20 VC 062: Shaking Up London's VC Scene with Fede Pirzio-Biroli, Founder @ Playfair Capital

Fede Pirzio-Biroli is Founder @ Playfair Capital, a leading investor in seed level, technology based startups. Fede founded Playfair Capital from his first investment in December of 2010 and the portfolio quickly grew to 20 investments by the end of 2012, including the likes of Duedil, AppearHere and On Device Research. During this period, Fede was an angel in residence at White Bear Yard. After working closely with Passion Capital, he built the Playfair Capital team and moved into Warner Yard, Playfair's current home. Prior to Playfair, he spent several years in Africa working for the UN, Oxfam and PharmaSecure, after which he lobbied government and large aid organisations to increase the transparency of aid flows. In Today's Episode You Will Learn: 1.) How Fede made his move into angel investing and then transitioned to form his own fund? 2.) What is the mission at Playfair? What is the average ticket size? Does Playfair have any preferred sectors? 3.) What do startups need to have to get the Playfair stamp of approval? What are Playfair looking for? 4.) How has Fede seen the seed funding environment change in London? 5.) How does Fede and Playfair stave off competition for the 'hot' startups looking to raise VC money? 6.) What benefits do founders get for working in a co-working space? How important is it for VCs to offer this service? 7.) How does Fede create a united company culture in a co-working space with so many different companies? Items Mentioned In Today's Episode: Fede's Fave Book: The Circle by David Eggers Fede Fave Newsletter or Blog: Dojo, AngelList Fede's Most Recent Investment: Knytton (Techstars London W14) As always you can follow Harry, The Twenty Minute VC and Fede on Twitter right here!

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

• 0:00Harry Stebbings?

  Hello everybody, you're listening to episode 62 of the 20 Minute VC with your host Harry Stebbings. And on today's incredible episode of the 20 Minute VC, we are welcoming Fede Pirzio Biroli, founder at Playfair Capital to the show. Playfair have made quite a splash to London's investment scene over the last few years and are now considered a leading investor in the seed-level technology-based startup scene. Fede founded Playfair Capital from his first investment in December of 2010 and the portfolio has grown quickly to 20 investments by the end of 2012, including the likes of Due Deal, Appear Here and On Device Research.

• 0:41Harry Stebbings?

  During this period, Fede was an angel in residence at White Bear Yard with our friend Stefan Glanz, who was a previous guest on the show, and after working closely with Passion Capital, he built the Playfair Capital team and moved into Warner Yard, Playfair's current home. But before we delve into today's amazing episode with Fede, I'd like to draw your attention to a product that I've used to build out the 20 Minute VC team, and that is HiringScreen. As startup founders, time is incredibly limited and HiringScreen analyses all your candidates' profiles and then compiles an in-depth analysis of all of their individual strengths and weaknesses, making a clear assessment before building your shortlist.

• 1:24Harry Stebbings?

  Check them out at www.hiringscreen.com. But ladies and gentlemen, without further ado, it's time to welcome Fede from Playfair Capital.

• 1:44Harry Stebbings?

  Well Fede, it's absolutely fantastic to have you on the 20 Minute VC. I've been dying to interview you for a while now.

• 1:49Speaker 01

  It's my absolute pleasure, I'm very happy to be here.

• 1:52Harry Stebbings?

  Can you start off by telling us how you made your move into the venture industry and a little bit about yourself and your background?

• 1:59Speaker 01

  Um, absolutely. So, so um, my, my move into the venture industry really didn't, I mean, I didn't, I didn't come to this from a traditional background. I um, I'd actually spent a pretty much total of, I think, about four years uh, working in various different jobs within, within the NGO industry. Um, um, so I actually was um, uh, in Uganda for two years. I was in Kenya and Tanzania for a year. I uh, I worked for UNHCR um, doing refugee patriation in northern Uganda. I worked in, uh, I worked at Oxfam and I worked at uh, Midsensel Frontière, so MSF, um, which you might think has very little to do with the world of investing.

• 2:42Harry Stebbings?

  It's not the traditional route, I've heard.

• 2:43Speaker 01

  No, it's not the traditional.

• 2:44Harry Stebbings?

  Not McKinsey, but still, it's, it's fascinating. So how did that translate to, to?

