20 VC 073: Life Inside Accel Partners with Michael Treskow @ Accel

Michael Treskow is a VC @ Accel Partners, one of the world's most successful venture firms having funded the likes of Facebook, Dropbox, Spotify, Etsy and many more. At Accel, Michael is responsible for the firm’s investments in SpaceApe, a mobile games developer, and GoCardless, an online direct debt provider. Michael was also instrumental in Accel's investments and ongoing work with Funding Circle, Packlink, Qubit, Semmle, Trufa and WorldRemit. Prior to Accel, Michael focused on early-stage investments in technology companies at Warburg Pincus in San Francisco, invested in publicly traded technology companies at Highside Capital, and helped advise technology companies as part of Morgan Stanley's investment banking team in New York. In Today's Episode You Will Learn: 1.) How Michael made his way into the VC industry? Do you think it is very important for VCs to have entrepreneurial experience? 2.) How does Michael compare the investing environments between London and SF? What was his biggest takeaway from Warburg Pincus in SF? 3.) Accel is stage agnostic, why is that? What size market attracts Michael? How can Michael tell whether founders have the ability to exploit the market? 4.) What Michael believes are his key value adds? Have these changed over time? 5.) We often hear startups being described as ‘uber for’, ‘tinder for’. Do VCs like this simplification of business? How else would Michael suggest a complex concept can be broken down into something easily digestible? 6.) Does Michael still believe there is room for improvement in the consumerisation of enterprise software? Does Emergence Capital's pivot signal a turning tide? Items Mentioned In Todays Episode: Michael's Fave Book: The Innovator's Dilemma, Crossing The Chasm Michael Productivity Tools: Wunderlist Michael's Fave Blog or Newsletter: Dan Primack, Term Sheet Michael' Most Recent Investment: CartoDB As always you can follow Harry, The Twenty Minute VC and Michael on Twitter here! If you would like to see a more colourful side to Harry with many a mojito night, you can follow him on Instagram here!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Hello and welcome to the 20 Minute VC with your host Harry Stebbings. I hope you enjoyed last week's feature of the seed stage funding environment in New York. And this week takes us back to London and to one of the most successful venture funds of all time. It is of course Accel Partners, who have invested in the likes of Facebook, Dropbox, Spotify, Etsy and many more. And joining us from Accel is Michael Treskow. Michael is responsible for the firm's investments in SpaceApe and GoCardless. Michael was also instrumental in Accel's investments and ongoing work with Funding Circle, Packlink, Qubit, Trufer and World Remit. And prior to Accel, Michael focused on early-stage growth and equity investments in technology

• 0:45Harry Stebbings?

  companies at Warburg Pincus in San Francisco, and he helped advise technology companies on strategic alternatives as part of Morgan Stanley's investment banking team in New York. However, I first want to talk about business agreements. They are the cornerstone of all startups' financial success, and I cannot reiterate how important it is to have them created, monitored and revised by experts in the legal startup industry. That's where Vidal Law come in. They have decades of experience dealing with startups from all spectrums of the startup cycle and allow you, the founder, to focus on what matters: growing your business. To secure the legal foundations for your business, head over to www.vidallaw.com or

• 1:28Harry Stebbings?

  send an email to my personal friend and partner at Vidal, Chris Werner, by sending it to C Werner, C W E R N E R at vidalaw.com. But back to today's show, and without further ado, I would like to introduce Michael Treskow, VC at Accel Partners.

• 1:54Speaker 01

  You have now arrived at your destination.

• 1:56Harry Stebbings?

  Michael, it's absolutely great to have you on the 20 Minute VC. Thank you so much for joining us today.

• 2:02Speaker 02

  Yeah, thanks for having me.

• 2:04Harry Stebbings?

  Now, I'd love to hear a little about your backstory and how you made your entry into the VC industry.

• 2:11Speaker 02

  Yeah, so my backstory is

• 2:15Speaker 02

  really traditional to the point that it's probably untraditional, given how sort of random everyone's backgrounds are in VC. So I, out of college, worked in investment banking, doing technology, M&A. And then from that, went to the buy side to a growth stage investing firm, Warburg Pincus, where I did technology investing as well for a while. I went to business school, came back, and then eventually, after spending some time with Warburg in San Francisco, got the early stage bug and joined Excel.

