Jean Sini (Partech): We like to see Series A companies with traction.
25 Sep, 2020
Julie Maples is Co-Founder and MD at FYRFLY Venture Partners. She has over 20 years of venture experience as both an investor and operator. She is founder of two venture firms in the seed stage arena achieving top percentile returns. She is Founder and Chairwoman of the Wine Celebration, Board of the V Foundation for Cancer Research, V Capital Campaign Committee.
Actually, I entered the venture capital world right out of college. I came to California between my junior and senior years from Philadelphia, where I studied for an undergraduate degree. As I did a summer internship, I found my passion for this career that I just loved. I just love being in the industry. I always thought I would be working in the consulting, financial, maybe banking industry in New York. Finding VC world in Silicon Valley kind of ruined my plans, because I could never go back.
We really invest thematically around data and intelligence and what that means is that we’re investing in founders and technology that use proprietary data sets as competitive advantage. That means we’re really looking for companies that cross industries, while we are focused on the core data sets being applied, as we say, prescriptive ways, for exponential effects. Having invested there for over two decades, we screen looking through these filters. In companies that come to us, we’re looking for incredible founders and founding teams, we’re looking for the chemistry, we’re looking at track records. Team is super important to us. And again, looking at business model or assets and researches they have, we try to understand do they have competitive set of data wrapped around some specific area.
We are B2B investors in Enterprise or SaaS businesses, which also includes marketplaces or platforms. In some cases we invest into minor hardware at the edge, but we are really looking for a platform in the way it collects data and uses it in very strategic way. In the companies that come to us we are looking for strong founding teams. Sometimes we invest on pre-revenue stage, sometimes they may have a set of beta-clients. As a seed-stage investor, typically, we are the first institutional money (sometimes syndicated with another co-investors), and our goal is to help to channelise those first sets of milestones, so it’s really important, when we invest, we try to see that the team is there. We believe that there is proprietary data and the ability to collect these proprietary data, like in the case of cyber security platform we recently invested into. Also we strongly believe that as the first investor along the journey of a company we can really accelerate its development. And we do what we call “360° review.” We are looking for where, as we think, we can really help in very simple ways – via our network, or a set of advisors, or contacts, or strategic partners we know in the industry. That’s important to us as filters we use.
We are what we call “a seed stage fund with a global footprint,” and what that means is we are pulling from very specific packets where we see that it can have network effects, where we have contacts and are seeing the top deal float. In some of the cases where we invest – Data, AI Machine Learning, Fundamental Accelerators – a lot of those may come from pockets outside of Silicon Valley. We invest in different pockets around the USA as well as companies from Berlin,Germany and Switzerland. I would like to notice that those are areas where we have strategic relationships, and we are pulling from those very discrete pockets where there are great technologies and you can reach a great pool of talents – this is our geography.
Number one it’s having come through some of the filters that we have in place. Definitely, with all the inflow that we get we really love to get a personal introduction. It is much easier and better way to reach us than try to get through just a cold call or emails that coming to us. So it’s always better for a founder to get an introduction to us. Also it is good to have done your homework. Sometimes companies that are outside of our areas try to reach us, so it’s really important for founders to do their homework and make sure they try to reach the right investors. Often we get referrals from later stage VC proposing us to look at something they find interesting, but too early for them. But one of the strongest is actually the founders that we work with, because, on the global basis, founders are supportive of one another. An introduction from a founder is one of the strongest ways to get to us.
There have been a number of companies, like one of the security companies. I think, if founders are able to personalise a message because they really done their homework and they weaved into an initial meeting something that shows they understand your style of investing, it is really what you bring to the table for them. Some of the pitches that are the most personalised, charismatic and, in particular, that make me laugh, where you can see that founders are catching with their passion – we remember those pitches for a long time. If we look at the pitch, it shouldn’t be a very iterative discussion. It can be some sort of demo but coalescent to understanding the experience or the application of what they’re doing. It is much compelling. Typically, we just want to know the general idea. It’s 15-20 minutes of talking around the business model and or the idea or the approach. Then from there it should be very interactive, engaging discussion. At the seed stage it is very important to have the chemistry within the founding team, it’s important to have that connection.
Often we find that the founders we wind up backing are really mission driven. We have a company which is in human sports performance and injury prediction. The founder is very passionate. He’s a doctor, his PhD in human anatomy and performance, he’ve spent a lot of time collecting specific data in sports medicine. But his passion goes back to love to sports, to improving performance, but also its sports science can help almost perfectly predict a prosthetics that a person, who lost a leg, may need, when, say, there’s somebody coming out of the military. We find that oftentimes the founder is driven by some pure passion, and a company is not a way to earn some money. It’s something that’s in their DNA that they almost can live without building that company. It’s almost a maniacal desire to win, to solve the problem.
