From Memes to Value-add: What Matters "Beyond Money" and How to Find It

SaaStr Europa 2022

1. Madeline Lawrence Associate Peak @madelinelawren From Memes to Value-add: What Matters 'Beyond Money' and How to Find It

2. These are unprecedented times - literally .

3. Welcoming a new ‘normal’ in the capital markets 93% of seed funds in Europe reported increased intensity last year (vs 57% between 2019-2020) Consider : international entrants, new players, growing funds Leading to: Valuation inflation Cheque size inflation Pre-emptive, earlier rounds Capital moving at its fastest pace, ever

4. Welcoming a new ‘normal’ in the capital markets Fast money. Big tickets.

5. Huge funds. Welcoming a new ‘normal’ in the capital markets

6. Let’s find out. How competitive is it, really?

7. Stealth mode How competitive is it, really?

8. Stealth mode Activated How competitive is it, really?

9. First Step: Test the waters. Lure in the VCs.

10. Testing the VC waters. Welcome to: My 72 hours as a Stealth founder

11. And it worked …a little too well.

12. And it worked …a little too well. *

13. And it worked …a little too well.

14. And it worked …a little too well.

15. What’s the point? Ok Madeline,

16. It’s busy out there.

17. Of course, we can’t ignore the last few months…

18. Money, Money, Money. But still:

19. How do you decide? With investors knocking on your door or lurking on the corner.

20. An overarching personal & professional goal. Founder Guides to Venture Capital Guides to help founders navigate this black-box industry

21. But a logo & ticket size only tells you so much.

22. To founders (…and to each other), we’re still largely “all the same” We’re backing category leaders, ‘game changers’, innovators, visionaries. We’re catalysts, partners for the long-haul. Shifting paradigms. …….disruption… But a logo & ticket size only tells you so much.

23. It’s hard.

24. Capital is (becoming) commoditized.

25. Capital is (becoming) commoditized. (& we’re freaking the f*ck out)

26. We know this.

27. We know this. (& we’re still freaking the f*ck out)

28. What is there besides money ?

29. We VC's are scrambling to differentiate.

30. Some tactics investors are rolling out to stay ‘competitive’ and unique in 2022 We VC's are scrambling to differentiate. Source: State of European Tech, Atomico, 2021

31. Even the best of us have to stay relevant.

32. And founders are getting picky.

33. What investors think ‘win deals’ vs what founders look for. And founders are getting picky. Source: State of European Tech, Atomico, 2021

34. Founders value investors who share their vision. … investors don’t care. But we’re not quite seeing eye-to-eye. Source: State of European Tech, Atomico, 2021

35. VCs are pushing ‘ value-added services and capabilities ’ …a topic that 96% of founders don’t value . But we’re not quite seeing eye-to-eye. Source: State of European Tech, Atomico, 2021

36. How do you see beyond money?

37. Speed Portfolio success Portfolio synergy “Value-adding” services Expertise Brand and marketing Chemistry & personal relationship… Let’s skip what you already know. And dare to go deeper.

38. This is an opaque industry.

39. This is an opaque industry. With steep power & information asymmetry

40. You have to know what to ask In order to see beyond money (and marketing),

41. and have the courage to ask it. In order to see beyond money (and marketing),

42. 1. Who is your boss?

43. What : We get money from someone / somewhere ( government, corporates, institutions, family offices, individuals). Investors almost never fully disclose their LPs (and likely never will). Why : This can impact power dynamics, decision making, risk tolerance, culture, and more. Information rights + mixed incentives = can lead to conflicts of interest. Money has morals. 1) LP Structure: Who is your boss?

44. What : We get money from someone / somewhere ( government, corporates, institutions, family offices, individuals). Investors almost never fully disclose their LPs (and likely never will). Why : This can impact power dynamics, decision making, risk tolerance, culture, and more. Information rights + mixed incentives = can lead to conflicts of interest. Money has morals. How : Who are your LPs? What is their role? How diverse are they? What is the fund structure? Are there any conflicting investments? What level of information do you provide them? Be critical and get to the real story. 1) LP Structure: Who is your boss?

45. 1) LP Structure: is it so hard to imagine?

46. 2. Whats in it for you ?

47. What : You may know general 2/20 VC structure, but what does it really look like in practice? Why : Venture Capital is a long-haul partnership. Incentive alignment is essential to steering the company ahead. Knowing who you’re working with and their buy-in is…logical (just like investors asking for your your cap-table & SHA). 2) Incentive structure: What’s in it for you ?

48. What : You may know general 2/20 VC structure, but what does it really look like in practice? Why : Venture Capital is a long-haul partnership. Incentive alignment is essential to steering the company ahead. Knowing who you’re working with and their buy-in is…logical (just like investors asking for your your cap-table & SHA). How/Ask : Dare to flip the scrip around. What is your ‘skin in the game’ / Did you personally invest in the fund? What is your ‘piece of the pie’ / Do you participate in the carry? What is your vesting period? 2) Incentive structure: What’s in it for you ?

49. 3. What’s your business model?

50. What : We’re making money into more money. Our model is driven by outliers (‘high risk / high return’). We have a limited amount of time & money to realize returns. Why : Funds have their own assumptions informing portfolio & investment strategy. This decides resource allocation, sensitivity to valuation / ownership targets, timeline to exit, dependency on other investors, and more. 3) Incentive structure: What’s your business model?

51. What : We’re making money into more money. Our model is driven by outliers (‘high risk / high return’). We have a limited amount of time & money to realize returns. Why : Funds have their own assumptions informing portfolio & investment strategy. This decides resource allocation, sensitivity to valuation / ownership targets, timeline to exit, dependency on other investors, and more. How/Ask : How many investments have you done / will you do from this fund? What is the life cycle of the fund? What is your risk & return profile? What are your key assumptions (eg # write offs)? What drove your past performance? …What is your past performance? 3) Incentive structure: What’s your business model?

52. 3. How do you celebrate?

53. What : You know personal chemistry, but what about the wider team dynamic & structure? 3) Fund culture: “it’s all about the team ”

54. What : You know personal chemistry, but what about the wider team dynamic & structure? How : Examine hierarchy and bureaucracy. Look at employee turnover and wellbeing. Examine the team member profiles - especially the new hires. Ask ‘how do you celebrate’? What are your OKRs? What is your most important metric (and ask again, ‘what is it really?’). What’s your hiring roadmap? Tips: You can tell a lot by a team page (Crisp white shirts? Ordered by seniority? Golf handicap as a fun fact?) and don't forget the shoes! 3) Fund culture: “it’s all about the team ”

55. You may not get answers.

56. Let’s wrap this up.

57. This is an imbalanced and opaque industry… It’s hard to tell investors apart and even harder to understand them. VCs are scrambling to differentiate and create a competitive offering in an increasingly commoditized space: money . To see beyond money, dare to ask critical questions about ownership, compensation, incentives, priorities, and culture . My Top Takeaways

58. 4. …and don’t forget about their shoes ;) My Top Takeaways

59. THANK YOU

60. Join us for the The Diversity, Inclusion & Equality Brunch 11:45 AM - 12:30 PM Speakers We Love: Stage B P2: Banquet Hall