20 VC 068 Why Now Is The Best Time To Be An Entrepreneur with Sean SetonRogers @ PROfounders Capital

In a dynamic interview on the 20 minutes VC, host Harry Stebbings talks with Sean Seton-Rogers, founding partner at Profounders Capital, about the evolution of the venture capital landscape. Seton-Rogers shares insights from his early days during the dot-com bubble, emphasizing the importance of laser focus for startups. He discusses the influx of US capital into Europe due to lower valuations and the potential for Europe to produce global leaders, citing the importance of proximity for early-stage investments. Seton-Rogers also touches on the rise of crowdfunding, its impact on traditional VC, and the regulatory concerns it poses. He highlights the need for improved talent recruitment and immigration policies to support company scaling in London, acknowledging Berlin's growing prominence as a tech hub. The conversation concludes with Seton-Rogers' perspective on the future of European tech and the importance of strategic support for entrepreneurs.

• Profounders Capital is a venture capital fund focused on the digital media space.
• Investors and principals include well-known figures from companies like Bibo and lastminute.com.
• Sean Seton Rogers has experience investing in technology companies in both the US and Europe, including at Balderton Capital and Commonwealth Capital Ventures.
• Sean has also worked with companies like Bibo and Wonga.com.

"And following our fantastic interview with Atomico, we are back on the streets of London to talk to the incredible Sean Seton Rogers, founding partner at Profounders Capital, a venture capital fund for entrepreneurs."

This quote introduces Sean Seton Rogers and his venture capital fund, Profounders Capital, highlighting his significant experience in the technology investment sector.

• Sean began his venture capital career in January 2000.
• He was previously a consultant and an engineer, with a preference for working with smaller companies.
• His passion for investing and working with early-stage companies led him to venture capital.
• The early 2000s bubble burst provided Sean with valuable learning experiences in handling tough times and company survival.

"I joined as an analyst at a venture fund in 2000 and it was an amazing first six months... And then things kind of came to a crashing halt in June or July of 2000."

Sean describes his initial experience in the venture capital industry, which quickly shifted from celebrating successes to navigating the challenges of the early 2000s market downturn.

• The biggest takeaway from the tough times is the importance of laser focus for companies.
• Companies should concentrate on delivering one product exceptionally well.
• During difficult periods, companies must prioritize survival by focusing on their core strengths.

"It's all about laser focus... You've got to have one thing that you do much better than anyone else out there, and that is what you live or die by."

Sean emphasizes the critical importance of having a singular focus on doing one thing exceptionally well, which is a lesson he learned during the challenging times of the early 2000s.

• The trend of US venture capital entering Europe has been ongoing for a few years.
• US investors find Europe attractive due to lower valuations and the potential for European companies to become global leaders.
• Early-stage investing remains local, but for larger rounds, US investors are willing to travel to Europe.
• European tech companies like Klarna, BlaBlaCar, and Funding Circle have already attracted US investment.

"Europe is now producing what can be global leaders... for a New York based large fund, if they're writing a 2030, $40 million check, to hop on a flight once every two months, quick four, five, six hour flight to London is not tough to do."

Sean explains that Europe's potential to produce global leaders in tech is attracting US investors who are willing to make the trip for significant investment opportunities.

• Sean acknowledges that more capital in early stages could lead to increased competition and potentially higher valuations.
• The presence of more capital is beneficial for founders but raises the bar for Series B and Series C funding rounds.
• The growth in early-stage capital has not been matched by a similar increase in later-stage funding.

"From a founder perspective, it's absolutely fantastic that there's more capital available... However, what it's done is it's actually raised the bar for the follow on rounds of financing."

Sean discusses the double-edged sword of increased capital availability: while it benefits founders in early stages, it also demands higher performance for subsequent funding rounds due to raised expectations.

• Entrepreneurs need to prove their business value more than ever due to increased expectations.
• Significant capital raises suggest a viable business model and strong traction.
• Companies that raise large amounts of money are believed to have the potential for substantial growth.

"When you're raising 2030, $40 million, it doesn't happen by accident. There is a viable business model there are strong traction proof points and there's a belief that the company can build to something very substantial."

The quote emphasizes the importance of having a solid business model and evidence of traction when raising large sums of money, indicating that such funding rounds are a sign of a company's potential for significant growth.

• Early-stage companies benefit from face-to-face interactions with investors.
• Local investors can provide advice and act as a sounding board for CEOs and key management.
• Pro Founders' unique selling point is that their funds come from successful entrepreneurs who can offer counsel and advice based on experience.

"And so in the early days, when founders are going through the crucible, they're hiring their first proper employees that expect real paychecks. They're signing their first business development deals. They're really on the early stages of that exponential growth. Having someone to basically just converse with, someone to get advice, act as a sounding board, especially for the top level kind of CEO."

This quote highlights the critical role local investors play in the early stages of a startup, providing not only capital but also guidance and support as the company begins to grow and face new challenges.

• Successful entrepreneurs contribute deal flow and due diligence to the fund.
• Their experience and advice can significantly impact the growth trajectory of portfolio companies.
• Having successful entrepreneurs as investors adds credibility and can help win deals.

