Investor Circle
Investor Circle is the podcast series from Canopy Community brought to life to capture insights from investors across the globe. In each short interview we get under the skin of how the investors think and make decisions as well as what kind of people they are.
Our goal is to build empathy within the community of the what, when, who, how and why behind raising funding for your startup. #Empatia
This series is primarily for Founders of early stage startups who are looking to raise their first funding, but it’s also helpful for investors looking to raise their first funds and for anyone in the ecosystem who is interested in how this all works.
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Investor Circle
Are You VC-able? Hard Truths About Startup Funding
Oli from Fuel Ventures unpacks the firm's investment strategy across their pre-seed and seed funds, sharing his personal "Venture Playbook" that guides their decision-making process. He reveals counterintuitive insights about founder profiles and what makes a business truly "VC-able" in today's funding landscape.
• Fuel Ventures operates two vehicles: a pre-seed fund (30-40 deals yearly at £250k max) and their flagship seed fund (10-12 deals yearly at £1-2.5 million)
• Their investment remit covers marketplaces, platforms and SaaS model businesses across B2B and B2C sectors
• Oli's "Venture Playbook" includes eight rules developed through investment experience, including avoiding "mediocre founders with good ideas" and requiring total founder commitment
• Previously successful founders often make better investments as they can take bigger risks without worrying about basic financial security
• Fuel Ventures prefers observation rights over board seats to better allocate resources across their portfolio
• Not all businesses are "VC-able" - venture funding requires potential for £50-100M+ in annual revenue and comfort with burning capital
• Different funding sources (angels, corporate ventures, VCs) have fundamentally different expectations and criteria for investment
Know what you're trying to achieve before approaching investors. Save yourself time and effort by understanding if your business truly matches what VCs are looking for or if another funding path might be more appropriate.
Virtual Incubation for new and emerging Founders. Zero to One.
#TRIBE
Community Membership at Canopy
Scribe
Find and connect with angel investors in the UK Founded by Rob Cossins
Revolut
Business banking from Revolut
SeedLegals
The platform for Startup Legals including SEIS Advance Assurance.
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Okay, fantastic Investor Circle. Lovely to have you here, oli. Thank you so much for making time today. I think we met originally through Albert Scribe, right, so it's nice to bring you now into the Investor Circle thing. Do you want to introduce yourself? And, of course, fuel Ventures how does it work?
Speaker 2:Yeah, absolutely. Thanks, Joe. So I'm Oli. I'm one of the partners for Fuel Ventures. Fuel Ventures is a pre-seed and seed fund focused on UK, specifically SEIS and EIS qualifying businesses, and we do that through two separate vehicles. So we have our pre-seed fund, which is 30 to 40 deals a year it's 250k max tickets, highly diversified at the very early stages. Now I don't work on that fund personally, although obviously I'm very heavily connected to the people that do. We have a team very specifically that works on that side of the business. We then have our seed fund, which is really the core fund that we initially built Fuel Ventures on, which is the fund that I represent. We'll do one to two, two and a half million pound tickets at seed as a general lead investor. We don't have to be a leader, but generally we will come as a lead and we will only invest in EIS qualified businesses doing about 10 to 12 deals a year. So much less than Pre-Seed Fund but still pretty well diversified, and that's a really core part of our thesis. We want to make sure that diversification is significant. That goes into our investment remit as well. In terms of sector, we're pretty generalist, so our official investment remit is that we look at marketplaces, platforms and SaaS model businesses, both B2B and B2C, which is broad and is purposely broad for that diversification piece. We want to make sure we're not pitching too hard at the start. We want to make sure that we can. Um look at loads of different opportunities. Um, we have about 75 companies in our seed fund. We have about 125 130 in our pre-seed fund. Um, so we're a very active investor. Um, those are all investments we've made since um 2016.
Speaker 2:Um, we were founded in 2014 by a guy called Mark Pearson. Mark was the founder of a company called myvouchercodescom which was an online marketplace of vouchers and experiences Very simple to walk sort of group on board to the market. Later he sold that business in 2014. He was also a very active angel private investor as well, had a decent sized portfolio of which he put decent money into, had some really good success from that. Once Mark sold my voucher codes, he decided to set up for your ventures just because of his experience working with founders in his own portfolio people that he'd actually brought into his own offices to support and decided that's the route that he wants to go down. Mark's an investor in our funds, so he has a very strong personal interest, but he's also our CEO MD. This is all the work we'd expect that person to do on a full-time basis, so he's a full-time member of the team as well.
