, you have a good time. I’ve already met tons of people I’ve been in touch with email. It’s just great what they’re doing. So happy to be doing this.

1:36 And our guest today is Raj Ramanandi. You like that? who is the CEO at number one seed, which is a silicone roundabouts, only dedicated seed investors in early stage technology. Maybe not the early, but yeah. Okay.

1:49 At one point you would. I would maybe in prices words, but yeah. Okay. Well, you know, that’s good. You guys, from what I understand, aim to do five to 10 deals per year, where you invest between 50 and 150, thousand pounds of basically your own money, you and your partner, which is very cool actually.

2:06 So, you know, your borderline kind of VC seed in companies that have a product, our pre-revenue. Is that about right? Yeah, in most cases. Yeah, that sounds right. And for people who aren’t familiar with tech talk, that means you got no money coming in.

2:19 So no cash flow. Yeah, no cash flow. Raj, you previously had, I think, four or five companies, including oddschecker.com, Aqua Online, Digital Profits. I think three of them, you had successful exits via IPO or acquisitions. And yeah, like I said before, you actually invest your own money.

2:36 So thank you so much for being here. Welcome to Silicon Real. Pleasure. Yeah, it’s very cool to have you, man. I think you’re the first guy of this type that actually comes in and actually spends your own money, and you choose who has the best ideas.

2:51 And when I was researching your company, a lot of articles were saying, finally, London and Europe has someone who is doing the seed funding, finally, after the years. And I was wondering why London has lagged the world when it comes to this? And do you think those days are over? Do you think we’re like, we’re here now, we’re ready to compete with the other centers in the world? Why is London lagging, I’ll come to that later, but I think it’s rapidly getting better.

3:19 It’s really getting quite interesting in terms of the amount of seed stage capital that’s coming into London. Bumping into, you know, people have complained about there being plenty of dumb money in the past, people that haven’t run startups and haven’t been involved with technology companies. You know, like a dentist or a lawyer that makes a lot of money somewhere else in the country And it’s like, OK, what am I going to do with my money? But let’s say they’re really interested in early stage technology.

3:44 We’ll put some cash in. But they’re looking at the wrong metrics when it comes to assessing how a company’s doing. So they don’t quite get it. There’s nothing wrong with their kind of motivation. But the problem is how they then try and nurture that company has been a problem.

3:59 And I think London’s definitely not got a shortage of capital. But what’s really interesting now is there’s guys who have done it before and are kind of coming back and kind of trying to get that loop going of having been there, done it, and putting their own money back into the ecosystem. And that’s where Silicon Valley has been incredible because of the huge exits, acquisitions, there’s plenty of money to kind of keep that ecosystem flowing. And they’ve ridden that for a very long time.

4:25 Right. They use their Facebook shares to then invest in the next company and then invest in the next company. Yeah. And so the Valley has been the leader. And then it’s kind of, Israel’s been a great ecosystem, New York’s really flying.

4:40 But London certainly, you know, it’s getting there. It’s probably, you know, I don’t know New York very well, but let’s say it’s two years behind New York and kind of five or ten years behind the valley. But it’s a really interesting space right now. Two years ago when I started investing, there were very few guys putting their own money, putting their own money down, and there was probably one dedicated seed stage fund, which was passion capital. And now I would say there are three or four, couple more interesting ones coming up behind.

5:09 And we recently moved into a new office in Clark and Will called Warner Yard, which is a four-story building. And Techstars, the accelerator program that started in Boulder, in five or six cities in the US, have just moved to London, which is kind of almost rubber-stamping London as a scene where something interesting happening if Techstars wanna come here. And so they’re in the building and on the top floor is just what they call the capital floor, I like to call the penthouse, is just three early stage funds and about four or five angel investors that are working out of that floor.

5:46 And that’s really interesting because all these early stage deals are typically syndicated deals. So let’s, for argument’s sake, a typical London seat stage deal is 300,000 pounds and very quickly you can fill that round just on that floor. Yeah, that’s an interesting analogy for the building, yeah, there’s kind of money on the top. How come the money guys are never in the basement? They pay the rent.

6:16 So just to get, I mean, we always like to get kind of the business models out of the way, but I kind of described it in the beginning, but when you meet someone on the street who has no idea about tech in London, how would you describe number one seed? So number one seed is, it’s the same model as a venture capital firm, but they are managing 100 million pounds for a venture capital firm wouldn’t be a big fund. They’re managing 100 to 500 million, typically, that would be the average ballpark for VCs in the Valley, New York, London, Germany, Israel.

6:45 They’re managing big sums of capital. And so this is where seed stage investing has kind of not happened, it’s because those guys, the cost of them deploying any capital is vast. they have these big sums of capital, partners are earning big sums of cash, just their models don’t allow them to, their legal fees will be 50, 100K per deal, so why would they deploy 100K seed stage deal when they cost them the same to do the deal? And so the change has been these, the angels have kind of fitted the gap, that kind of funding gap by working lean essentially, So their cost of deploying capital is, let’s say, legal agreement is 2, 3, 4, 5K in London.

7:30 It’s a lot more, actually, in the States. Your lawyers charge a lot more there. And that’s kind of allowed people to easily access that space. And then, because of that huge funding gap, you’ve started to see other entrepreneurial capital guys have seen an opportunity to kind of come in and be professional investors in the gap between angels and VCs. The model is deploying capital, but it’s finding a model that’s efficient enough for them to say, all right, these are interesting companies.