• 2:55Harry Stebbings?

  Having worked at Warburg Pincus in San Francisco, how do you compare the investing environments between London and San Francisco for you?

• 3:04Speaker 02

  Yeah, you know, it's a good question. It's it's surprisingly similar in the sense that there is a ton of ambitious entrepreneurs who are trying to change the world or a subset thereof. And there is, you know, venture capital investors trying to partner with these people. You know, the differences are maybe in scale on both sides, but the fundamental principles are fairly similar and the energy and excitement around entrepreneurship is certainly similar as well.

• 3:43Harry Stebbings?

  And do you think it's important for VCs then to have the entrepreneurial experience? We often hear that, you know, VCs need to be founders. And what would you respond to that?

• 3:55Speaker 02

  Well, I I hope that's not true because I don't I don't have a founder background, but I think that's that's a very fair question. So, you know, I mean, the way I think about this is all else being equal, all incremental experience helps. And so if you can have somebody who has had prior entrepreneurial experience, all else being equal, uh, you you'd like that, right? And and the question is is more um around to to to what extent that's that's necessary, right? Because fundamentally, as as a VC, I am um an investor, not an operator, right?

• 4:36Speaker 02

  And and and so so where uh where I work with companies is, you know, strategic decisions, uh, introductions, hiring, uh, and and and being a trusted advisor. And so

• 4:49Speaker 02

  it's that what entrepreneurs want uh from a partner and and and so uh

• 4:56Speaker 02

  if you get that from an entrepreneurial background, that's that's great, but ultimately it's slightly different skill sets uh that you need to to run a company versus to invest and sort of have pattern recognition and et cetera, et cetera. So, you know, the that's a long-winded way of saying that. I think it's great to have that. Uh, I don't think it's a must-have.

• 5:17Harry Stebbings?

  And having seen the immense growth of your portfolio companies, do you ever get the bug to enter the game yourself as an entrepreneur?

• 5:24Speaker 02

  Yeah, you know, it's interesting. I do, but I'm also constantly reminded just how difficult it is and

• 5:32Speaker 02

  uh, how impressed I am with entrepreneurs that uh that I work with.

• 5:36Harry Stebbings?

  And then moving back to your time at Warburg Pincus in San Francisco, what would you say your biggest takeaway was from your time there?

• 5:45Speaker 02

  You know, I think in general, um.

• 5:50Speaker 02

  Having spent time in the valley is, there is no, you know, there is no secret sauce about that place, right? It's not that the water is different or there's something in the air. It's just, you know, people trying to be innovative and then, you know, having access to capital. And so I think one of my beliefs and one of the reasons that I made the move to Europe is that innovation certainly is not limited to the west coast of the United States, right? And so if you think about, you know, all the channels available today, you know, mobile, internet, et cetera, the location is actually becoming increasingly less important, right?

• 6:34Speaker 02

  And it puts significantly more emphasis on ideas and the quality of the teams behind it. And so, you know, if anything, I would say, you know, my takeaway is that the next big entrepreneurs can be anywhere and I'm excited to be looking for them in Europe.

• 6:53Harry Stebbings?

  And in previous interviews, you've stated that Accel is stage agnostic. Why do you think Accel is stage agnostic firstly?

• 7:02Speaker 02

  Yeah. You know, I think philosophically, the belief is that we are in the business of trying to identify and partner with the greatest entrepreneurs with the most exciting ideas. And ultimately, that definition does not in it include, and it must be a company in stage XYZ. So, you know, if we meet an entrepreneur that we are excited about her, his idea, and we think that they are going to be able to execute upon it, you know, we can't really

• 7:46Speaker 02

  tell them, oh, you know, I'm sorry, I think, you know, you are a little bit ahead or behind of where our sweet spot is. It's much easier to say, we are flexible and we want to try to help you regardless of the stage that you're in on your journey.

• 8:02Harry Stebbings?

  And you've previously stated that it's the size of the market and the team's ability to exploit that market that you really look for and drill down on. So what size market attracts you? We often hear the billion dollar market, but for a firm like Accel with, you know, obviously huge funds.

