Venture Capital is very much like gambling with Dan Bowyer

Mudassir (00:55.837)

Awesome, awesome, having a lovely time over there. Usuallywhen we invite anybody, I talk to them about who they are, what's their story,where they come from. And one of the biggest things that I have learned from aperson from UK actually, a big, big fan of his work, Steve Bartlett, and Ilearned this thing from him, like whoever we are, there's a context of ourlives. So I wanna understand, what's the earliest context you have of yourlife? Who is Dan, behind all the successes, who are you?

Dan (00:58.113)

Alright.

Dan (01:24.714)

life. How big a question. That's a mega question. I thinklet's, um, if you break it down to the things that I think are influential inyour life. I come from a very poor, not very pleasant part of South London.

called Croydon, which is the equivalent of, I can't think ofa Dubai equivalent. There's only nice things in Dubai. So just imagine like areally scratchy part of a town, like the very working class, low rent, lowfamily income.

Mudassir (01:58.901)

Yeah.

Dan (02:02.31)

single parent, broken home, difficult, interestingchildhood. And then while I was at school, started doing kind of teen modelingand young modeling for

kids magazines and tween and teen magazines, then got into aband, then did kids TV presenting. So I had this kind of after school, while Iwas still at school, this kind of media entry into the world of being on stageand being on radio and being on TV, which is all super fascinating andinteresting. Especially if you're a young man meeting girls and drinking beerand being naughty and doing all those things that's through your formativeyears. And then I just didn't like.

much of it. So I got to about 22, 23 and left all of thatworld behind. And then what the hell do you do once you've gone to school andthen gone into this crazy kind of entertainment world? Um, but I've always beengood at fixing computers, fixing radios, fixing my mom's friends would alwaysbring around their appliances for me to fix, Hoovers and stereos and TVs. And Iwas always good at fixing and making and electronics and doing things. Nevertrained in it, but I was always

I didn't know, I just always had the fascination with howthings work. So then ended up a friend of mine asked me to build a learningsense, a build a network of computers for, for Virgin Atlantic. And I wasbuilding kind of networks and tech and computers and installing software, andthis was mid nineties. So kind of early days of the internet, but super earlydays. And people were just thinking about emailing and just thinking about thecommercial application of tech. And I loved it. And I just fell in love.

And then ended up doing my engineer certification. So itbecame a windows engineer and Apple engineer. I didn't really care about theplatforms. That's like learning about tech. Set up a business that did it. Ihad an MBO with my business partner set up another, another kind of moresoftware, social media focused business. Um, when social media started tobecome a thing in the mid 2000s, sold that. And then, uh,

Dan (04:06.53)

Did other weird and wonderful things. Moved to Cape Town,ran an incubator, invested in a number of startups, started angel investing,interim CEOing. And just basically messing around in startup and tech andmeeting smart founders and doing a little bit of support, a little bit ofconsulting, a little bit of investing. Just very free form, however it fittedtogether. Never had a plan. Lived in Miami for a bit, lived in LA for a bit.And...

And then in 2014, my mum fell ill in the UK. So I came backto the UK, looked after her nurse, they're back to health. She's now fine.Well, she's still mental, but she's fine. Um, and then I met my businesspartner, my now business partner in 2016, 17, when we set up the VC. So then weset up super seed. So I was still interim CEOing and, and angel investing andsupporting startups and founders, but

I met him and he's everything that I'm not. So I'm veryflighty and very feelings based and very emotional and just want to set mypants on fire and run around and break things and try things and build thingsand mostly fail. And he is very structured, financial, legally minded,strategic thinking, and we are a really good union. And we were workingtogether, helping a mutual friend with a portfolio of companies, doing variousthings for these startups.

And we started just to realize that we should work togetherand we should, you know, invest together and we should build somethingtogether. And that was the root of super seed, which is, which is a B2B 50million pound B2B business software fund that invests in technical foundersthat do the transform business that, that help big business do smart thingswith tech and software. And we're on our, we're about to launch our third,we're about to raise for our third fund, um, between us, we've invested inmaybe 50 companies. And, um,

I don't really care about being a venture capitalist. It'snot something that I wake up and think, my goodness, VC so cool. It's mainlyfull of a holes and difficult and it's not particularly nice vehicle for, forstartups to raise through. It's this, there's either angel friends, family, orother kind of debt and other bits, and then there's venture capital, which isthis kind of very power law rules driven thing that lives over here. Butanyway, so I met this incredible guy. We set up the fund about six years ago.We've invested in.

Dan (06:26.186)

multiple businesses deployed about 16 million quid now. And,you know, love meeting founders, helping them build startups, helping themsell. It's quite magical.

Mudassir (06:40.217)

Amazing, amazing. You know, we were like doing some researchand we were like, oh, okay, so you went from a small town in UK, all the way toCape Town and back in the UK, so like, what the heck happened there? But now,like now you explained that it makes sense. Yeah.

Dan (06:53.178)

Yeah. I just like trying new things. Get out there. I thinkthe best thing you can do, and I'm not, I'm not young anymore, but the bestthing any young person can do is travel. And then the other thing they shoulddo if they're thinking about working in startup is go and get a job in salesand startup. So go and work in a youngish startup and work in sales, sell the,sell the product or service that doesn't work. That's, that's the best, thebest I think.

Mudassir (07:04.667)

Yeah.

Mudassir (07:11.714)

Yeah.

Mudassir (07:18.21)

Yeah.

Dan (07:21.859)

baptismify you can have in startup land if you're thinkingabout becoming a founder.

Mudassir (07:26.505)

Yeah. Why do you think so? Like why? Why exactly?

Dan (07:29.75)

Because you, when you're selling, you're at the sharp end ofthe business. You're dealing with clients and I think sales unlocks everything.Sales is existential. Sales is the answer to everything. You either getfeedback or you get cash or both. Right. So you either learn about, um, so ifsomebody gives you money for a thing, okay, there's something in this and thenyou can work out what it is and how, and find out where more of them are andthen replicate that. And when they say, no, I don't want to buy your product orservice because there's something better in the market or you haven't hit thetarget or there's something else going on, you get this incredible feedbackloop.

So either way, sales is the answer. And also when you areselling, you are doing the one job that any founder in the world needs tolearn. It's the first thing you need to learn. How do you sell? Which is notjust putting on a shiny suit and being a grease monkey. It's about hiring,you're still selling. It's like dealing with investors, you're still selling.It's dealing with clients, you're still selling. So sales is the answer topretty much every question in startup land.

Mudassir (07:59.715)

Yeah.

Mudassir (08:08.33)

Absolutely.

Dan (08:27.318)

So if you're thinking about becoming a founder, that's whatI would say is go and sell somebody else's stuff because you'll learn all ofthe core toolkit to become a great founder.

Mudassir (08:27.563)

Yeah.

Mudassir (08:38.141)

Yeah. Why you become an investor? Why not become a founderagain?

Dan (08:43.858)

I shouldn't have done it. Given my time again I wouldn'thave done it. I like new experiences. I don't care what they are. I don't careif they're good or bad. I just think life is about experiences. The main reasonthat I became a VC is because I didn't have enough money to invest my own cash.So the only way to invest more cash and have more meaningful stakes infascinating businesses is to set up a fund. There's no other way to do it. Youeither have your own money.

and you set up a family office or you invest other people'smoney as a fund. I think most people don't know. I mean, obviously there's alot of my money in the fund because you have to, when you start out and there'salways the GP commit. The other thing I think that people don't know is thatall, all investors in funds insist that there is at least a percentage of the,the manager's cash in the pot, because that's how you get skin in the game andyou're, you're more aligned.

But I just didn't have, I didn't have the quantum, so Ididn't have that kind of money. So I needed to invest other people's money.That was it.

Mudassir (09:47.365)

Okay, I was fortunate enough to host a couple, like a lot ofVCs actually on this podcast and one of the questions that one person asked is,not asked, like he was sharing something, and he's a very well known earlystage VC in New York. And he mentioned there's a lack of resources availableout there for anybody who wants to start a VC firm. Like there's like, you canfind tons and tons of information like how you can start a startup, like allkind of support systems.

Dan (10:10.477)

Yeah.

Mudassir (10:16.909)

But there's not that much information available in terms ofhow to start a venture capital firm.

Dan (10:21.714)

Yep, that's absolutely right. I mean, there's not that manypeople that do. You know, there are a lot more firms than there were 10 yearsago. I think probably with pretty 10X, I mean, that will die. I mean, a lotwill pass by the wayside because of the current macroeconomic. Disruption,dislocation, whatever you want to call it. And also LPs, our investors, LPsdon't have the appetite to VC. They've been stung a little bit. They've been suckedinto the crypto nonsense or.

Mudassir (10:28.393)

Yeah, now it's blowing up. Yeah, totally agree.

Mudassir (10:36.101)

Mm-hmm. Yeah, situation. Mm-hmm.