"So they help us. The great thing about having founders as investors is listen, they get asked to invest all the time so they can funnel that deal flow through to the Crow Founders fund."

The quote explains how having successful entrepreneurs as investors benefits the investment fund by providing access to a wider range of potential investments and offering their expertise in evaluating and supporting those investments.

• The shift from infrastructure to services on existing platforms has fueled opportunities in Europe.
• Europe's historical expertise in certain verticals like music and fashion translates to success in these areas on the web.
• Companies like Spotify and Farfetch'd exemplify Europe's leadership in these verticals.

"It's about the creative, the design led, the services led businesses that you can build on top of what is there."

This quote explains the current trend in the web economy, where the focus is on innovation and services built upon existing platforms, highlighting Europe's potential to excel in these areas due to its historical strengths and expertise.

• London is the central hub for European tech, but Berlin is quickly becoming a significant player.
• The concentration of entrepreneurs in Berlin and the support infrastructure is enhancing its growth.
• The Samwer brothers and Rocket Internet have been influential in educating a generation of founders in Germany.

"London is the central hub, but watch out, because Berlin is doing a fantastic job crushing it."

The quote acknowledges London's status as the central hub for European tech while pointing out that Berlin's rapid growth and concentrated efforts are making it a city to watch in the tech industry.

• Talent recruitment is a key area for improvement to support the entrepreneurial community in London.
• Europe's lack of mega unicorns like Google or Facebook may be due to limited access to scaling talent.
• Access to experienced talent that can scale companies is seen as a barrier to creating large platform-type businesses in Europe.

"And I think what's held back Europe a little bit is it's the access to the company, scaling talent."

The quote identifies a challenge in Europe's entrepreneurial ecosystem, suggesting that the ability to scale businesses is hindered by a lack of access to experienced talent capable of growing companies to the size of major global platforms.

• Europe has technical expertise but lacks experienced senior management talent for scaling companies.
• The need for individuals with experience in taking companies from 50 million to 500 million in revenue is highlighted.
• Senior management talent in business development, sales operations is crucial for rapid scaling.
• The immigration policy impacts the recruitment of global talent.
• Berlin is currently more attractive for US talent due to easier immigration policies compared to London.
• London should not fall behind Berlin in the global talent acquisition marketplace.
• The cost of hiring experienced company scalers is high, regardless of the lower costs of setting up in Berlin.

"But what we don't have, we haven't had people that have been through big companies multiple times and can take companies from 50 million in revenue to 500 million in revenue."

This quote emphasizes the lack of experienced senior management talent in Europe capable of scaling companies significantly, which is a hurdle for business growth.

"And this kind of leads into the immigration policy, which is a pet peeve, a pet area of mine, like I said, where I think a lot of times in the current environment, we're throwing the baby out with the bathwater and making it tougher for companies to really recruit that global talent."

Sean Seton-Rogers discusses how current immigration policies make it difficult for companies to attract the necessary global talent, which is crucial for scaling businesses.

"Is. But actually, you know, when you're talking about these company scalers, they're not cheap."

Sean Seton-Rogers points out that despite Berlin being cheaper for setting up a company, the cost of hiring experienced senior management talent is substantial and should not be a deterrent for companies that need to scale.

• There is a perception that there is a barbell approach to VC funding, with fewer Series C funding rounds.
• Sean Seton-Rogers disagrees, believing there is an equitable investing marketplace.
• Good companies can raise the capital they need.
• Successful funding examples include made.com and one finest day.
• The US market also has companies that fail, which is not often publicized.
• Europe has a strong number of companies valued at a billion dollars, indicating a positive environment.
• Sean Seton-Rogers is bullish on the European investment climate.

"So I might disagree a little bit with thesis that there aren't enough getting funded."

Sean Seton-Rogers disagrees with the notion that there aren't enough companies getting funded, suggesting that the investment market is fair and good companies can secure funding.

"I passionately believe that's true. And even made.com, which is a portfolio investment of ours, just announced a $60 million round of financing very recently, or one finest day announced a $40 million round in the last couple of months."

He provides examples of successful funding rounds within his portfolio, reinforcing his belief in the availability of capital for strong companies.

"I don't believe Europe is underrepresented."

Sean Seton-Rogers expresses his belief that Europe is not lagging in terms of successful funding rounds and has a strong representation of highly valued companies.

• Crowdfunding has seen significant growth in the UK market.
• Crowdfunding platforms like Crowdcube and Cedars are becoming more competitive with traditional VC funding.
• Entrepreneurs can raise capital with potentially higher valuations and less equity loss through crowdfunding.
• Crowdfunding is a competitor to VC, and it forces VCs to prove their value.
• Concerns exist about lighter regulations on crowdfunding investments and the potential for investor abuse.

"And it's interesting, when they first started, I thought, oh, look at that, it's cute."

Sean Seton-Rogers initially perceived crowdfunding as a minor and non-threatening method of raising capital, which has since evolved into a significant competitor.

"Gosh, if I was a VC, I'd be worried. I thought, oh my God, I am a VC. I should be worried about what's taking place, or I should pay attention to it, because frankly, it's a competitor to what we're doing."