• 8:19Harry Stebbings?

  How big does the market have to be to make it an attractive investment for you return wise?

• 8:24Speaker 02

  Yeah, that's, you know, I, I, I get that question all, all the time.

• 8:30Harry Stebbings?

  Sorry about that.

• 8:31Speaker 02

  It's, no, no, no, and I, and I think it's, it's a good one. And just to preview, uh, I'm not gonna be able to give you a specific number, unfortunately. So it's a couple of things. Uh, let, let, let me make this a little bit more long winded. So, so one, I think it's so, so much the size of the market that, that we care about, but the opportunity ahead of the company, right? So, so can you, can you build a large company? And, and the market is, is a, is a constraint thereof. You know, if the market is not large enough to build a large company, then, uh, you know, by definition, the company is not gonna be large. So it's more of a necessary, uh, condition. And then, um, the, the real question becomes around

• 9:13Speaker 02

  how, how big is your addressable market? So, uh, you know, take into account the structure of the market and the competition and the type of customer you're going after. And, and how large is that number? And that typically significantly smaller than, um, you, you know, wh- wh- what the addressable market is to begin with, right? So, so for example, you know, if, if I want to sell, um, a, you know, technology widget to someone, uh, i- i- it's not the size of, of all technology sales in the world. It's, uh, what is particularly relevant to my target audience. And then, um, you know, to come a little bit closer to it, it's

• 9:55Speaker 02

  we, we wanna just be able, when I speak to companies, to just say, um, okay, that market feels large enough to, to build a large company where I don't think that's gonna be an issue. Because it's really hard to build a company to begin with, right? Uh, and there are so many issues. And so you just wanna be able to get that, uh, out of the way and say that, uh, you know, we're comfortable that, i- if you do well and you execute, there is plenty of room for you to grow, right? And so, so that's how you then kind of sort of get to this, you know, uh, billion plus mark. Because then you say, well, some of it is not gonna be addressable to you and, um, you know, you're not gonna get all of it anyway.

• 10:38Speaker 02

  And, but this is then gonna be large enough for you to feel comfortable.

• 10:41Harry Stebbings?

  And do you really deep dive then also on the future market size? Or do you just look at the present market size?

• 10:48Speaker 02

  Yeah, for sure. So I think that's a very important point, especially with

• 10:55Speaker 02

  innovative ideas, the markets may not be present yet, right? So Facebook is a great example, you know, when we invested early on, you know, what's the size of Facebook's market, right? And you really need to believe in the founder's vision and you also have to have a degree of imagination, right?

• 11:19Harry Stebbings?

  Absolutely. And you say you wish to partner with great founders wanting to build huge companies. How can you tell whether the founders have the ability to exploit that market? Are there any tells within the founder's characteristics which kind of reveal them?

• 11:35Speaker 02

  Yeah, so, I mean, look, there is the easy things, like all else being equal, it helps to have a relevant background in the space that you're going after, right? Especially the more complex and esoteric the space is, the more relevant that is, right? So if you are trying to, you know, build an insurance company or sell something to the insurance space, it has enough complexity and regulation in it where it might be helpful for the entrepreneur to be familiar with that space, all right? So I think that's one.

• 12:13Speaker 02

  I think really a passion or obsession for the topic is important as well, right? That you have a reason to really go after it and you're excited about it. And, you know, the other things that I'm looking for is a nuanced insight from the entrepreneurs. You know, what is it that they have understood about the market that is going to enable them to do well? And to create a new company where there's probably plenty of existing companies going after the opportunity, right? You know, why is now a good time to start this new approach?

• 12:56Speaker 02

  And why will this approach work, right? And so, you know, I love Coming out of meetings and saying, oh, wow, I didn't know this. Yeah, I I really learned a lot.

• 13:08Harry Stebbings?

  And and you've said before also another element of your investing decision rests upon how much you feel you can really provide in terms of value add to the company.

• 13:18Speaker 02

  I did.

• 13:19Harry Stebbings?

  I I've researched well. So what are your key value adds, do you think? And how do you think these have changed over time since you've become, you know, a more seasoned investor?

