20 VC 057 The Investor Checklist with Nicolas Wittenborn, VC @ Point Nine Capital



In episode 57 of the 20 minutes VC, host Harry Stebbings interviews Nicholas Whittenborn, a venture capitalist at .9 Capital. Nicholas shares his journey into the VC world, starting with his early tech enthusiasm and an entrepreneurial stint importing iPhones. He discusses the investor checklist, emphasizing the importance of market size, product engagement, and team composition in evaluating startups. Nicholas also talks about the significance of having a working product at seed stage and the potential of emerging business models. Additionally, he highlights the importance of passion for entrepreneurs and reveals his latest investment in Green Blender, a smoothie subscription service. Throughout, Nicholas provides insights into what .9 Capital looks for in startups, from technical prowess to the ability to return the fund.

Summary Notes

Introduction to the Podcast Episode

  • This episode of the "20 minutes VC" podcast features Nicholas Whittenborn, a VC at Point Nine Capital.
  • Nicholas Whittenborn has a background as an analyst at Team Europe.
  • The podcast will discuss the investor checklist, including founders' first impressions, metrics, and traction requirements.
  • Harry Stebbings promotes Nicholas's blog and a template for the perfect startup pitch.
  • Hiring Screen is mentioned as a sponsor with a clean user interface and an algorithm for improving the hiring process.

"And on today's show, I'm so excited to welcome Nicholas Whittenborn. Nicholas is a VC at .9 Capital, one of the leading seed funds in Europe, and prior to zero nine, Nicholas was an analyst at Team Europe."

The quote introduces Nicholas Whittenborn and his credentials as a venture capitalist at Point Nine Capital and his experience at Team Europe, setting the stage for the podcast's focus on venture capital insights.

Nicholas Whittenborn's Background and Entry into VC

  • Nicholas Whittenborn shares his unconventional journey into the VC world.
  • There is no standard career path to venture capital, leading to diverse backgrounds among professionals.
  • Nicholas's interest in tech began in school with a fascination for computers and coding.
  • The launch of the iPhone in 2007 was a pivotal moment for him, leading to entrepreneurial activity.

"And for me personally, I'm probably particularly lucky in how I ended up in VC."

This quote reflects Nicholas's acknowledgment of the fortunate circumstances that led to his career in venture capital, emphasizing the serendipity often involved in entering the field.

Early Entrepreneurial Experience

  • Nicholas imported iPhones from the UK to Germany to satisfy his desire for the device without the financial means.
  • He recognized a business opportunity in unlocking and reselling iPhones to friends and others.
  • This experience demonstrated the potential to make money and create opportunities online.

"So I started doing this in a bigger scale, I guess, which is kind of a gray zone. But it actually taught me that it's relatively easy to make these things happen."

Nicholas's quote highlights his early entrepreneurial spirit and willingness to explore opportunities that existed in a legal gray area, showcasing his proactive approach to business.

Education and Career Decisions

  • Nicholas was torn between pursuing a technical or business path.
  • Influenced by his brother's computer science background, he ultimately chose to study business administration.
  • The entrepreneurial spirit in Germany around 2009-2010 was not as prevalent as it is now, with a traditional focus on consulting and investment banking.
  • Nicholas was inspired by Team Europe's company-building approach and pursued a career in that direction.

"And one day I just happened to read about these guys called Team Europe, which were one of the original company builders and kind of pioneers of the Berlin tech scene."

The quote captures the moment of inspiration for Nicholas to pursue a career in the tech industry, influenced by the pioneers of the Berlin tech scene.

Persistence in Pursuing VC Opportunities

  • Nicholas applied for an internship at Point Nine Capital but did not receive an immediate response.
  • He almost accepted a consulting job offer before being encouraged by friends to follow his passion for tech and entrepreneurship.
  • After a delayed response and a series of interviews, Nicholas was able to secure a position in venture capital.

"So they just never got back to me."

This quote conveys the initial disappointment Nicholas faced when attempting to break into the venture capital industry, highlighting the challenges of entering such a competitive field.

Early Career Decision to Enter Venture Capital

  • Nicholas Wittenborn declined a consulting offer to join Team Europe, initially applying for a Bizdev role.
  • He was involved in the early stages of creating a seed fund with Team Europe.
  • Nicholas's entry into venture capital was influenced by the opportunity to work on a seed fund, which he found more appealing than consulting.
  • He joined .9 capital full time after its inception, which was a collaboration between a Team Europe partner and Chris of Jans.