Dan (10:49.186)

the metaverse nonsense or the web three nonsense or the fiveminute grocery delivery nonsense, whatever the crap that was being sold. Sothere's a lot to wash through, but he's right, there's not, there's no, butit's still, it's a very niche thing. I mean, even though we've probably 10x thenumber of VCs over the last 10 years, as a proportion of jobs or roles in theworld, it's tiny, tiny. There are hardly any, I mean, in the UK, I think thereare.

Mudassir (10:49.38)

Yeah.

Mudassir (10:54.999)

Yep.

Mudassir (10:59.134)

Yeah.

Mudassir (11:07.895)

Yeah.

Dan (11:17.11)

200 VC firms in the UK, roughly. And then, but there's VCand there's VC, there are VCs that aren't actually VCs. There are a lot of VCfirms that are actually incubators, accelerators, private equity, C&T,other things. They're not venture capital in the classic sense.

Mudassir (11:20.217)

That's all.

Mudassir (11:27.977)

Yeah. Yeah, Venture Studio. Yeah, exactly.

Yeah, so if anybody wants to start a VC from today, like,don't do it, okay, how can you do it? Okay.

Dan (11:40.131)

Don't do it.

Dan (11:44.802)

Just say no. Just don't do it. No, I'm being a tool. If youwant to start a fund, be very clear as to why and be very clear as to whyyou're different. Now, I'm not, we're not. We're a couple of middle-aged whitemen doing business software. We're about as common as they come. So we strugglewith differentiation. And I think the firms of the future will be niche firmsbuilding out and layering their onion over time, but they'll start in a veryspecific theme, territory.

Mudassir (11:58.424)

Okay.

Dan (12:14.242)

customer profile they'll start. I think that's the way to doit if you want to start a venture capital firm.

Mudassir (12:19.413)

Yeah, that's a great answer, I think. So in my relativelysmaller kit compared to yours, one thing that I've seen is there's a termcalled product market fit, right? So everybody knows about that. And then weheard a term called co-founder fit or something like that, you actually need tofigure it out. Quite recently, probably six months ago or eight months ago, Iheard the term first time, which is called an investor fit. I think you weretalking about that a few times ago.

you know, LinkedIn as well. So in my opinion, or like theperception that I used to have from other founders, they see an investor as checks,okay, half a million. So Dan is gonna write me a check, so you know, access tocash a pile or something, a pile of cash or something like that. What exactlyis an investor fit?

Dan (13:12.27)

There is language market fit, founder market fit, co-founder,founder fit. So, and there are lots of, depending on how you want to view, viewthe world. Now on investor, on investor, founder fit, which is why I think youprobably need to frame it. There are lots of ways to answer the question. Theway that I...

Mudassir (13:19.789)

Yep. Yeah.

Dan (13:41.41)

perceive the investor founder piece is that it's a marriage,it's a partnership, it's a union. So I always look at when I first meetfounders, are we going to have a fruitful relationship? Now I don't expect usto be friends, it'd be nice, but I don't expect us to be friends. Most smartfounders are what I call charmingly disagreeable and determined.

there's an opportunity for them to go off and build theirbusiness, which means they're probably not going to be that pleasant acharacter to be around. They're going to be working 20 hour days. They're goingto be stressed, miserable up against it. And that's not really conducive to,um, you know, there's three to four years of your life when you first start outas a founder, which are abject misery.

And that's not a time for having a family or maintainingfriendships. So you need to, because otherwise you lose your mental health andyour mental strength and your, your mental ability, but there, you know, it'sgoing to be a hard time. So what I look for in founders is this kind of thisdisagreeable is this kind of determination, this, this brutality. And is theregoing to, are we going to have a fruitful union? Do we have enough of arelationship to, to make

difference together to be greater than the sum of the partsto create something special and it's my job to not only invest capital but toOpen networks to create access to help them solve problems It's all abouteither me or the team or connecting in the right people who can help them

Am I able to do that? Is this a business that I am able tocreate or support with some version of value, whatever that might be? And isthere a coaching, union, relationship available between us as individuals andas teams to be able to be greater than the sum of the parts? So I need to beable to understand what that is and have a candid conversation about whetherwe're a good fit or not.

Dan (15:48.298)

And it's perfectly fine if you're not a good fit, that'sokay. Then maybe if, you know, I've met plenty of founders where it's notright, but I know people that it might be right for. So it's very much a twoway street. It's a relationship. It's, it's, it is a, it is a marriage ofsorts.

Mudassir (16:00.322)

Yeah.

Mudassir (16:03.645)

Yeah. Is there any other popular notion in venture capitalthat you fundamentally disagree with?

Dan (16:12.75)

The main challenge I have with venture capital is power law,is what venture capital is based on. Which is that we are going to, I read theother day, I can't remember who coined the phrase, but foie gras capital. Wheredid I read it? Anyway, the notion that when founders become venture attractive,VCs like me will stuff money down their throats because we need to deploy...

Mudassir (16:20.376)

Okay.

Dan (16:40.038)

and you need to go and crush it and kill it. I was rammed.And the whole power law is an ugly and brutal reality of venture capital, whichis that I expect of the 30 companies that I'm gonna invest in this fund, only oneor two will survive. Only one or two will return the fund 2345X. The rest willfall by the wayside.

And that means that you have this kind of disparity betweensuccess and failure. And it's, it is the nature of the beast, but there's abrutality that I often find very uncomfortable. I would much rather invest inthe 30 companies and for them all to do. Two, three, four X and for them all todo reasonably well, but not shoot for the moon, but that's not how VC works. Sothe VC is, is the outliers. It's the, it's the fund returners.

Mudassir (17:29.109)

Yeah.

Dan (17:37.632)

And I've always found that uncomfortable. Sorry.

Mudassir (17:41.477)

One personal thing I want to ask you, because I think we'regonna get like very candid response to that, and that is, isn't venture capitalfeels like gambling at some point? Right? Exactly.

Dan (17:52.434)

It's totally gambling. That's what it is. It'sintellectualised gambling. We spend days, weeks, months cogitating overdocuments. It's all bullshit. It's um it's not it's not it's a necessary partof the process but it's just like it's gambling. It's gambling. I do I believeyou. I do. Do I think there are enough of them that will believe you? Yes thereare. Here's a million quid. Off you go. Go go and kill it. It's it's

Mudassir (18:02.954)

Yeah.

Mudassir (18:09.013)

Yeah, exactly. Yeah.

Mudassir (18:21.073)

Exactly.

Dan (18:21.81)

It could be, and there are plenty of VC firms that do this,that there is a low level of, you know, the DD is, are you a criminal? Youknow, are you full of rubbish? Is there like, is there deceit baked in it? Butanything above that is like fair game. And, you know, we're just going to writechecks. We're going to we're going to spray and pray. And there are models thatdo that. There is a VC model just like very quick, 100K checks, very quick 300Kchecks, just throwing them in and then, you know, one, one in 50, one in 100might take.

Mudassir (18:38.775)

Yeah.

Mudassir (18:51.331)

Mm-hmm.

Dan (18:51.354)

I'm not convinced. I think there are other models, but thereis very little between Friends, Family, Angel and VC. There's like, there's,there's nothing smarter in the middle. And there's, there probably should be.

Mudassir (18:58.785)

Exactly.

Mudassir (19:03.713)

Okay, you know, taking the other side of the same equation,which is the founder's side. So I was like reading the other day, one out ofevery six startup were able to raise money in 2020 and 2021, because that was atime like everybody was deploying cash. One out of six. If VCs are looking toinvest that much amount of cash, like you guys need to deploy cash, right? Whynot so many deals are happening?

Dan (19:29.718)

Yes.

Mudassir (19:34.126)

Bye.

Dan (19:34.794)

Because when you have market shock, whatever is dictatingthat market shock doesn't matter. When you have that, whether it's Russia,Ukraine, or COVID, or financial crisis, or whatever it is, the instinct forhumans is to stop. They're in headlights, sit on their hands, panic. And that'sall that happens. It's very short-lived in venture capital. And there was a lotof cash baked into VC. There was a lot of money raised in 1921.

that still needs to be deployed. So it's only a period ofinertia. There's this shock, inertia, and then it's back to business. If youlook at all of the numbers, Q4 looks like it's gonna go back to pretty much2020 deal deployments, but obviously we're averaging out there. I mean, if youlook at pre-seed and seed, the actual number of deals done hasn't reallychanged. You could draw a line through the crazy 21, 22 times, and all we'vedone is draw the same trajectory.

Mudassir (20:17.55)

Yeah.

Dan (20:32.222)

So nothing much has changed at pre seed and seed. What haschanged is the style of companies that are being invested in. They have to befundamentals as I call them fundamental. They can't be nonsense crypto metaverse.Five minute grocery deliveries, faster e-scooters. It can't be that. Um, it hasto be fundamentals and that's to be kind of business, business fundamentalslayered in behind and growth is still taking a hit. So there'll be, there willbe a period of time where growth is going to continue to be.