7:59 Let’s deploy capital for it to be cheap enough for them to do that. And the other thing that’s allowed this, which we’re all aware of, is that the declining cost of setting up a company is so much cheaper. 10 years ago, to even get your hosting sorted out, I remember my first company, one of the things I was tasked with was bringing clients on and getting their hosting relations put in place. And that was like a big chunky handbook of, okay, who do we have to speak to, what needs to happen?

8:27 And then there was a nice big fat cost attached to getting that hosting in place. You know, now it’s, you know, any guy can do it. You don’t have to be techy to get your hosting sorted out and it’s dirt cheap. And so, kind of makes sense being leaner, deploying less capital, not having huge offices in Green Park or Mayfair, you know, everyone’s in Clark and Wellall Shoreditch and yeah, I think, does that explain the model? No, yeah, it always does.

8:53 From your model, so you’ve been around for two years? Yeah. So you’re investing in five, roughly? Five to 10 deals a year in the last, so 15, 16 months, we’ve done 10 deals, so. So at some point, are you gonna need to pull in another angel?

9:06 Or are you gonna start having to exit or sell some shares in companies? Hopefully I never have to get another angel because things are going really well. For people that don’t know, what’s an angel and why do we come up with that name? Oh, good question, I don’t know where to. No, we’re kidding.

9:18 I was trying to think about where to come up. But if you have to describe it on the street, what would you say? So an angel is basically a guy or girl that is investing their own capital in, it could be an angel not only in tech, you know, there’s, I don’t know if you’ve seen the series Dragon’s Den here in the UK. Yeah. Yeah.

9:35 So the guys that sit at the… Shark Tank. Yeah. That kind of stuff. Yeah, Shark Tank in the US.

9:40 So it’s someone spending their own capital. And it’s the first round of funding typically. Interesting question. So, we break it down into, yeah, so there’s a friends and family round, which is kind of a really small amount to get you going. And then it’s your first move towards a professional round of investment, let’s say.

10:00 Okay, I understand. So, Sarah, you were saying you might have to get another angel involved. Yeah. Because turnaround on these companies sometimes can be five years, seven years. Yeah, you’re looking at, I think the averages for VCs have been, I think it’s like seven, eight years.

10:13 Yeah. And kind of moving in and out. So far, five years a year, fifty, hundred years. 50-150. I don’t know your personal background and net worth, but yeah.

10:20 Yeah, I definitely, so I basically put a window if I would be able to do this for two or three years at the levels that I’d set out to do. So you know, some of my companies are doing pretty well, so maybe I’ll have to bring in someone else. But you know, it’s a good problem to have, I guess. If your companies are doing well and your money is deployed, then you’ll figure it out. to monetize shareholder value when you have such a small company, say after three years, when you’re looking to exit after seven or eight, or is it just really hard to do that?

10:52 There’s something called second market. I don’t know if you’ve looked at that. Yeah. Yeah. Secondary market where you can sell shares in private companies.

10:57 Right. I don’t know anyone who’s ever used it, but- I know the Facebook guys were using it pre-IPO, some of those things, but they’re probably very big companies. Yeah. So for bigger companies, but- I guess if you’re doing a second raise for a few million, you might be able to sell some of your shares to those people, just to liquidate, I guess, some cash. Yeah, so of the 10 deals we’ve done, three of them are now doing well and therefore looking to it, that sounds counterintuitive, but three of them are doing well and so raising more capital, which usually means that their valuation has gone up.

11:25 And if we really wanted to, that would be an opportunity where, okay, our money is kind of already enough, done a 5x, let’s pull it out. But typically, case by case, where we’re gonna follow that money and stay in the company if we believe it. Okay, the second question we always ask about business model is quite simply why will you win, and what makes number one cedars different from the rest? I think part of it is your background you mentioned, but what makes you guys unique in the space?

11:52 Yeah, I think we’re backing ourselves in a sense is that our ability to not particularly help, but kind of just look someone in the eyes and kind of figure out whether that’s a right, that’s an entrepreneur that’s going to take this company or the next company somewhere really interesting and take an idea and turn it into a business which is kind of you know that early stage piece is a bit that whether I’m doing myself or working alongside someone else doing it I’m kind of addicted to that bit it’s you know I’ve been involved in companies that have grown beyond that I’ve set up companies of kind of growing beyond it and kind of once it gets beyond 10 employees I’m I’m getting a bit bored because the buzz of that that the fear and the risk is kind of gone and also you have to start putting in process and it’s execution time. Yeah let’s make this less chaotic and that’s when I start getting a bit bored. But I’m backing myself to know to help there and kind of see that in someone else. How many hours are you spending on each project you think? Is it really hands-on? Yeah it is really hands on and you know that’s kind of been a bit of a problem actually we’ve got to a stage where so at about seven or eight deals my full-time job was helping the portfolio right and so I was there was a fine balance between bringing a new deal flow because I like to explain and helping the the teams out so so I co-invest with my co-founder of ten years we met at odds checkers

13:22 Part of the founding team he’s a technical guy and I’m on the commercial side which is great because he can help out on that side of things where I have no clue and and I’m gonna help out with marketing, strategy, sales, fundraising those kinds of things and that’s something that they’re always going to be dealing with at those early stages so it’s it’s been more hands-on than I actually thought it would be but which is great because I love it but in order to bring on another 10 deals kind of I’ve set myself a target of being able to do of doing 15 or 20 deals kind of spread that risk something had to change. Do you ever get tired of hearing a pitch? I was just thinking when Roger’s coming over here I’m like you know I was in the dot-com startup in 99 in New York and I remember I was pitching I was at a company called luxury finder.com and we had raised like 20 million to sell like jets online and this is when nobody knew what e-commerce was and we had no idea what we were doing like there was no retail experience in this company and I remember pitching the I was a CFO, pitch in, pitch in.