• 13:30Speaker 02

  Yeah, I mean, look, um, I I think some of it is is in common with regards to, you you know, sort of sectors and dynamics in it. So so we we do not look, for example, at clean tech or biotech, because, you know, I know nothing about that space. So um, I think all else being equal, I would probably more a more effective investor in in technology. I think um, the main, there's a couple of main values, right? One of them is is to be a a trusted advisor to the entrepreneur or entrepreneurs, right? To to really uh ha- have have the trust and and and be able to to brainstorm ideas with them and and propose strategies and and and give them feedback, right?

• 14:14Speaker 02

  Um, a- another one is is pattern recognition and strategic insight, and that's clearly something that that improves over time, right? So the more I am in particular situations and the more I observe certain things happen, the better I can um next time formulate an opinion or uh, you know, draw back on on on the things that I had seen before. Um, um, the the other couple of things that are important are um introductions, of course, right? So partners, customers, uh useful people to talk to. And that is, again, it's a personal network that is increasing in size as uh as I have more experience uh in the industry.

• 14:55Speaker 02

  Um, hiring, uh help with hiring is is another important one. And and and last, but least, it's uh exposure to to the global um Excel network, right? So it's it's uh other um entrepreneurs in that network. It's um um potential friends of the firm and um.

• 15:16Speaker 02

  Just being able to draw on, uh, you know, the thirty plus years that we have uh in the market and and the global presence.

• 15:23Harry Stebbings?

  And let's dive more specifically now into the tech market itself. And we often hear startups being described or describing themselves more as the Uber for laundry, the, you know, Tinder for dogs, the whatever it may be. So do VCs like this simplification of business models? I mean, do you like it?

• 15:43Speaker 02

  What I do like is founders who can quickly and succinctly articulate their vision. Right, um.

• 15:55Speaker 02

  And I think that's that's very important. And sometimes you take the shortcut of saying, oh, we are the X of Y, or, you know, um, eh, eh, just just draw an example or analogies, right? And I think that's fine case by case, right? I mean, ultimately, I think, um, sometimes uh it's done to say, oh, Uber is a really successful company. We are going to be a really successful company because we have the same model applied to something else. Right? And I think that may or may not be true in individual cases. So I think you you just have to be wary of making the wrong comparison.

• 16:39Harry Stebbings?

  And how do you think if you don't do the Uber for Tinder for you can uh succinctly and clearly uh describe your vision as a founder? Should you have like a five word test where you can describe it in five words, you know? Uh, easily call a taxi or do you know what I mean? How would you?

• 16:57Speaker 02

  Yeah.

• 16:58Harry Stebbings?

  Quickly and succinctly describe a startup? What are the kind of easy ways?

• 17:03Speaker 02

  You you know, that's that's a that's a really good question. And I think it's it's ultimately for for the founders to find what what best describes their idea. I don't know if there is a particular word count, but I I think for the most part, there are hopefully other ways to do it than uh than refer to to an Uber.

• 17:21Harry Stebbings?

  Yeah.

• 17:21Speaker 02

  Right? But ultimately, as you think about your vision and what it is that you want to build or what it is, what problem you're solving, I think. That typically is a good point to to get across.

• 17:35Harry Stebbings?

  And before we dive into the quickfire round, you you've mentioned before that at X Excel, you do deep dives into particular sectors and industries to kind of hone in on the trends that are arising. And one of them, which you have discussed recently, is the consumerization of enterprise software. So do you think there is room for improvement further on this? You know, we we've we've seen unicorns produced with the likes of Slack. Do you think we'll see many more?

• 18:04Speaker 02

  Yeah, I mean, I I think, look, I think the big picture trend that that we see is that enterprise used to be this monolithic organization where you you sold to to one to one person, right? And who decided on behalf of that organization, you know, what technology you're going to go with. And I think the trend has been to to really look at the employees and and their individual wishes and what it is they're looking for and and to enable them to be more productive, right? And so individual employees, of course,

• 18:45Speaker 02

  are the same people at work as they are in in their leisure time when we call them consumers, right? So it's it's the same person that that shops somewhere or, you know, is on the phone in the park that then sits in the office. And so there is no reason to believe that the the way that they would like to interact with information and technology changes dramatically when when they enter the office environment, right? And so, you know, as as I would like to consume information on my mobile phone outside the office, you know, it's probably fair to assume that that desire doesn't change significantly when when

• 19:25Speaker 02

  I enter the office. And so, so, yeah, I I I think software and and enterprise tools are taking more and more.