"So I was just like, fuck it, I'm just going to do it. And I said no to the consulting offer. I went into Team Europe... And then eventually the partner that was managing that seed fund actually joined forces with Chris of Jans... and they started .9 capital."

The quote explains Nicholas's decision to pursue a career in venture capital by joining Team Europe and later .9 capital, highlighting a pivotal career choice that led him away from consulting.

Venture Capital Investment Criteria: Total Addressable Market (TAM)

  • Nicholas believes in the importance of a checklist for evaluating companies but acknowledges the difficulty in standardizing due to the unique nature of each case.
  • He emphasizes the necessity of looking at market size among other factors.
  • The size of the TAM required to excite Nicholas depends on the fund size and investment strategy.
  • .9 capital, being a seed fund, aims for investments that can potentially return the fund's value at least once.
  • Investment targets are either a significant stake in a large market or dominance in a niche market.

"And for us, what we aim for when we do an investment is trying to get to an outcome that at least returns the fund once."

The quote outlines the investment goal of .9 capital, which is to achieve returns that can at least equal the total value of the fund through strategic investments.

Evaluating New Emerging Business Models

  • Nicholas discusses the difficulty in evaluating new business models that do not have existing market definitions.
  • He suggests using proxies from similar spaces to estimate potential market size and focusing on numeric signals of user engagement and product love.
  • The belief is that strong usage and growth metrics can indicate potential for successful monetization later on.
  • Nicholas's current approach to emerging markets involves balancing the assessment of proxies and measurable early-stage user engagement.

"So I think the key here, at least this is my current thinking, is the combination of two things, and that's one, it's having proxies... and I think the other, maybe even more important part here... is just looking at other numeric signals that tell you that this is something that people really love to use."

This quote reflects Nicholas's methodology for evaluating the potential of new business models that lack a pre-existing market, focusing on indirect indicators and user engagement metrics.

Preferences in Founding Teams

  • Nicholas has seen success with various types of founding teams, including single founders and first-time entrepreneurs.
  • His preference is for a complementary team with diverse skill sets such as technical, business, design, and visionary leadership.
  • While a balanced team is ideal, .9 capital does not have strict criteria regarding team composition and evaluates opportunities on a case-by-case basis.

"And I guess ideally what we look for is kind of a complementary team where you have a technical founder, you have a business guy, maybe a design leader, or just a visionary that can tell a story and set a strategy and fundraise at the end of the day."

The quote highlights Nicholas's ideal founding team structure, which includes a mix of technical, business, and visionary skills, although flexibility remains in their evaluation process.

Importance of Technical Teams in SaaS and Marketplaces

  • Technical and product expertise is crucial for SaaS companies to differentiate their solutions.
  • In contrast to e-commerce, where execution is key, SaaS demands continuous innovation and technical development.
  • A strong technical team can have a greater impact on the success of a SaaS company than in other business models.

"It's super important to have great product people and great technical people, right. Because at the end of the day it's about really differentiating with the solution that you're creating and then distributing that."

This quote emphasizes the critical role of product and technical teams in developing and maintaining a competitive edge for SaaS companies through innovation and solution differentiation.

Investment Criteria for Seed and Pre-Series A Stage

  • .9 Capital typically invests in companies with at least a first product version, which can be a beta or demo.
  • The firm's name, .9, signifies their interest in investing before a product reaches version 1.0.
  • They look for six to twelve months of usage data or customer payments, allowing for some flexibility based on prior relationships with entrepreneurs.

"So we do typically only invest when there's a first product. That doesn't mean that the product has to be perfect, right."

This quote clarifies that .9 Capital is willing to invest in early-stage products that are not yet perfect, indicating a focus on potential and growth rather than immediate perfection.

The Role of Product Quality in Investment Decisions

  • .9 Capital values product-focused companies and considers a great product as an ideal foundation for a successful business.
  • An example cited is Typeform, which impressed with its user experience and performance in conversions.
  • Investing decisions can be influenced by a product's ability to outperform competitors and show organic growth.

"And it's just beautiful. Right. If you sit people on something like this versus a Google survey or maybe, and I'm burning the competition a bit here, a survey man cave form or something like that. It's just a huge difference, right."

This quote highlights the importance of user experience and aesthetic appeal in a product's ability to stand out from the competition, which can be a deciding factor for investment.

