20VC Europe's Youngest Series A Venture Partner, James Wise @ Balderton Capital on How To Get Into Venture & What The Future Of The VC Industry Looks Like

Abstract
Summary Notes

Abstract

In this episode of the 20 minutes VC, host Harry Stebbings interviews James Wise, partner at Balderton Capital, about the viability and future of venture capital. Wise, who became the youngest partner at a Series A fund in Europe at age 29, shares his insights on the industry's size, the importance of geography in VC, and the varied backgrounds of successful VCs. They discuss the changing landscape of European venture funds, the significance of personal networks, and the potential for Europe to compete with Silicon Valley. Wise emphasizes the need for VCs to have good judgment, passion, and a focus on process over outcomes. The conversation also touches on the rise of narrow AI, the importance of talent acquisition, and Wise's recent investment in Magic Pony Technologies. Throughout, Wise offers advice for those looking to enter the VC world, advocating for public advocacy of one's investment picks and demonstrating genuine enthusiasm for the sector.

Summary Notes

Introduction to the Podcast and Guest

  • Harry Stebings is the host of the 20 minutes VC podcast.
  • James Wise is a partner at Bulldog Capital, a leading early-stage venture fund in Europe.
  • James, at 29, is the youngest partner at a series A fund in Europe and has led deals for companies like Crowdcube, Sketchfab, 3D Hubs, Sunrise, and Workable.
  • The episode will discuss the viability of a career in venture capital, the diminishing importance of geography in VC, and advice for entering the industry.

Welcome to the 20 minutes VC with your host, Harry Stebings. And joining me today is a very special guest for me, a true friend and mentor in the industry who really showed me what it takes to be a great VC when I was his intern not so long ago, the man in question, James Wise, partner at Bulldog Capital, one of Europe's leading early-stage venture funds with two and a half billion in funds.

This quote introduces Harry Stebings as the host and James Wise as the guest, highlighting James's credentials and their personal connection.

Viability of Venture Capital as a Career

  • Venture capital is a small industry with a high public profile.
  • The number of VC funds in Europe decreased from 700 in 2007 to about 400 after the financial crash.
  • James questions whether one should pursue a career in such a small and variable industry.
  • He suggests that operational experience isn't necessary for sourcing and judging companies, which are key VC skills.
  • Successful venture capitalists come from diverse backgrounds, not just entrepreneurship.
  • Bulldog Capital has a team with a wide range of experiences, which James believes is beneficial.

Is it a viable career? Well, first of all, do you really want a career in such a small industry, and especially one which is so variable?

James Wise expresses skepticism about the desirability of pursuing a career in a small and inconsistent industry like venture capital.

Diversified Approach in Venture Capital Hiring

  • The traditional model of hiring in VC firms in Europe is outdated.
  • A consulting background can be advantageous, but a broader skill set is increasingly valued.
  • European VC firms are moving away from the private equity model of hiring, which favored finance and consulting backgrounds.
  • The venture capital industry is diversifying, with funds specializing in specific sectors or expertise.

Look, I think that's an outdated model and I think the only people who are still following that model are people who haven't realised that the venture game has changed considerably.

James Wise criticizes the traditional European VC hiring model as outdated and emphasizes the need for a shift in the industry.

Geography and Venture Capital

  • There is a debate about whether to build a VC career in Europe or the US.
  • The US, particularly Silicon Valley, is known for high venture capital returns.
  • James encourages staying in Europe due to the personal network and the growing European ecosystem.
  • Europe is now in the 'third wave' of its ecosystem, with companies reaching higher valuations and not selling out early.

So if you want to be successful, I mean, it's an interesting one. I was once told by a friend of mine who works in a valley fund, when I said, look, I'm thinking about working in venture in Europe, he said, well, that's great, but why would you want to be the top goal scorer in division two?

James Wise recalls advice from a colleague, using it as a springboard to discuss the decision between building a VC career in Europe versus the US.

The Third Wave of the European Ecosystem

  • The first wave of Europe's ecosystem involved software companies with early IPOs.
  • The second wave includes companies reaching $10-15 billion valuations and aiming for further growth.
  • Examples of second-wave companies are Spotify, which has not sold out despite opportunities.
  • The third wave could indicate Europe catching up to the US in terms of venture capital success.

We're now in what I think of as the third wave of our ecosystem. And the first wave was sort of software companies, which are running pretty well.

James Wise outlines the progression of the European tech ecosystem, suggesting that it is maturing and offering greater opportunities for venture capitalists.

The Third Wave of European Tech Companies

  • Europe has experienced two waves of tech company growth and is now entering a third wave.
  • This wave is expected to produce companies with valuations ranging from tens to hundreds of billions.
  • European entrepreneurs are not aiming to compete directly with dominant companies like Google or Facebook but will focus on areas where Europe has a lead.
  • Key sectors include artificial intelligence, fashion, and fintech.

"They're going to go and build the third wave, which is the ten 5100 billion the companies, and they're obviously not going to be competitive with the types of companies built in San Francisco in the same fields, not in sort of the information, the search. They're not going to compete directly with Google, not in the social graph, not compete directly with Facebook, but in other areas where actually Europe does have the lead."