• 2:49Speaker 01

  To this?

• 2:49Harry Stebbings?

  Yeah.

• 2:49Speaker 01

  Well, it, it, so basically, I, you know, I, I came out of, I, I came back from East Africa being very frustrated with the um, with the uh, with the NGO kind of industry and then how competitive it was and um, how inefficient it was. And so I came back and I was an aid transparency lobbyist for a year. So I lobbied kind of, you know, uh, Department of International Development, uh, USAID, big, basically big multilateral and bilateral donors uh, to increase the transparency of their aid expenditure. And after doing that for a year, which was even more frustrating than uh, than uh, than operating the, the kind of on the ground with NGOs, I realized that actually it's, this is trying to solve a problem from um, the inside.

• 3:31Speaker 01

  Um, and actually without taking a step, step back to look at how kind of the effects this industry had had on um, on the economic environment of the, of the countries they were operating in. And I came to this conclusion that basically, and, and I know this is a long-winded story, but I came to the conclusion that, that essentially, um, you know, these NGOs um, had been present in some of these countries for more than twenty years. And the youth of these of these emerging economies, often well educated, you know, with with good degrees from, you know, relatively speaking, good universities like Macarere. They were coming out of university aspiring, I saw it too often, aspiring to build careers

• 4:15Speaker 01

  in these NGOs, because these NGOs had been present since their birth, right? And they assumed that that, you know, these NGOs would always be present, which to me really struck alarm bells in terms of there existing a fundamental disconnect between between the perception of these NGOs by the local population and, you know, the mission that they're there that they're meant to be there to undertake, which is essentially to put themselves out of business, to solve a problem and then to leave. And to me, basically, I came to the conclusion that these, you know, these these kind of the well-educated youth coming out of universities, every single one of them that gets kind of attracted to going to work for an NGO comes at the opportunity cost of not becoming an entrepreneur.

• 5:00Speaker 01

  And actually, small business and entrepreneurship is what grows an economy. That's what contributes to GDP. That's what actually, you know, aside from growing jobs, which NGOs do, they create jobs, sure, but they don't actually create sustainable development, I think, within the economy of a of a country. And so that's what made me start thinking about entrepreneurship. And granted, I started deploying capital here and not in the kind of in emerging economies, but that was more kind of to cut my teeth with a with a view to go and become operational in Sub-Saharan Africa later on. That was as an angel, was it? That was as an angel, exactly. That's how that's how kind of I started deploying capital. So I I invested in Doodle in late 2010, and very soon after that, I was very lucky

• 5:42Speaker 01

  enough to to meet Passion Capital, so Eileen, Robert and Stefan. Absolutely, we had Stefan on the show. Fantastic, yeah, so we got along really well. They they co-invested in Doodle and then they very kindly kind of. Suggested, you know, or offered me a desk um uh at White at Whiteberry Yard. And so I ended up sitting, you know, pretty much next to them um over the next two years. So two thousand eleven and twelve into early two thousand thirteen. And over those two years, um I ended up investing in twenty one or twenty two companies.

• 6:13Harry Stebbings?

  From from your own funds?

• 6:15Speaker 01

  Yes, yes, from my own funds, from funds that I'd sold. Um, basically from shares that I sold in the family business that I was admittedly very fortunate enough to have uh available to me. Uh, but basically I decided to dive into the deep end and do something proactive with uh with these funds. Um, and then basically got carried away and then, you know, and then that turned into Playfair Capital today. The team I have now and the coworking space that that that I'm talking to you from today or now. And that that is very much, um, I'd say, uh, everything's been built reactively and not proactively, right? So instead of instead of, it's not like five years ago, I said, right, I'm going to have a large portfolio of companies, have a team running a venture capital firm and and operating a coworking space.

• 6:59Speaker 01

  That's by no means what I intended to do. But it's more, uh, what I mean by being reactive is that as things grew and the portfolio became bigger and bigger, I started having a a real need for support in different things like um, you you know, finance and and legal, at least initially. And then that's snowballed into now having kind of head of talent and basically, you know, to to plug the gaps that that became apparent as as the portfolio became bigger.

• 7:28Harry Stebbings?

  And you said about selling the shares in the family business. I mean, that's absolutely fine, but it's no mean feat to raise a fund. I mean, that really is a tough challenge. How did you find raising your own funds?