Speaker 1:Amazing. So how many people are on the team now at Fuel?
Speaker 2:That's a good question. I think across everything, we've got about 21 people um. We've got um three on the eis side specifically, um. We've got obviously some support. It's all the important things that we need to do as an investor, um. And we've got a fundraising team and that includes fundraising for our own funds. We're an sdis fund, so we continuously fundraise.
Speaker 1:We don't do it to gpl and stuff do you run that as a series of closed funds every year, or do you run that as an evergreen fund that you're constantly fundraising into?
Speaker 2:We run it as an evergreen fund, although technically I can't call it an evergreen fund because we don't recycle funds, and I think a core part of an evergreen fund is that it's recycled, which ours is not. As soon as we get returns from our investors, we distribute them to investors. So we don't have that process in, but in terms of fundraising it looks very similar to an evergreen fund. We have a single pot of money that we continuously raise money into. We will then deploy those pots into a certain number of deals, post their their investment to make sure that they've got a sufficient number of diversified deals. Um and um. Yeah, that's how. That's how we'll do it, but we won't do secondary investments or tertiary investments.
Speaker 1:So for the first-time founders that are watching this, how would you position FuelSafe compared to SFCD or Hatch? Where do you fit in that kind of space?
Speaker 2:Yeah, so obviously I have good relationships with the guys at SFC and Hatch. I have respect for both of them and we've worked with both of them. We're slightly different just in terms of staging size. So with our fund, um, so quite, it's quite competitive in terms of of of what we do and and, frankly, if, if you've got a term sheet from all three, it really comes down to personal preference who you want to work with. Who do you think the right people are for you? Um, you know what questions you are asking. So one question you might ask for us, and maybe something that works Our favour, is about future investment, because we've got quite a significant seed fund and we've got a pre-seed fund. Well, actually, if you do well and you're representing our pre-seed fund, we can actually quite easily come in with our seed fund with a quite significant lead ticket for your next round and that saves you a lot.
Speaker 1:And it's a big signal to somebody else looking in as well. If you've been part of the pre-season, then you don't actually put into the seat.
Speaker 2:They're kind of wondering what you think about everybody absolutely, absolutely, and there's loads of, there's reasons that we want that aren't are legitimately not necessarily to do with um, uh, the, the, the. What we think of the company, of growth, the company, but you're right, like, and people want to know if we're like following on and things like that. And the fact that we think of the company, of the growth of the company, but you're right, like, and people want to know if we're like following on and things like that. And the fact that we've got the ability to do it is quite significant.
Speaker 2:Where Hatch and SFC sit is just on the slightly smaller ticket side. They'll come in earlier than our core seed fund, but they'll come in with smaller tickets. So our average ticket size is about A. I'm taking a bit of a guess there, just based on my experience, but I think I'm probably right in that, because they're investing in that slightly earlier stage. But, like I said, when we're thinking about the competitiveness of it, there is a little bit of competition at that pre-seed stage, actually at seed stage. We'll work. We'll work with the guys there because, like I said, we've got we've got a good working relationship with them, so I'm very, very happy to work with them obviously all seis funds work in their own way.
Speaker 1:Uh, one of the things that a few fans have mentioned to me is the gents and ssc take a and SSE take a commission on the money that's deployed when it comes out of the fund. So it's usually somewhere in the 5% to 10% range. Is that something that Fuel does or is that something more like that?
Speaker 2:It's something that we do, so we do it that way round. So for our SES fund it's 5% fee. So for our SES fund it's 5% fee. The reason that we do it that way as opposed to doing it the hatch way is this is a really interesting internal conversation, stuart, that you're hitting on quite a bit, because for me, yeah, for me, as an investor, I would obviously rather that we took from the investor side. You know that. For me, because I can talk to companies and I can say I can say, like you know, no fees on you and things like that.
Speaker 2:Um, if you're raising money, you want to take it from the investment side because, um, ultimately it's more convenient for the investor. The investor comes to you and says I've got, I'm an seis investor, I want to invest 100k with you guys into your seis fund. Or I'm an eis investor and I want to give you guys half a million quid. Um, but what does that mean in terms of, like, what I'm actually deploying? Well, if we're taking fees from the investor side, actually what that means is that they're not getting eis on half a million quids worth of investment. They might only be getting eis on 95 of half a million quids worth of investment and that's something that they've got to factor it into their, into their taxes and things like that. So we've always worked on the basis that actually we work, it's it's it's by being more convenient to the investor and by charging fees on the company side. Two things can happen. One we can make the fee super simple. So when we put a term sheet forward and when we do have fees attached to it, we just say it's a flat fee, like we don't have. I think some people work in they've got like a mentoring fee on a yearly basis or they call might call it a director seat fee on a yearly basis and they might call it we don't do any of that. We have a flat fee at the point of investment. Covers done off the table, no, no longer on your balance sheet, as it were, um.
