20 VC 033 The Pros and Cons of Venture Capital, Atomico and Entrepreneurship with Chris Dark, President International @ C2FO

In episode 33 of "The 20 Minute VC," host Harry Stebbings interviews Chris Dark, a seasoned entrepreneur and venture capitalist. Dark recounts his journey from founding an early esports community, GameReplays.org, to leadership roles at AOL and Bain, and eventually entering the venture capital world with Automico. He discusses the importance of timing in business success, the significance of investor-founder relationships, and the challenge of balancing entrepreneurial instincts with the advisory role of a VC. Dark emphasizes the value of investors who support founders during tough times over those who focus solely on metrics. He also shares insights on evaluating ventures, such as prioritizing the right investor partnerships over valuation figures, and the potential of blockchain technology beyond Bitcoin. Finally, Dark reflects on his decision to leave VC to join C2FO as President International, driven by his passion for solving global financing issues for SMEs.

• Chris Dark is celebrated as a true entrepreneur.
• He founded GameReplays.org, an early esports community, in 2002.
• Chris has held leadership roles at AOL and Bain.
• He transitioned into venture capital with Automico and became VP.
• Eventually, Chris left to join C2FO as President International.

"Now a quick shout out to Stefan Heller for introducing me to today's guest, Chris Dark. And what an awesome guest Chris is today. He is a true entrepreneur."

This quote introduces Chris Dark and credits Stefan Heller for the introduction, highlighting Chris's entrepreneurial background.

• Chris began his career while pursuing his PhD at Oxford, starting a games company.
• GameReplays.org was an early esports platform with significant traffic for its time.
• The venture was ahead of its time, launching before platforms like YouTube existed.
• Chris's experience at Bain & Co provided business experience but revealed a preference for building over advising.
• His role at AOL Time Warner was challenging due to the corporate environment post-acquisition.

"I started off when I was doing my phd at Oxford, I started my first business, and that was a games company."

Chris discusses his first entrepreneurial venture, which he started during his PhD studies.

• Chris joined Automico at the invitation of Skype founder Nicholas Senstorm.
• He had no prior consideration for a career in venture capital.
• His decision to join was influenced by the opportunity to work with a world-changing entrepreneur.
• At Automico, Chris was involved in raising institutional capital and helped in its early stages.

"So I left there and actually was just in conversation with Nicholas, who was one of the Skype founders. So we're using Skype now, and Nicholas Enstrom was one of the two founders, and he was just starting up Atomico and said, hey, why don't you come and help me out?"

Chris explains how he was invited to join Automico by Nicholas Senstorm, co-founder of Skype, marking his entry into venture capital.

• Pros included working with Nicholas Senstorm, an innovator and world-changer.
• The appeal of joining a venture fund that was still establishing itself.
• Cons were related to Chris's desire to build and create companies, which is limited when one becomes an investor.

"The con is, I do like building things and creating companies, so you're not going to be doing that. And when you're an investor, you've got to hold back."

Chris discusses the downside of transitioning from entrepreneurship to venture capital, emphasizing the restraint required as an investor.

• Chris highlights the importance of recognizing the founder's deeper understanding of their business.
• The key is to build a good relationship with the founder and focus on areas where the investor excels.
• Automico specialized in helping companies expand globally, leveraging its team's experience from Skype.

"So once you've had that realization, then really it's just about building a good relationship with the founder, CEO, whatever the situation is."

Chris emphasizes the importance of building a strong relationship with founders and focusing on the investor's strengths.

• Harry Stebings emphasizes the importance of being honest about one's skills and limitations.
• Being forthright about what one is good at and acknowledging what one doesn't know can garner respect from founders and lead to a positive relationship.

"And I think if you're just honest like that and honest with what you're good at and what you don't know about, then you get respect from the founder and then you have a good relationship."

This quote underscores the value of transparency in professional interactions, particularly in the context of venture capital where trust and respect are foundational for successful partnerships.

• Chris Dark joined Atomico because of Nicholas, suggesting that individual relationships can be a decisive factor in career choices.
• Dark was not actively seeking to join another venture firm, highlighting the significance of personal connections in career trajectories.

"Well, if he wasn't there, it wouldn't."