14:19 I pitched my grandma when I would see her. I’d be like, okay, this is what we’re trying to do. And I got to be so obsessed with this that it really started affecting my personality. I was wondering if that happens to you or if you get pitched by so many people that you go to the drink about and you’re like, I just don’t want to talk about business. Or if you got away where you give people a minute and do that, thank you.

14:38 I see that it’s a recent change where I used to allocate an hour for a meeting and I was like, this is nuts. I just, and I would stop, I don’t know about you, but in any field, if you allocate an hour, you end up filling that hour. So first meetings, I’ve now got down to 20 minutes because I lose interest after 20 minutes, realistically. And if you’ve got an interesting enough story, you can get it across in five, 10, 15, 20 minutes to engage me to do a bit more research into the sector or about you guys, or speak to someone else that I know that knows that sector.

15:07 So will you tell people you get 20 minutes? Are you quite militant about it? Yeah, yeah, yeah, I’m very militant about it. And so I’m very open to taking meetings because I think that’s good for me and good for the ecosystem for early stage investors to be very accessible. So this afternoon, one of my meetings was a guy that literally tweeted me saying, what do I need to do to get a meeting with you?

15:27 He was like, here’s my email address, send me a calendar invite for a Friday, any Friday coming up, and if I can make it, I’ll hit yes, and if I can’t, we can reschedule it. I told him it was gonna be 20 minutes, and you know what, it was actually quite an interesting pitch. So we’re gonna follow up, so it’s like, send me a bit more detail, and I’ll run it past the rest of the team, and we’ll see what to do. But yeah, you get, there’s a lot of people that are pitching things where there isn’t a fit or there is an interest in the sector or it’s just been a long day.

15:59 Yeah, what if you’re having drinks and stuff and you just tell people not now or do you say just email me? Don’t pitch me, bro. Don’t pitch me, bro. Yeah, yeah, yeah. Yeah, yeah, yeah.

16:07 So when I walked in here, I’d just come from a panel session where I was one of three or four investors in a room full of 100 people, Q&A with some investors, and we’re pretty much the only investors in the room. So for me to get out of that room was to go through everyone and out the other end, which is not easy when you’re in a rush and everyone wants to talk to the few investors in the room. And so the thing I tell everyone is just email me. I’m pretty good on email and send me some details about what you’re up to.

16:39 If it’s interesting, we’ll hook up a meeting. If it’s not, I’ll give you feedback to say it isn’t Or, you know, I’ve realized there’s a VC out of, formerly in the Valley, now in LA, called Chris Sucker. And he just tweeted something about, unless someone comes up with an inbox solution that allows me to answer every email, there’s gonna be a lot of people think I’m a jackass, but I just can’t get around to all of these emails, right? And it’s the same with me as like, you know, I immediately retweeted it because it’s true.

17:08 It’s not, I’m not an asshole, it’s just, sorry, mind the language. but it’s not physically possible to get through all of this. And we talked about how a model being lean, I could probably employ like 10 people to help me deal with this flow, but it’s like, it just doesn’t make sense to deploy that amount of capital. And so things get missed, but generally I’m pretty good at listening to people and giving them that 20 minutes. Let me start doing that.

17:36 How much equity do you normally take in companies? I know as a startup often guys just hold their equity so close to their heart and never want to give it up. So I just, you know, you go to a crowd cube or crowdfunding site, you get it, you know, they take this much equity, you pretty much set it and then take a bit of cash. What’s your model in terms of? So it’s almost set by the city and the brackets between C and Series A, how much activity there is.

18:01 And that kind of relationship between those is what dictates almost standard terms at the early stage because, you know, it could be bisector or business model. You know, if you’re working on a business that’s gonna be cash generative very soon, then that’s gonna skew your valuation. But if you’re gonna need to spend a good two years building up a database and then you might figure out how to monetize it, you’re gonna be in the bracket with other companies that do that, regardless of whether you’re in FinTech or FoodTech, whatever you wanna call it.

18:31 And so, actually, so I made a note before the panel session I was gonna do, was like, don’t, you know, make your terms almost standard because it needs to be kind of formulaic for guys like us. It’s like, look, your roughly, your valuation is gonna have to fit between our label, half a million and one and a half million, and there’s not gonna be much maneuver and the sweet spot’s roughly 750 to a million pre-money. And so if they’re raising a round of 250, 300, they’re roughly giving away between 50 and 25% of the company, up to 30%.

19:07 And then it’s a case of how big that check is in that round. Right, but you don’t sort of negotiate a little bit larger piece because you get so much more than just the cash? So, yeah, that’s an interesting point. This comes to what we’re talking, this comes back to where the challenge between doing 10 deals and getting, being hands-on and trying to get to 20. So there’s a, what I call it a phenomenon, there’s a movement, a small movement amongst, in some of the major startup scenes, New York, California, of investors creating something called a start-up studio.