Speaker 2:The second thing is we can bring significant tickets. Um, and actually, by the way that we've structured the fund in terms of being slightly more beneficial to investors, yes, ok, we have to charge a fee at the point of investment which, like I said, for me is also quite annoying, but what it does mean is that I can bring a significant ticket, my seed fund. My average seed fund ticket is 1.6 million. Very, very few EIS funds In fact, I don't know really any eis funds on the market that can bring that size of ticket at seat um. The reason I can do that is because we've got the ability to fundraise quite, quite aggressively and people are willing to put significant sums of money behind us.
Speaker 2:Um, it might be annoying if I have to charge a fee at the end of it, but at the same time, what I can prevent is is you, as as a company, having to herd the cats um, which is, you know, okay great, I'm not charging a fee, I can only give you 500 grand, and you've got to go out and find another one and a half million, um, and I can't give you the money until you've found the other one and a half million. And then you have to make sure that everyone's in line and everyone's happy with the documentation and everyone's happy with that, and then you got to herd the cats. I can do, I don't have to do that. I can sometimes give you a full round and that's time right, that's valuable time and valuable cognitive cycles that you don't have to spend on yeah, absolutely so.
Speaker 2:Yeah, that's that's. That's how I would validate it to a company, even though I would happily admit that it can be a bit more effective, but I do think there is a validation there.
Speaker 1:All right, ali, in quickfire top three criteria for your investments. You've mentioned diversification. Where does team fit? What are the three things that you're absolutely going straight at as soon as you get that deck and you're scratching and sniffing at it?
Speaker 2:Yeah, so the first thing that we'll always go for team is always the first thing, which I imagine, stewart especially for you, who's done quite a lot of these interviews is completely unsurprising, um, and I imagine even the people that are maybe raising their first time around- but everybody has a different view on team, right?
Speaker 1:you know, if I put 99 investors on an interview, they'd all have a team in the top three. But some people say I want supply and demand. Some people we advocate for a triangle of three co-founders in a responsible matrix where one's a visionary, one's a technologist and one's an order filler. Everybody's got a different matrix. What's yours on team?
Speaker 2:I think, as a generalist investor, I think actually it's different strokes of different folks. No-transcript maybe. Don't all admit and I'm willing to admit that um experience comes into it quite a lot. It's all good and well invested into the 23 year old visionary, who's amazing and, don't get me wrong, most of the people that we invest into are either first-time founders or younger founders. But the reality is, is that we know this, we, we know the stats. The stats are is that the people that are most likely to achieve outlier returns are people, um, who have already had some form of exit previously, whether that's an outlier exit or not. Although if you had a previous outlier exit ie exit for, let's say, over 500 million coming up, you know, or over a billion, you've got better access to capital. You've got better access to potential customers, you, you've got better access to basically everything that matters um or an early student journey.
Speaker 1:So obviously that's why you're more like even you've got you've got that resilience as well, right? You know, if you've done that level of exit, or even even a quarter of that, you're not worried about money day to day. So you're doing this with a very different sense of drive and purpose, right?
Speaker 2:yeah, that's a really interesting point that you've made there and a point that I think garners quite a lot of debate in this space, and I actually had a conversation about this not that long ago. Do you prefer to invest into people who are already independently wealthy and successful or people who aren't? Um, and this is this has been a big topic of conversation, right, because when I, when I started in in VC nine years ago now and this was before I was at Fuel, this was when I was at Syndicate Room in Cambridge a lot of the conversation that I seem to have seem to be around people being like no, we want people that are super hungry, we want people who have failed. It's not an option. We want people who have put it all on the line to make sure that this like business, like works, and therefore the person to go for is the person who like, who needs this to work right, the person who's like you know, who's not necessarily independently wealthy, um, but um needs this to work for them to to make riches right. My view on that has changed over the years that I've been doing this, and the reason it's changed is purely through experience.
