20 VC 047: 4 Ways Investors Find Great Startups with Rob Moffat, Principal @ Balderton Capital

Rob Moffat is Principal at Balderton Capital, one of London's leading VC firms. At Balderton Rob specialises in Fintech, Martech, Gaming and Marketplaces. Rob is currently a board director or observer with six portfolio companies: Qubit, Wooga, Housetrip, Carwow, Rentify and Nutmeg. Other investments Rob has been involved with at Balderton include Citymapper, Top10, Scoot and Archify. Prior to joining Balderton Rob worked for Google in London, as a Manager in the European Strategy and Operations team. He started his career with five years in strategy consulting with Bain, working mostly with financial services clients. In today's amazing discussion with Rob we discover: What characteristics make a great VC? How VCs assess incoming business plans and investment opportunities? The biggest problem facing Rob today, as Principal at Balderton? How the structure of VC firms is changing to a service based environment? Does Crowdfunding pose a threat to VC as a alternative method of finance? For individuals wanting to move into Venture, what can they do to optimise their employability in the VC world? Items Mentioned in Today's Show: Rob Moffat: Medium Rob's Favourite Book: The Circle: Dave Eggers Crowdcube Just Park Nutmeg: Online Investment Management As always you can follow Harry, Rob and The Twenty Minute VC on Twitter here!

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

• 0:00Harry Stebbings?

  You're listening to episode 47 of the 20 Minute VC with your host, Harry Stebbings. Now, I am immensely excited to welcome the incredible Rob Moffat to the show today. Rob is Principal at Balderton Capital, one of London's leading VC firms. At Balderton, Rob specialises in fintech, martech, gaming and marketplaces. And Rob is currently a Board Director or Observer with six portfolio companies, including Qubit, Wooga, Housetrip, CarWow, Rentify and Nutmeg. Other investments he has been involved with at Balderton include Citymapper, Top10, Scoot and Archify. And prior to joining Balderton, Rob worked for Google in London as a manager in the

• 0:45Harry Stebbings?

  European Strategy and Operations Team. But before we dive into today's incredible episode with Rob, have you ever been in charge of a recruitment process and wished you could tell the unsuccessful candidates that they didn't get the job? Well, if so, you'll love HiringScreen's smart feedback option, where you can send a personalised message to your entire applicant pool, or simply create a customised message for your shortlisted candidates. Nobody likes their CV to just disappear into cyberspace, so let HiringScreen help you boost your company's brand image by keeping candidates' updates with the application process. But without further ado, ladies and gents, I'd like to introduce you to Rob Moffat.

• 1:32Harry Stebbings?

  You have now arrived at your destination. Rob, welcome to the 20 Minute VC. It's an absolute pleasure to have you on the show. Can you start by telling us a little bit about yourself and how you made it into the venture industry?

• 1:47Speaker 01

  Yes, I guess I'm somewhat of an accidental venture capitalist, as most of us are. So I started my career, I did a statistics degree, looked briefly at going into that area, decided against it, went to work for Bain Consulting and spent five years there, doing a lot of work with financial services, as you tend to do in London, MBA from INSEAD. And then went to Google. So I always wanted to sort of work in the internet area, thought it was fascinating and Google was a nice sort of safe step out of Bain to do that.

• 2:21Harry Stebbings?

  And what year was that?

• 2:22Speaker 01

  Fascinating role. And doing sort of strategy and operations for Europe, so working out how you scale up this kind of sized company.

• 2:31Harry Stebbings?

  And what year was that? Was that two thousand and?

• 2:35Speaker 01

  Two thousand and seven I joined Google. So I, when I interviewed in two thousand and six, they had two hundred and fifty people in London. When I joined three months later, it was more like five hundred.

• 2:47Harry Stebbings?

  Wow.

• 2:47Speaker 01

  Um, just incredible pace of hiring, um, and then hit sort of the global financial crisis and they actually made job cuts, um, and it was sort of very sort of, uh, Google share price was down at what would now be one hundred and fifty dollars. Um, everyone was kind of suddenly very worried, um, and then coming out the end of that, uh, it was kind of interesting time to be there.

• 3:12Harry Stebbings?

  Was it an amazing experience to work at Google?

• 3:15Speaker 01

  Yeah, it's, it's, it's a lot of fun, right? You work with some really great people, um, and in this sort of crazy environment where you're pumping out a bunch of fascinating products and trying to, uh, as we were on the business side, trying to vaguely keep up with everything the engineering team is sort of pushing out, um. But at the end of the day, it's still a big company. It's a pretty well-run big company, um, but it's a big company and that got got frustrating for me after a while and I think for a lot of other people.

• 3:46Harry Stebbings?

  So then, so then, did you move straight to Baldur's Home from Google?