• 19:36Speaker 02

  You know, a resemblance to to the things that we see in the consumer world. Because they're ultimately, they're targeting the same user base.

• 19:46Harry Stebbings?

  And then what do you make of emergence, you know, the famous enterprise SaaS VC pivoting away from enterprise software? Do you think that signals a turning tide in VC investment in in enterprise software? Or do you think that's just a single isolated case?

• 20:01Speaker 02

  Yeah, you you know, I think that from what I saw is that they are embracing the role of of of mobile and and distributed workforces in in the enterprise, which to me is actually supporting what what I was just talking about in in the sense that, you know, you're introducing more and more consumer like elements and the importance of of mobile for for enterprise and and its workforce.

• 20:30Harry Stebbings?

  And then finally, we're going to dive into a quickfire round now where I say a short statement and you hit me with your immediate thoughts.

• 20:36Speaker 02

  Yep.

• 20:37Harry Stebbings?

  So productivity tools, what are your must haves?

• 20:40Speaker 02

  Uh, Wunderlist is is a big one that I use every day.

• 20:45Harry Stebbings?

  I literally just interviewed Chad Fowler, the CTO at Wunderlist.

• 20:49Speaker 02

  Yeah.

• 20:49Harry Stebbings?

  Yeah, amazing, amazing.

• 20:51Speaker 02

  Made in Berlin, that's right.

• 20:52Harry Stebbings?

  Made in Berlin. And that brings us on to the next question in the quickfire, which is the European tech hub. Where's it gonna be?

• 21:03Speaker 02

  You know, I'm not sure there's gonna be one or or I I'm not sure it's there's necessarily for for one to emerge. I think London is is doing well. Berlin is showing a lot of energy. But you also have, you know, Tel Aviv and you have Madrid and Barcelona and you have the Nordics. So there's a lot of them. That's what makes venture in Europe so exciting.

• 21:28Harry Stebbings?

  And what's your must read blog or newsletter?

• 21:33Speaker 02

  Good one. You know, I read the Dan Primex term sheet.

• 21:39Harry Stebbings?

  Yeah, brilliant.

• 21:39Speaker 02

  Pretty regularly and then, you know, I follow all the big names in VC.

• 21:50Speaker 02

  Yeah.

• 21:50Harry Stebbings?

  Fantastic. And then your favourite book and why?

• 21:55Speaker 02

  I think as far as business is concerned, and I'm a fan of the classics, I think

• 22:02Speaker 02

  Christensen's The Innovator's Dilemma is great. I think Crossing the Chasm is super helpful and, you know, even Portos Five Forces is a good one.

• 22:15Harry Stebbings?

  And then finally, your most recent investment and why you said yes?

• 22:19Speaker 02

  Yeah, so we just announced an investment in Car2DB, which is a Spanish mapping data processing and visualization engine that we're super excited about. And, you know, the reason that we said yes is it's just the perfect combination of a really strong technical team that is passionate about, you know, a really unique product and has a great vision for where they want to take it.

• 22:51Harry Stebbings?

  Well, Michael, thank you so much for coming on the show today. It's been absolutely fantastic to have you on.

• 22:56Speaker 02

  Yeah, much appreciated. Thank you.

• 22:58Harry Stebbings?

  What a fascinating insight into one of the world's most successful VC firms provided there by Michael. And as always, all the resources mentioned in today's show can be found on the blog at www.thetwenty minute vc dot com and you can follow us on Twitter at twenty minute VC, all in letters. But before we leave, don't forget to check out Vidal Law to make sure all your current and future business agreements are watertight. And what is best, you can secure a structured payment to ensure that you never receive a large unexpected legal bill. And you have the partners on the phone willing to help without worrying about bill for every minute. So secure your legal peace of mind and email Chris at Vidal Law by emailing C Werner,

• 23:42Harry Stebbings?

  C W E R N E R at vidalaw.com or check them out at www.vidalaw.com. And thank you so much as always for your continued support and we look so forward to seeing you in the next episode.