Usually, it is a couple of people. In some cases we have supported very small teams or single founder teams. Because in certain cases that really works, and a single founder can surround himself or herself with right people, like a talented CTO, for example, or sales. Oftentimes we feel that the best teams consist of several co-founders, so you’ve got two co-founders building a company that have a shared vision and have complementing one another qualities, and that provides a sounding board. But we’ve done this both ways, and it seems accessible both ways.
I think working with either one of them would have been successful for LPs. We like to work with successful founders, but we’re also ultimately answering for our LPs, and have to make money.
It’s night one process for every investment. It depends upon the stage of the company. Sometimes the technology is not that far along, sometimes it’s certain proof of concepts or MVP – for every company it’s a little bit different. We are tap into our advisory board: there is a gentleman there who has over 400 patents and really helps us in tech area. There are two partners now – in our next fund we’ll be bringing more – we always meet the company separately at first, so that our discussions are not influencing one another. After several meetings we come together and share at the partners meeting, we discuss pros and cons, then we go back and work with the team. It could be anywhere from a month, because the document processing at the seed stage is pretty straightforward, it could be a little bit longer. In the case of some of the European companies – if it makes sense, we flip them to help them with structure of their company. There’s a lot more work in those cases to do, so it takes longer. As a seed stage fund we try to move pretty swiftly.
It’s more about the percentage of the company we want to earn. In our next fund we are looking for 10%, in our last fund it was somewhere between 5 to 8% ownership. Depending on the valuation of the company as a combination of the team, technology, how far along they are – from there that’s how we determine the check size.
One of the things that we have seen with European teams that oftentimes angel investors take larger steaks, which is not sustainable. We try to have long-term view, try to think of how many rounds this company may need and structure it from there. If you have big goals, if a company has big goals, you need to think about Series A stage, Growth stage. You cannot start with, say, 25% at the seed stage. It’s not sustainable.
We’re looking for the highest multiple we can. We invest at the seed round and at exit we have everything from 8x to 45x. You look for some huge multiples to make up for the companies that don’t necessarily make it. As a seed fund, you’re looking to make 4x to 5x at your fund.
Founders that overnegociate at seed stage round. At this stage the valuation of the company is not going to set the company you want to build. And we are looking for founders that are very collaborative and coachable. Oftentimes in some European companies we need to come and help them to set up compensation structures as well, which is how are you reward your employees with stock options, etc. In some cases that is newer for some of the European founders, so it takes some coaching and building trust. If you don’t have that trusted relationships and something in the team dynamics doesn’t feel right, we trust our senses and consider it an important red flag.
Oh, yes! Everybody in VC world has the one or more that slide away. My famously was PayPal with Peter Thiel. It was at the time of original PayPal idea, when people used PalmPilots for payments. The whole back-end system of banking and transactions was becoming so valuable, but I didn’t see that at the time. Thus I missed the whole founding team with large companies came out. And not only them. Joe Lonsdale, who was a co-founder of Palantir, is now a co-founder of 8VC. LinkedIn founder Reid Hoffman was there.
I don’t know if I can say that I regret it. There are things that turned out in ways that you could never have imagined. Some of them I shouldn’t have done, some didn’t make it for outside reasons you couldn’t have predicted. But I think all those projects brought me the experience that make up where I am today. You learn from your mistakes, hopefully, you learn from your successes and try to repeat them. I’m not sure that I should regret all this experience. I am who I am because of it.
We invest in data, intelligence and enterprise software that is not really sexy part of the market. I don’t have any investments that are highflyer consumer companies. As I’ve said, the cash flow is the king, and some of the companies we’ve backed are really lucrative. From that perspective I don’t think that “exotic” is the right word, but not having any B2C – it’s a little bit different that that.
A lot of companies that I see coming out with unique direct to consumer brands, and I don’t have an eye for that. So let’s start with Consumer Technologies. I would also add Real Estate type of entities. The wine industry is outside of our scope, despite the fact that I’m a big wine fanatic. We invest in small circle around Enterprise Software that’s driven by Machine Learning, AI, DLT and all these new technologies that are fundamental accelerators, transforming Industries where we found it. You may see us investing across Industries, but it is only because it is coming back to very specific business model. We back up Altoida company, which is in early prediction of Alzheimer’s, and we really kept coming back to what was an incredibly proprietary set of data predicting Alzheimer’s in 6 to 10 years on onset. That’s a company now based in Houston and raised $6.3m with M Ventures and is really doing some amazing work. We would love to see this team to succeed, because it’s such an area that needs to have development. People suffer for a long time, it would be great to have this team win.