Post-Investment Key Metrics

  • After investing, .9 Capital looks for growth and heavy engagement as key metrics, which can manifest as MRR growth or frequent user logins.
  • Nicholas introduced the concept of "key usage indicator" to focus on the core function a user utilizes in the product.
  • These metrics provide flexibility and a focus on what's truly important for the product's success.

"So there has to be some growth and we like to see some kind of heavy engagement."

This quote explains that after investment, .9 Capital prioritizes evidence of product growth and user engagement as indicators of potential long-term success.

Strategies for Organic Growth of Apps

  • Organic growth is challenging to achieve and often requires foresight in the product's development stage.
  • Nicholas suggests that distribution channels and growth hacks might help, but the product should ideally be designed with growth in mind from the beginning.
  • The quote is incomplete, but it suggests that Nicholas would discuss the importance of considering organic growth strategies early on in product development.

"But on a high level, I like to think about, and this is something that is honestly very tough to fix once a product is out..."

Although the quote is not complete, it points to the difficulty of addressing organic growth post-launch, emphasizing the importance of incorporating growth strategies into the product from the onset.

Empowering Customers Through App Experience

  • Empowering customers involves making them feel accomplished with minimal effort.
  • The user experience should be so positive that customers are inclined to share it with friends.
  • Word of mouth is a significant growth driver for mobile apps, especially those that do not monetize initially.

"Is that you think about how you can empower the customer to actually be awesome or just be a better version of himself. This would at least, or the least effort possible."

This quote emphasizes the goal of creating an app that enhances the user's capabilities or self-perception with ease, leading to a satisfying experience they would likely share with others.

Importance of Ambition

  • The book "What Makes Sami Run?" explores the balance between ambition and its effects on an individual.
  • The story is especially relevant to entrepreneurs and those in the tech industry who are driven to succeed.
  • It serves as a cautionary tale about the potential downsides of excessive ambition.

"But then it gets to a point where you wonder how much ambition is great and what does it do to a person."

The quote reflects on the theme of the book, which questions the extent to which ambition can be beneficial before it becomes detrimental to an individual's well-being.

Berlin Tech Scene

  • Described simply as "vibrant," indicating a dynamic and lively tech environment.

"Berlin vibrant."

The brevity of the response suggests a positive and energetic tech scene in Berlin without going into detail.

Advice for Young Entrepreneurs

  • Passion is crucial when starting a company.
  • Enjoyment and resilience during tough times are more likely when one is passionate about their work.
  • The advice is based on personal experience and is shared with aspiring entrepreneurs.

"So I think it's very important, especially when you think about starting your own company, to focus on something that you're really passionate about."

This advice stresses the importance of aligning one's entrepreneurial efforts with their passions to ensure sustained motivation and enjoyment.

  • Nicholas Wittenborn endorses his own newsletter, which provides updates on investments and content.
  • He also recommends Claire Mauryon's SaaS newsletter and Benedict Evans' mobile-focused newsletter from Andreessen Horowitz.

"And then there's two other ones that I really like. One is by Claire Mauryon, who's doing an amazing SaaS newsletter. And then one more. And I really love this one because I think it's one of the few ones that really focus on mobile and is really good is Benedict Evans newsletter of Andreessen Horowitz."

The quote highlights two newsletters that Nicholas finds valuable, one for its focus on SaaS and the other for its mobile industry insights.

Recent Investment: Green Blender

  • Green Blender is a New York-based smoothie subscription service.
  • The investment is driven by the trend towards healthy nutrition and the impressive team behind the company.
  • The founders have achieved promising unit economics at the seed stage.

"It's a New York based company called Green Blender. And what they do actually is a smoothie as a service subscription play, which sounds maybe a little bit niche, right? Or funny at the beginning, but when you think about it as an entrance to kind of a subscription for a healthy nutrition, which is, I think, a huge trend at the moment. This can really be big."

Nicholas explains his recent investment in Green Blender, a company that aligns with the current trend towards healthy living and has demonstrated promising early-stage business metrics.

Acknowledgement of Hiring Screen's Contribution

  • Hiring Screen's algorithm has streamlined the hiring process for Harry Stebbings.
  • The algorithm helped Harry avoid irrelevant CVs and meet suitable candidates efficiently.
  • The assistance from Hiring Screen has been instrumental in managing the workload for multiple shows.

"Their blink algorithm meant I spent so little time looking at tons of irrelevant cvs and allowed me to meet the most relevant candidates for the job and really allowed me to choose the right person to join my team."

Harry expresses gratitude to Hiring Screen for their algorithm, which has significantly optimized the hiring process, allowing him to find the right team member.

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