In this episode, the host engages with Ophelia Brown, the founder of Blossom Capital, one of Europe's leading Series A firms with a $475 million fund. Ophelia discusses her journey from early entrepreneurial aspirations and lessons learned from failed startups to becoming a successful venture capitalist, previously working at LocalGlobe and Index Ventures. She emphasizes the importance of focusing on making things happen, not taking 'no' for an answer, and the dedication required in venture capital. Ophelia also shares insights on portfolio construction, advocating for concentrated investments, and the value of building long-term relationships with founders. She critiques the venture capital industry's hype and advocates for a return to thoughtful investing, highlighting the unique challenges and biases she faced as a female solo GP raising a fund. Throughout the conversation, Ophelia underscores the significance of enabling entrepreneurs and the competitive, yet rewarding nature of venture capital.
"I think actually the Followon can really damage fund returns. You should buy your ownership at the lowest possible cost and then, especially in the growth market that we've been on, where the followon is done at four or five x, say your initial cost was five or 10 million and you were spending an additional five or more in Prorata but at a much higher valuation. Then your blended average suddenly looks a lot worse than having just bought your ownership at a lower cost."
Ophelia Brown emphasizes the risk of follow-on investments at inflated valuations, suggesting that they can lead to worse overall returns compared to securing larger ownership stakes at the initial, lower valuation.
"I always hear that blossom is long in the making and short in the making, long in the making in that. I think I always knew that I wanted to have my own company or build my own thing."
This quote reflects on Ophelia Brown's long-standing desire to create her own venture, which eventually led to the founding of Blossom Capital.
"When I want something to happen, I just focus on making that thing happening. And so when it comes to working with an entrepreneur or wanting to support them or partnering with them, it's just relentless focus on achieving that."
Ophelia Brown describes her approach to securing deals with entrepreneurs, highlighting her determination and focus as key factors in her success.
"I think about this a lot and I think during a meeting, if there was like a radar of I'm in, I'm out, I'm in, I'm out. I'm constantly trying to test myself, okay, I've fallen in love within the first five minutes, but is this love real?"
Ophelia Brown discusses her internal process of evaluating potential investments and the importance of critically assessing her initial impressions.
"I get it from a founder's point of view. I've got better things to focus on. But you and I know this from fundraising ourselves. There is so much to be said for the relationship that you built."
Ophelia Brown recognizes the significance of relationship-building in venture capital and the long-term benefits it can bring to both investors and founders.
"Everything about your life is basically trying to escape from the very reality of mortality, that life is finite."
Ophelia Brown shares her philosophical perspective on life, emphasizing the importance of living fully in recognition of its finite nature.
"Mickey's one of the people that I respect the most. The one thing that really resonated, or I took away from, was that he told you, you have to really follow your own judgment and believe in you and do things your way."
Ophelia Brown reflects on the impactful advice received from Mickey Malka, highlighting the importance of self-belief and individuality in venture capital.
"So rather than try and build a fund of 30, 40 companies and then build that over two, three years, we said the number of quality companies that we can be great partners to is actually probably smaller than that, and that's be super concentrated."
Ophelia Brown explains Blossom Capital's approach to portfolio construction, opting for a concentrated investment strategy to become better partners to a select number of companies.## Series B Investment Concerns
"No. We've always said the vanders be in control of your own destiny, manage your Runway and your burn."
Ophelia Brown stresses the importance of startups being in control of their financial trajectory and not expecting automatic funding rounds.
"But the reality is, even for a multistage fund, when they could theoretically do the BCD, they're still underwriting that new investment."
The quote explains that multistage funds do not guarantee funding for later stages without reevaluation of the startup's performance.
"It's not coming as a surprise. We're working through. There's a budget, there's a business plan."
Ophelia Brown emphasizes the importance of keeping founders informed about their progress and investment potential, to avoid surprises.
"That's why we did away with the IC process. It just didn't make sense."
The quote reflects the decision to eliminate the traditional IC process to improve investment decision-making efficiency.
"There is signaling, but a good investor doesn't necessarily pay attention to those signals."
Ophelia Brown downplays the importance of signaling risk, suggesting that good investors make decisions based on their own analysis.
"Definitely speed of execution. There's courage and the conviction of ideas and how to move on things."
The quote highlights the importance of speed and decisiveness in executing business strategies for startup success.
"And as an investor, I don't have regret, I have learning."
Ophelia Brown expresses her philosophy on investment mistakes, viewing them as learning experiences rather than regrets.