The quote reflects Sean Seton-Rogers's realization that crowdfunding has grown to a scale where it competes directly with VC, prompting VCs to reassess their value proposition.

"The legal documents are very light compared to what venture capital investors will get, and it does potentially leave itself open for abuse."

This quote raises concerns about the lighter regulatory framework for crowdfunding investments compared to traditional VC, which could lead to potential abuse or disadvantage for crowdfund investors.

• Concerns about the fairness of rewards for investors in crowdfunding.
• Potential regulatory overreach in response to issues with large exits.
• Importance of good faith operations by all parties in crowdfunding.

investors aren't fairly rewarded for it. I think that's actually where the bigger stink will come and the bigger hullabaloo. If there's been any sort of shenanigans around a fantastic billion dollar plus type exit.

This quote highlights the concern regarding fair compensation for investors, especially in the event of questionable activities around major exits.

And then what I fear is that regulation will swing too much in the other direction and it will close off what is a fantastic source of capital for founders and a fantastic source of access to a different investing asset class for the average punter.

The quote expresses a fear that regulatory responses could be too severe and restrict the benefits of crowdfunding for both founders and investors.

• Uncertainty about the impact of E Car Club's exit on the perception of crowdfunding.
• The importance of portfolio diversification in venture capital.
• A single 3x return may not be sufficient to cover losses from other investments.

Well, I don't know about renewed, I think continued belief now, actually, I think none of us actually know what the size of that exit was.

Sean Seton-Rogers indicates a lack of clarity on the impact of E Car Club's exit due to unknown exit size.

Three x. Okay, good to learn. So, yeah, so that's not bad. Now, what I don't know is how people are diversifying and if a three x is enough to make up for other ones.

Sean Seton-Rogers acknowledges a 3x return but questions whether it compensates for losses in other ventures, highlighting the importance of diversification.

• Increasing quality of companies on crowdfunding platforms.
• Uncertainty if crowdfunding is taking away quality deals from traditional VC.

I definitely noticed that the quality of the companies is going up on these crowdfunding platforms.

Sean Seton-Rogers acknowledges the improvement in the quality of companies using crowdfunding.

• The market for crowdfunding platforms is not "winner takes all."
• Time will determine the leading platform.

Oh, it's not a winner take all market. Not a winner's take all market. So by time will tell.

Sean Seton-Rogers suggests that both Cedars and Crowdcube can coexist and succeed in the crowdfunding space.

• Memorable experiences at industry events.
• Value in being part of successful company exits.

Career highlight in a fun manner. I was going to one of the very early Sean Parker crazy parties just after he had exited Facebook and kind of mixing with the intelligentsia of the west coast, which was in a crazy environment.

Sean Seton-Rogers reminisces about a notable party with tech elites as a fun career highlight.

From a career perspective, I think definitely being involved with being partied to great companies with good outcomes is what it's about.

This quote reflects on the professional satisfaction derived from being involved with successful companies.

• Fiction favorite: "Cryptonomicon" by Neal Stephenson.
• Non-fiction favorite: "Influence: The Psychology of Persuasion" by Robert Cialdini.

Neil Stevenson is my favorite author and his book Cryptonomicon. I'd really recommend from a professional perspective, there's a great book by Robert Chaldini called Influence Psychology of Persuasion.

Sean Seton-Rogers recommends "Cryptonomicon" for fiction and "Influence: The Psychology of Persuasion" for understanding human behavior and influence.

• Evernote for cataloging business interactions.
• Google Apps for efficient email management and productivity.

One is evernote. I use it to kind of catalog every business interaction meeting that I have, eminently searchable. And the other is a more recent one. Most startup companies will have done this years ago, but I switched over from exchange and Outlook to Google apps, Google Mail, and it has been absolutely fantastic.

Sean Seton-Rogers discusses his use of Evernote for organization and Google Apps for improved productivity.

• Old guard: Mike Moritz of Sequoia.
• New generation: Chris Sacca, an early investor in Twitter and Uber.

Successful VC, two. So from the old guard, Mike Moritz at Sequoia on the west coast. And he's actually, most people wouldn't know this, but he was a welsh journalist before he moved to the west coast and became the most successful investor probably in history. Google and others. Among his investments of the new generation, there's a guy, Chris Sacca, who's invested in, gosh, Twitter and seed investor into Uber and other things and he's just Google images of him. He's a really cool guy.

Sean Seton-Rogers names Mike Moritz and Chris Sacca as successful VCs, highlighting their impressive investment track records.

• Benedict Evans' newsletter for market analysis.

Benedict Evans, he's a Brit that just moved over the west coast at Andreessen Horowitz and he talks about, he talks about kind of the structural market and what's taking place from an analyst perspective.

Sean Seton-Rogers endorses Benedict Evans' newsletter as an essential read for insights into the market.

• Follow-on investment in Made.com.
• Belief in the company's potential and the founders' vision.

It's made.com and it's one of these companies where we've had the opportunity to work alongside the founders for a number of years and we really think they're building towards the next unicorn.

Sean Seton-Rogers explains his recent investment in Made.com, emphasizing the company's promise and his relationship with the founders.