What can you learn from unicorn startups? — Rob Kniaz, Hoxton Ventures
Today we publish my interview with Rob Kniaz, Partner at Hoxton Ventures.
Hoxton Ventures is an early stage venture capital firm investing in European technology startups that can scale into large, global winners. It focuses on startups that either disrupt existing industries or invent entirely new market categories. It already has four unicorns in its portfolio: Babylon, Darktrace, Deliveroo, Epic Games and it’s just getting started. To date Inovo Venture Partners made two co-investments with Hoxton Ventures — that was Spacelift and Preply.
I sat down with Rob to discuss:
✅ What has Rob learned from investing in unicorns?
✅ What does he look for in early-stage startups?
✅ How does Rob’s Google PM experience help in his investment activities?
✅ And what does he mean by: “You have to be crazy to be a founder”?
You can also find this episode on: YouTube, Spotify, Apple Podcasts, Google Podcasts, Spreaker.
Hi, Rob. Pleasure to have you.
Hi, Maciek. How are you?
Let’s kick off with the unicorns. So you have a couple of very household names that you’ve invested in: Deliveroo, Darktrace, Babylon. Let’s start off with the learnings from those. So what are the things that those companies had in common or what have been the learnings that you got out of them?
I think the biggest commonality… if you look at the companies, they’re all quite different companies. But for us, the commonality was really the very big market size. I think to make venture work, you really have to be thinking about how do you find really, really big markets. So either you’re disrupting something that’s already really large or you’re creating a brand new market.
When you think about Deliveroo, it wasn’t necessarily a new market, but it was an existing market that was being destabilized by the advent of mobile phones. You could give every driver a cheap Android phone, track them down to the meter and track where they’re at. So you could make a lot more efficiencies in there. So when we look at every business, depending whether it’s B2B or consumer or gaming, you think about what’s the really big market and what’s the opportunity size.
If you look at our deals, with the exception of Deliveroo, usually they focus very early on selling into the U.S. because it’s a bigger, more homogenous market than Europe. So even though the companies often start in Europe, almost always they sell very heavily into the U.S. pretty quickly. Darktrace went very early into the U.S. Babylon went very heavy into the U.S. and now that’s arguably their single biggest business driver, the U.S. market.
I think that the common theme is almost always finding very large markets. There’s plenty of great businesses that make a lot of sense, but don’t get that multibillion dollar opportunity. So we come in with every deal thinking about is this a multibillion dollar type outcome? Can it be a 5–10+ billion dollar company if things go well?
I couldn’t agree more on the market size and how big the opportunity is and what I find founders having trouble with is: “OK, so I’m building a solution. How do I put a number to the market I’m in? How do I know I’m really in a big market that allows for this great outcomes if things go correctly?”
Yeah, it’s hard. You can do it from the top down and look at market size. You can do it from the bottom up around your customer value. I think as a Product Manager, I can look at things from a core utility principle and say: “Great, if this works, how valuable is it to me? And then how many people are there like me as potential users?”
If it’s a SaaS product around managing SMB finance, for example, you look at how big is that potential market? How eager are the customers to buy? So you understand, is it something where overnight you have a lot of customers that are ready to sign on or it’s going to be a potentially slow build? You look at the friction of going around the world. Some things are very easy to take globally.
Darktrace as a product — you can take it and sell it in any country tomorrow. You localize the currency maybe. But aside from that, it’s a general product. Things like Deliveroo are very market specific.
We look at how fast and expensive as a company — can it take over the world tomorrow or is it going to take years to grow? So all these different factors you think about in terms of scale and can it turn into an Uber-type scenario or a massively big growth company? Because at the end of the day, what matters, in venture anyways, is that growth at the simplest point, from the top line you’re looking at, is that top line really growing fantastically high?
There are a couple of points that I want to dig deeper in. First of all, this is all cool, but I think that for a lot of people, it sounds a lot more like art than science. “OK, so how do you know what’s the value?” Especially when you’re being early-stage, meaning you don’t have the traction, you maybe have a couple of POC that you’ve done or a couple of early adopters. And then how do you extrapolate that?