Speaker 2:Some of the founders that I've worked with and the conclusion I've come to is this founders who are already independently wealthy, um who have made their own wealth, very specifically, are not quitters, so it's very easy to be like well, it doesn't really matter for them because they they, they've already been successful and they've already done. You know, they've already got money and things like that. Actually, I think that makes them more powerful for a couple of reasons. The first is these people don't quit, right. So if you're already someone who's built a very successful business, um, you are very unlikely just to take it on the chin that your business isn't very, your current business isn't very good, isn't succeeding. Like you, you're a winner. Right like you're you're you're the amount of resilience that you need in order to build a really successful company. You know, in the, in the modern day, is is significant, and you don't do that lightly and you don't do that without a winner's attitude. So the idea that suddenly that you just be like, oh, I don't care about that anymore is, in my experience, incredibly rare, doesn't doesn't really pan out.
Speaker 2:The second is that people who already meet that that first criteria and have done it successfully before, their previous success cements everything important in their life, and by what I mean by that is their kids are looked after, their families looked after, their houses paid off and safe. Their kids are going to school. Like all those important aspects of their life are already ticked off. They know that their family is happy and healthy and and and can, can succeed, and therefore they can roll the dice just that little bit more. Because when you're not in that situation and you've got super important, the most important people in your life who are turning to you and expecting something from you if things aren't working out, then actually it can.
Speaker 2:That can be a drive to just be like you do. You know what. I just need to go get a proper job, because I've got people that depend on me and I can't let them down. It's the purest and realest reasoning in the world to say something like that, because you're absolutely right. You can never be in a situation where you're letting your kids down and you're not putting food on the table and things like that, because ultimately, you've got huge responsibility and that, in my experience, can lead some people to stop rolling the dice, because actually what they need is security more than exponential growth.
Speaker 1:Yeah, that's one of the most strange things it's super interesting when, uh, you know, I teach on a master's course when we talk about this, uh, in the founder team, I I get them to walk along a metaphorical tightrope in the, in the classroom. So you know, some founders, they'll walk along a tightrope, they'll see the drop and they'll run across it anyway. Some founders will see the drop and fall because they choke on it. And some founders will see the drop, recognize they may very well die and just say, screw it, I'm gonna do it anyway.
Speaker 1:And it's interesting how many different founders are the ones that have got the kind of network that we're talking about here. They don't even see the drop anymore because there isn't an impact for them. It's kind of like, yeah, it's a highlight, this is going to fail, but I don't, it doesn't matter to me. So I'm going to keep doing that type of walk because there just is no consequence, almost. You know, it's a reputational thing maybe, but they'll. They'll go at it in a slightly different way, but when you ask, you know which one would I invest in? I've got a cheese and wine palette for social mobility. I'm always looking for that founder who's going to be creating their own future when they're going through things, and that's that's very important to me in the matrix. But I also recognize something you said there, which is the first the resilience of that high net worth founder is much higher, and staying in the game for three years at least on that venture is one of the keys to it succeeding.
Speaker 2:I know it seems really hard, but just to still be around three years after you started it and to caveat why I said stewart is, like I mentioned, the vast majority of people slash businesses that we invest in won't meet that criteria, right, they won't be the independently wealthy person who, um, has done really well and already and can roll that dice a little bit more. Because those people are rare, right, let's be honest, just statistically, those people are rare, um. So, so the vast majority of people that we invest into are those first-time founders. They are, they are the people that need to make it work, you know so, so, but it is something that we always take into consideration when, when we're doing our um, when we're doing our, uh, our investments, um, things like that.
Speaker 2:I, I run what I call a venture. I've got like a, what I call my venture playbook, um, which sits on my, my computer, which I've got eight rules in my venture playbook which I always follow. Now, that rule about founder background things. Actually, that's not one of my rules. I've got other rules regarding founders, but that's not one of my rules. But it's just an observation I've made after sort of nine years you've got got to tell us what are the eight.
Speaker 1:Do you want?
Speaker 2:me to read them out. I've got them up. I was looking at them this morning. Okay, so rule number one mediocre people with unique ideas don't work. If the idea is good, that person will quickly become a liability and the competitors will win.
Speaker 1:Wow, that's number one. That's the proper experience.
Speaker 2:And a lot of these come just from. A lot of these do come from experienced judges in terms of, like, the people that we've invested in previously, um, and actually that goes back to what you asked earlier, which was like, well, what do I, what do I put value in in terms of due diligence? Rule number one I will never or I say I, we fuel, we will never invest into a founder that we deem to be mediocre in the nicest way possible. Mediocre people aren't horrible people, right, like, but we just mean just from a founder perspective, just from an acceleration perspective. We will never invest into founders that we don't think can cut the mustard on the basis that we think their idea is good, because those people, in our experience, like I said, quickly become a liability because actually, if the idea is good, other people run with the idea and competitors beat you, which can be the most painful of all when you've got a really good idea and a really good company but actually you just can't make it work.