19:41 So the famous one out of New York is BetaWorks, been going for five years. And then in California, there’s IdeaLab, which has been going for, I think, 15 years? Yeah, forever. Forever. 20 years, yeah.

19:55 And then more recently, in LA, something called Science Incubator, which is a similar model. So what these guys have created is, rather than just having a fund of cash that they deploy, they have talent in-house. So by talent, I mean doers, right? So developers, designers, marketers, PR people, finance people, and you know, these teams vary in size. So I think PizzaWorks is pretty big now, Science Incubator probably has a team of 20, 30 guys, Idea Labs even bigger.

20:28 Has a bit of a scene right now where people are creating start-up studios where they deploy capital but they also create their own start-ups because they’ve got that in-house talent. So it’s like, this is an interesting sector, hell, we’re a talented bunch of people here and we’ve got the skill sets to do everything in-house. And so that’s what we’re, at number one seed, is essentially in start-up language pivoting to create an environment where we do one of three things with any idea.

20:55 We either externally invest, just as number one C does right now, it’s like, okay, that’s a good team. They’re in an interesting, I call the three arses, it’s a smart ass team with a kick ass product in a big ass market, right? So that’s, I’m not going to get involved in that. So that’s stolen from a VC in the Valley or New York called Jeff Clavier. But yeah, it’s a three arses rule, it’s like those are three key things you’re looking for when you’re going to invest in an external entity, right?

21:24 So then you sometimes see a guy, let’s say, it’s Colin who’s like, he doesn’t have an idea but he’s, that sounds wrong, but what I mean, he doesn’t have an idea he’s working on right now, but he’s like a really smart entrepreneur and we get on really well and I’m like, I want to work with this guy and he’s going to come up with something really smart but he doesn’t have an idea right now, so it’s like, well, I’ve got the resource and I can help bootstrap, so why don’t we, why don’t you come in-house and we’ll work on ideas together or there’s another scenario where Colin has an idea and his options are I raised two three four hundred K in the open market and build a team around me or another option is something that we’re going to offer is we bootstrap the business and we say look here’s a hundred K but here’s access to all my talent and then if we prove something together then great go and raise external capital and we can help you with that because we have all the connections. So number one seed is kind of pivoting into something called the corner shop, which we’ll do all three of those and pretty excited about that.

22:26 That’s very interesting. So just a bit back to the equity percentage, you take between 20 and 30 percent of companies? No, no. So all the investors in that round will typically take 20 to 30 percent and if the round is 300 and we’ve put in 100 we’re going to take a third of the 30 percent. So I think our bracket is You know, we’ve got taken as little as two or three percent in companies up to about ten percent in companies Okay, so it’s not just your own money. You have some other people that you invest. Yeah, so a typical Like I say a typical seed round in London is about 300k So even if we’re investing at our maximum ticket size, it’s it’s only half the round Okay Yeah, and you all have this one building over in clerk a while. It’s like four-story stall. It’s funny I was just over at level 39 in Canary Wharf and in his course of an hour I met you know that the guy that runs at Eric I met our guest that was here last week, Tommy, the Nigerian startup guy, he like grabbed me and I was like, whoa.

23:19 And then I met a former employee of mine at ICAP named James Dawson and some other guy that was working on retail tech where he can track where people are in a retail space based on just where their mobile phone is. And you can see the footprint. Present tool. Yeah, maybe that would sound, that was in an hour. And so I was just, everybody in this space, it was really relaxed and we all like shook hands.

23:37 I’m sure we’ll email each other, but powerful. Is this where you’re pivoting to with number one seed or is there power in having proximity of all these businesses next to each other? The proximity thing’s really interesting because the government’s really pushed it and a lot of the press have kind of poo-pooed the idea of plugging an area and trying to encourage activity in an area. And I was kind of on the fence about it initially, but, and maybe because I was based in West London and I was like low, and I live in West London, it’s like, everything in East London, this is, this is a 45 minute tour.

24:08 Every time I wanna hang out with like a packster, it’s such a pain in the ass. But having finally made the move to East London, to Clark and Well, I’ve really seen the value in the proximity of investors, startups, lawyers, account, whoever it is that kind of feeds the ecosystem. It’s like, if you bump into these guys and you have a beer with them or when you’re grabbing a coffee, you see them. I think that’s part of, it’s momentum building, right? And things happen quicker and think that kind of serendipity and I think that’s really helped London that there is something happening in East London.

24:42 It’s the vibe of the neighborhood that helps a bit, that it’s kind of new, it’s artistic, people take chances. I mean, you do get a feel sometimes when you’re in the West End, it’s very old school and BBC-ish and like everything’s been there forever. Yeah, the West End I definitely find more families, do you know what I mean? Whereas here it’s more just younger sort of people doing startup stuff and I think the startup community by nature is I think a younger sort of population, especially the tech scene, just because when you have a West End mortgage and they have kids and stuff like that, which I don’t have, because I can’t afford it.