Mudassir (20:45.099)

Yeah.

Dan (21:01.974)

Difficult. So once you get beyond series a That whole riskprofile has shifted I think it will come back relatively quickly, but we'velost IPOs obviously SPACs have died So we're gonna lose some of that recyclingnot that we have much of that in Europe because all of the European teams go tothe states to list so It will balance out with there will be more trade sales.There are lots of

corporates and mid caps who'll want to acquire and growthrough growth. So they'll go off and buy. So we're seeing a lot more kind ofmicro M&A, bit of M&A, bit of PE going on in certain layers wherestartups are struggling and they've raised too much capital. So there are dealsto be had. And I think we'll see more secondary. So there'll be more.

VC firms selling off at a discount so they'll lose and someof their assets will be spread. That's fine. That's fine. So wherever I guesswhat I'm saying is wherever there is disruption and dislocation there isopportunity. And all that's happening is that the deck chairs are beingreshuffled a bit. The 2021-22 pimple has been shaved off the graphs. We're backto business as usual and the chairs are being shuffled around a bit. And that'sokay. That's okay.

That's healthy. We needed to stop the nonsense and thebubble needed to stop and it had a very short sharp punch in the face And itabsolutely had to happen

Mudassir (22:32.793)

Where do you stand on this entire Web3 crypto bull shit orsomething? Yeah.

Dan (22:36.11)

nonsense. It's theft. Crypto is theft.

Mudassir (22:41.177)

Did you guys invest in any other crypto based, crypto backedstartup? No?

Dan (22:44.458)

No, no, I got into crypto in 2013, 14 and got out in 18. SoI realized that I got in on the ideologic kind of principle that there's a newway of, of distributing wealth as a new way of managing capital. And, and, andwhat I don't think people understand is that we need inflation. So one of the,you know, one of the

purported benefits of Bitcoin, just to pick one example, wasthis anti inflationary only whatever it is 21 million, 21 million because it'scirculation, whatever it is, it's just nonsense. It's just not it. You canintellectualize this stuff. And I don't know if you're a crypto investor and Idon't want to offend you, but it's just it's just theft. You're taking moneyout of money, which never ends well. So I got to 2018 and I went, oh, hang on aminute. This isn't going to work. This isn't what I thought it was. This isn'tthis isn't decent. This isn't this isn't.

This isn't, and then it just became greed. And then itbecame greed and then all the coins and the ICOs and it will not end well. Itwill either be layered into financial systems and become properly regulated.Whichever, whichever group of, whichever entity is going to do that, whetherit's the SEC or whether it's other government departments and the same acrossEurope, or it'll be effectively banned and controlled and put underground.

Mudassir (23:56.619)

Yeah.

Dan (24:10.09)

And I hope that it's layered in because it will lose itsintrinsic value. There's no greed when there is available, when it's part ofthe financial system, your tax and it's regulated. So who cares? I mean, it hasno value. So I kind of hope that it's layered in rather than banned, likeChina, I think China and India are banned, Bitcoin or Bitcoin mining.

Mudassir (24:31.157)

I think so. Yeah. Yeah, they have been.

Dan (24:33.794)

So yeah, I have a very strong position on crypto. And I'monly talking about the coins. The technology is very smart. The technology haslots of application and I love it. So there's lots of cryptographicapplication, but coins is theft.

Mudassir (24:44.527)

Mm-hmm.

I think so, you know, you raised a very good point, like, Idon't know if you are a crypto investor or not. So I was, I don't want to say Iwas a crypto investor or something like that, but I was stupid enough to dosomething because I think everybody had done something. So I bought theBitcoin, you know, and all of that crap. But one thing that I realized, thatwas back in 2020 actually, you know, when this entire thing was like on thehype. One thing that I realized is like...

Nobody's willing to learn like what the heck is blockchainlike what this technology can do or like whatever they're investing in Peoplewere like more drawn to okay, so if I buy something today, it's gonna get athousand X a hundred KX or something I think exactly Fair and great. Yeah, likenobody give a damn about like what the heck is this entire thing? That was likethe whole concern was like, okay if we deposit like a hundred K You know

Dan (25:28.517)

We're human, we're governed by fear and greed, that's all.

Mudassir (25:42.425)

10 days later we're gonna be like, I don't know, 10 millionor like whatever. So I totally agree to that. And I think, what's your opinionon meta, you know, this metaverse thing? So you think it's exactly the samething?

Dan (25:53.578)

Nonsense. It's nonsense. But it will have a fabulous gamingapplication, some of the commercial applications around, I don't know, beingable to put on a headset and operate from Cape Town on a patient in London orwhatever it might be. There will be specific commercial applications, there'llbe lots of gaming applications. But the thought of you and I having aninteraction and living and working with a headset is never gonna happen.

Mudassir (26:11.205)

Yeah.

Mudassir (26:23.051)

Yeah.

Dan (26:23.114)

And I was so surprised and disappointed when Apple releasedthe, whatever it is, the, the I head, I don't even know what it's called. I waslike, what are you on? You've been drinking too much of your Kool-Aid Tim.Just, this is just absolute bullshit nonsense. And then you read the figs like,Oh, we only want to sell 200,000 a year, whatever, which is still going to be,you know, massive income. And, but who cares?

Mudassir (26:27.369)

yeah the big the big I AR thing yeah

Mudassir (26:49.401)

Yeah.

Dan (26:49.77)

Move the needle, you know, improve society, create productsthat we want, build a car, build a TV. Why haven't Apple built a TV? I justthought it's basically, it's just another big iPad, right? I mean, that's allwe've got. We've got iPhone minis and we've got iPad pros and what I just, justmake an iPad pro and then we're done.

Mudassir (26:56.521)

Yeah.

Mudassir (27:00.621)

They should have. Yeah.

Mudassir (27:12.045)

Yeah, exactly like that. Coming back to the whole founderVC, or whatever all that is, in your opinion, because you've been on both sidesof the spectrum. You've been a founder. You've helped a lot of founders. Nowyou're investing in founders. What are the biggest red flags when you meetfounders for the very first time? And why you think those are the red flags?

Dan (27:35.05)

Uh, there are lots of red flags. I had a call today where,um, the founders, a solo founder, which I don't care. I don't care if it's soloor G. I mean, if you look at the numbers, the greatest rate of success is threefounders in a team, as in those that go from nothing to IPO, it's mostly threefounders, I don't much care for, I don't care if it's a solo fan or a two or athree. Um.

But this chap, I would ask him a question and he would.

deviate and project and

Dan (28:17.43)

it just sounded deluded. It sounded like, you know, if youdon't have the answer to a question, you say, I'm not, I'm not, I don't know.This is what I think. This is my sense of it, but I don't know. And can I comeback to you on that? And I'll go, absolutely. Yeah. So that's a red flag. Imean, let me flip the question around as, as what, what do I look for that Ifind impressive that is this, this kind of, this powerhouse piece, becausethere are so many red flags, but the

Mudassir (28:38.806)

Okay.

Okay.

Dan (28:42.306)

The powerhouse piece, this charmingly disagreeable anddetermined piece, comes back to this sales piece. So if I'm going to call witha founder or founding team and I get a sense that they've got it, this is whatI say to my founders when they're going on for their subsequent raises. Nowhalf the people I've invested in have gone on to follow on round, so that's avery high percentage. And all I say to them is, all you've got to do is makethe investor feel like you've got this. That's it.

It doesn't matter what you say, what you present, howyou're, you just got to, you've got to effectively make the room feelconfident. Make the room feel like, it's okay, don't worry, I got this, we'regonna make this happen. That's it, that's the essence of it. So it does comedown to questioning that some of the smartest founders I work with are alwaysasking questions, always filling the cup, always.

or it's intellectually stimulated, they never quite switchoff. What is that? Who do you know? How does that work? What do I do here? Andit's not that they think that I have all the answers is they're just constantlyasking multiple people that they trust and then learning to be the best filterin the world. So I'm always looking out for, could I put you in a room withsomebody from Sequoia or Accel or Benchmark or can I put you in a room like thefollow on? Can I put you in a room with any...

C-suite enterprise sales team, any of the C-suite that'sgonna potentially buy a product and how would you fare? Could I put you in aroom with any of our partners, or investors, potential customers, potentialpartners, could I put you in a room and how would you fare? Could you hold yourown? Could you hold core? Could you share stories? Could you sell the vision?And so they're all the things that I'm always looking for.

And it's everything kind of in the early, in the laterstages, it's spreadsheets, right? And I don't deal in that work, but I don'tknow that work, but in the early stages, it's all about this narrative and thisability to sell and be compelling and be attractive. Can you build a team? Canyou sell to a client? Can you sell to an investor? That's all you need to beable to do in early stage.

Mudassir (30:41.037)

Yep.

Mudassir (31:00.021)

And I think not many founders check in that criteria. Likethere's like not many out there.