I read a lot of the information coming out of across Europe. I find some of the packets that are coming out of ETH and EPFL really interesting. I like to read a lot about Artificial Intelligence and the applications of it; areas like TechCrunch are certainly good to track this kind of information. If you do your homework, it is where folks investing go. It is important to target the right investor, not just a firm, but the right partner interested in doing specific deals. I listen to a whole bunch of Curious Minds, Wait Wait…Don’t Tell Me! on NPR, various podcasts. It’s information overload, actually, just go and find it. One of the events, that we’ve actually been really proud to be associated with, is Worldwebforum, held every january in Zurich. They are bringing speakers from around the world and pulling VCs from across Europe, because there’s a lot of interesting startups, connections that we make there. We love supporting that event. It’s going to be very interesting to see how our world is changed in terms of what are the events that are emerging, when we come out of COVID. I think it will change the nature of interactions. Still I think it will be a lot of business travel, it will certainly come back; nothing beats a face-to-face. We don’t go to events to look for deals, unless it is like Y Combinator; it is a great programme, we backed a number of companies out of that. But it’s going to be different, and making personal connections, doing your homework, finding direct introductions to VCs and knowing about them will become even more important than ever. When somebody has done that, even if he or she is not fit for us, we will do our very best to send them along to whom it might be a fit for.
I have to go back to Steve Jobs and Steve Wozniak. Apple, as a company, fundamentally shifted the way we work today, it became a platform for future transformations. Now we all have mini computers in our hands, and it changed everything we do. I think, in the next 5 to 10 years (and COVID has accelerated this) we will see areas of telemedicine and telehealth personalization, we will see supply chains totally turned upside down. The next 5 to 10 years were going to see the fastest acceleration, in Silicon Valley and beyond, and COVID will make us change faster than we would have otherwise. We have a few companies in digital health which, we thought, would be further down the road, but looks like a road map is changing and we see the results faster. And it is very important now to have both right folks on the front lines, smart and mission driven, and right investors to back them up. The companies that are wrapped around the human genome – that is an area which fundamentally changed what we know about the human body. Now we have personalised medicine, especially for cancer. Genetics teaches us that, say, breast cancer is not one disease, but a set of different diseases depending on your genetic mutations. There’s a number of companies that contribute to that, but that is a key area. I think, there are three areas rather than three specific companies. The platform of mobile computers and the network access, creating a very distributed wide network, where information can flow. In the medical field that’s the genetics studies, genetic decoding, if you will, creating the foundation for understand so much about the human body and how it heals and how it gets sick. And the last uncharted territory is the mind: there is so much unknown about the brain and how it works. This area is also incredible, and there’s a lot of people doing amazing things. So, these are sectors, not specific companies.
I think, it’s both. First of all, companies have to assess where they are today, do they have the capital, do they have the resilience to make it through the next 18-24 months. We’ve been working with our portfolio making sure everybody’s got enough runway. Still we will see a lot of shift in supply chain: it’s both fascinating and terrifying to see what’s happening to the food supplies and just logistics everywhere. The effect it had will shift the consumer behaviour. We won’t know until we come out the other side: things are changing on daily basis, but I think it is going to shift consumer behaviour globally in ways that we can’t anticipate. So, definitely, it’s a challenge like we’ve never seen, but, fundamentally, there’s always opportunities coming out. Some of the founders, who get to work now and try to solve problems and address the market needs in intuitive and creative ways, will have a lot of opportunities coming out of this. In the last 4-5 weeks our own portfolio companies came up with creative ways to reposition themselves at market. It’s time to reassess the customer segments you’re looking at as well as the way you approach those markets. The big question is the relevance: when we come out of COVID, will your startup, will your technology, will your company be really relevant to addresses those needs. It is impossible to predict now, but companies that remain agile, flexible, that try to stay on top of the pulse of consumers and businesses, will come out with huge opportunities.
Yes, I’m absolutely satisfied. I always say that the day I came out to do that summer internship, I found a job that I love. I spent time on both sides of the fence, but working with founders, helping them to achieve goals, helping them with finance, helping to find other investors upstream – these all is an honor and privilege to help people achieve their dreams and build companies. Many of the founders that we work with are very mission driven. As one of the first venture firms to take the Pledge 1%, which is Marc Benioff concept of the 1-1-1, we actually from day one established FYRFLY Foundation to carry out the 1-1-1 approach. We found that many of the companies that we work with, weather at the beginning or down the road, the founders also have a passion for giving back. We are very supportive to our companies who do Pledge 1% or donate software. One of our company has donated it’s software to schools in Africa, and many of them are using their platform. For example, WhatsApp is banned in the Congo, and we found that many of the schools, that The Gates Foundation supports, are using that platform for communication. It’s a job I love, and it’s just so stimulating we to work with amazing creative people. I love it.