25:16 All right, we’re gonna go a bit devil’s advocate questions. I’m gonna do one, you’re gonna ask him something, but 50 to 150 grand, not a lot of money. Obviously, if you’re covering the overheads, that makes less of a difference, but man, I could burn through that pretty quick. Couple of salaries, couple of developers, some creative, and I’m wondering, how do you get by on such a small amount of money, And do you think you’ve missed a few fish in the net over the years because you didn’t have that extra three months to get that deal closed or that extra 20 grand or that kind of thing?

25:46 Yeah. I actually recently wrote an article for Wired magazine complaining about just that. I think in London startups don’t raise enough money. I think it’s a problem. So a seed round is probably averaging like 250, 300,000 pounds in London.

26:04 But there’s been this tax break called SEIS, which is, I don’t want to get too tricky, but it’s encouraged basically high net worth individuals to write off some of their tax by investing in startups. And they’ve capped the round size for startups, raising capital from that source to 150K. So what it’s done is drive in more capital at the earlier stages. That’s more amounts. That’s more amounts.

26:36 And so the average seed round in London, my guess, is coming down because of that tax break. So it’s having the effect of making it harder for a good startup that should be able to raise $300,000, $400,000, $500,000, $500,000, it’s making it harder because investors are getting used to terms where they’re investing $150,000 and they’re getting more bank for their buck essentially in the startup, right? So I think it’s a problem, even in LA where I spent all of December and January, primarily on a break, but what I did was like every day I was meeting three to five people in the startup world there.

27:19 So VCs, angels, startups, there’s a lot of accelerators cropping up their incubation spaces and I would say LA as a tech startup scene is behind London, no disrespect, but just a little bit behind London. However, a seed stage round in LA is a million bucks, which is, you know, let’s say the equivalent of a million pounds in London based on cost of living or there or thereabouts. So that got me thinking about, you know, why, why has that happened? And it’s, it’s unfair if you’re in London raising smaller amounts.

27:53 Because I mean, correct me if I’m wrong, but to get that second round, it almost like there needs to be an event to get it, right? It’s a very psychological thing. Like we’re We’re going for a second round. It’s not like I just need another 150 on top of my 150. They always ask why.

28:06 Is that not true? It is true, yeah. I think this SEIS bracket should replace a friends and family round that we spoke about earlier where people would raise a little bit of money before they have any proof of concept and they need to get, convince their co-founder to quit their jobs. look, we’ve got 50K in the bank, you can cover your bills at a really basic level, but it gives us a chance, like a small window, three, six months to just give this a go, right?

28:37 And that’s where you prove something out. But what the problem is, the jump from there to 300 is not a big jump, right? And so if the seed round was bigger, I think London would be better off for it, where good startups get more money to really prove something because talking about being lean and learning from the market, if you only have 150K, you might learn an awful lot in 11 months and you burn through 150K and then you go to your investment and say, I’ve cracked it, I know exactly what I need to do but I need more money.

29:10 They’re not going to give it to you because you’ve not proven anything but you’re trying to convince them you’ve learned something but you’ve got nothing to prove it. If you’ve got 300K in the bank, you get a chance to give it a go, fail, learn from that mistake and give it another go and I think it’s a problem. My point by investing up to 150 was about affordability for me, not this is how much you need to survive. So in answer to your question, I think I wish startups could raise more money and it would raise the bar of the quality of the startups at DUTA.

29:40 I’ve heard so much from startups like just guys, founders, just how much time they waste raising cash, right? So from that perspective, you go and raise half a million instead of Well, now you’ve got yourself maybe a year, year and a half or whatever your business is to really go at it as opposed to go six months and then spend three months raising. You know what I mean? You’re not working on the business because, you know, fundraising can be a full-time sort of job for a founder, which is not always the best resource to spend your time.

30:09 But you’re capping your investments at 150. But you’re different because you’re providing an environment and overheads and that kind of thing. No, we’re different because we appreciate that the round shouldn’t be just 150. We appreciate we’re going to share that deal, right? So if someone comes to us and we think they’ve really got something interesting there and they say we’re raising just 150, I’d probably encourage them to raise double that and let me help you introduce it to other angels or early stage investors, seed funds, so that you’ve got a longer runway.

30:40 Okay, cool. All right. Moving on to our silicon real checklist. If you had to sign a non-compete right now for your industry, which I guess is seeding in any other company that you’re currently involved with, and then someone gave you 20 million pounds, what would you do with it? As in what new area would you pursue that you find kind of interesting right now?

30:57 So if I had 20 million dollars or pounds in this space, I would double down on the Startup Studio concept. I think having in-house talent and looking for external talent is really interesting right now. bit of a nod in the valley towards the terms called the operational VC where those old-school big VC firms that manage big sums of money have a bit of a team in-house to kind of help steer their companies and I think that it’s something we’re gonna see far more over the next five, ten years and that’s what I would do. And what if you couldn’t? What if you couldn’t be in your industry and do something completely different? Do something completely different. You’d be devastated, I can see it.

31:42 If it wasn’t in the tech space, it would be something commercial. The thought of getting off my arse and my hard work actually bringing the buck in is much more interesting to me than doing that for someone else. It would be entrepreneurial, but maybe not using technology, maybe not scalable, but I don’t know, maybe a fish and chip shop down the road or something. Food tech is big, but food start-ups are big. Is there something in the past where you can see like that you’ve been like, you know, mistakes that you’ve made when you were kind of being this cedar type things where you didn’t give these guys enough of your time or you’re like, I really should have set those guys up with, you know, better overhead or less interference or is there something you saw in the past where you really fixed about the way you do business?