"So I think investors can get fooled into thinking something is a great investment thesis and ignore the practicalities of execution."
The quote acknowledges that a strong investment thesis can be undermined by poor execution or an inadequate team.
"It was a great idea. But as I said, all these operators were starting to be angels."
Ophelia Brown explains the rationale behind the scout program and its misalignment with founder preferences.
"We actually pulled out of seed. I do worry, actually, when I look at all of the deal activity in Europe that it's all at seed stage at the moment."
The quote explains Blossom Capital's strategic decision to concentrate on Series A investments due to their perceived value addition at that stage.
"We're with you as partners, we're an extension of your team."
Ophelia Brown describes their approach to supporting startups, emphasizing partnership over governance.
"We always say we want to know the bad news as quickly as possible because that's how we help you figure it out."
The quote underscores the need for open communication between investors and founders, particularly regarding challenges and setbacks.
"If at the early stage it's all about seeing something that someone else doesn't, then there shouldn't be 15 term sheets for a deal."
The quote reflects Ophelia Brown's investment philosophy of seeking unique opportunities rather than following the crowd.## Data-Driven Investment Practices
One of my friends is a very pedigreed operator, and they got 28 pings from associates on one day because they showed up on a data platform.
This quote illustrates the intensity and frequency with which investors reach out to promising companies that appear on data platforms, suggesting a highly competitive and data-driven investment landscape.
That's not thoughtful investing.
Ophelia Brown expresses concern that the reliance on data and fast-paced deal-making may not constitute thoughtful investing, where due diligence and strategic alignment are key.
It comes back to the philosophy of there are only a finite number of outcomes that are going to matter each year, and you just want to be the best possible partner to them.
Ophelia Brown discusses the investment philosophy of focusing on a limited number of companies and being the best partner to them, which influences their approach to pricing and ownership stakes.
No, I don't worry about adverse selection.
Ophelia Brown dismisses concerns about adverse selection when aiming for a 20% ownership stake, suggesting confidence in the fund's investment strategy and value proposition.
So a lot of discussion and debate. It's very iterative.
Ophelia Brown describes the thorough and iterative process of making investment decisions, emphasizing the importance of discussion and debate within the partnership.
Venture is a very transparently competitive sport where the founders ultimately choose who deserves to be in the ring, which is quite an exciting industry to be in.
Ophelia Brown highlights the dynamic and founder-centric nature of the European venture capital industry, where founders have significant power in choosing their investors.
Fundraising as a solo GP for Europe was brutal.
Ophelia Brown shares her personal experience of the difficulties faced during fundraising as a solo GP in Europe, highlighting the challenges and misconceptions in the LP market.
I would like to see those companies scale and we have fewer companies going from the series c beyond to exit.
Ophelia Brown expresses a desire for more growth and scaling of European companies, suggesting that increased collaboration and support networks could facilitate this development.## Fundraising Advice
"So the advice that I was given was get to 50%."
This quote emphasizes the recommended target for an initial fundraising close, indicating a level of seriousness and potential for success.
"And then there's a provision in the LPA that says you have twelve months."
This quote refers to the common clause in a Limited Partnership Agreement (LPA) that allows a period for finalizing the fund after the first close.
"It was a big lesson for me. Actually watching you externally was you did the closes and then you invested."
Harry Stebbings notes the importance of investing and building a portfolio as a way to prove the fund's capabilities to future investors.
"It's the toughest thing, I think, finding talent the right talent, building a culture."
Ophelia Brown highlights the difficulty in finding the right talent and establishing a strong company culture.
"You've got to understand that people aren't necessarily like you."
Ophelia Brown discusses the need to recognize and respect that different people have different working styles and intensities.
"I think that's a comment that people level up a woman all the time."
Ophelia Brown addresses the gender bias that often leads to women being labeled aggressive for behaviors that would be accepted in men.
"I don't like the hype. I would love to go back to the art of deal making."
Ophelia Brown expresses a preference for a more traditional, less hype-driven approach to venture capital.
"99% of it is sheer determination and perseverance."
Ophelia Brown emphasizes the importance of determination in the fundraising process.
"Just be genuine."
Ophelia Brown advises on the importance of authenticity in cold emails.
"It's being incredibly conscientious about how you spend time."
Ophelia Brown discusses the importance of being deliberate with time to balance work, marriage, and parenthood effectively.
"The best performing fund, at least in Europe, if not the world."
Ophelia Brown states the ambitious goal for Blossom's performance in the next five years.