Dan (31:04.042)

No, it's a very, very low percentage. But what I say to allfans is it can be learned. All of this stuff that I ask of people and I ask of myself,because I'm out raising, I'm out selling, I'm out building a team. These skillscan be learned by anybody. You need a little bit of self-awareness, a littlebit of ego and a little bit of kind of effort. I'm going to go for attitude.And I don't care what anyone else says. So there are there are thesefundamental staples that I think you kind of bring the baseline off.

Mudassir (31:06.894)

Yeah.

Okay, out.

Mudassir (31:17.015)

Yeah.

Mudassir (31:27.95)

Yeah.

Dan (31:34.23)

but then all of these skills, behavior can be learned.

Mudassir (31:34.402)

Mm-hmm.

Okay, that's good to know. That's good to know. What's thebest investment that you have made and the worst one, and what did you learnfrom both of them? As a VC, yeah.

Dan (31:47.862)

Poor. Well, well, my funds are very young. So I startedventure capital investing in 2018, like mid 18, and we started fairly slowlywith relatively small checks, two, three, 400K checks. The first fund was ourdemo fund, our learning fund. And we did 18 investment, got it. Understand ourmodel, understand our thesis, understand what we stand for. Okay, that took acouple of years just to hone that.

So there was lots of experimentation. I wouldn't put any ofthem in the bucket of the worst because I don't buy into that notion of theworst. There are some, who knows which ones will succeed. We're still veryyoung, so who knows what will happen. The key learnings are trust your gut. Sowhen you're working with a family it's like there's something not quite right aboutthis. And I've done this twice where I've not followed my gut feeling.

and both have borne fruit. The other side is that I shouldhave just not done that deal. And on the other side, there's a couple offounders that I just adore. They just, I know you're not allowed to favoritechildren and stuff, but they're just incredible humans who would, they're justgonna kill it. They're gonna go out and...

It doesn't matter whether this vehicle works for them.Obviously I hope it does because it's the one that I invested in, but they'regoing to, they're going to, they're going to be just fine. Whether it's thisvehicle or the next, they're going to be just fine. I can't say that I would bein trouble. I can't have favorite children, but they're, they know who theyare. And it's, there's, there's a small handful of guys. This is just, you arejust ridiculously impressive people doing impressive things. And I learned, Ilearned from all of the founders that I work with.

Mudassir (33:19.014)

What's the company you're talking about? Okay.

Mudassir (33:29.497)

Okay.

Mudassir (33:35.909)

Amazing. Yeah.

Dan (33:38.326)

That's part of the joys of being a VC is that I get to learnabout these weird and wonderful topics like intraday bank liquidity, edge computing,supply chain demand forecasting. I get to learn all these topics I would neverbe exposed to in the normal world and meet people that are experts in thosedomains that are just, just unbelievably smart and it's, it's a privilege.

Mudassir (33:47.927)

Yeah.

Mudassir (33:53.625)

Yeah.

Mudassir (34:04.545)

One thing that comes to mind is, and this is again,scratching a personal itch because I started out in products early on. Mycareer was around products. That's all that I knew. How likely is a VC fund toinvest in a copycat sort of a product?

Dan (34:24.762)

No, well, I have some, I mean, there are some models thatare based on it. The old rocket internet model was based on it. I think theywere the first big play to just effectively the states, rip it off, launch itin Germany or Egypt or wherever. And I think that's just hateful. Um, I, that'sjust hateful shit. That's the, the thing that inspires me about venture capitalstartup is the reinvention. It's where.

Mudassir (34:32.746)

Yeah, yeah.

Mudassir (34:36.402)

UK or yeah in the Europe or something.

Dan (34:52.078)

There's no such thing necessarily as a new idea, but we areconstantly, we are pure innovation. We are going to be the net creators of jobsand opportunities in the future. So the startups that are coming through, thatI value and rate, and obviously that I invest in on the B2B side, are the onesthat are transforming the old. They're finding new ways to solve problems.Anything that is just replicant stuff is just, go and make sandwiches and goand do something else. That's just hateful. That's just...

That's just opportunistic nastiness. I'm a very emotionalcreature. I have no time for that stuff. Some people can make lots of money onit. I just don't do it. This would sound awful and ridiculous, but we have anopportunity and I think a responsibility to use money to change the world forthe better. So there are lots of people that are using money just to be makingmoney.

Mudassir (35:23.629)

Yeah.

Mudassir (35:46.401)

Yeah. Yep.

Make you more money. Yeah.

Dan (35:51.934)

and opportunistic. And that we, but we have an opportunitynow to, to take the capital that we have and invest it in people and ideas thatare gonna absolutely transform how the world works. And that's what gets me outof bed. And that's the most important thing. It's not money for its own sakebecause that's just misery. But to actually try something new and buildsomething new and change the way that something is done.

That's how we solve climate change. That's how we solve allthe DEI challenges. It's if we're constantly looking for things that needfixing and reinventing and circulating in that way.

Mudassir (36:32.941)

Yeah, one company that pops up and quite recently, you know,something happened. So I just want to pick your opinion on that. What do youthink of WeWork? Of all the crap that's happened? Yeah.

Dan (36:41.95)

It was never going to work. I mean, it's if you said tosomebody, look, I'm going to get my investors to subsidize a really nice officefor you so that you pay 20, 30, 40, 50 percent. You're going to say yes.

Dan (36:59.382)

So that's it. There is no, I mean, it's lovely that Ubersand WeWorks and that there's a whole plethora of these kinds of businesses camethrough because, well, actually Ubers are a bit nastier because theyeffectively crushed lots of mom and pop shops and taxi ranks. And so there'slots of horror stories of...

Mudassir (37:19.169)

Yep. 100%.

Dan (37:24.946)

Uber drivers committing suicide because they couldn't makethe salaries that they were promised and I know that there are edge cases inanything and any transformation, but there's some horrific stuff going onthere. So to crush a market and discount on investor capital and then startputting your prices up. I understand the strategy intellectually. I just cannotreconcile that. I think it's massively unpleasant.

On the Uber side, what we're left with is the ability towalk into any city in the world and reliably find a taxi. Now that is quite anincredible feat. So I'm not saying it's always one. It's not these things arenever purely one sided. We work. There are going to be a lot of landlords incities that are going to lose a lot of money at a time when commercial propertyand commercial landlords are already under it because of Covid and peoplearen't.

Mudassir (37:58.041)

That's a good one. Yeah.

Dan (38:17.814)

you know, hybrid working, aren't going back to the office.So I don't massively feel sorry for most of these people because most of themmega wealthy and they'll be fine. They're not going to be eating ramen noodles.But at the same time, it just feels wasteful to, I love the innovation. AndI've had three WeWork offices in my life so far and I love the offices, they'rebeautiful and it's lovely. But it goes back to my other point. It's just, it'sa bit of a shame that it's just kind of

Mudassir (38:26.933)

Yeah, yeah, yeah.

Dan (38:48.502)

we've wasted billions of dollars on something that's notreally all that meaningful. Nice! Loved it! Thank you, thank you Adam, thankyou Mayoshi, thank you, thank you, thank you.

Mudassir (38:54.788)

Yeah.

Mudassir (39:00.845)

But yeah, my follow up question, yeah my follow up questionon that was like.

Why waste that much amount of money on such a... Yeah.

Dan (39:10.134)

Well, what's a waste? I mean, if you think about thetendrils that were released into the commercial world. So there'd have beenpeople that were building these offices. There would have been landlords thatwere renting these offices. There would have been employment for people to comein and work these, operate these offices. There was this whole community push.I know it went a bit too far with the indoor surf school and whatever othernonsense Adam Neumann was doing, but.

Mudassir (39:37.975)

Yeah.

Dan (39:38.286)

That's ego maniacs for you. That's narcissistic psychopathsfor you. That's part of our world. In venture capital and startup founding,that's, psychopathy is a big part of it. And we have, that's, you know, I thinkthe world would be a worst place without them, oddly. Yeah, a lot of thingswouldn't happen, you know, without some of the psychopaths that are out there.I mean, look at Donald Trump. I know that's not, let's not get into that, but.

Mudassir (39:45.814)

Yeah.

Mudassir (39:53.4)

Okay.

Mudassir (40:02.135)

Nah.

Dan (40:05.39)

I forgot what you asked me now, the questions just left me,I got stuck on Donald Trump.

Mudassir (40:09.477)

Thanks for watching!

Dan (40:11.79)

Wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait,wait, wait, wait, wait, wait, wait, wait, wait, wait, wait, wait

Mudassir (40:12.689)

He's a character. Yeah, the question was, a lot of moneythat was invested, that went to waste. Yeah, so it was a waste.

Dan (40:21.879)

Oh, the waste. It didn't get wasted. And again, those thatwere investing and, you know, there were a lot of a lot of funds that will notdo well and a lot of people that probably shouldn't do well that have done extremelywell. I'll put Adam Noem in that bank as well. He's you know, how many billionsor billions did he walk away with for being fired? It's just, it's just, it'sjust a bit of a joke that people didn't look at the fundamentals

Mudassir (40:41.59)

Yeah, 1.7.

