E268 | The VC Helping Founders Beat The Odds with Nic Brisbourne
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CastBoxThis week on Mind Your F**king Business, we delve into the world of venture capital, IPOs, and the limitations of traditional investment structures. We learned from Nic Brisbourne, a serial founder of VC firms and founding partner at Forward Partners, which has some rarity value. It’s one of only a handful of VC firms in the UK that has gone through an IPO. Every year, they get 4,000 pitch decks, from which they only interview 400. Ultimately, they only invest in 1% of the people they meet. That’s a very wide funnel at the top and incredibly narrow at the bottom.
In this episode, Nic dives into the complexities of recruitment and the importance of making the right hiring decisions. Along the way, he unveils his proprietary framework for assessing founders and shares valuable lessons on the IPO process and the structure of venture capital firms.
Download and listen to learn more.
On today’s podcast:
- Forward Partners investments
- The recruitment challenge
- Traditional vs Innovative VCs structure
- The CIDL proprietary framework to assess founders
Follow Nic Brisbourne:
Twitter: @brisbourne
Nic is the founder and CEO of Forward Partners. He has worked in venture capital in London and Silicon Valley for over 20 years. Prior to founding Forward in 2013, he was a founding Partner at leading venture capital firm Molten Ventures (formerly Draper Espirit), which went on to admit to AIM in 2016. Before entering the venture capital industry, Nic worked as a strategy consultant for Gemini Consulting and at London-based startup Operis Group plc.
He has led over 100 investments and has overseen several successful exits, including, most recently, Wonderbly and Heights from the Forward portfolio. In 2021, Forward listed on the London Stock Exchange, raising £36.6m. He currently sits on the board of multiple fast-growth startups, including Robin, Makers and Koru Kids.
Outside of Forward, he’s a proud husband and father of two teenage kids and a long-time season ticket holder at Chelsea Football Club. He’s developed a keen interest in mindfulness and philosophy that’s proved to be a great asset at home, at work and as a club supporter.
Forward Partners
Forward Partners, the VC company founded by Nic, invests in applied AI, web3 companies and marketplaces within applied AI. At the moment, all the excitement lies around Generative AI, ChatGPT and all the opportunities emerging from it. Throughout their ten years in operation, Forward Partners have tried to set themselves apart from other VCs with how much they help founders.
One of how they help founders is through what they call the ‘studio team’, a small agency run on behalf of portfolio companies to help them succeed. They also took the slightly unusual decision to list themselves on the London stock market in 2021. So they’re a listed VC firm, which gives Forward Partners a platform to innovate more than in a traditional GPLP structure with the plus of giving them permanent capital.
For Nic, doing the IPO was one of the hardest things he’s ever done.
“When you start to think about IPOing your business, the first step you take is to meet with a bunch of potential brokers who might take you to market. And then, you select a broker, and the first thing they do is organise a test roadshow for you where you meet with five to ten potential IPO investors and have conversations with them. We’re thinking of listing in six months. If we do that, might you invest? That’s your market test. And if enough of them say, yes, we’ll put some money up, then you push ahead and do the whole thing. If not, you put it on pause and fix whatever you need to fix to get your business to the point where they will invest.”
With their IPO, Forward Partners were trying to bring an innovative approach to investment and innovation. Nic explains that the traditional structure of VCs – GPLP – doesn’t create the right environment for innovation.
“When you have that structure, because there’s differential ownership between the two, then that makes innovation very difficult because if the manager, the VCs, are innovating down in the general partnership, it’s not clear that the benefit accrues to the general partner, not to the limited partners, increased limited partners, the extent of flow through to investments.”
When you change to a company, he adds, all stakeholders and shareholders in a single vehicle; if you want to innovate, you take it to the board. The governance as to whether the innovations are working comes through the board.
“We wanted to unlock that. Specifically, we wanted to do it because we had begun launching an additional business alongside our venture capital equity investment business, which was a revenue-based finance business. So, we provided a novel form of debt to early-stage e-commerce SaaS businesses, and doing that inside the traditional structure was impossible. To scale that, we needed to get to a single company, and the IPO allowed us to do that.”