We see a couple of different approaches. Sometimes people come in and say, “Hey, Gartner said this is a huge market and we are going to be there leader there.” And sometimes people come in with very meticulous calculations which have tons of assumptions around them. And this is not really the way we perceive assessing markets. We tend to be more — is it in the right trend, on the right market, and does it generate enough value for the customers so that it justifies generating millions in revenue in a couple of years in the future. So what is the approach that you like best when founders talk about markets on which they operate?
It’s always a little bit different depending on each company and the product they’re selling. I think of the trade off between the value of a contract and the time to close the contract. If you’re going to wait six months to close a deal, you think of the human time. So if you have one human working six months, likely full time on closing a deal — and the salesperson isn’t necessarily cheap — so how do you think about that cost in terms of sales ROI? You add scale.
If you’re one salesperson that closes two deals in six months and a salesperson costs, in the UK, 300,000 dollars a year, the sale should be a multiple of that in terms of topline revenue to the company, because at the end of the day, sales has to pay for itself. Some things like if it’s a SaaS product you can go out there and have this crazy leverage where you’re buying AdWords, you’re buying your views on YouTube or things like that and getting that scale.
I think of that spectrum around the velocity of sales closure and velocity of dollars and also the size of the deal. And the worst ones are where it takes six months or nine months to close and you make 15 or 20 K. Yeah, those are — I think — really dangerous because those are the deals that become very, very sluggish because you can’t grow revenue fast enough. You have to overinvest in sales early and maybe over time you can make that up or you can grow the basket. But those to me are the trickiest companies, if I’m waiting six months for a deal to close I want to see some serious revenue behind that deal.
And you yourself, you guys specialize in the early stage. You do Pre- Seed deals, you do Seed deals. Usually, at Seed deals you already have some of those numbers that you’ve mentioned and you have some ideas about what it can be on close time and all the others. How do you look at Pre-Seed deals then? Usually, Pre-Seed wouldn’t have any of those, it would be just assumptions. So what do you look for in Pre-Seed deals?
This is where it’s tough. To your point about this being an art more than a science… for the Pre-Seed usually for us what we key on is, is there something we know about this space or something we like about the opportunity? We may not be experts necessarily in the space, but there’s something that tells us, it’s a very binary type opportunity where, again, it’s going for a massively big market.
To us, Pre-Seeds are by definition, the highest risk. So they have to be the highest reward. Sometimes it’s people that we know or people on the Google network that we know and can trust and take an earlier bet on them. But usually it’s a matter of the earlier the deal, the crazier it’s got to be to justify the risk/reward profile.
We’ve done a lot of things in deep tech where you’re looking at machine learning applied to pharmaceuticals or applied to biotechnology, where if it does work, there’s a massively big market you can disrupt, but there’s plenty of things that can go wrong along the way.
For a Pre-Seed, if you balance the valuation assessment, then it comes out being worth the risk profile. But we assume also the Pre-Seed failure rate is going to be quite a bit higher than the Seed. So you can price that into your risk profile. You have to have an even higher bar for potential opportunity, but a lower bar in terms of what you’re seeing now that you’re taking a punt on the team as well as the market as well as, the unknowns around the IP. Usually there’s five different categories of risk in a Pre-Seed. So you’re taking risk in all of them. And then eventually, if it works, you’re seeing the levels of risk diminish, where maybe there’s less product risk because you can show a product is built or there’s less tech risk that you can prove out the core IP works, or you can sometimes take out some of the market risk. If you have customers that say “I love this, I want this”, you just balance those levers of risk.
One thing that you haven’t mentioned in this which is actually very important for us is the team and people who are building it because at Pre-Seed you don’t have much more than that. And, there’s a couple of points around the team itself.