This quote highlights the ambition and direction of the upcoming third wave of European tech companies, emphasizing their focus on sectors where Europe has a competitive advantage rather than directly challenging established tech giants.

European Market Size and Integration

  • The European Union has a larger GDP than the United States and China, making it a significant economic bloc.
  • European countries like Britain and Germany have strong domestic markets, particularly in e-commerce and technology.
  • Entrepreneurs in Europe are increasingly thinking globally from the outset, launching products that are instantly available worldwide.
  • The use of common platforms like the App Store and Play Store enables European companies to circumvent traditional market entry challenges.

"The GDP of the European Union is larger than America and China. If we were a country, we would have, I think, the highest GDP per capita of any."

This statement refutes the notion that Europe's market size is a disadvantage by highlighting the European Union's collective economic strength compared to other global powers.

Global Mindset and Talent Acquisition

  • Thinking globally from day one is essential for success, especially in terms of talent acquisition.
  • Companies must aim to hire the best talent worldwide, not just locally.
  • London is cited as one of the few hubs capable of attracting global talent to work in one place.
  • The real challenge for European tech hubs is not capital or regulatory barriers but the ability to attract top global talent.

"I'm thinking about hiring the best person in the world to do this. And I'm going to take them out of Google, and I'm going to take them out of Wechat, and I'm going to take them out of Flipkart, whatever it is."

This quote underlines the importance of a global approach to hiring, where the goal is to recruit the best talent from around the world, regardless of their current affiliation with leading tech companies.

Choosing a Venture Fund

  • The venture capital industry is long-term, with relationships and decisions playing out over five to ten years.
  • When choosing a venture fund to work with, it is important to consider personal growth, support, and the quality of the team.
  • The speaker chose to work with Bulldom due to shared networks, supportive relationships, and the team's expertise.

"I thought to myself, well, what do I want to be doing in five to ten years time? Like, how am I going to improve my myself personally? Who are the people I want to be around and supported by?"

This quote reflects the speaker's thoughtful approach to selecting a venture fund, focusing on long-term personal and professional growth and the importance of a supportive and skilled team.

Preferred Investment Stage

  • The speaker's venture fund focuses on early-stage investments, typically between one to $20 million.
  • The fund's preference for early-stage investments stems from a desire to work closely with operational aspects and data of growing companies.
  • There is a gap in Europe for early-stage investment, which the fund aims to fill given the increasing number of startups and deal flow.

"We do one to $20 million. I'm excited about that region for a couple of reasons. One is, as much as any of us like to think we're the perfect judge of people, we're kind of slightly geeky as well and we like to feel and touch product, and we like to see some data."

This quote explains the speaker's enthusiasm for early-stage investments and the hands-on approach they prefer, which allows them to engage directly with the products and data of the companies they invest in.

Wave of New Companies in Europe

  • Europe is currently experiencing a surge of new companies entering the investment stage.
  • James Wise emphasizes the excitement and opportunity present in the European market for investors.
  • The challenge lies in effectively selecting the right companies and founders to work with.

"I'm really excited about that." "I think that's the really exciting thing about being in Europe now at our stage is that this wave of opportunity is coming now..."

The quotes reflect James Wise's enthusiasm for the influx of new companies in Europe and the investment opportunities they present. His excitement is based on the potential for growth and success in this market.

Pan-European Investment Landscape

  • There is a limited number of funds that engage in pan-European investment at the early stages.
  • Venture capital is a personal game with varying decision-making processes among investors.
  • James Wise believes that his team is well-positioned for the future economics of their business.

"And also there just aren't many people who do pan european investment at our stage." "Venture is a very personal game and we make decisions which other people will think are crazy and vice versa."

James Wise points out the scarcity of pan-European investors at their stage and the personalized nature of venture capital decision-making. He expresses confidence in his team's strategic position within the market.

The Future of Venture Capital

  • Venture capital has evolved towards a more operational, specialized, and active deal-hunting model.
  • Sectors requiring venture capital shift over time, with new sectors emerging that are beyond traditional data models.
  • The future will likely see more specialization in venture capital, with experts focusing on emerging sectors like AI, self-driving vehicles, and blockchain.

"I think there will always be the ability of individuals, the need for venture capital to come in and provide high risk capital at situations where you just can't yet fully apply a data, rigorous data model to a sector..." "It's looking at artificial intelligence, it's self driving vehicles, it's uavs, broad range of use cases for the blockchain, and on and on and on."

James Wise discusses the constant evolution of venture capital and the need for high-risk capital in sectors where data models are not fully applicable. He highlights the emergence of new technologies that are reshaping the landscape of investment opportunities.

Specialization vs. Breadth in Venture Capital

  • There is a debate about the extent to which venture capital funds should specialize in specific verticals.
  • James Wise argues that while specialization is important, a breadth of skills and support is crucial for early-stage companies.
  • A successful fund should have a mix of specialists and generalists to provide comprehensive support to portfolio companies.

"I'm far more in favor of funds having people attempt to be experts or specialists or... But to share that breadth of expertise with a broader base of skills..."