Mudassir (40:48.402)

Mm-hmm. Yeah. Exactly.

Dan (40:49.154)

can never work. It's always never, it's always, you know,kick the can, the never never. It's okay, like with Uber, oh, when we haveflying taxis, we'll make money. It's like, it ain't gonna happen. When we haveself-driving cars, we're gonna, we're gonna make money. That's never gonnahappen either. So it's, that whole kick the can, never attitude, I findoffensive in, in VC specifically.

Mudassir (40:58.278)

Yeah.

Mudassir (41:10.473)

Yeah, okay. Okay, one last question that I personally wannaask you before we get into that audience segment sort of a thing. So what's thedifference between going to a shark tank or a dragon's den in the UK orpitching to a VC? Like what's the difference between all of these things?

Dan (41:34.063)

There's chalk and cheese. It's like cars and airplanes.Shark Tank is TV. Dragon's Den is just TV. There is nothing. There are notakeaways. In fact, founders shouldn't watch that shit. You should run for thehills. We shouldn't be investing in economies that we don't like. And that'sjust entertainment. That's just television. So there is no comparison.

Mudassir (41:49.957)

Okay.

Dan (42:00.318)

There is no answer to that question. I mean, pitching to aVC is, you know, having a vision, being able to sell that vision and havingcustomers that care about your vision and that you could take on a journey withyou and then investors and team members and whatever. Shark Tank is in Dragon'sDome is just shit TV.

Mudassir (42:20.625)

Okay, but a lot of people, especially from founder'sstandpoint, they do market that thing like, okay, we went to Shark Tank, raisedthat much amount of money, becomes a part of our marketing gimmick or whateveryou want to call it. Oh, as seen on Shark Tank, as seen on Dragon's Den orsomething like that. Yeah. Okay, that's a good one. All right.

Dan (42:40.99)

If that works for you then all power to you.

Mudassir (42:48.865)

As I mentioned before the chat, we have this audience andpeople are kind enough to submit some questions, so there's only a hand pick ofthese. And again, there's a ton of those, but I think we consolidated all ofthem into these ones. And they're not in any particular order, just randomly.So what are the most overlooked terms in a term sheet that a founder should paymore attention to? That's the first one.

Dan (43:17.358)

There are a small handful of terms that you need to bemindful of and most people will know them. I think the...

Dan (43:31.434)

What would it? I'm-

The challenge that you have really is getting a good lawyerand understanding the terms that will affect the terms. So you will negotiateall kinds of reverse-festing preemptionist. There'll be a whole bunch of stuffthat is there to protect the business, stuff that is there to protect you asthe founding team, stuff that is there to protect the investors. There are nohard and fast rules. There are some things that look particularly

ugly, but are probably potentially quite meaningful andrequired for you at this stage of business. The only thing that you must do iswhatever terms and whatever valuation and whatever you raise, whatever that is,remember two things. One is you only refer to these documents in times oftrouble, right? So most contracts are only useful when the shit's hitting thefan. Everything else is.

is negotiable or workout-able because you know things aregoing well. So of course you need them and of course they're very important,they're a very important backstop. But all you really want to do is be usingthese terms to set up the next fundraise. So you must make sure for example ifyou're, use one example, CapTable, if you own less than 50% as the foundingteam of your own business at Series A, you have a problem. Now it's a solvableproblem you can

build an options pool and you can reverse vest and then youcan give yourself some more of the options. So you can, you can shuffle. It'sproblematic, but you have to constantly think what do we need to do to get thisterm sheet, these terms right so that we are, so that we're on the righttrajectory to build a venture scale business at series A, series B and beyond.There are, there tend to be ways to un mess. I was going to use a stronger wordthere.

Mudassir (45:23.778)

Yep.

Dan (45:31.446)

but you mustn't, you must always just keep in mind to setup, set up one round ahead. But the actual to pick up on any specific, I mean,double dipping. So you've got to watch out, you know, how each investor isrewarded and to make sure that there are no, there are no clauses.

Mudassir (45:55.129)

Mm-hmm.

Dan (46:00.118)

You know, you're not paying, you know, exorbitant fees, oryou're not paying annual fees, and there's nothing in there that is givinganyone, you know, any kind of, the double-dip perhaps I think is pretty, isparticularly pernicious. But there's nothing in there. There are certain thingsthat you might want because it enables other aspects of the deal to go ahead.So negotiate, understand every single line item.

get the lawyer to work out the terms that are going toaffect the terms. Um, understand that you will lose. I mean, there is anelement in the earliest stages of feeling like you're losing control of yourown business. If you feel it's not, that's not the reality because everybody isaligned for success here. No, we are completely aligned. We're investing in youbecause we believe in you to succeed. I mean, that's, that's the basis of theinvestment. It's not to scupper you by terms, but there are, there are

often protective rights in there in favour of early VCs thatcan be sometimes a little bit ugly. I think the double-dip preface is probablythe most pernicious.

Mudassir (47:04.875)

Mm-hmm.

Mudassir (47:09.857)

Okay, okay, I appreciate it. Can you take us through yourdue diligence process at like SuperSeed, or like some of the red flags that canimmediately hold the whole investment opportunity?

Dan (47:22.526)

Yeah, so the main are that due diligence is broken down forus into two main buckets. One is what we call commercial diligence. Docustomers care? So we'll do a whole bunch of due diligence on almost on behalfof customers and new customers and potential customers. Do they care? The otherside of due diligence is pretty much box checking. Are you a criminal? Has whatyou told me?

Is it baked in lies? Does it make sense? Are you, do youreally have these contract values? Is there really this much cash in bank? Isthat, so they're, they're just very, and there's maybe 20 or 30, just tickboxes, um, sending in, you know, passports or proof of ID, it's, it's properlyadministrative checkbox for us. It's, it's, you know, the commercial diligence,which is, you know,

Mudassir (48:00.037)

Okay.

Mudassir (48:07.85)

Got it.

Dan (48:13.962)

do customers care and we're speaking to existing customers,we're speaking to potential customers and we're doing that, the kind of thecustomer viewpoint as part of our due diligence. And the other is just acheckboxing exercise. What you need to do is two things. One is to have a listof, get the list from any VC of all of their DDI items and just put them into adata room and protect it. Don't send that to anybody and get them all in a dataroom, protect them all, have everything all very clearly labeled, have a spreadsheet.

Mudassir (48:36.278)

Unless they ask, yeah.

Dan (48:41.354)

noting and linking to where everything is, or it can be in aNotion database, whatever it is. And the other thing to do is to have an FAQ.So all of the stupid questions that investors ask you, collect them all andhave that as part of your DD. So have that as part of your header. It's part ofyour pitching, but have it as part of your DD material. All of those stupidquestions that people like me ask, list them all and answer them all in an FAQformat.

Mudassir (49:04.677)

Okay, and then the other part was, what are some of the redflags that can immediately hold the entire investment process?

Dan (49:10.858)

If customers don't care for me, the only thing I care about,assuming there are no red lines in the, in the hygiene stuff. So you, you are,you aren't a criminal. Um, the rest of it is if we cannot get any, any customerpull or any, any form of. Customer draw. And we've only had this once, but in,in process at almost at DDs, we just couldn't get anyone we believed in itintellectually, it made sense. We just couldn't get customers to care. So, um,

Mudassir (49:16.233)

Yeah, criminal, yeah.

Mudassir (49:30.009)

Mm-hmm.

Dan (49:41.626)

That's the main thing. That's not really a red flag. I mean,that's something that's just a data point. Then you go back and, okay, we needto tweak or pivot. That's okay. There's still, invariably there's stillsomething in that area to solve because you know it, you've lived it. So you cansee the thing, you see, but then you've got to work out how you approach it. Soit's either a tweak of strategy or it's a pivot into a whole new way of solvingit.

Mudassir (49:49.248)

Mm-hmm.

Mudassir (49:54.649)

Yeah.

Mudassir (50:03.477)

Yeah, okay, yeah, that's helpful. So once you have investedin a company, how hands-on are you typically? Like, you know, do you preferfounders to reach out like proactively? Yeah, good.

Dan (50:13.002)

much as much as founders need. So it's not, it's not our business.We're not here to run the business. We're not here to get operational, but forhiring, most founders screw up hiring senior hires, so we help, we very muchhelp with that. We have, uh, an internal head of talent. We very much help withthe financial, uh, the board packs or the financial structuring. So it'sanother thing that founders don't.

Mudassir (50:20.726)

Okay.

Mudassir (50:25.538)

Mm-hmm.

Mudassir (50:37.187)

Mm-hmm.