First of all, with current competition for deals, I see that there is less and less face time that you can have with the team, especially on the competitive deals, because they know they have a choice and they don’t need to spend this time with you. So what are the traits or things that you look for when you meet those entrepreneurs trying to assess are they the right team? Are we going to enjoy working together like is there this chemistry?
It’s a tough choice sometimes, but again, to us is the trade off of the market plus the team. If you’re a great surfer, but there’s no waves, it doesn’t really matter. Whereas if you’re an average surfer and the waves are perfect, you can actually surf well.
I think for us, we look at both those factors. Are the founders ambitious? Do they want to build something really global?
Being a founder is a really hard job. It looks sexy from the outside and everyone wants to be a founder and get on the cover of Forbes. But it’s really, really hard and often unpleasant and a thankless task. Spending 5+ years of your life on one idea here you have very concentrated risk, you’re probably paying yourself less than your other options of going to work at a big company if you’re halfway decent. It’s a very risky maneuver with a generally low quality of life for the hopeful payoff at the end.
We ask ourselves, do they have that passion or do they have that craziness that makes them successful? Because you have to be crazy to be a founder. I say this in a good way, but it’s not an easy business. It looks sexy when people read about the success stories on the cover of Forbes, but for every one of those there’s a hundred bodies of things that didn’t make it all that way.
If we don’t know the founder already, we look at their resilience. Have they done it before? Obviously, multiple-time founders know what they’re getting into. So they have their learnings. Plus, they understand, this is not an easy task being a founder. And then we overlay that with the market as well, that even average teams, if they’re at the right place at the right time, the market can make them fantastically successful, but sometimes great teams are just in the wrong market, at the wrong place and you can’t do a thing. And so, again, you look at that, are they nimble enough? They can pivot around to find something that works. But it’s a tough scenario.
Yeah, I like the wave analogy. There is something that brought to my mind when you said about people reading in press about the success stories. I also like the overnight success that takes 10 years. And even when it’s growing and everything there are still pains with that.
I have a lot of empathy for founders. Both of us have smaller funds in newer markets where it’s not easy to fundraise necessarily so much. It’s a long, painful journey. Fundraising in Europe is far more difficult than it is in the U.S. across the board. Particularly the smaller the city you’re in, the harder it is to raise capital because there is fewer choices.
Being a founder in Europe has its opportunities. You can find amazing talent locally at different prices than you would in the U.S., but it’s also harder to raise capital. I think the upside is that the world is getting flatter every year and you can be in Kraków or Wrocław or anywhere, really, and sell in the U.S. We have companies that are from small cities that are entirely remote that generate the majority of the revenue in the U.S. purely by doing Instagram ads or AdWords or regular content marketing and taking inbound calls and emails. To me, that’s the opportunity that you’re able to do this from anywhere now. And every year, it gets easier.
I’d say even particularly in the past 12 to 18 months the world has changed even more favorably in this regard, that Americans are doing deals entirely remotely by Zoom. Even London funds are doing deals entirely on Zoom, which is helpful for bringing more capital into the market. So for us these are all factors that, again, level the playing field and make things even more equal globally.
And I think this is about both of us, too, right now. That’s going to be a global village. Someone being in Wrocław or Kraków or Warsaw can build a business that is going to be selling to the biggest companies in the U.S. or in Germany or Australia. So this is the bigger wave we are all riding, in a way. So that all being said, usually when people think about fundraising and I agree with you that it’s probably tougher to fundraise in Europe than it is in the States, but I also think that there is the maturity of the ecosystem, maybe apart from London and maybe Berlin, right now is still on the rise, let’s call it. So there’s still some stuff that is, I would say, considered pretty basic. But there are some misconceptions about how VCs operate and what they look for and also how to find a good VC. So what would be some of the misconceptions or the things that you feel need to be cleared up for the people to understand for this cooperation to be beneficial for both?