• 3:50Speaker 01

  Yeah, so I was lucky enough that in two thousand and nine, I sort of started looking elsewhere and, um, for some reason, that combination of Bain, sort of consulting, plus a big internet company was a profile that a few VCs were looking for. Um, so I talked to some startups, talked to some VCs and, um, Baldur's Home seemed by far the best option there, so somehow convinced the partners I knew something about entrepreneurship and, uh, being a VC, which definitely was not the case.

• 4:21Harry Stebbings?

  Well, you've done incredibly well in, in the years you've been in venture and I saw on your angel list profile, one of your recommendations from, I think it was a portfolio, uh, CEO of yours, said if Rob were a football scout, he would work for Barcelona. Leading me to ask, what do you think makes a good VC and what sets one good VC apart from the rest?

• 4:48Speaker 01

  Um, so it's a lovely quote. I'm not sure it's true.

• 4:51Harry Stebbings?

  It's a good one.

• 4:53Speaker 01

  What is it that makes a good VC? I think

• 4:57Speaker 01

  the ability to

• 5:00Speaker 01

  I said a lot of things. Um, so in terms of finding interesting deals, I think the ability to keep challenging your assumptions. I think it's easy to get in a VC to talk about pattern recognition. And you have a bunch of sort of simple shortcuts in your brain on what a good entrepreneur should look like and what a good business should look like. Um, and that's the easy way to do VC. I think what marks out a really good VC is someone who keeps challenging themselves. And keeps saying, actually, yes, five years ago, it used to be the case that your enterprise products um had to be something you could sell for at least a thousand dollars a month. Otherwise, you couldn't sell them economically. Uh, and then Zendesk comes along and completely rips that apart.

• 5:44Speaker 01

  Someone who can understand that and sort of speak to Zendesk and and get that, I think, is an unusual characteristic.

• 5:51Harry Stebbings?

  So flexibility in approach is very important.

• 5:54Speaker 01

  Flexibility in mind, I think. That's that's the uh, what it comes back to. Sort of a mind that's not fixed at all and that keeps sort of challenging itself and evolving itself. Um. I think that's a really big part and that, I think. And the ability to sort of really go on a case by case basis with portfolio companies. After you invest and really sort of go deep and understand their issues. Um, I think is really important.

• 6:21Harry Stebbings?

  And how does?

• 6:22Speaker 01

  And that's the ability to sort of get out of the weeds, get out of the complexity and find what's the really important thing that I need to steer this entrepreneur in direction of. Rather than sort of just reacting to the day to day.

• 6:35Harry Stebbings?

  And how does your VC time allocation work? Do you spend kind of fifty percent on new deal sourcing, fifty percent with existing portfolio companies? Or is it not that concrete is split?

• 6:47Speaker 01

  Um, it it varies week by week, but um. Yeah, so the longer you spend in VC, I've been in it for six years now and started off with probably ten percent of my time on portfolio companies. Um, and now it's probably more like fifty percent. Um. And there's other things as well, right? There's always a bit of helping um with our PR as a firm, there's a bit of internal work. Um, sort of, uh, and then, yeah, there's always a bit of fundraising involved.

• 7:17Harry Stebbings?

  Absolutely. And you recently recommended an article by um Paige Craig, um Arena VC. Uh, she was actually coming on the show in a few weeks' time, but it was, the article was on finding great startups and the methods that investors use to find great startups. What are your main ways of of filtering through the mass of startups that we've seen in the last few years? How do you kind of handle uh sourcing deals?

• 7:45Speaker 01

  So I think, as I remember it, there were four, four ways. There was hunter, trader, farmer and trapper.

• 7:54Harry Stebbings?

  Yeah.

• 7:54Speaker 01

  Um, so I think when you start in VC, you have to be a hunter because you've got nothing to trade with. Um, farming hasn't any results yet. Um, and so, yeah, I think you always start off as a hunter and you're kind of chasing what you think are interesting new sectors. Um, and going after that.

• 8:14Harry Stebbings?

  And that's going to meet ups and a lot of tech.

• 8:18Speaker 01

  Yeah, getting out to events and just doing a bit of best research, saying that, yeah, um. I don't know, uh, machine learning as a service is an interesting sector. I'm gonna get smart on that and talk to five companies in the sector and work out who I think is the best and then charm them and try to get them to take investments. Um.

• 8:38Harry Stebbings?

  So you started as a hunter when you moved from Google?

• 8:42Speaker 01

  Yeah, I think, yeah, I think everyone starts as a hunter. Uh, well, maybe a bit of a farmer as well, because I think a VC uh, Balderton always gets a bunch of inbound, um, and so sort of filtering through the inbound, um, of entrepreneurs reaching out to us cold. Um. I think over time tried to become more of a trapper, um trying to get more, build my kind of blogging. Um so I sort of have a blog on Medium and spent a bunch of time writing particularly around marketing, um marketing and tech companies. Um so sort of getting people engaged through that and through Twitter. Uh and so, yeah, getting people to think, okay, Rob actually does sort of think carefully about some of the issues in growing a business and.