• 7:38Speaker 01

  So wait, let me clarify, let me clarify, right? So because this is this is quite an interesting point, I think. Um, so when, so today, Playfair Capital is a li- limited liability partnership. Um, so it is a venture capital firm, um, in every sense of the word, legally speaking as well. Um, but it's a venture capital firm which doesn't have the usual motivations uh and incentives of venture capital. Because we're quite uniquely uniquely positioned, um, I can't think of another fund like this in London, um, where uh I am both the G uh the the G P or the or or, you know, the managing partner and and the only L P.

• 8:20Harry Stebbings?

  Okay.

• 8:21Speaker 01

  So, we don't have external capital, but the reason that I've structured things in this way is, I think, to provide a slightly disruptive environment that can incentivize a team in a different way than a normal salary that, you know, an any angel investor could could hire. So, in other words, when things scaled and I and and I realized the team I have is is a great cultural fit and, you know, I'd want nothing more than than to be able to create a situation that is attractive to them for at least five years. You know, that was, that became a goal and I realized that I don't have the budget to pay, you know, to pay a team. You know, let's face it, I don't have the budget to pay a team as much as as a two hundred million pound fund does.

• 9:04Speaker 01

  And so I, you know, I did a lot of thinking in terms of how, you know, how to make myself competitive. And I think, you know, if if we look, if if kind of, if I changed my thinking from that of an angel to to thinking about things more within the fund structure. Under the current arrangement, just like a standard fund, which has, you know, eighty percent of the carry going to LPs and twenty percent of the carry going to to the fund managers. That's very much a situation that we're in now. Eighty percent of the carry goes to me as the LP. And then I have an allocation, or the fund has an allocation of twenty percent, you know, of its carry that go that gets distributed distributed amongst the team with with the vesting schedules and and everything like that, that that you'll be familiar with. And that way, you know, there's an upside potential for my team

• 9:49Speaker 01

  that is, that is, that is in place retroactively for all the companies I've also invested in when I was by myself. And in that way, I think that we have kind of a structure that gives me a fighting chance of keeping a team motivated and not having them kind of looking elsewhere too soon. And, you know, I mean, it's, it's, we don't have external capital currently. We may one day. The structure is there. But, but yeah, just just wanted to correct you. We don't have external capital.

• 10:19Harry Stebbings?

  Can you give us the low down then on Playfair? What's your average ticket size? What sectors are you interested in? You know, are you round agnostic? What are your general preferences?

• 10:28Speaker 01

  So, the average ticket size is somewhere between two hundred and two hundred and fifty K. You know, when I was, when I was a one man band and and I was an angel, I could go smaller. But, you know, as much as we'd like to in some cases now, now, you know, practically speaking, it, we always end up doing just as much work for smaller. Ticket sizes, so it really doesn't make sense to do things kind of below that. So the average ticket size between two hundred and two hundred and fifty. We are overwhelmingly investing at the seed stage, although we have done a few series A investments recently. And, you know, one of the things that is quite nice about having kind of a closed loop of

• 11:10Speaker 01

  of of me on the on the partnership side and on and on the funding side being a limited partner is that we're very flexible and very free to change direction if we want. And and if one day, you know, a very late stage investment that we we we have access to a very late stage investment for whatever the reason may be, you know, we can do that investment if if if we really want to. Because we don't have external investors to answer to.

• 11:38Harry Stebbings?

  And you said that, obviously, you double down on the seed funding. Over the years, over the past few years in London, the seed funding environment has changed quite dramatically. How have you seen it change and how do you stave off the competition from the kind of vast array of different funding sources that are available to founders?

• 11:57Speaker 01

  So I've seen the the the seed funding environment change enormously since um since I started out, which is admittedly not even that long ago, right? I really became active in early two thousand and eleven. I think at the time, um, at the time, it was still, you know, it was two thousand and eight was still relatively fresh in people's minds. There wasn't that much capital around at the time. You could count on two hands the amount of credible angel investors that um were really, you know, with that had kind of respectable deals though in London. And so the barriers to entry to me coming in as a new investor with capital and new experience at the time were very, very low.

• 12:40Speaker 01

  Because it means, you know, the best companies would would come to you at the time because because there wasn't that much competition.