James Wise expresses his preference for a balanced approach in venture capital, where funds have both specialists and generalists to support companies in various aspects of their growth.

Advice for Aspiring Venture Capitalists

  • James Wise offers advice for young listeners interested in entering the venture capital industry.
  • He emphasizes the importance of good judgment, passion, and the ability to spot early investment opportunities.
  • Aspiring venture capitalists should engage with the industry, demonstrate their insights, and show genuine enthusiasm for the sector.

"So one know we want to see people who've got good judgment. We want to see people who are very passionate." "But you all have the ability to get in touch with ceos or companies you really are excited by and provide support to them because you want to learn from them..."

James Wise advises aspiring venture capitalists to build a reputation for good judgment and to demonstrate passion for the industry. He suggests ways to engage with companies and the community to build a track record and showcase enthusiasm for venture capital.

Book Recommendations and Personal Reading Habits

  • James Wise mentions that he does not read much for pleasure but reads industry books a lot.
  • He highly recommends "The Score Takes Care of Itself" by Bill Walsh, emphasizing the focus on process over outcomes.
  • The book advises building the best team and right processes, with the belief that good outcomes will naturally follow.
  • James appreciates the book's message of striving for excellence without comparing oneself to the competition.
  • He finds the book applicable in broad ways to many aspects of life, not just management.

"The best one I've ever been given, which sits up in the Bolton library actually, is the score takes care of itself by Bill Walsh."

This quote highlights "The Score Takes Care of Itself" as the most impactful book James has received, which resides in the Bolton library.

"One is Bill's focus on process. So he's more interested in building the best team, building the right processes, and then the outcomes will look after themselves."

This quote explains the core philosophy of Bill Walsh's book, where the process is prioritized over the outcomes.

"It's about raising the right round for you. It's about making sure that the public understand your message. It isn't comparing yourself against the competition."

James stresses the importance of personal excellence and appropriate goals over competition-focused benchmarks, which he takes from Walsh's book.

Sector Excitement: Narrow AI

  • James Wise is excited about narrow AI and its specific use cases.
  • He believes that the real excitement lies not in the AI technology itself but in the applications that solve particular problems.
  • He cites customer service, sales, and marketing as areas where narrow AI can improve efficiency and experience.
  • James sees potential in conversational AI to improve stateful interactions, where information needs to be remembered and utilized.
  • He is cautious about investing broadly in AI companies but is interested in those applying recent breakthroughs thoughtfully.

"I think narrow AI and the applications of it, and I actually don't think it's the technology that really excites me."

James expresses his interest in the practical applications of narrow AI rather than the technology itself.

"I feel that stateful narrow used in the conversational way may be a solution to that."

This quote indicates James's belief that conversational AI could improve processes where maintaining the state of information is crucial.

Views on General Intelligence

  • James Wise does not believe narrow AI is simply a stepping stone to general intelligence.
  • He recommends "Superintelligence" by Nick Bostrom for a more in-depth understanding of the topic.
  • James defers to Bostrom's work rather than sharing his own thoughts on general intelligence.

"I think that the breadth of general intelligence is far beyond."

James acknowledges the vast complexity of general intelligence compared to narrow AI.

"I instead will recommend another book by Nick Bostrom, superintelligence."

James suggests reading Bostrom's book for a comprehensive argument on general intelligence.

Favorite Blog or Newsletter

  • James Wise's top blog is "The Morning Paper" by Adrian Collier, which summarizes computer science papers.
  • He warns that it can be intellectually consuming but finds it enriching.
  • James also recommends Nathan Benaich's newsletter, which focuses on AI and machine learning in the startup world.
  • Nathan Benaich's newsletter is a result of James's advice to create a high-profile venture capital presence.

"I have one which really pushes me, which is the morning paper by Adrian Collier."

James regards "The Morning Paper" as intellectually stimulating and challenging.

"He summarizes them and he sends out a fortnightly, I think it is newsletter, summarizing ten brilliant articles and giving you his tips on it."

James highlights the value of Nathan Benaich's newsletter in summarizing key articles on AI and machine learning.

Mentorship in Career

  • Harry Briggs is identified as James Wise's most significant mentor in his career.
  • James credits Harry Briggs with encouraging him to enter venture capital and for providing trusted advice.
  • He believes that being a decent person is crucial for success in venture capital.

"Harry Briggs is a role model in that aspect and I'm very lucky to have worked with him."

James expresses gratitude for Harry Briggs's mentorship and the positive impact it has had on his career.

Public Investment Insights

  • James Wise discusses an investment in Magic Pony Technologies, which focuses on video compression through machine learning.
  • The company's technology predicts video patterns to improve streaming quality.
  • He mentions the relevance of this technology to the growing consumption of video content.
  • Magic Pony Technologies was incubated at Boulderton, where James had direct experience with the team.

"Magic Pony Technologies is a former entrepreneur, first company, and it's a machine learning approach to working video compression."

This quote describes Magic Pony Technologies' core business and its innovative approach to video compression.

"They are building a very smart solution to improve that through software rather than hardware."

James emphasizes the software-based solution provided by Magic Pony Technologies to address video streaming issues.

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