Dan (50:39.834)

have the skill set for the time for all the inclination for.So we will help build the financial model and then, and then effectivelyframework the financial model so that everything for management meetings andeverything for board meetings is already templated and done. So that'ssomething we can take off the table. So hiring financial modeling and also whatwe call like the startup OS or startup ID, which is the ability to, once you'veraised it, when you've got a couple of million quid in the bank.

Mudassir (50:45.827)

Mm-hmm.

Mudassir (50:58.969)

Okay.

Mudassir (51:09.857)

Mm-hmm.

Dan (51:09.866)

You, you do a number of stupid things. You'll hire the wrongpeople, which we hope to solve. You'll start spending money on, you know, thatyou'll, you'll start deviating off. You know, because you can, you canexperiment too much and you can try too many things. So we, we go back to thisstartup OS piece, which is why you get out of bed? Where are you going? What'sthe next thing that you need to achieve? How do you communicate that to themarket? And that's all mission.

Mudassir (51:19.417)

Yeah.

Dan (51:39.202)

vision, position, it's all those kinds of aspects. So weworkshop those things with founders, but when it's the right time and when it'srequired, it's our job to either put things in the way and get things done orto take things out of the way. That's our job on the value piece, but reallywe're investing in people because they're amazing and they're gonna go and killthe world.

Mudassir (51:40.499)

Mm-hmm. Oh, there.

Mudassir (52:01.385)

Do you, because you have internal talent, is the ideasubconsciously is to hire somebody and put it in the company so you can keepevery single thing in structure? Or is it just like, no, if you need it, we canhelp you. If you don't, you can just.

Dan (52:16.674)

It tends to be the first highs that we tend to do is as, asstartups move into kind of quite a drawn product market fit mode is to then, isthen hiring a really powerful head of sales who can then transition fromfounder sales to a systemized sales, so go to market strategy and they tend tothen assist, understand work with the founding team or the founder of the CEO,bottle them, and then credit system around that. What works because thefounding team.

probably done this for a couple of years and worked outwhat's good, bad and ugly. And then they can turn it into a proper go to marketplaybook. So that is, it's not about, it's not about anything to do withcontrol or us being in any way dictatorial at the right time, we need tosystemize this function and we start with sales because that's what we're allabout. Um, and that tends to be a CRO or a head of sales or whatever you wantto call them who then on.

or bottles found ourselves or unbottles it depending onwhich way you look at it and then creates the system and the playbook. Andthat's, I think is really powerful and it's proven. I mean, proven to bepowerful.

Mudassir (53:21.335)

Yeah.

Mudassir (53:29.117)

Mm-hmm. Okay. I had a question around control, but I thinkyou already answered that. So why most founders have this notion that we seewant to control the whole business? Why is there a widespread sort of a notionout there?

Dan (53:41.874)

Yeah, the conversation comes up a lot. For example, when youreverse vest, so when you take a funding round, you'll probably have to, let'ssay you own 80% of the business and you've raised a pre-seed, you own 80% ofthe business, you've given 20% away at the previous round, you will have toprobably drop whatever to 50% ownership and then re-vest because if we'regiving you a couple of million quid,

there's almost a payment for that, which is, you know, weneed you to kind of think back a step, almost have re-skinned in the game tothen earn your full ownership in the business. Now that feels really kind ofsucky controlling. It's like almost how dare you. But if you think about itfrom the other side of the desk, it's like, well, if I give you two millionquid, and then you decide to sell yourself the business for a pound.

and you've got two million quid in the bank and, and there'sno way of me having any exercising any control over it. I mean, you, so yes,there's a, there's a trust piece, but we also, there has to be some weightsmeasures controls in there that will, that will stop you from being a Dickbecause you can, I've seen companies sold to their cousin for a quid and thenthey milk all the money out and they still own 80% of the business. Right. Sothere are, there are mechanics in there that can sometimes feel heavy handed.

Mudassir (54:51.417)

Mm-hmm.

Mudassir (55:01.345)

Yeah, yeah they do that.

Mudassir (55:06.583)

Mm-hmm.

Dan (55:07.074)

But they are, that's the price of taking a substantial chunkof venture capital. And, you know, the other thing that I think many founders don'tappreciate is that many founders by the time they are the trade sale or IPO ownless than five, 10, 3% of their own business. It's, it's a really goodquestion. I mean, in some instances when all of

Mudassir (55:23.48)

Yep.

Should they?

Dan (55:31.882)

when they've got it wrong and they've taken too long and therisk has changed and other people have picked up that risk profile. Yeah. Imean, sometimes having 1% of a, of a billion dollar business is much more thanyou would ever have made had you bootstrapped, but sometimes it's too heavyhanded and sometimes there are, um, sometimes there's been too many fundingrounds, sometimes the cap table has been too screwed and there's just

Mudassir (55:46.681)

Yep.

Mudassir (56:00.864)

Mm-hmm.

Dan (56:01.314)

there's just no way out of it. And they almost becomefigureheads in their own business. Sometimes that's how it rolls. Is itpleasant? No. Venture capital is not nice.

Mudassir (56:05.609)

Yeah.

Mudassir (56:10.765)

Yeah, exactly. But it's a necessity. One thing that comes tomy mind, because you mentioned the word bootstrap, and I happen to interview alot of people who are like, they build a bootstrap business and manage to exitthat and whatever. Why is there a sense of a pride in all the bootstrapfounders?

Dan (56:28.03)

Is it pride? Is it, is it, is it, is it, is it, I'm going todo it on my own. Um, I think there is something, I mean, there's something megaimpressive. If you are going to build your business on a bit of debt, a bit offriends and family, a bit of client money, and you're going to build it andyou're going to hustle and you're going to build it and you're going to sellthat. I think you should, you absolutely have the right to feel incrediblyproud. Of.

Mudassir (56:29.637)

I don't know, but there's some sort of a cockiness outthere.

Dan (56:56.67)

And four, I think that's just. If you do want to get on theventure capital track and you are ready to pour venture capital fuel on thefire and you want to build a global business, then you take a different trackand it's just horses for courses, right? So, and I think there's no better,worse. It's your personal choice.

Mudassir (57:10.543)

Mm-hmm.

Exactly.

Mm-hmm.

Dan (57:23.73)

It's not a natural, there is no natural progression fromfriends and family, angels, venture capital. That's not, it's not a linearpath. It's a choice. It's a lifestyle choice, which doesn't have to be small.You can have extremely substantial lifestyle businesses, or it's a globalbusiness and it's venture scale. There's not, there's very little in between.You either, you either going to either bootstrap or debt and small fundingrounds and build and build and build, or you're going to go screw it. I'm goingto go global and we're going to take this massive and I'm going to raise

Mudassir (57:40.845)

Mm-hmm. Yep.

Dan (57:54.577)

as impressive a VC as I can find and the most amount ofcapital I need to achieve my objective.

Mudassir (57:59.873)

Yeah, okay. The next one is kind of a funny one. When youdecide not to invest in a startup, do you generally tell them why? What are themost common reasons of rejection anyway?

Dan (58:13.262)

I try to always be honest. It's a very strong part of mypersonal value set. Sometimes I can't be honest with founders because partly Idon't feel like it's my place. What the hell do I know? Partly I want to notopen floodgates which are unnecessary or cause unnecessary distress or what youknow so what...

it doesn't matter go you know everyone would have adifferent opinion so the next VC will think you're wonderful and I think you'rean asshole it doesn't matter so it's kind of like partly it's not my place andpartly I don't want to open I don't want to open that floodgate or thatconversation path but that mostly I would say 90% of the time I am very directand very honest but caveated with it's just my opinion

And I would say most of the time that I don't invest isbecause of the founders. So that's a really hard conversation to have. It'slike sometimes when you're with mid pro say, this isn't right because you'rethe problem. That's a really hard conversation to have. I tend to change thelanguage set around it. I don't make it so accusational. It's more like I don'tbuy it. I don't buy this. What I'm really saying is, is you.

Mudassir (59:20.222)

Mm-hmm.

Mudassir (59:26.253)

And

Mudassir (59:32.069)

Mm-hmm. Yeah. Okay. Uh...

Dan (59:39.591)

And if you don't know that and you can't hear that, thenthat's even doubly more the problem.

Mudassir (59:44.217)

Sorry. Yeah.

How do you resolve that in case you don't like the founder?What do you do with that?

Dan (59:52.726)

It's not a case of liking. No, no, no. It's not about likingor disliking. It's about I don't buy you. I don't buy that you can sell it.It's all about the team. You know, the founding team have to be able to. Andit's the hardest job on the planet to create a new way of solving a problem andnot only to understand the content, but to build a business around the content.It's the hardest job on the planet. And you're starting from nothing.

Mudassir (59:56.63)

Okay.

Oh, okay. As a person, as a leader of a company orsomething. Yeah.

Mudassir (01:00:16.983)

Mm-hmm.