• 12:49Harry Stebbings?

  Sure.

• 12:50Speaker 01

  Today, you know, with, call it for whatever reasons, there's a large, there's many, many reasons, I think, behind kind of the added capital available to the early stage kind of market at the moment. But, you know, let's let's say SEIS is one of them. SEIS has, you know, has really come into its stride since two thousand and eleven and basically, you know, created a whole new pot of capital, which is, you know, sometimes not motivated to deploy the capital for the right reasons. They're seeing it as a de-risked investment.

• 13:25Harry Stebbings?

  Yeah.

• 13:25Speaker 01

  And they have asset managers who are saying, you know, you can invest in A, B, C, or D. But then, look, there's this new asset, there's this new kind of seed, like qualifying investments under SEIS, this is a new asset class where you're de-risked by X percent. And so there's a lot of money piling in that isn't necessarily smart capital.

• 13:44Harry Stebbings?

  So how do you differentiate yourself from that and offer something different?

• 13:49Speaker 01

  So, look, so we, we, we are, well, firstly, we have Warner Yard, which is this coworking space that I'm in now, where we have one hundred and eighty desks and we have kind of a vibrant community. We have some resources that are available to our portfolio companies, but primarily, they're primarily focused around recruitment. And I think this is something that, well, we're seeing more and more VCs do this now, but hiring is the most difficult thing, hands down, pretty much ninety percent of the time when you ask founders in most portfolios. And we've taken on, we've taken on a head of talent who was formerly at Facebook and Google before that, who's a technical recruiter. And we are deploying him amongst

• 14:33Speaker 01

  portfolio companies to hire CTOs, front end, back end, full stack devs, entirely engineering-focused at our cost, because of the nightmare that kind of, you know, so many portfolio companies seem to have in terms of, in terms of hiring recruiters that sometimes don't deliver, but even when they do, at great cost. Um. So I think that's definitely a differentiating factor that we're, we're, we're, we're, um, we're, that we've been developing, um, here.

• 15:00Harry Stebbings?

  And you mentioned their Warner Yard. I mean, I've been around the tech and funding environment in London for a while now. And everyone tells me what an incredible place Warner Yard is for, for the portfolio of companies and to just to visit. So how important do you feel a co-working space is for VCs to provide? And, and what benefits do the founders get, do you think, from working in a united space?

• 15:21Speaker 01

  Um, well, I'm biased, but personally, I think it's very important. Uh, um, I'm biased for a variety of reasons, namely that like my entire, that my entire, um, my entire kind of development in this world as an investor was basically at a co-working environment, which was White Bear Yard. Um, I think, you know, eh, especially today, it's becoming eh, with the, with kind of, with the arrival of WeWork and, you know, them achieving unicorn status and all these copycats opening up shops, there's, there's the whole, there's, there's basically a whole, a whole host of businesses that are really trying to, to, to, to basically have co-working spaces as a business model, right? And executing one and opening it, executing the next and then executing the next and, and growing this as a business.

• 16:06Speaker 01

  And I think, um, you know, in our case, as, as, as a venture capital firm, that where I happen to own this building, um, we have the freedom, because we have no designs on, on replicating it elsewhere. This is a one-off. That gives us a lot of freedom to, to kind of quietly curate, I think, who comes in. We don't, we're just not, we're not looking just to fill the space. We're looking to fill the space with interesting people because the value of the space very much depends on the quality of the people in it. And, um, and so when tenants move out, we usually have, you know, we usually have a list of four or five companies that are looking to move in and whilst we're not openly kind of selective, we are quietly selective,

• 16:48Speaker 01

  where we can quietly say, well, this kind of team would, would gel very well with that team next to, on the floor or whatever it might be, because they, they are operating similar spaces or, or they have similar, similar kind of skillsets on the engineering teams and hence, you know, it just. It just kind of benefits everybody else to make sure the quality that's coming in stays high. Now, in terms of in terms of making sure that it's it's it stays an engaging kind of space with a unique with a with a united culture, sorry. You know, our communities, our community managers work very hard on on kind of activities, everything ping pong tournaments to newsletters to free beer to everything like that. And then from our perspective as an investor, it's fantastic because every six months,

• 17:32Speaker 01

  it's a very different picture in New York, right? Companies move in, move out, people, you know, it's priced in a way that I think is very attractive, but also is is makes sense until, you know, you're about fifteen people roughly. And and then and then it becomes kind of, you know, and then organically it starts making sense economically to move into a space of your own. So what ends up happening is teams move in, either they do really well and they outgrow us, or they do badly and the opposite happens unfortunately. But it means that there's always kind of change and there's always a kind of, you know, it's it's not a stagnant environment, it's it's an ephemeral environment that that is that that is always different.