32:28 It’s interesting. It’s like I, one of the early angels in the tech space, but to me it still feels like I only just started doing it. So I’m still digesting kind of what I’ve done well and what I’ve done badly. I think the time in L.A. when I was away was really interesting because it allowed me to look at what I’ve done and look at, you know, it’s obvious when you look at something far too closely, you can’t get any insight into what’s happening that you need to kind of step away.

33:01 And the time in L.A. was really interesting because it’s more on a personal note because it was like, okay, there’s investing things, awesome, love it, but actually I want to build something as well. So how do I figure that out? But I haven’t really taken the time to look at our process as in how we’re helping companies. I think maybe subconsciously we’ve realized that we could be helping more tangibly, rather than just talking to them about something we could be doing it for them, right?

33:30 Which is maybe why we’re setting up the studios. That’s another thing about fundraising is finding talent for your startup is difficult. You pay lower than anyone else. If you want really good people, you need to be really persuasive. So, you know, my thoughts there are is if you can access really good talent via your investor, that’s really interesting.

33:53 That’s one, and the other one I think is we have, You know, I was alluded to earlier where fund raises were getting lower and lower and lower. And as an investor, you can kind of fall into the trap where you think, right, I’m going to get more money if it’s a smaller round and the valuation is lower. And that’s definitely something that we’ve stopped, is that we actively encourage good startups to raise more money, whereas previously I was falling into the trap of the market saying, you’re going to struggle to raise $300, you’re going to struggle to raise $400.

34:24 My advice is raise a little bit more because it’s achievable, but now I’m spreading the gospel that good investors should be encouraging big arounds for good teams. I think those are two interesting things that over the year and a half, two years of investing that we’ve done wrong. How about as a mentor, what’s the biggest mistake you see in the founders of the companies you invest in? I think the biggest mistake a mentor can make is because you sometimes have these young guys young impressionable guys is the biggest mistake you can make is you that you know all the answers because you don’t right I might be good at sales and partnership marketing and help with fundraising but who says I’m the best guy to figure out what your business model is or what your pricing strategy should be and I think there’s a there’s not because there’s not enough experience in London of people building scaling large tech technology companies is the quality of the mentoring is not fantastic.

35:23 And I think the one way to improve that until there’s more knowledge in the ecosystem is for people to be more honest about what they’re genuinely allowed to have an opinion on and where they should say, you know what? Here’s an opinion, but I’m no expert. And I think we’ve been really honest about that from the start, about, look, we are going to help you, but it’s much more as a sounding board, not as the expert, as someone that’s always had kind of the, I’ve never really had a mental, but there’s always been someone within the company that’s kind of been more mature, been around this more than we have.

36:01 And I’ve always just really appreciate bouncing ideas off them. And especially if you’re a solo founder, not having a co-founder to bounce ideas off is really tough. And we kind of try and play that role for solo founders. You know, the tendency in the US is to overwork, maybe in Canada as well. It’s like, you know, you’re in Silicon Valley, you work in 120 hours a week, I want you on your Blackberry 24-7.

36:24 And it’s even been argued that the productivity goes way down in the States when that happens. I’ve found that it seems to be a little more relaxed when it comes to London and the startups, as in you don’t expect people to be there at 10 at night doing the burning the midnight oil. But, or do you? I was wondering, which kind of guy are you? Do you go sometimes out to the cedar’s folder and no one’s there on a Sunday and you’re like, what the fuck are you doing?

36:45 Money’s burning, fixed costs are ticking away. Um, I think it’s, I think the startups in London have been following the trend of how people work in London is like, it’s from all accounts, New York is nuts, like people work for really long hours and it’s unusual for someone to walk out of the office at six o’clock in New York. Whereas in London it’s pretty normal for everyone to leave the office at six and go and have a drink and then go home. And I’ve been a big advocate of, you know, working smart and breaking up your day.

37:18 But then, you know, I’m like Jekyll and Hyde on that one myself. It’s like sometimes I’m like, I need to work, I need to work longer, harder hours. And then sometimes I’m like, let’s break this day up and be a bit smarter about this. So I’m not shouting at people for not, not, not being there longer hours. It’s at the end of the day, it’s what you need, not how long you work at it, right?

37:36 And so we’re looking at what’s achieved rather than the effort taken to achieve it. It’s a fine line though, isn’t it? Yeah. Absolutely. But we’re not that closely involved where we’re checking out what time people turn up.

37:48 We don’t know what time people turn up, what time they don’t. However, more on a macro level, if things aren’t getting done, then let’s have a chat about the problem you’re having in that area. Are your offices in the building, the same building? As some of the startups? Yeah.

38:04 Well, number one seed, like that four-story. Are you there? Oh, yes. Yeah, we’re in the four-story. So you are watching.

38:09 So we are… How many of your companies are in the building? Yeah, so 11, but that’s because I’ve invested in, I’m an LPN, the Textiles Accelerator, but I hold like 0.0002% in one of the companies that go through that program. So it’s not like, I’m remotely important to any of these startups. Any of the startups that I’ve invested more money in, none of them are in the building currently.

38:36 A couple of them are thinking about moving in. So that would be interesting. I’m going to just move us along here and ask you another typical silicone real question. If you could make a phone call right now to the 20-year-old Raj and give him some advice and it can’t be just keep going, Raj, you’re doing great. It has to be some real advice.