Speaker 1:That's, that's one of the most painful situations I'm super keen to hear the other seven, but I so want to ask you this question, like do you have a personal like way that when you're in the room with one of these founders, like you know that they are going to excel? So you know an example? I have this silly thing that I teach in my management development stuff, which is I know a really good salesperson when they're in the room because I feel slightly uncomfortable around them because they're so far on the spectrum, along the spectrum from me, that a really good salesperson actually makes me feel a bit anxious.
Speaker 2:Do you, do you have something silly like that that you're using kind of and I actually I for what's worse, I agree with you there um, for me, quality of pitch is really important. The point where I know where I know we're not getting through the ic process is when a pitch turns into a ramble. Um, you know, I say to a founder well, tell me about yourself, tell me about what you're building, tell me about your background, and we're there for the next half an hour with the founder talking through pretty much all aspects of their business. Like that, for me, is a really low quality pitch. Um and um, that is completely subjective. Right, that is a subjective thing that's come around in terms of, after doing hundreds and hundreds and hundreds of pitch meetings, that I can instinctively tell the difference from what I do need to be high quality and low quality pitch. But people that can't get to the point are problematic in that situation, because what I really like are people that are like so this is who I am, this is my background, this is what I'm building. This is where we are right now.
Speaker 2:Bosch, 10 minutes. We've covered all the core bases. What you need? Great, I can ask you questions about the business. Nice, go on, then on, then hits with the other seven. I love it. Amazing. Number two um reference, reference. Reference. When making founder-led investment decisions, make sure you're backing up assumptions with reference calls to mutual contacts and previous investors. Mistakes are mandatory for startup founders, but founders with a history of bad behavior will repeat it.
Speaker 1:Um, and again dating advice, let alone good investment advice goes back to um.
Speaker 2:I've had calls with people before. I thought, okay, this is quite an interesting founder, quite an interesting background. I've called their previous investors and they've just gone. Something happened and we're not sure what happened, but we don't like what happened. Um, and in that case, bad behavior generally gets repeated. In my experience, um so, and especially under pressure, and the one thing you can guarantee about startup life is there's always going to be pressure at some point. It's never going to go flying swimmingly all the time. At some point there's going to be pressure and that's where bad behavior comes out. So that's something that we we always take into account as well. Um.
Speaker 2:Point number three if a founder is not 100% engrossed within their business, they may as well be zero percent. No distractions, no side hustles, no other roles, missionaries, not mercenaries. Um again comes from an experience in terms of like investments that we've made previously um and um, something that we take into account. Um. The thing that I'll say about all of these rules is that they are dedicated towards vc founders, um, not dedicated towards other founders. There are people out there that have fantastic businesses, that might have multiple fantastic businesses. Um, there are people out there that have fantastic businesses, that might have multiple fantastic businesses. There are people out there that aren't trying to build a one billion pound behemoth. They're trying to build a business that does five million a year in revenue. Great, you know, these rules don't necessarily apply to you, because you're outside of our remit of what we do.
Speaker 1:You've got a great business, but it's not quite the remit of what we look for.
Speaker 2:If you're putting one and a half, two million into a seed investment, you're looking for a very significant growth. Absolutely, we're looking for that outlier growth and outlier time frames. Not every business can do that, not every business wants to do that. Most businesses don't. That doesn't make it a bad business, it just makes it not suitable for us. There are plenty of fantastic businesses out there worth 10, 50, 100 million quid. Fantastic businesses, generational wealth worth 10, 50, 100 million quid. Fantastic businesses, generational wealth for the people that start them. But just not the right business for VC, necessarily.
Speaker 2:And so different set of rules, different strokes, different folks, right? Rule number four what am I on now? Rule number four yeah, invest in products, not features. Do people expect what you're offering as part of other products that they use? Rule number five focused, intense execution is essential. Floating around multiple iterations of the product early on suggests that what you're investing in is not big enough. Rule number six the power law is essential. If the company can't be a billion pounds in value, we don't do it. Vc success is grand slams, not home runs. Sorry, that's rule number seven Discipline is easy to preach but hard to teach, whilst we know that basic metrics like CAC and payback periods are likely to have wild swings between seed and series A. Working with founders who understand what great looks like and trying and try to manage them within their business early on means that we can manage outsized investment into those areas post round.