• 18:15Speaker 01

  And with Techstars in the building, that twice a year move in ten teams at a time, it means, you know, I mean, Techstars here now, the the most recent, the most recent program started three or four weeks ago. And, you know, from a Friday to a Monday, of of the hundred and eighty people in our building, sixty moved out on the Friday and sixty moved in on the Monday. And that that's a third, that's, you know, that's a third of our community in one fell swoop that's coming in kind of cold turkey and and starting off. And that and that just keeps things really stimulating and engaging, I think, just having that variety.

• 18:47Harry Stebbings?

  And you mentioned there about, you know, company selection and how you select them for for you. And looking at your incredible portfolio, you know, appear here, dojo, due deal. What do you look for in potential investments and founders? What do they need to get the kind of play first stamp of approval?

• 19:02Speaker 01

  Well, okay, firstly, I mean, different verticals, whether it's B two B and you're creating a SaaS tool or or or you have a B two C kind of focus, obviously, there are different kind of skill sets. But I think. I think serial entrepreneurship, so in Doodle's case, for example, just to look at those three. In Doodle's case, Damien is a serial entrepreneur. He was on his third or fourth company. And I think often kind of us investors, I think it's quite well documented. Investors often pay more for serial entrepreneurs. People who have been through kind of ups and downs, hiring, firing. You know, the pains of having to wind a company down. All of those are very, very educational beneficial retrospectively, right?

• 19:48Speaker 01

  But not everyone, obviously, is a multiple father. So appear here in Dojo, these were, this was Ross from appear here and Robbie and Dev. That was their, this was very much their first company. And I think, I think basically, basically making, making something out of very few resources is definitely an admirable trait. And also kind of a lack of entitlement or expectation. So, so you know, in Ross's case, appear here came out of him opening a pop-up shop during the Queen's Jubilee, right? And, and strangely enough, printing T-shirts of the Queen's face on, with the Queen's kind of Warhol-like T-shirts with the Queen's face on them.

• 20:34Speaker 01

  And, and then getting in trouble with Buckingham Palace, right? And that's what propelled him into kind of into actually going somewhat viral and, and having some of his friends say, oh, so what about, you know, we want a pop-up shop? And then getting that ball rolling under Forward's banner. In, in, in Dojo's case, I mean, these guys literally just showed up in the yard, right? Literally just showed up downstairs and after two weeks, I was like, who are these guys? Who have been hanging out the kitchen? Literally, like, who are these guys? Yeah, basically. And then after another week, it was like, okay, well, let's give them some desks and they, and they kind of appeared, they arrived. And then another week later, I looked under the desks and all their clothes were under the desk. I was pretty sure they were living in the yard.

• 21:16Speaker 01

  And and you know, these are guys who were going out and and obtaining kind of getting ridiculous conversion out of handing out flyers at a tube station, right? Who I mean, you know, handing out flyers at a tube station is

• 21:30Harry Stebbings?

  Has to be the lowest

• 21:31Speaker 01

  Has to be the lowest, right? I mean, you never get conversion from that kind of a thing. But something about their attitude and something about their their their tone of voice and and and their personalities really somehow had these guys had people actually writing comments on Twitter about this, you know, lovely person who gave them a flyer outside of a tube station. And and basically, that is, to me, an admirable example of really creating something with very little with no money and and embracing kind of the true kind of culture of being a founder in the startup world of of true grit and and kind of versatility despite a lack of resources. And that, to me, is really

• 22:12Speaker 01

  something important because versatility and and demonstrating kind of demonstrating, you know, kind of effectively outreaching to people and converting converting leads with no money really translates as something positive once funding comes around. Does that make sense?

• 22:29Harry Stebbings?