• 9:25Speaker 01

  He's something who, someone who would be worth talking to if I'm looking for for V C down the line.

• 9:29Harry Stebbings?

  And where would you place yourself now in that four-stage process?

• 9:34Speaker 01

  Um.

• 9:39Speaker 01

  Yeah, a bit of, bit of everything. I think the article, the page's article was about you need to do all four um to be a good V C. Um I don't think I'm a very good trader. That doesn't come naturally to me, this kind of idea of forced trading deals and. Maintaining a kind of a balance of payments with other V Cs. Uh um but I think hunter, farmer, uh trapper certainly across those three.

• 10:02Harry Stebbings?

  And what do you, would you say is the biggest problem or challenge that's facing you now in your role as principal at Balderton?

• 10:11Speaker 01

  Well, I think the V C market in general is becoming much more competitive. And I think that's, that's true in Europe to a lesser extent than the U S, but it is true. Um and and so you need to evolve the role, I think. Three years ago, five years ago, um the majority of the role was about taking. Deal flow and deciding which ones we wanted to invest in. Um and you'd sort of, a company would come to you, you'd spoken to a few times before, they say, yeah, we're now doing our fundraise. Uh I'm gonna talk to you and three other people and probably one of those firms would say, make a serious offer, maybe two.

• 10:50Speaker 01

  Uh and what you're now seeing is good companies are getting chased by VCs, um they're getting funded before they were thinking about doing a funding round, they're getting funded on less sort of traction, less data, um than would have been the case a few years ago. Uh and so this is, yeah, it's it's much more of a kind of a a need to track down, um, the really interesting companies and be willing to uh invest earlier than you would have done three, five years ago.

• 11:18Harry Stebbings?

  And so how do you make Balderton, I mean, obviously Balderton is a very attractive proposition in itself. But how do you increase that value add to really further your position in the bargaining process against other VCs? Is it?

• 11:32Speaker 01

  So something we put a big emphasis on the last year is, um, we have fifty or sixty companies in our portfolio. Um, and there's this real critical mass in London, uh and we moved to a new office where we have an event space where we can very easily put on a sort of portfolio event. Uh and so really using that to do events across all sort of disciplines, so um, marketing, finance, talent, technology, product management, um, CEO mentoring. So doing a bunch of those kind of portfolio events where we can bring in a kind of a guest speaker, or it's just between our CEOs or kind of management of our portfolio companies and letting them bounce ideas off each other, um.

• 12:17Speaker 01

  Cause generally they are taking the lead, they're probably two steps ahead of us and five steps ahead of anything in the way of training that's out there. So allowing them to keep learning from each other, um, I think it's a great format to have. So I think that's a, this is a big kind of piece of the value add for us is the fact we have a portfolio of fantastic companies. Um, being able to jo- join that portfolio is a is a great asset. Uh, um, and then we're also sort of building up our own. Internal support for the company. So we hired in a new talent director last week. Uh, who came from Amazon, so senior sort of talent role at Amazon is how upward fellow companies really kind of

• 12:57Speaker 01

  get smarter in how they recruit, but also how they develop and retain and talents across our organisation.

• 13:04Harry Stebbings?

  Would you say the structure of VC firms is changing then to the more Anderson Horowitz style of a service based VC firm? With your.

• 13:12Speaker 01

  I think you see, um, I think it's different models. So I think you have the one in the spectrum, you have Benchmark, um, who was our sort of parent company, um, going back many years. Uh, and they have taken a resolutely uncompromising approach of we are a partnership of five incredibly impressive partners. We don't have a website of any real meaningful content, um, and you need to introduce to us and that's what we believe VC should be and the rest is window dressing. And you have Andreessen, who have raised a huge amount of money, which will enable them to recruit a hundred, two hundred person team.

• 13:50Harry Stebbings?

  Enormous.

• 13:51Speaker 01

  Um, he will run a whole chunk of your business for you, right? They'll do the sales for you, they'll do recruiting for you. Uh, and they just find interesting, smart entrepreneurs with good product minds and, and sort of take away all the complexity for them. Um, and then you have Rocket Internet in Berlin, um, taking the kind of approach of, yeah, we're just gonna try every idea we possibly can and, and bring in smart business types to run that. Uh, and I think all three of those models are valid, uh, and I think every VC has to look at those and work out what makes sense for them, but they do need to make a clear decision on what their approach is gonna be. And I think our approach has been closer to Benchmark than Andreessen, but supplemented with,

• 14:35Speaker 01

  I think there's a couple of areas where we can add real value to our companies. Um, one is on talent. I think that's the biggest. Um, there's one around sort of the finance and legal side, which is not very exciting, but I think where we can be incredibly valuable. And I think we've got, I think the best team in Europe in terms of being able to help portfolio companies navigate the financial and legal sides.