Dan (01:00:21.186)

back of a napkin and the conversation in the pub and thenyou've got to build the first thing and then you've got to hire the first boyor girl and then you've got to sell the first client. It's ridiculously hard,right? It's the hardest thing. But if it's not going to be a venture scalebusiness and or I don't believe that you can do it, I think there's a versionof the truth that is always available.

Mudassir (01:00:53.767)

You did, okay. All right, so what's an ideal pitch deck foryou and how do you evaluate pitch decks in general? Like what's the tensionspan? Do you spend like three seconds looking at the pitch deck or do you spendlike 30 minutes? I doubt that, but yeah.

Dan (01:01:07.962)

I think everyone's different personally and there are lotsof pitching tools. I hate them. I want a really simple If it's cold, I want areally simple no more than 10 slides visually appealing narrative driven Pitchdeck so I want to go and I've written them a long post in this I'vedeconstructed Most of the successful pitch decks that I could find and then andthen codified what

what element content and what the context of the slideshould be. And there's 10 slides. So and it's all the stuff that you know. Itdoesn't have to be called whatever, problem, solution, team, financials, track.It doesn't have to be called those stupid titles. Get creative. Don't beboring. But at the same time, a very simple flat PDF, no more than 10 slides.

Mudassir (01:01:41.285)

Okay.

Mudassir (01:01:47.582)

Mm-hmm.

Dan (01:02:02.834)

I will spend about 10 seconds per slide and I want to feel anarrative of this is interesting, these people are interesting, they're solvingan interesting problem. I want to just feel there's something in. I don't needto know all the details, you don't need to drop your underwear, I don't careabout the mechanics, I care about who are you, why do you exist and why are yousolving this problem?

Mudassir (01:02:06.158)

Mm-hmm.

Dan (01:02:31.242)

If I can buy into this trend that you're leaning into, thisproblem that you're solving, this community that you're serving and feel likeit's a venture scale opportunity and you're the team to build it, I'll pick upthe phone or we'll have another meeting or we'll go into more materials, butit's, um, it's very simple, cover all the major food groups, break some of therules to be interesting, make it visually appealing. It doesn't have to be thatbeautiful. It'll be designed by

Van Gogh, but it needs to be something that kind of, I'm notkind of squinting and trying to decipher, don't cognitively overload me. Andit's a flat PDF, no more than 10 slides if it's cold. If it's warm, you mightentertain a few more, but generally, you know, fewer than 10 slides, flat PDF,attached to an email, a couple of teaser bullets, looks like we're a fit for yourportfolio, looks like we really fit your thesis. Here's why I want you toinvest in us, five key bullets of your key metrics and a teaser pitch deck.

Mudassir (01:03:25.218)

Mm-hmm.

Mudassir (01:03:30.549)

Okay, a follow-up on that is how much of a personalrelationship slash warm intros really influence your investment decisions? DidI?

Dan (01:03:40.174)

They don't, they don't. What they tend to do is open thedoor, but the thing still needs to be on thesis, impressive, say you might giveit a bit more time because you feel a respect for the person that referred you,but you're not going to, um, if it's not, if it's not right, it's not right.And I would, there are stories of if you invest in my team, I'll invest in yourteam across VC.

Mudassir (01:03:48.259)

Yeah.

Dan (01:04:05.682)

And there is, there is a little bit of that. I've neverexperienced that, but I've been told that goes on. Um, I don't buy it. Iespecially don't buy it when the chips are down right now. You know, the, theventure capital market is, is not that buoyant. And I don't, I don't thinkanyone's going to play those stupid games right now.

Mudassir (01:04:05.978)

Okay.

Mudassir (01:04:11.725)

Okay.

Mudassir (01:04:24.873)

Yeah, okay. One thing you know, just personally wanna askis, how common is it for VC to kick out the founder when the growth actuallystalls?

Dan (01:04:36.674)

It's not. I mean, these are the serious minorities. I mean,if, I mean, founders typically make shitty CEOs. Typically, if you're a greatfounder, you're not going to be a great CEO. It's a different skillset. One isspinning plates, magic, sales, you know, pants on fire. And the other issystems, processes, spreadsheets. They're very different skillsets.

Mudassir (01:04:41.077)

Okay

Mudassir (01:04:49.621)

You are a shitty. Yeah.

Dan (01:05:06.83)

I mean, if you look at Google, you look at Larry Page, theybrought in what Eric Schmidt super early to run the business. I mean, there arelots of stories. I mean, Zuckerberg doesn't run his own business. There arelots of stories of very impressive founders, the creative minds bringing inreally powerful operators to actually run the business.

Mudassir (01:05:24.893)

Mm-hmm. Tears. Yeah.

Dan (01:05:33.518)

I don't know if that answers your question, but it's...

Mudassir (01:05:38.317)

This is not that often.

Dan (01:05:39.626)

As long as you have the awareness, it doesn't happen often.As long as you have the self-awareness, you need to have the ego to go for it.You have the self-awareness to go, this isn't my skill set. I need tofunctionally bring in somebody to replace this thing that I'm not very good ator to bolster this thing that I think the business needs. But yeah, I think theonly time that founders get replaced is when they're dickheads, they're genuinebecause the board don't want to get involved.

Mudassir (01:05:42.51)

Yeah.

Mudassir (01:05:46.36)

Yeah.

Mudassir (01:06:00.954)

Mm.

Dan (01:06:05.698)

The board don't want to replace you. There is no incentiveever for anybody at board or as an investor to replace you.

Mudassir (01:06:06.125)

Yeah.

Mudassir (01:06:15.349)

Oh, okay. Okay. Yeah. Exactly.

Dan (01:06:18.76)

Worst thing, it's so disruptive, it's such a time-strucker,you will invariably get it wrong, it invariably doesn't work. So it's the pathof last resort.

Mudassir (01:06:24.61)

Yeah.

Mudassir (01:06:29.927)

Mm-hmm, got it. Okay, so, and the thing is...

Does a startup that's failing reflect poorly on a VC that'sinvested in them? So you invest in like 30 other companies and God forbid, andlike three of them are like horribly wrong.

Dan (01:06:44.926)

it. I expect of the 30 companies that I invest in, I expect25 to... I expect 15 to flat fail. I would expect that 15 will flat fail. I wouldexpect 10 to return some version of capital. A 1x, a 1.2x, a 2x, a 3x, asomething x, a sub 3x something. And I would expect

Mudassir (01:06:52.277)

Okay, like just go like zero.

Mudassir (01:07:02.253)

Something.

Mudassir (01:07:06.261)

Okay.

Dan (01:07:14.202)

significant operators and one or two hopefully to be fundreturners.

Mudassir (01:07:19.689)

Okay. Suppose, you know, off those 15 companies, off thosecompanies in the founding team, they come up with another idea, they haveanother breakthrough, something like that. Will you invest in them again?

Dan (01:07:29.026)

Yeah.

Yeah, absolutely. If they, I don't, I invest in people. Sosometimes the vehicle isn't right. Sometimes the vehicle needs to be thrownaway or I would, yeah. I mean, I, we just invested in a, in a, in a founderwho's found another co-founder who was one of the earliest founding teams ofanother startup that we invested in. I w I absolutely every day of the week. Imean, there are lots of stats around second time founders.

Mudassir (01:07:35.79)

Yeah.

Mudassir (01:07:40.15)

Yeah.

Dan (01:08:01.074)

outperforming and there are firms that will only invest insecond time founders with a minimum of a 10 million dollar exit. So that'stheir strategy. They'll do this thesis but only second time founders that havehad a semi-decent, not too decent because you become lazy but a semi-decentout.

Mudassir (01:08:02.478)

Okay, yeah.

Mudassir (01:08:10.873)

Yeah.

Mudassir (01:08:18.703)

Mm-hmm.

Okay, if the startup pivots, how often do you guys supportit?

Dan (01:08:28.966)

I will support the founding team, I'd infinite them. There'sno rule.

Mudassir (01:08:32.516)

OK. So if they pivot, like whatever, you'll support them.Yeah, yeah.

Dan (01:08:36.726)

Listen, if they're editing every week because they're beingunfocused and lazy and stupid, I'll have serious words. But I mean, that neverhappens. That's never happened to me. That's a, that's not common. What, whattends to happen is that after a major funding round, everything gets a bitloosey goosey, and then you need to have some pretty serious words to get backon track because egos are strong and

Mudassir (01:08:43.145)

Yeah. Other than that.

Mudassir (01:08:56.544)

Yep.

Mudassir (01:09:03.01)

Yeah.

Dan (01:09:04.986)

They've got 10 million quid in the bank or whatever it mightbe. And they think they've got it. They think they've worked it as a masssunshine. I mean, even post series C, 50% of startups failed to return capital.And post series C, you look like a substantial business. You will have hundredsof employees. You'll have raised hundreds of millions of dollars. So you willlook like you've got it. You'll look like, you know what you're doing. Eventhose guys and girls half the time failed to return capital.

Mudassir (01:09:08.568)

Yeah.

They've done it. Yeah.