When you think about the investors and quality and experience, a lot of the best investors tend to be in California just because they have so much of a history of them coming out of Google or Yahoo! or eBay and then starting firms or joining firms. Their networks are phenomenal. So I think of the end game is almost always moving westward where if you’re successful, the U.S. is probably going to be a target market for you and you’re probably going to raise money in the U.S. over time. Maybe not in the very early days. Maybe it’s a Series A, maybe it’s a Series B, and for sure by the Series C, but increasingly the Americans are coming earlier where they’re looking at Series A.
When I think about the task of founders it’s how do you get to that point where you’re globally fundable and how do you break out of your initial few proof points into something that shows that product-market fit? And how do you really define that? So, again, often the easiest product-market fit for getting to A’s and B’s with the American funds is usually having American customers. So I think it’s a challenge sometimes to break into that.
But the good thing is, there are far fewer barriers to entry now to get in, to sell to an American company is not as hard as it used to be. 10 years ago if you were selling B2B — and we’re talking on the B2B track here especially — 10 years ago it was having a salesperson that knew the right person at the company, that knocked on the door, that took that person to lunch. It was all stuff that wasn’t really well socialized. So if you’re coming from outside this market, you don’t know the customer. So you’d have to really hire a salesperson that knows your customers. And it’s a big deal. Now, you can see everyone’s playbook, right? You can look at their content marketing. You can see what the best companies in the world are doing and effectively use it to your advantage, figure out how they’re selling. What AdWords are they buying, what does their marketing copy say? What are their white papers do? You can go to LinkedIn and find your own customer list. That’s pretty good to start to get you a bootstrap. So to me that those are, again, the advantages of our founders with good hustle can put themselves in a lot more playing field because there’s so much more information out there now for them to find and hustle and resource themselves into.
So you get a deck from a company you don’t know or haven’t heard of before. What are the parts that you pay the closest attention to? What are you looking for in those?
Honestly I look at what’s the core product of the company or where are they in that product-market fit stage. As a Seed investor it’s much easier if they already found product-market fit or they’re pretty close. So I work backwards. I look at the team going in and understand what’s their DNA? Are they engineers? Are they salespeople or are they product people? You can see for every company there’s sort of a core DNA of the company, whether they’re robotics experts or dev ops engineers at the heart of it.
And I skip to the product-market fit to understand what can you demonstrate so far. Who are the kinds of customers you’re talking to? And I key on these things. If you’re in Warsaw and you’re selling to a company in London… that’s interesting. That’s not an easy thing.
I always discount local stuff to an extent. If you’re in London and you’re selling to a London company, maybe it’s your buddy from university that you’re selling to. You always ask yourself, how did this company make this happen? And so I look for something unusual here. Is this company getting initial traction with people that are really reputable? And sometimes you see interesting things where e.g. DoorDash is using them as a customer, even though they’re 6000–7000 miles away and they’ve never met in person.
I look for those signals — is there something interesting about this company that shows me they’re not just very iterative, but there’s something that might be groundbreaking, where they’re selling into new markets or they’re getting customers that are name brand customers that are arguably very selective type customers.
To give folks in the region maybe a better example… We are co- investors in Spacelift and Preply. And you also have exposure to Nomagic and maybe some other scene in the region. So maybe focusing on those three. What, like in a nutshell, what got you interested in those?
So working on the list… in the case of Spacelift, it was specifically that that there was great engineering talent that personally we were connected to through the Google and Deliveroo network because the founder was at both. Of course, we knew you guys as well, which is very helpful around the table. Again, it was a very leading edge product, so a very hot space around terraform. A lot of companies are investing in terraform. Very well engineered product and early traction with companies that are seen as being very smart about this. So ideally, if you’re building something that’s innovative from an engineering perspective, you want the best kinds of customers who are saying, “we’re looking at everything in the world and we think this is the best solution.” So it’s keying on that very early that they had very good customers that weren’t just folks down the road that they knew uni. But folks that were legitimate customers, they fought their way into and were able to win big size deals.