Speaker 1:A founder who says we'll sort that out later has no evidence that it's possible do you find in your portfolio that you end up following that kind of power law thing where the ones that are excelling you double down on the ones that are dropping off? You're basically giving less attention to?
Speaker 2:uh, yes, as a rule of survival. That's what we have to do, and don't get me wrong, we don't.
Speaker 2:It doesn't get to a point where, just like well, you're cut off, like there's no founders in our portfolio who I think would openly admit that they haven't achieved what they wanted to achieve. Um, I think there is room, especially with like smaller vcs, like us cdcs. There is room for these smaller success stories. Right, because in a world where we invest into a business that are five million pre hypothetically and that business never gets to these outlier returns that we want, but managed to sell for 30 million at some point five or six years down the line right, it's not thelier returns that we want, but manages to sell for 30 million at some point five or six years down the line right, it's not the outlier that we want, but it still has the potential to return good money to investors. Um, and actually, when we're thinking about building a portfolio, actually if we end up with in a portfolio of 15 companies, if we end up with a couple of those businesses, if three of those businesses return either the money that we originally invested or maybe a couple of X on the money that we originally invested, they're not outlier, but they've actually grown significantly enough that actually they can return good money back to investors, then meeting that threshold of okay, great, now we're making money for investors becomes easier and hopefully, within there, you've got that grand slam opportunity that is really shooting the lights out, but it doesn't mean there's no room for supporting those slightly smaller companies that haven't quite hit the, the remit of what you want.
Speaker 2:Um, and then my last rule uh, move fast and break things is always the goal, but it doesn't work in all areas such as health, politics and cybersecurity. Fair enough, yeah, and that's to remind us that there are industries out there that require outlying investment earlier on, because the strength of their product is so core to any revenue coming in. You can't be a cybersecurity business with half a product because you can be a SaaS business with half a product. You can be a B2B SaaS business where you're like. So this is what we've built. It does one core thing, and actually what we're going to do is we're going to build out on that. You can't do that with cybersecurity business, because if cybersecurity fails, there are massive, massive, massive, massive internal repercussions there are people, mns and the co-op and a few other places recently.
Speaker 1:They'll probably agree with you there you'll be agreeing with that absolutely.
Speaker 2:So yeah, that's.
Speaker 1:That's my list okay, no, that's fantastic. And you say, I mean, did you come up with that stuff before you met with the market and all the different interviews and things you've done, or are they all from experience? It's kind of like heuristics built on the good, bad and ugly that you they are pretty much all from experience.
Speaker 2:Um, these are. I mean, I still change this list, I quit, I take away from it um, because I, you know, I'm learning um. So, um, yeah, this is from learning, experience of doing. I've been at fuel for over six years now. I've been involved in in in that nine years, um, and this is just my, my learnings over the course of of of those nine years.
Speaker 1:When you guys make an investment, do you personally then get involved with the board? You just have observation rights. You take a seat. You know how active do you get involved?
Speaker 2:We just have observation rights. We used to take board seats and then we realised that that was not that responsible. To be totally honest, last year we changed the policy on that. We changed it for a couple of reasons. The first reason is because actually, it can be quite difficult for the company. When the company wants to do things like open bank accounts or regulatory bits or anything like that, they need information and all the directors of that business, including us. They need information and all the directors of that business, including us. So if we're a director, the company then relies on us to provide a quite significant amount of information, and obviously that's not. Our job is to work with loads of companies, and so what we found is that we could sometimes hold the process up, and actually for companies that's not good. So we felt that within our agreement, that our investors were suitably protected through the shares that they had, the shareholding that they had, and the observation rights were suitable, and so we moved to observation rights.
Speaker 2:On a more selfish aspect as well, like, one of the things that we have to think about is how we manage our fund, and if businesses are not performing, we need to make sure that we're spending as much time as possible with businesses that are performing and actually, if you're a director of a business, you can't do that.
Speaker 2:You've got fiduciary responsibilities on that business and the shareholders and the creditors of that business that you need to fulfill, which can make the process of managing an entire portfolio quite difficult, because actually, from a fiduciary standpoint, the time sink is going to come from the businesses that aren't performing that well generally, because that's where you have to be careful of things like solvency and stuff like that, whereas in our head we want to make sure that we focus more time on the businesses that are doing well, where we can support them even further. So it became, in my view, slightly counterintuitive to what we were trying to achieve as a VC and actually we felt our investors, like I said, were suitably protected by the observer rights that we had, alongside the class of shares that we had in those businesses.