38:55 What would you tell him? That is a really tough question. I think I… You’ve got an 11-month-old child at home? Yeah.

39:07 Start giving advice pretty soon. Yeah so the advice myself is like don’t lean on that table, you might bang your head. 20 year old Raj, 20 year old Raj was he would he was not particularly mature, he would see something shiny and chase it. He didn’t realize he didn’t have any understanding of of when he would work hard and when he would work hard, what was motivating him. And so it would almost be a case of just think about what you enjoy and what you’re good at and focus on that.

39:43 I think I was kind of almost aimless. I would just stumble across something I was good at and do it, whereas maybe that little bit of advice would be concentrate on what you’re good at. I think that would be really good advice to a 20-year-old Raj. and I think that kind of started happening for me when I was, you know, I put more mid-twenties where I just realized that, okay, just concentrate on what you’re good at, rather than trying to be something that you’re not, I don’t think that’s a…

40:13 I think it’s hard to for Tony, you know, you don’t always know what you’re good at, right? So, you know, until you stumble and fall and be like, wow, I sucked at that, right? Which is also… Yeah, so for me, it was like, kind of always been like, average to good at a lot of things, but I had an inkling of what I enjoyed is really important. And I felt like, okay, I can write pretty well, so maybe I should look at journalism or something.

40:40 But I hated the process of writing, but I could write pretty well. And so I probably wasted time, yeah, do what you enjoy and what you’re good at. I think that’s smart advice for that. And on that same note, you must deal with a lot of young guys in your startups, and for that 20-year-old that’s listening right now, I mean, what advice do you give them if they, for example, one day want to get an investment from number one seed or want to be in the Silicon roundabout community?

41:07 Like, what do you tell them if they have one thing to work on or focus on? So you get a lot of, there’s a lot of guys that are just, guys and girls that just think that’s a really sexy scene, I want to be a part of it. And so they’re literally sitting there, tapping on the table, trying to come up with an idea to be part of the scene. And I think that’s a wrong way to look at things, right? It should be back to what the advice is like, what are you good at, what are you passionate about?

41:34 And then if that’s a tech startup, awesome. So yeah, that would be the advice is like, don’t just look at a lifestyle that you kind of, that appeals. Go back to what you’re good at and what your passions are on that. I think that’s gonna lead to a much more fulfilling life rather than just kind of trying to live someone else’s dream. Yeah, it’s tempting, you know, it does look sexy from the outside, so.

42:00 Well, look, we did a show. Yeah, it helped these massive exits, right? I think that’s attractive too from like a 20-year-old. And the thing I joke about too, is like come to the drink about it and you’ll find people that are very unique, they actually enjoy their jobs, or at least they’re excited about their jobs. There’s something infectious about that too, you know.

42:16 Last piece on the advice tip is just best advice you’ve ever been given. Related to the startup world, one of the things that resonated with me was advice from a former investor and now a co-investor, a guy called Luke Johnson, famous for investing in restaurants in the food space. He floated Pizza Express, we all know Pizza Express. One of the things he always said was what makes a good partnership, that’s in the skill sets of a couple of people that come together to build a business.

42:52 And that’s something that has really resonated with me is because I, to this day, I mentioned it earlier, guys that do this on their own, I don’t know how they do it because you can get carried away with yourself and you need a sense check sometimes, and certainly for me who’s very optimistic and wants to move very fast, I sometimes need someone that’s very negative and says, hold on, slow down here, let’s think about this before we go don’t do that. So Luke, it’s a bit more old school and he was like, you know, what makes a good partnership is an accountant and a salesman. And in the tech world, it’s kind of being a technical guy and a commercial guy, which is a kind of the relationship, which is, in some senses, someone that’s methodical, logical versus someone who can sell and just wants to go to 100 miles per hour. Actually, one of the worst pitches, someone pitched to me and it’s one of the worst pictures ever, but something he said was like one of the smartest things ever was like, so I was saying, you know, what is your, do you have a co-founder?

43:54 Do you need a co-founder? It’s like, yeah, I have this kind of advisor guy who’s kind of like the accelerator to my break. I was like, that’s a really good piece of advice. It came back to this, what makes a good partnership. And so when it’s applied to my own life, where my own working life, where I’ve got this accelerator break relationship with my business partner, And it’s also informed how I invest, because when I’m assessing the quality of a team, I’m looking at, okay, who’s gonna be an accelerator here?

44:22 Because you need one. Who’s gonna be the breakhead? Because you’re gonna need one. Who’s gonna look at the detail today? And who’s gonna be looking at where we’re gonna be in six months’ time, in the 12 months’ time?

44:32 That was, yeah, whether it’s the best piece of advice, it’s certainly one that resonated and informed what I do, quite a lot. What did I miss, what did I miss, Collin? If you could only choose one personality trait, the top personality trait of a founder that you want to invest in, what would it be?

44:56 Drive, yeah. It’s funny, we were having a conversation the other day on this, on the penthouse, the investor floor at the office and someone’s talking about the office who wasn’t an investor and there’s like a gaggle of four investors just having a chat with this guy. We’re talking about good traits for entrepreneurs And one of them that, it’s been documented it’s not something, I’m not saying anything new here, but good entrepreneurs often have a chip on their shoulder.