Preply, again, going after markets for them, they initially were very CIS-focused around Eastern Europe and interesting, but relatively comparatively low GDP’s and again, relatively lower market in terms of people who are able to tutor and buy and sell and pay a reasonable price. So the company pivotted really heavily to focus on the U.S. student market so that within an 18 month period of the founder deciding to do it, the U.S. became his biggest single market. And that’s pretty impressive. So, again, it speaks to something really working. That either the team is executing really well or they’ve made a globally excellent product that’s able to beat out all the competition. If you can win in the U.S., usually you can win anywhere else. So for me, at the point of entry, you could see that these guys were able, despite being in Kiev and not having any presence in the U.S., they worked, they cracked the U.S. market and made that very sizable market for them. So that was really impressive.
And again, same thing with Nomagic. It’s a very global market where they sell. So, this is a company selling robotics. Europe actually has an advantage there that a lot of the European companies probably have invested earlier in robotics because there’s more precision manufacturing than in the U.S. It’s a case where Europe is actually as interesting, if not more interesting than the U.S. Certainly the Walmart’s are interesting customers, but also the BMW is here. And same thing, they’ve gotten early customer reference points where they were in pilots, but pilots with serious customers that are talking to all the big manufacturers in the world of these kinds of products and saying, “I’m choosing Nomagic because we think it’s the best we evaluated out of the 10 things out there.” So in a way, the customers do our work for us. If we see a customer that’s very smart saying, “we looked at all the options out there and we chose Nomagic,” it’s a pretty good sign that other people will do the same. And you can then extrapolate out and say “OK, this could be a really big company”.
That’s a pretty interesting point. I think that’s what distinguishes some of the companies that we perceive as more exciting than the others is that they understand. They just have this tendency to go out and sell to bigger clients in either London or in the States. Whereas there is a group of founders that build something that might be super interesting, but they sell locally. And it also has its drawbacks, because I would say that buying power in the region and the willingness to go into innovative solutions is not great. So, there is a paradox that it might be more difficult to sell locally. And then it’s not as telling as an early sign whether you have a world leading product or not, because the conception is that everyone’s going to the States with their software. And if you can win a customer in the States, it’s probably worth 10 customers in Poland because people just perceive it as a more competitive market. And if you can win there, you can probably win everywhere else. So this is, I think, extremely interesting. And I think we’ll see more and more of this move West, as you mentioned before.
And it’s tricky because depending on the sector of business. Some businesses are very localized in what they do. So if you think about fintech, a lot of fintech opportunities around pairing with all the right banks, all the right service providers. So you may have a fintech that’s paired up with all the credit card providers in the UK, but then going into France is actually really hard because you start from scratch and you have to build relationships with the local banks. And there’s all this PSD2 stuff where you can scale across Europe theoretically, but still requires a lot of the last mile tuning.
Oftentimes we’ll see a company that’s done a great job in Poland, that’s locked up all the local banks, and so it’s a local advantage they have. But then going into the next market, you’re starting from scratch. It doesn’t give you that much opportunity along the way. When I look at businesses, I like to try and see is there compounding value where — once you have a playbook, if there is localization required, once you have a playbook, does that playbook also scale really well? And things like fintech are hard because usually you have to go to a cluster of the five or ten biggest banks in every country, make sure they want to partner with you or figure out how to work with them, figure out what the right accounting packages are. Each country has their own SaaS accounting. So it gets really complex where there’s not an easy way of saying “Great, we’re going to turn on all of Europe”. It’s more — we do France, then we do Germany…
There is also this point of the U.S. being more homogeneous as a market itself. Selling in Europe is great and you can build local defensibility for what you just said. But then again, expanding and building scale is so much more difficult because you have different legislation, different regulation, different habits, different languages. It somehow feels that the States might be similar in size to Europe, but the complexity in Europe is an order of magnitude bigger. Right?