The brevity of this quote reflects the absolute influence that Nicholas's presence had on Dark's decision to join Atomico, indicating that his participation was contingent on specific individuals rather than the firm itself.

• Chris Dark identifies two main reasons for joining the venture industry: gaining broad experience through working with startups and using one's entrepreneurial experience to help portfolio companies.
• He criticizes those who want to leave banking for venture capital without a clear rationale, suggesting that a genuine interest in the industry is important.

"I think there's two answers. One is if you're young and you've worked two, three years in a bank or a consultancy or whatever it might be, or Google or whatever, and you want to go and just experience working with a whole bunch of different high energy startups...And then really the only other type of person that joins is someone that's probably been quite successful in doing some form of entrepreneurial thing before..."

This quote outlines the two principal motivations for entering the venture capital field: to gain diverse experiences or to leverage one's own entrepreneurial success in assisting other companies.

• Chris Dark stresses that being an investor is difficult, contrary to common misconceptions.
• He draws a parallel between the challenges faced by investors and entrepreneurs, noting that success in venture capital is concentrated in the top few percent.

"And I think people think it's easy being an investor no, it's tough. Most VCs don't do very well. Most of the returns were in the top few percent."

This quote challenges the notion that investing is a straightforward path to success and emphasizes the competitive nature of the industry, where only a small percentage achieve significant returns.

• Chris Dark describes a mental tug of war between operational and investing interests.
• His passion for CTFO's mission to address financing difficulties for SMEs led to his departure from Atomico.
• Dark highlights SMEs' contribution to global GDP and the financing challenges they face, which CTFO aims to solve.

"I completely fell in love with CTFO as a company. I was thinking through some of the core problems the world has at the moment... And then I sort of realized that with CTFO you can actually solve this entire problem."

This quote captures Dark's enthusiasm for CTFO's potential to address a significant global issue—the financial struggles of SMEs—reflecting a mission-driven approach to his career move.

• Chris Dark discusses the perception of raising money as an achievement, which he disagrees with.
• He emphasizes that CTFO's approach is to focus on building a great business rather than publicizing fundraising milestones.

"We just don't talk about it because we're sort of old school in that a lot of people think raising money is like the achievement, and it's not."

The quote criticizes the common misconception that raising capital is an end goal, instead of just a means to grow a business. Dark's perspective reflects a focus on substantive business development over public accolades.

• Chris Dark shares his experience of being both an investor and an entrepreneur.
• Having been on both sides, he believes he can communicate effectively with VCs by understanding their mindset.
• His decision to join and invest in CTFO was driven by thorough evaluation and a strong belief in the company's mission.

"I've been on both sides of the table... And I think what's really interesting is when you've been on both sides, I'll be talking in a way that I know the kind of VC, how they're thinking."

This quote highlights the advantage of having experience on both sides of the investment process, which provides a unique perspective and understanding of the dynamics involved in venture capital and entrepreneurship.

• The approach to raising funds varies depending on the stage of the company.
• For early-stage seed rounds, securing the first investor is crucial as it can catalyze interest from others.
• Entrepreneurs should be cautious of non-committal language from potential investors, such as the word "interesting," which often indicates disinterest.
• In later funding rounds (Series A, B, C, etc.), entrepreneurs should prioritize investor compatibility over valuation.
• The difference in founder ownership between different valuations is often minimal compared to the benefits of having the right investors.
• A simple test to gauge potential investors' helpfulness is to ask for introductions or assistance before they invest.

"You just need to find one person that will write any size of check. It doesn't have to be 200,000, 400,000, just get someone that's willing to put in."

This quote emphasizes the importance of securing the first investor in an early-stage round, as it can lead to further investment from others.

"What's much more important is, can you work with the people who are probably going to be joining your board and you're going to have to work with them for maybe the next eight years."

The quote highlights the significance of the relationship between entrepreneurs and their investors, given the long-term nature of their partnership.

• The right investors are those who demonstrate their value and support before an investment deal is finalized.
• Entrepreneurs can test an investor's commitment by requesting introductions or support upfront.
• A good investor will understand the fairness of this request and is likely to comply without it being an undue burden.

"Can you do that? Now, before you invested, please show your worth."