  Absolutely. Yeah, absolutely. It does. And then if it's okay with you, we're gonna dive into a quickfire round.

• 22:34Speaker 01

  Of course.

• 22:35Harry Stebbings?

  So your favorite book and why?

• 22:37Speaker 01

  Um, I think, uh, actually, last few years, The Circle by David Eggers. Um, I don't know if you've read that. It's it's

• 22:45Harry Stebbings?

  Absolutely, I have. Rob Moffat from Balderton recommended it.

• 22:49Speaker 01

  Has he? Did you like it?

• 22:50Harry Stebbings?

  I did. I thought it was brilliant. Really, really good.

• 22:52Speaker 01

  I think it's just a very realistic kind of perspective on the world today and and where we might be very soon. Um, and and it's kind of terrifying, basically.

• 23:05Harry Stebbings?

  And then investing in Africa.

• 23:07Speaker 01

  Yes. So absolutely. Um, we I so we now have two companies in Kenya, uh, two companies in Nigeria, and we're looking at more and more. I mean, eventually, over the next few years, I'm going to be spending my plan over the next couple of years is to to be in East Africa and Southern Africa, um, and indeed Western Africa at least two or three times a year, um, and to really establish a presence, more of a presence there and to to try and kind of become, you know, within it can become kind of a proficient investor in Africa within kind of the London scene.

• 23:40Harry Stebbings?

  And if you were to start Playfair again, is there anything you would have done differently?

• 23:45Speaker 01

  I think I'm, I mean, if I had, if I had done anything differently, then we wouldn't be here for the reasons that we are today, which is entirely reactive. And there's something I really like about that. There's something, there's something off the cuff and organic and you know, the, the opposite of like execute meticulously executing a predetermined plan. And I think that I wouldn't actually change anything.

• 24:11Harry Stebbings?

  Fantastic. I mean, that's the perfect, perfect answer.

• 24:14Speaker 01

  Yeah.

• 24:14Harry Stebbings?

  And then favourite newsletter or blog?

• 24:16Speaker 01

  Um, honestly, and I, I mean, it's not just a plug, but Dojo's newsletter is the funniest thing I, I read all week. Um, it's fantastic. Their tone of voice and I mean, that, that's really kind of, yeah, that's my absolute favourite.

• 24:27Harry Stebbings?

  Do you have a preferred kind of investing resource, be it kind of Ben Evans's newsletter or or Matamox or, or something like that? Or are you quite agnostic in terms of?

• 24:36Speaker 01

  To, I mean, we're quite agnostic. To be fair, I spend quite a lot of time on Angel List because it gives me some interesting insights into foreign deals. Um, and, and who's around them, most importantly.

• 24:46Harry Stebbings?

  Sure. And then your most recent investment and why you said yes?

• 24:50Speaker 01

  Uh, the most recent investment we announced is Nitten. Um, Nitten was a text service company. And, uh, we invested because, um, the quality of their IP, um, um, in terms of the code they've written to program these knitting machines. And the absolutely massive global market, um, that they can tap into. Um, and the closed nature of that market, basically.

• 25:17Harry Stebbings?

  Well, Fede, it's been absolutely brilliant to have you on the show. I'm so grateful.

• 25:21Speaker 01

  It's my absolute pleasure. I, I, I hope it wasn't entirely boring.

• 25:24Harry Stebbings?

  As always, all the incredible resources mentioned in today's interview with Fede can be found on the blog at www dot the twenty minute V C dot com. I would absolutely love to hear your thoughts on the show and the guests that we've got on and any suggestions that you might have for the future. It could be guests, it could be questions or themes. So please do email me at harry at the twenty minute V C. Twenty in letters. However, before we leave today's show, I want to say a huge thank you to Hiring Screen who make all. of this possible as they allowed me to sift through 197 CVs in order to find my brilliant assistant Jackie. And quite simply, I couldn't have done it without them. It would normally have taken me three or four days to go through that many CVs.

• 26:09Harry Stebbings?

  And I did it with Richard and Luke at HiringScreen in just 15 minutes. And then they compiled an amazing shortlist with all the candidates that had applied and were relevant for me. Thank you so much HiringScreen, I couldn't do it without you. And thank you so much to everyone for listening, I really do appreciate it and we can't wait to see you in the next episode.