Exactly. I think one of the things that I’ve seen consistently is if you look at the big enterprise software companies, like the early Oracles and IBMs, a lot of them did analysis. And I’ve read some of these summaries over time. But you look at sales force effectiveness and Europe is 20 percent harder. So that’s a vague term. But if you look at the different components, depending on the company it is, deals take 20 percent longer to close or they’re 20 percent smaller on a dollar by dollar basis or they’re 20 percent fewer in terms of volume for the year. So it just winds up that dollar for dollar of your spending on sales and marketing or your spending on a team of people, usually it’s just that much easier to sell in the U.S. Americans love to buy new stuff. I say this as an American, Americans love to buy magic beans — if someone selling you some cool idea. Americans probably have a higher likelihood of trying new stuff. They’re less conservative. And historically, Europe has been a more conservative place. Right? So if you’re running a Mittelstand business in Germany, you’re probably not that necessarily tech-focused as a small employer in the U.S. might be.
And we had this case in Spacelift. When in certain industries the innovation curve is further down in the U.S. So when they talked to customers in Europe, it’s been a tough sale. But when they moved to the U.S., people understand those pain points. They have already been there and tried to solve it by the traditional means and they understand the problems that come with scale. So I also think that from this perspective, if you’re building something truly innovative and you understand your industry inside out, it might play to your benefit to go to other people that understand that. And to your point risk aversion is probably much higher in Poland or in Germany. And also I really feel that the amount of dollars that you can extract out of clients in Poland is much, much lower for the same amount of effort that you put into selling the product.
This, to me, is always a factor of the effort versus the reward. So if you’re going to spend that much time on sales or marketing, like arguably all things equal, try and go after the most UC targets first. And then again competitively, if you’re thinking about a world where for any idea more than ever, no matter how innovative it is, there’s someone else, who’s going to be doing the same idea. You have a globally competitive pool and frankly, that’s going to require capital. So if you’re in a business that’s venture-backed or a sector that’s venture-backed you might have a great idea, but you’re in a race, right? You’re in a sprint. And there’s going to be someone else who might be faster out there that’s going to raise more money. And this is how Europe used to be. And it’s changing now. It’s a lot more equal footing. But 10 years ago, it was an intrinsic bias that you couldn’t build something big here because you can never raise as much as the American competitors. So even in the pre-Rocket era, you had local people who were doing classifieds, or doing auctions in every country. And eBay would say “Great, once one of them gets to have a plurality of the market, we’ll buy them and pay 5x revenue”. So you saw a bunch of local auction sites that got rolled up. They got OK prices, but they were 50 million, 100 million dollar deals. Whereas, why didn’t one of them become eBay? Because eBay was early and very well funded and became globally dominant. Nowadays, building Uber in Europe is so hard because there is still not as much capital. But, ideally over time, you should be able to build things like an Uber from anywhere if you have that level of ambition and capital behind it.
That’s true. But I think it’s also changing. The argument that some people are raising is like, “look, Europe is cheaper,” which admittedly is getting less and less so, but it’s cheaper in terms of price of work. So, you can build it with smaller funding. And also now you have Bolt and a couple of others heavily funded companies from Europe that made a mark on a global scale in customer business, where I think it’s increasingly important to have this kind of financial backing to be able to build a global perception of your brand. Let’s maybe switch to this point. Because I think it’s also interesting.
We touched upon this from a different perspective. At an early stage, what drives you very often is how good is your product. Whether you can compete on a global scale and with anyone, whether it’s Silicon Valley, Chicago, London or Warsaw, are you really, truly the best? And building products is tough. And you’ve spent four years as a Product Manager at Google and you made a very, maybe not controversial, but strange move from the perspective of someone living in Europe. You decided to move from the States to London to build your venture fund. But I wanted to touch upon, what are the learnings that you got out of being a Product Manager at Google, which notably is regarded as one of the best organizations in teaching and building new products? And how does it affect how you look at investments?
Being someplace at Google is a fascinating opportunity, right? Because it’s like being a founder with a safety net behind you that you have depending on where you are in the company. You have a very interesting opportunity to take advantage of all the scale and all the platform abilities. And with Google, I was working mostly in ads, so we had a tremendous number of advertisers. That number was growing as people went to Google. If you have marketing money, you’re going to come to Google. So it was really we could have a lot of flexibility with trying new things, trying new products to bundle in. But again, it’s very much a skill that you learn on the job. I didn’t really know anything about product management. I had a computer science background, but it’s a job you learn through apprenticeship.