Speaker 1:Nice. Well, this leads me to one of of traditional questions in these interviews. Ollie, what makes you awesome at your role? Um?
Speaker 2:I absolutely, absolutely nothing. My, my, my job is not to be. My job is to find the people much better than me. Frankly, it's to go into a room, find the people that are much more skilled, much more talented, much more experienced than me and convince them that we're the right person to support them, them that we're the right person to support them.
Speaker 2:Um, I think I think one thing that we do particularly well at fuel is a, frankly, a sense of humility. When we come to a business, we're not there to rip apart your company. We're not there to rip apart products. And I've seen vcs that come in and the first thing they want to do is they want to get knee deep in the products and they want to rip it apart and they want to talk about. You know that? Oh, we've got this technical expert that comes in and does this and does that.
Speaker 2:And I do ask myself the question sometimes why are you investing into people where you don't really even trust the product to be a good product? I think one of the things we do relatively well is is a level of humility where we say look, we're not going to get involved in that side of things. We're a seed investor. We're a generalist investor. Our job is not to come in, get knee deep in the products and absolutely rip it apart. Our job is to support you in all the periphery things that go into building a really fast scaling business.
Speaker 2:So we can help on things like HR policies. We can help on things like hiring. We can help on things like future fundraising. We can help on things like setting up, can help on things like um future fundraising. We can help on things like um, setting up, options, pools and option schemes, things like that, giving views on that. I'm not here to change the core of what your business is, because if I needed to change the core of what your business was, then I'm not really sure why I'm necessarily invested into it directly, like I'm here to support you so that you can spend more time doing that, because I think you're really talented individuals and that, that you've got the ability to do something really great, and I'm here just to to to release some of the stuff around the outside, help you with some of that, so you spend less time doing that and more time and that's the sort of stuff where, having done this multiple times before, you can simplify, almost commoditize some of it right and make it easy rather than first time founders.
Speaker 1:It's going to drag them back and they're going to spend all this time on options pools and no, not as much time with customers.
Speaker 2:Right, absolutely, absolutely, and I'm a big fan of things like founder-led sales and things like that, so freeing up as much, especially between seed and series a, so freeing up as much time for the founders as we can so they can really dive into the core, important parts of the business, as opposed to, like you said, doing the options pools, which are important but shouldn't suck up huge amounts of founder time. Um then, um then, then I've done my job and I think there is a level of community there that we do do quite well at like, where we, I think I think we we bring the help when the help is needed. I think we back off when off, when we should be backing off. I think we're quite active and we're quite good at that. But beyond that, stuart, like, our job is not to be remarkable, our job is to back people who we think are remarkable and within that, like, we have to accept that we need to let these people fly, breathe, we need to give them space. We can't, we can't constrain them within what we think building a business is. We can just support them.
Speaker 2:And, um, I think the thing, if I was gonna, if I was gonna be self-congratulating a pat on the back and I think that one of the things that maybe I do well, and I think we do well as a group, is getting into that room, getting in front of the people who really are talented human beings, more talented than we are and saying, look, we think that we'd be a really good partner for you, and this is why and then going, okay, great, yeah, no, I agree, I think you guys would be a really good partner. So I want to take your money and I want, I want, I want you to be part of this experience.
Speaker 1:I want you to be part of this journey and supporting them through that that's super awesome, molly, and I didn't think that's what you're going to say either. It's really interesting. Thank you so much. I've enjoyed every aspect, especially the eight rules. Today I I guess it sort of falls to me to ask you the the final question, which is what's your best advice for a first-time founder? They're looking for money for the first time. They've never raised an seif or anything else before. What's your best guidance for them?
Speaker 2:so my the first thing I would say is know what you're trying to achieve, because, um, it's going to have an a huge effect in terms of who you should be speaking to, which, in turn, could save you a lot of time. One of the things that we get approached by and I I alluded I alluded to this earlier, I talked a bit about this earlier we get approached by a lot of founders who are just not vcable. A lot of founders who are just not vcable. They're not bad founders, they're not running bad companies, they're just not vcable, and there is a distinct difference between something that could be supported by vcs and something that could be supported by angels, for example. And angel investors are a fantastic, completely legitimate route to raising money, but the the return profile for an angel investor or a vc investor can be very, very different, because vcs have to work on a portfolio basis and angels are working on an individual basis. You know, all the money is their money, they make all their decisions and a return on an individual check for them is is is positive, whereas for a vc, not necessarily. So, um, you need to know what you're looking for, and actually, you need to know that what most institutional investors are looking for are these power law style returns where we can take this business to 50 100 million plus in annual revenue.