This quote suggests a practical approach for entrepreneurs to assess the sincerity and usefulness of potential investors by asking for pre-investment assistance.

"Any decent VC gets it. That is a very fair request."

The quote reassures entrepreneurs that it is reasonable to expect potential investors to provide value even before the investment is made.

• The most valuable VCs are not necessarily those with the best connections or experience but those who provide unwavering support during challenging times.
• Investors who stand by the company and assist in navigating difficulties earn the respect of entrepreneurs.
• The character of an investor is revealed not during success but during adversity.

"What really distinguishes, I think, the best investors is, you know what? And if you read the hard thing about hard things, Ben Horowitz, amazing with Lautald, he had some horrendous days, but he made it."

This quote underscores the importance of resilience and support from investors when a company faces challenges, referencing Ben Horowitz's experiences as an example.

• Timing is a critical factor in the success of a business, as exemplified by the story of Game Replays and Twitch.
• Being too early or too late to the market can significantly impact the potential of a business.

"Timing is just absolutely crucial."

This quote asserts the essential role of timing in the success of a business venture, with the implication that good timing can be as important as the business idea itself.

• Timing can be the determining factor in the success or failure of a business venture.
• The growth of broadband penetration was a critical factor for certain businesses to thrive.
• Launching a business too early or too late can result in failure, even if the idea is strong.

They just hit that curve when it started to go crazy, grow crazy fast. And if they'd done it two years earlier, wouldn't have worked two years late, would have been too late.

The quote emphasizes the significance of entering the market at the right time, suggesting that a good business idea alone is not enough for success; it must align with market readiness.

• Content creation for a website was achieved through the passion and voluntary contributions of individuals around the world.
• Passionate volunteers can produce a significant amount of quality content without monetary compensation.
• The concept of crowdsourcing was utilized before it became a widely recognized practice.

So what I realized is you've got to use people's passion and you can get a lot from people.

This quote highlights the strategy of tapping into the enthusiasm of volunteers to generate content, which can be a cost-effective solution for startups.

• Understanding the timing of network effects is crucial for VCs, especially for those investing in network effect businesses.
• Experience can give VCs an edge in predicting the success of such businesses.
• Luck plays a role in venture capital success, alongside hard work and talent.

And you know what, some of the great vcs just got lucky if you put the first money into Google.

This quote acknowledges that while skill and effort are important, luck can also contribute to a venture capitalist's success.

• The focus for Chris Dark's company, c two fo, is on global expansion.
• Working capital is a global issue, with the banking system being a significant challenge.
• The goal is to address these problems on an international scale.

So now really for us, it's about global domination and we have suppliers already in over 60 countries.

The quote outlines the ambition for global growth and the recognition of working capital as a widespread problem that the company aims to tackle.

• Chris Dark is bullish on bitcoin, not for trading but for the potential of the blockchain technology.
• Blockchain technology can revolutionize authorization processes and international remittances.
• The inefficiency of the current banking system in moving money globally can be addressed by cryptocurrencies and blockchain.

What matters is the blockchain and how ultimately you're using a whole. It's a different way of authorizing things.

This quote points to the transformative potential of blockchain technology beyond the value of bitcoin as a currency.

• A university degree can be beneficial but is not necessary for success in the startup technology world.
• Founders like Mark Zuckerberg have proven that dropping out of college to start a business can lead to enormous success.
• Education provides a safety net, but for those certain about wanting to start a business, starting young and embracing potential failure can be advantageous.

A lot of people think they want to be a founder, but they don't really, what they actually want to be is kind of the fifth 6th employee, have a little bit of infrastructure around them and work in a kind of fast paced startup.

The quote reflects on the misconception some individuals have about their desire to be a founder and the realities of starting a business versus joining an early-stage company.

• Chris Dark's career highlight was investing in the gaming company Supercell, which aligned with his passion for gaming.
• The decision to invest in his own company, c two fo, was driven by belief in the company's mission.
• Personal investment decisions can vary from exciting startup investments to more stable options like the FTSE 100.

I think probably to date would be the investment I most liked doing was supercell, because brilliant company has done fantastically.

The quote reveals Chris Dark's personal satisfaction with his investment in Supercell due to its success and his interest in the gaming industry.