Kind of like venture as well. There’s not really books on it and it’s hard to train on it. It’s a job like being a plumber where you have to ride alongside for a couple of years. And I was fortunate to have a really great people in the early days that were teachers that you can learn from just by watching and see how they scale it.
Because at the end of the day, product is really… it’s being a founder without actually having authority of management. So no matter what you’re sort of managing from the middle where you have a task that you’re sort of the responsible one for, but you don’t really have P&L responsibility. You have loose ability to function as far as budgeting goes. But, you can’t hire and fire people necessarily. You’re in a matrix environment where you work with other teams, you’re trying to get resources to do other things. So the Google environment teaches you to be fairly resourceful, where you’re managing people through carrot and stick, but you don’t have much of a stick. So how do you try and convince people that were all lined up or going in the right direction? It was a really unique opportunity that I think helps you look at companies and figure out how do you think about growth and how do you think about finding unfair resources? In the early days, one of the beautiful things about AdSense when we launched it was we had a tremendous number of ads from Google.com, and it was really easy to take them and put them on a blogspot blog post because they’re all text format. You just format them in the format of the blog and you’re good to go. So we had this crazy network advantage where we could launch a content network from scratch and have full ad content on it from day one. So again, looking at startups, the same thing of what advantages are out there, who are the partners you can partner with or what gives you that sort of exponential capability really early on?
And do you have… I think it’s fascinating, the times when you’ve been at Google, I can only imagine the network that has been over there and people that have worked there — this is all pretty incredible. But, right now, you’re in VC. And companies in Europe tend to have a hard time finding good product managers. So, do you have any hints for them? How to develop the skill set internally, if possible, or, if not, how to attract the talent that actually has the skill set?
Yeah, if you look at the Valley and some of the best PMs that came out of Google, like Brett Taylor at Google who now runs Salesforce, basically is the President of Salesforce and he was an early PM at Google. And you basically find people that are intellectually curious and are generally polymaths. So it’s not always computer scientist. Sometimes, it’s biologist’s. There’s a general technical acumen you probably need to have to build trust with engineers, but it’s that high EQ, the intellectual curiosity to figure out, how should I be doing things? What should I try? Can I be creative in new ideas?
Obviously it helps if you have people that have come out of these organizations. The value of Silicon Valley is you can go there and start a company tomorrow and say, great, I need two Product Managers. You can find a thousand from Facebook and Twitter and Yahoo! and Google. And they all know the playbook, right, because they’ve been trained up. They know how to run OKRs. They know how to build a product roadmap. All these things are already trained up. So if you don’t have that, it’s a lot of trial and error sometimes. So if you’re in a place that you have access to this kind of talent, you can learn more every day. Every day it gets easier. There’s more things out in the web, there’s more tools. But it’s still sort of a business where you’re teaching yourself. So you’re going to make mistakes, but you’re going to get better over time. It’s one of the challenges that as we have more generations of companies here throwing off this talent.
If you rewind 10 years ago, there weren’t any companies in Europe really throwing off California style talent. Or there was no place you’d go and say “Great, that’s that person is well trained as a Product Manager”. Now, you’re seeing the Spotifys and the Klarnas and the Deliveroos and the Adyens and all these companies that are now getting big and post IPO that have, Spotify is probably one of the most well known now, people that are respected for being good PM’s that are now leaving to do their startup. And they’re training up a dozen younger folks that are fresh out of university. So, it creates this virtuous loop that over time should create lots of PM’s and each one is training up 10 more. But it’s a patience game.
