Jos shares the lessons he's learned as a founder and investor from thousands of investment pitches.
For any VC backed founder, their ability to raise capital throughout their journey is critical. In this interview we are joined by Jos White, who has “been there” as an entrepreneur, as an angel investor, and now as a VC at Notion.
- Keep it simple: as an early-stage founder you have three jobs: tell the story, build the same, raise the money.
- At Series A, give me evidence your idea has merit and you can build a top team.
- At Series B+ show me you can communicate a big vision AND deliver on a plan.
My early experience of VC fundraising was quite extreme!
I co-founded MessageLabs in 2000 (with my brother Ben as CEO), and we grew that business successfully to a global leadership in email security with more than $150m in revenue when we sold it to Symantec in 2008. At that time it was the second largest SaaS company in the world behind Salesforce. Our timing was pretty good and we only raised money once, in 2000, just before the dot com crash, raising $40m from US investors, at a pre-money valuation of about $100m. The business had been incubated within another business I had co-founded with my brother Ben, called Star. Although we only raised venture money once – though we did raise some debt later – we did experience the wilderness years when the market had collapsed and our perceived value was a fraction of the $100m. This left us with a group of disillusioned investors around the table,but it came good in the end. It forced us to learn and learn fast, as we knew we wouldn’t be raising money again any time soon.
I moved to New York in 2002 to lead the US expansion of MessageLabs, and while I didn’t do any investing when I was at MessageLabs – I had neither the time nor the money – when we exited the business in 2008 I started angel investing in New York. We started Notion in 2009, but I continued to angel invest in consumer businesses, film as well as a few B2B businesses- instinctive as opposed to strategic.
The role of the early stage CEO? Define the vision, get the right people in the right places, and make sure you don’t run out of money.
In an early-stage, venture-backed business, I’m not sure that the role of the founder should be much else.
There is a tendency to get involved in too much, but if you can resist the temptation to be too distracted and focus on doing those three things, there is a much greater chance of success. I urge founders to think about the simplicity of this mantra. One of those three things is don’t run out of money. Normally to grow rapidly, you need to be able to raise money.
At the seed stage fund raising is really quite straightforward.
There isn’t a lot of commercial progress at seed stage, so founders need to be able to articulate their ideas and ensure that – as a team – they have the right characteristics to make something special happen. It’s quite an instinctive decision as an investor, you’re really backing the founders and the scale of their thinking.
At Series A, you need to demonstrate some commercial progress.
There should be at least one year of a plan that they have been through, so you can see evidence of performance and growth. You can look at the metrics and start to see the extent of product market fit. As an investor, at this stage, it’s not just about the founders and the early stages of building a team, it’s also about ensuring that they have a plan to build on that early PMF to go to the next stage.
At Series B and ongoing, demonstrate your ability to get the right people in the right places.
At this stage, founders need to focus on two things: 1) building out an experienced team and 2) demonstrating the operational discipline to deliver. A large part of success is the ability to build and deliver on a plan.
What have you learned, in more than 900 investment discussions in 9 years?
I am very founder oriented and double downed on that. I believe the founder must be an exceptional person, with certain attributes:
- An amazing scale to their thinking.
- An ability to articulate their thinking in a compelling and articulate way.
- They have a fire burning inside or a chip on their shoulder.
- They are compelled to prove a lot of people wrong.
- They have a balance of conviction and coachability.
Founders need to be prepared to listen to certain people and adapt. You don’t just want pure conviction because then they may drive off the cliff at 100 miles per hour. However, you don’t just want coachability either, because then their idea is capable of being compromised and it’s possible they’ll be talked into thinking smaller and staying in a safer place. They need the intellectual capability to think about the world differently and learn from their mistakes.
Lastly, I like founders who are an insider to the pain, but an outsider to the market; I’ve had a lot of success with this. When you work with people who have had first hand experience of the pain, but they are an outsider to the market, they think more freely about the market.