The recruitment challenge
Startups face many challenges, but the biggest one is finding talent. At the early stages, where he invests, the recruitment services market is very inefficient in its provision for small businesses. These are difficult for recruitment firms to work with, says Nic. Startups are not prepared to pay the fees of the biggest and best recruitment firms, so the CEOs are left working with recruitment firms that send CVs indiscriminately and that don’t treat candidates well.
“All the surveys show that the two biggest challenges for startups across stages are getting the right people and getting the right money into their businesses. And so A, there’s a problem and B, as a VC, what’s nice is that when we call candidates, they take our call. If there’s a VC firm calling, I will speak to them. If they get a call from a startup they haven’t heard of before, they’re much less likely to do that. And similarly, if they get a call from a recruitment firm, most good candidates are not taking those calls either these days.”
Recruitment is not only a challenge for startups but for larger firms as well. For many companies, hiring a new executive is one of the most critical decisions in their business, yet no one in the executive team has done any training on hiring. For Nic, it’s challenging to find and screen good candidates to speak with. And it’s also tough to convince them to join.
A common mistake during recruitment is hiring someone for the wrong job at the wrong time. Dominic gives the example of startups, which usually don’t have processes in place. These not only need someone who can sell but who can also create some order out of the chaos and build a process. So often, people have been successful in a big company, but they didn’t design the process; they executed it. They might be a great salesperson, but they may not be the right fit for the stage at which the startup is at.
“Another common mistake is arriving from a company having a successful sales track record and [thinking] I’m just going to implement the same process that worked for me before. You need to think, what product are we selling here? Right? Is the selling price the kind of average selling price the same? Is the sales cycle the same?”
The CIDL proprietary framework for founders
For a startup, growth is key, says Nic. And, for many companies, the CEO or the founder is the Chief salesperson until they get up to ten million in turnover. So, they might be hiring salespeople to give them leverage, but it’s the founder who is driving the revenue. In those cases where the CEO is not the chief revenue officer, Nic assesses the go-to-market by of the product.
“We invest when companies typically got between maybe 2 and 15 people. And so half of them are pre-revenue, and the other half have got some early revenues. But how do sales scale? How do revenues scale is a key question. Is this team going to be able to do it?”
And to find out, Forward Partners has developed a proprietary framework to assess founders. The CIDL framework focuses on the four drivers for success: Competence, Insight, Drive and Leadership. They evaluate the new investments based on those four components and compare them with their existing portfolio companies. This has enabled Nic and his team to have much richer conversations about founders than ever before.
“So you’re going to give them a five for Insight? Maybe. So let’s look at the other fives in our portfolio for Insight and say, are they as good as this person? So you can make that conversation real. […] And then when we look across the portfolio and see, well, is there any pattern to which founders are successful?”
Nic says one of the successful patterns is scoring five for Insight, which shows a deep understanding of the problem and the customer. Within Leadership would fall the charisma and sales ability. If founders can run a good process, that would go into the Competence bucket.
“Typically, if you’ve got deep Insight, they may not be a great salesperson, but customers love to speak with them because they are the expert on the subject, right? So if you can get in front of, you know, if you can get into the deep conversation, then customers end up buying.”
Looking for founders that stand out
“One of the amazing things about investing in early-stage startups is how much founders grow and develop as the business does. And one of the most profound learning experiences I think anybody can go on is setting up their own company. And you’re looking for someone who is going to be able to embrace that and really grow and learn.”
The experience is different when the company you’re investing in is a few years old. In these cases, he relies on the founder’s trajectory rather than assessing whether they’re going to be able to ‘get on this curve or not’. If founders have started a company before, that process is straightforward. But if not, Nic looks for what he calls master events. Have they stepped out and done something difficult, given the context? For example, if they went to a public school and then became a football team captain at Cambridge.
“That’s nice, but it’s nothing like the same as if you came from a much more difficult background and making this up. And we haven’t got one of these examples, but came from a difficult background and ended up partnering a major law firm at the age of 29, you’re going, okay, that’s much more real.”