Let’s hope for that. I think that those loops play out everywhere, even on a small local scale as well. So let’s hope it happens sooner rather than later. I also think that one interesting aspect is with the U.S. being a little bit difficult on getting visas and stuff like that, you can sometimes maybe try to approach people that have been there but might want to come back. We had some success in our portfolio companies with getting expats that just for personal reasons want to come back home. But they have come from this environment where the product management skill set is taught. And I totally agree with you. That is more like apprenticeship model where you need to have your master to be able to learn the craft. And it’s difficult to learn that all through reading and learning, takes a lot of time and sometimes you just don’t have it.
There’s a lot of trial and error. And I think people like you talked about, those are the real unicorns. If you find someone that’s been in California, a Polish Product Manager that wants to come home. Those are great opportunities, when you can find them. They’re obviously very rare. But, it’s a better time than ever to pull people out of the U.S., people that want to be home with their family or people that are re-prioritizing and saying, “I want the kids to grow up near grandma and grandpa.” It’s a unique opportunity. So, London is fortunate that it’s easy for Americans to come there. We’re seeing more and more of that every year. But every country has its own diaspora of expats. France has tons of people in the Valley. So we’re always delighted when we see people that are coming back because it’s another way of getting that knowledge. And they may have trained up at Facebook themselves and they’re coming back home. And you’ve seen this in some of our companies. They bring in that talent and that expertise.
On that front, what we see from time to time is people coming in that they’re building, something innovative, but they don’t really distinguish building great innovative technology from building a great innovative product. Right? So what would be your hints to people that are building something like this? Maybe, it’s my personal opinion. But, technology is not worth much if it’s not a product. Products usually need some kind of technology, but if you have only technology and this is the only thing that you focus on, it’s very difficult or impossible to build a big business out of that, at least through a traditional VC route. So what would be some advice that you can give to people building early stage to make sure they focus on products rather than technology itself?
Yeah, I think it’s exactly that. You need to invest where you have to invest but don’t overinvest. If you look at the companies that win, I’d say, it’s rarely the ones that have the absolute best technology that wins with the exception of a core IP around science or chemistry or some amazing new algorithm in quantum computing. It’s the companies that can commercialize the best. And if you look behind the scenes even in the best Valley startups they often look like a disaster. The systems are barely up.
Twitter for a decade was a poorly engineered company in terms of reliability and maintenance and people tended to leave pretty quickly after they joined because they realized it was a thankless task. But, it turned out to be a really big company.
So I think with any kind of technical founders or product oriented founders, the matter of balancing out your cost to reward and if you have to do things manually that’s fine. Like no one’s going to hold that against you if you’re using an Airtable and, half your business runs on Airtable that’d be perfectly fine, eventually you’ll have to engineer solutions. But if you can get by with that, better you focus on getting to market and showing product-market fit. The best problems to have or where the wheels are falling off and you just can’t scale fast enough because that’s a problem you can throw money at generally. And that’s the problem where money will find you. So even with Twitter, they were always able to raise money because their growth was always really good. They solved their problems by throwing cash at it. To me, those are the best scenarios where even if it’s poorly engineered, if you can throw cash at it and solve the problem, but you’re growing that problem will solve itself.
OK, interesting. Very interesting. I think that our time’s up, but it’s been a lovely discussion. Rob, thanks for being with us. Thanks to all of you for being with us as well. I hope you found something interesting that you can put into action right away out of this talk. And don’t forget to subscribe to our channels on YouTube or LinkedIn and on Twitter. That’s it for today. Thank you very much for your time. Rob, pleasure having you.
Pleasure. It’s good to be here. It’s nice to be back in Warsaw.
Yeah, that’s true.
Inovo Venture Partners is a first-choice VC for ambitious founders from Poland and the CEE region. We back early-stage, post-traction startups with up to €3M of initial investment, and help them build global brands while driving growth of the local startup ecosystem. We take great pride in being close to top founders who think big. We’re investors in: Booksy, Restaumatic, Sotrender, Infermedica, Spacelift, Tidio, AI Clearing, Zowie, Jutro Medical, Intiaro, Packhelp, Preply, Eyerim, Allset, SunRoof and Archbee. Our second fund reached a total of €54M.
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