Mudassir (01:09:17.795)

Yeah.

Mudassir (01:09:21.678)

Yeah.

Mudassir (01:09:34.489)

Do you think there's a sense of ego slash pride, you knowcockiness or something like that in founders who raise a lot of big rounds?Like, oh, I just, you know, raised 50 million bucks or something like that,right?

Dan (01:09:42.774)

Of course. Of course. Of course. I mean, but the irony hereis you've got a bucket load of debt. And it's not. It's not. It's not. But youbasically, you've managed to get off that credit card. Who gives a toss? You'vedone nothing.

Mudassir (01:09:51.617)

Oh, that's the other side of that. Yeah. Responsibilities.

Yeah, I mean it's more responsibility than ever before, right?Yeah, yeah.

Dan (01:10:01.826)

Yeah, it's awful. It's awful weight. It's a horrible way.But yeah, you need to have the ego the size of a planet to handle that. Soyeah, I've got this I can do this. I've got 100 million quid in the bank, I'm gonnago and kill the world is that that's the attitude.

Mudassir (01:10:10.178)

Yeah.

Mudassir (01:10:15.913)

Mentality, yeah. So one other thing that I do on the podcastis started recently. I consider myself as a lifelong learner, so I askeverybody one question that I personally want to learn from them. So the onething that I want to learn from you is, and this is, you know, the context ofthis question is, so I see you building this sort of a community brand sort ofa stuff on LinkedIn, like you talk about things that most people don't want totalk about, right? Or like, you know, bringing that reality check.

behind those things. So I wanna ask you, how important is itfor a founder to build his personal brand? And does that actually help infundraising or not?

Dan (01:10:59.718)

I can answer this both ways. One way is focus, get off allsocial media, delete social media and focus on building a business. And theother way, and I could go into more of that side of the, that hand if you like,that side of the fence. The other side of the fence is if you have a credibledigital profile.

Mudassir (01:11:02.008)

Okay.

Mudassir (01:11:16.228)

Yeah.

Dan (01:11:25.442)

you will be able to hire more easily, fundraise more easily,sell clients more easily. But it's a double-edged sword. And it takes a lot oftime. And I write, when I started writing it's because my partner said that weneed to build a personal brand, you know, and I was like, oh God, anotherfricking middle-aged white man VC talking about stuff. Nothing could be morewith dread than putting myself out there under that guise. But actually what Irealized is that I love it and I love...

Mudassir (01:11:30.883)

Yeah.

Mudassir (01:11:42.441)

Yeah.

Dan (01:11:55.482)

learning and sharing and I'm not learning and sharing toteach, I'm learning and sharing to learn more because the very process ofwriting, and I don't know if you find this with building your podcast audience,the very process of thinking about the topic and articulating it in differentways embeds it in your brain in a whole new way and sometimes like if you'rewriting things and I didn't know I thought that, I didn't know that was thedepth of that topic or whatever it might be.

Mudassir (01:12:00.855)

Yeah.

Mudassir (01:12:12.133)

Mm-hmm.

Absolutely.

Mudassir (01:12:20.884)

Yeah.

Mudassir (01:12:25.006)

Yeah.

Dan (01:12:25.45)

So that was about, it took me about a year and oh, I'mwriting to learn, not to teach. But to me it was about building, earlier it wasbuilding a brand and having an opinion and being out and it's like, ah, it mademe feel a bit sick. But it's, so should founders be doing that? I think onbalance, no, they should be focusing on business and they should probablydelete all social media and focus on.

Mudassir (01:12:31.734)

Yeah.

Mudassir (01:12:39.108)

Yeah.

Dan (01:12:53.398)

the weighty task of building a business, but there arecaveats in there.

Mudassir (01:12:59.993)

So, Dan, I appreciate it. We do have this small ritual onthe podcast, and what we do is we ask all our guests a question for our nextguest without telling or knowing who the next guest's gonna be. So we have aquestion for you, and obviously I'm gonna take a question for our next guest,which probably not gonna be, obviously not gonna be part of the recording. Sothe question that we have for you is, if you were to go back in time and investin a business that you think now have done, you know, they've managed to...

Dan (01:13:09.099)

Okay.

Dan (01:13:16.014)

Okay.

Mudassir (01:13:27.885)

get to a great success high, like whatever. If you can goback and invest in one business, what would that be? That you think you'vemissed the opportunity. No, the one that comes to you, and you kind of missedthat opportunity to invest in.

Dan (01:13:34.554)

any business in the world.

Dan (01:13:40.662)

Oh, passing on the Beatles. I've not had one. I've beenasked this before. I've not had, uh, I've not had a Beatles moment yet. Maybeit's because I haven't been investing for long enough, but I've not had aBeatles moment or maybe I, I don't see the world that way, but there is onestartup where the founding team or the founder really, uh, didn't take ourmoney because they, they got. They got a.

Mudassir (01:13:52.077)

Yeah.

Mudassir (01:14:04.044)

Mm-hmm.

Dan (01:14:09.834)

a ridiculously overvalued offer from an incrediblyimpressive VC. So I've thought, I mean, I was like, I can't even compete withthat. I mean, a, the brand, you need to get that on the cap table. I totallyunderstand that. And the valuation they've given you at the stage of the rat isjust nuts. So I can't compete and regardless of not being able to competefinancially, you should absolutely get that brand on your cap table. And thenthey wanted us to come in, but not lead as I can't.

Mudassir (01:14:16.727)

Okay.

Mudassir (01:14:28.375)

Okay.

Mudassir (01:14:38.564)

Mm-hmm.

Dan (01:14:39.206)

I can't not lead. I can co-lead or lead, but I can't notlead the Rams because we've tried that before and it just doesn't work for ourmodel. It just doesn't work. And that's a bigger topic, but we still stay intouch. He's asked me to be his coach. He's asked me to be an angel. We stay intouch. We speak often. And that's all I care about. Of course, I would have likedto have been the investor, but I never put that in the Beatles that got away.I, you know, you didn't sign Elvis Presley or whatever that phrase is. So Idon't have one.

Mudassir (01:14:45.373)

Mm-hmm. Okay.

Dan (01:15:08.83)

yet. Ask me next year.

Mudassir (01:15:09.321)

Okay. Absolutely. One fault that comes to mind is if aninvestor or a VC, you know, another VC is just like giving you a lot of moneyon an absurd valuation as a founder, should you take that much or not?

Dan (01:15:30.01)

I always wrap raise around request. So to me, I would onlyever raise what I need to achieve the next milestone. So what will I'm not so,so raises in the early stage, the pre seed or whatever you want to call themtend to be, um, for me, milestone driven or mission driven.

Mudassir (01:15:38.744)

Okay.

Mudassir (01:15:49.709)

Mm-hmm.

Dan (01:15:49.866)

My definition of mission is an achievable thing. So amilestone a big milestone and they tend to be wrapped about around You know thenext race so I want to find the seed. I want to achieve series I want toachieve a really substantial series a which in my world is about 200,000 poundsa month in SAS revenue and a really healthy pipeline a fat pipeline of SQLsMQLs all the way down to you know, try almost chomping at the bit waiting tobecome a client

Mudassir (01:16:08.908)

Mm-hmm.

Mudassir (01:16:18.859)

Yep.

Dan (01:16:19.086)

So.

Dan (01:16:26.762)

I've lost my train of thought, blimey, it's been a long day!So that, I think the...

Mudassir (01:16:34.637)

Yeah, the question was, as a founder, should you take highervaluation rounds or not?

Dan (01:16:38.826)

Yeah. So the, if you, if you want to achieve a thing to getto the next stage, you shouldn't be doing that by having money shoved down yourthroat by a VC or any investor. You should always raise what you need, which isthat, that piece that I just mentioned. And the, what I tend to do is if youthink you need

I know whatever 18 months and a million pounds then just add50% it's you know whatever 24 and a million off give yourself a bit ofbreathing space but not much so don't raise it crazy because that would justbite you in the ass at the next round you want to do a flat or a down run andthat's miserable so just raise what you need don't give too much away raisewhat you need to achieve the thing but give yourself a little bit of wiggleroom because you will mess it up and that's okay that's normal that's learningus that they're valuable lessons but

Mudassir (01:17:22.893)

Mm-hmm.

Dan (01:17:31.806)

You haven't hit the metrics. So I, so no, I wouldn't takecrazy money, crazy valuation, crazy quantum. Don't, don't take too much cashand don't take too much cash at crazy valuations. It's, it will kill you toomuch money will kill you just as easy as too little.

Mudassir (01:17:42.038)

Yeah.

Mudassir (01:17:50.826)

Awesome. Question for our next guest.

Mudassir (01:18:21.337)

Yeah, yeah, hopefully. Okay, thanks, Ann. Appreciate thetime. Loved it. And thank you so much for the candor. Thank you so much foropening up and sharing all these things with us.

Dan (01:18:32.012)

All of the goodness, all the pleasure.

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