Speaker 2:It's a, it's a very specific path, um, and it requires, uh, you to be comfortable with four years of burn capital in order to get that outlier growth. There are don't get me wrong, there are stories out there about people who are always profitable, and always they're very rare. Burning capital is the norm. That's why you're raising money, but you need to be comfortable with that, and if you're not, either not comfortable with that or you're not convinced that, in that time frame you're building a business that does 100 million in annual revenue.
Speaker 2:Vc is probably not the path for you. So don't try and structure yourself like it is. Don't be like I'm put together a pitch deck and going out to vcs. If, if that's not the path, that's not the path, it's not a point of shame, it's not a point of bad business, it just it's just different, um, and so save yourself the time, um. So my, my advice to it, just to condense it is before you even go into this process, know who it is that you want to speak to and why you want to speak to them. Save yourself the time, save yourself the effort of getting two months into the process and being told by 50 people that you're not a vc ball business thank you, ollie.
Speaker 1:It's been a real gift to the community today. Thank you so much for this knowledge. I really appreciate it. Is there any last question you want to ask me before we go?
Speaker 2:Yeah, go on, stuart, I'll ask you. So you obviously work with a huge number of founders. Based on the advice that I've just given, do you think that all the founders that you work with are VCA founders or do you think that actually, most of them, most of them, are actually not vc, and that's a conversation if you just ask me which one is my favorite child, that seems pretty harsh.
Speaker 1:Right, you know, if there was a burning building and all the founders are in it, which one am I going to rescue? But no, no, I completely, uh, agree with you that in part of our guidance and the fundraising stuff and the prep that we do, and even the master's course is saying pick the investment route that's right for you, that models with the profiles that you're looking for and a lot of the times the biggest, you know we run a mini accelerator program just before Web Summit, just for London Tech Week, where in one day we help people work out how to speak to investors when they're in the conference. And the biggest single piece of value everybody always feeds back is I sit there and I explain to them the difference between how an angel thinks versus how a vc thinks, versus how a corporate venturer will think and how an scis fund like sfc might think, compared to even hatch vc or fuel. And when we go through that spectrum of different needs and even down to the simple thing like try not to say this too glibly, but an angel is worried that you're going to lose their money, a VC is worried that you can't grow fast enough and an SFC equivalent fund is worried that they can't get the money too fast enough because they've all got different needs, you know, and they've all got different expectations. You know it's and they've all got different expectations. And then an sfc might wait for 10 years and see what happens. And they've just observed from the periphery all the way through.
Speaker 1:An angel is worried every minute of every day that you're going to lose their money and they're going to make they're not going to make a positive return on that and it's going to be less than five percent of their net worth has gone into it. But if they've overextended, they're going to really feel that if that goes wrong, they're not managing a portfolio, as you say, and a corporate venture is usually trying to acquire some sort of solution to a problem they've got within their corporate environment and most founders when they hear that for the first time, and particularly when they hear what a decent pc is doing in terms of fund development and moving through from 50 to 250 to 500 million type funds, they completely change how they walk into the room and they're almost pre-screening now, okay, which one are you? Are you the ones that I need to meet. Do I have to up my game, down my game, change my numbers, you know? And they stop giving one deck to everybody. They start thinking, okay, you've got very specific needs, I need to give you a different deck to this other guy who I need to give a very extreme example of the deck, and maybe I don't want that, but it's.
Speaker 1:It's amazing how that isn't understood, particularly in first-time founders. And, of course, where is it taught? You know, it's not like there's a special school for founders. Even masters in entrepreneurship don't always cover this, and so the masters I taught on didn't cover it before I went and involved myself with that, that curriculum, and added these kind of elements in yeah, absolutely, absolutely, totally agree.
Speaker 1:I mean listen, it just sounds like we're on the same page in the right we've obviously kissed the same frogs or gone through some of the same thing, but thank you so much. I mean, the whole goal of these um interviews is about empathy. It's about empathy between founders and investors, and I think what you've shared today is such incredibly it's such an incredibly valuable share that anybody watching this will now have a much better understanding when should they come to fuel, why should they come to fuel and when should they not do that? Right, because they're just not the right fit. So thank you so much. It's a real gift, thank you no, no problem at all.
Speaker 2:Thanks to it. Really appreciate the time.