45:22 They’re out to, perhaps it’s paranoia, but they’re out to prove something to the world. Whether that’s the same as drive, but yeah, that kind of something where you feel like, whether it’s you feel like everyone’s looking down on you or you feel like you’ve got to prove something to certain people, I think, which creates a form of drive, I think that’s something I’m looking for and a good entrepreneur. That’s a good answer. I’m gonna take a question you told me about earlier, probably our last question we can do, but one of your companies you invest in is Cedars, am I right?

45:53 And you know this space really well. Actually, I’ll let you answer the question. You ask the question, because it’s yours. Yeah, I was just sort of talking about you invest in Cedars, and in a way it’s almost like innovator’s dilemma, right? Because they are in your space, and they are- Can you explain Cedars business model real quick?

46:07 Yeah, so Cedars is just crowdfunding website, sort of put your business plan online and video and then you let the crowd invest. And they get equity, unlike in a lot of the Kickstarter’s. Which is unique to the UK if people aren’t, I think it is right now. Relatively unique, globally, right? I think the UK is one of the first sort of.

46:26 Open it up to the extent where anyone, any member of the public can invest from as little as 10 pounds, that’s pretty unique. In the US, you just have the jobs that, part of the jobs that go through, which allows people to promote their startup or someone else’s startup. but only accredited investors can put money in not just anyone. Yeah. So you have to be, although technically on cedars, you have to kind of click a button, click a button. That’s right. Yeah.

46:51 So you’re a high net worth or have a certain level of income. That’s true. Yeah. So this company you’ve invested in is effectively going to try to get get other people to invest in the goal. I guess crowd cube cedars, you know, there’s a few of them now, but they’re, they’re trying to raise for companies and in the space that you are.

47:09 So I thought it was interesting that you invested in money. Or what’s the difference between the two? The difference is, I know disrespect to, so the difference is, you know, where I talked about a lawyer or a dentist that wants to invest in startups, Cedars and CrowdCube, no, not CrowdCube, Cedars is the way for them to get involved because it gives them a good cross spectrum of what’s in the market. It means that they can do it at a distance, but get exposure to a lot of different types of companies.

47:38 And I see cedars, certainly at the level where they’re currently able to help fundraising. Things may change in the future where, as an asset class, it becomes bigger and they are able to raise larger sums of money. But currently, investments on cedars are limited to 150k. It’s no coincidence that’s the same level as the tax break. And so I think, and this is something that I wrote in that same Wired article that that was quite controversial, the CEO of Cedars came back at me saying, hold on, I don’t agree that we’re lowering the bar, but what I came back with was that Cedars replaces that friends and family round.

48:19 Not everyone has wealthy friends and family, they can reach out to help them get out of their job or build something or get some premises or whatever it is your business needs. And I think certainly Cedars and any crowdfunding platform will get someone that thinks, you know what, That’s an interesting idea, let me, I’ll risk some capital, it’s risky capital, we all know that, no one’s pretending otherwise. And I think that’s where cedars will come in, it’s like, we need 20k, we need 50k, we need 150k, but I’m always gonna be investing in bigger rounds, or being a part of a bigger round.

48:55 And later rounds as well. And slightly later rounds. Okay, but you are an investor in cedars? Yes. So you want them to be successful?

49:01 Hell yeah. Okay, guys, that’s pretty much our time. How do people get ahold of you? How can they get that email so they can get, you’re gonna have so many meetings that happen. Yeah, Twitter’s great to get ahold of me.

49:14 I have three accounts. As of my personal one is at Rajram 76 and then number one seed which has, most of our following is gonna start sending traffic to our studio, which is at Corner Shop News. Right. So yeah, start following us. Corner Shop News.

49:32 Yeah. Yeah, we were, yeah, yeah. We were looking at the Corner Shop I.O. Yeah, so that’s the studio brand. Number one seed will eventually, you know.

49:41 Is it all in a corner? It’s, when we get offices for it, they’ll have to be, right? Exactly. There’s a bar in short, it’s called Corner Shop, so we’re thinking of having our launch party. There’s also a band called Corner Shop.

49:51 Yeah, I love the song. So we’re gonna try and do our launch party for the Corner Shop at the Corner Shop with the Corner Shop. Brimful of Asha, right? Exactly, yeah. Brimful of Asha.

50:00 That’s a great song. I realize you’re not cool in the silicone space unless you have like three or four Twitter handles on your Twitter description Courtney Boyd Myers has like six. Yeah, she’s like I’m doing this. I’m doing this I do I just feel like I’m just lazy You doing a few things a few things, but I don’t put them in my thing, but I should yeah you should I’m leaving them Oh, yeah, okay. Um calling any news for silicone real people want to get ahold of us. They’re just at silicone real, right?

50:27 Yeah, tweet at us is the best way to get ahold of us right now and again feedback feedback feedback feedback. This is for you guys. So let us know what you want. Yeah, totally. I mean, this is literally dedicated to the people of the technology startup scene. All we’re doing is reflecting what’s going on out there. And I just know everyone likes hearing these stories because you might’ve, it might’ve taken you two weeks to get this meeting with Raj and now you can get a bit of a feeling for what it’s like. So, and we want to have all sorts of different types of people here, failures, successes, people in government, VCs, every part of the equation. So, so there you go. Thanks guys for being here. Loved it.

51:00 Thanks very much.