• 14:56Harry Stebbings?

  Which are fundamental for startups, which is normally very expensive.

• 15:00Speaker 01

  Yeah, and you're always gonna have to get a bit of external lawyers as well. We've had this guy here Jerome Missa, who's been in this for thirteen years, and knows every possible sort of legal, structural, cap table situation. He's been through it, venture debt, and knows what is feasible, what's not feasible, what rules you can break, what rules you can't break. I think it's a good asset to have.

• 15:26Harry Stebbings?

  Absolutely. I'm glad you brought up competition and differing VC firms. But in recent years, we've also seen the rise of crowdfunding. I mean, also incredibly relevant with your buying a stake in Crowdkeep. But how do you feel crowdfunding is a competing model of finance towards venture capital? I mean, with the raids of Just Park's, I think, three point seven million, would you say that's in the realm of traditional VC funding rounds?

• 15:56Speaker 01

  Yeah, that's definitely in the realm. There's a lot of companies raising us. Suguru just raised a great round on CrowdCube. Adzuna are raising a good round on CrowdCube. And those are sort of VC-type rounds that are getting done. Normally, what you see on CrowdCube and on most of the platforms is there is a leader. There's a leader of the round, someone who has really gone in and done some DD and met the team and has made a decision to lead the round.

• 16:25Harry Stebbings?

  Like a leader of mass.

• 16:27Speaker 01

  As we did on CrowdCube, we invested four million or so pounds and then they closed another one and a half million on CrowdCube and they closed it in fifteen minutes.

• 16:35Harry Stebbings?

  I know, I narrowly missed out checking in in twenty-two minutes.

• 16:41Speaker 01

  I'm sorry. Maybe you'll come back again.

• 16:44Harry Stebbings?

  Hopefully, there'll be another round.

• 16:46Speaker 01

  Might start to get expensive. So there's often a lead to the round, and I think. Yeah, we we're talking about doing with other art companies where we'll lead around and then do another sort of one or two million on CrowdCube. I think it's a good thing to do.

• 17:01Harry Stebbings?

  So do you think then CrowdCube and VC industry in general, not CrowdCube but crowdfunding and the VC industry in general can actually work in harmony together?

• 17:10Speaker 01

  I think they can. I think you look at Angel List, um I'm gonna be sort of not too sort of, what's the word, polished on this. But I think Angel List are more directly competing with VC. You look at the Angel List syndicates that have come together in the US and some of the ones, people like Gil Dibner and Doug Scott in the in the UK.

• 17:32Harry Stebbings?

  Doug, Doug we had on the show last week.

• 17:35Speaker 01

  Excellent, there you go. Um so they've they've got real money there and they are not involved with VCs, right? They are taking the lead and they they can do sort of million, I don't know what checks they can do, but yeah.

• 17:47Harry Stebbings?

  Well, Tim Tim Ferriss in the States, um he's got a six million now.

• 17:52Speaker 01

  Yeah, exactly. So, yeah, the guys in the States can do VC Series As um with their syndicates and that is more of a direct threat. Um and so, yeah, Kleiner announced the kind of dedicated seed fund this week. And what I found amazing about it was it didn't use Angel List. Um I think that's that surprises me. I think a lot of this will be VCs probably having some sort of separate seed funding arm, which probably uses Angel List alongside um to help to do that early stage investing.

• 18:26Harry Stebbings?

  And talking of Angel List, I'll just add a pure interest. Where do you spend most of your time on the web? Is it blogs in particular, which blogs maybe, or which sites are you most interested in?

• 18:40Speaker 01

  That is a good question. I I don't think I do this optimally. I spend too much time on Twitter. Um I don't think it's sufficiently valuable. I don't spend enough time on Medium.

• 18:51Harry Stebbings?

  Medium is brilliant.

• 18:53Speaker 01

  Yeah, and I think there's a real danger of VC and in general of your attention span shrinking. Um and Medium is a good antidote to that, but it's it's carving out the time. Um and in terms of purely.

• 19:09Speaker 01

  Uh what's the word tactically in terms of finding interesting startups, which is I guess the the the clear ROI for me. Um tech EU is a great sort of roundup across Europe.

• 19:20Harry Stebbings?

  Okay.

• 19:20Speaker 01

  Um and then Venture Village, um I spent a bit of time in Germany and Venture Village is sort of the best in Germany. Um it's not amazing, but it's the best German uh outlet.

• 19:32Harry Stebbings?

  And I'd love to hear your thoughts on a lot of individuals now uh wanting to move into the venture industry. And I was wondering what your views are on getting into the venture industry and what advice you might give to someone contemplating the move.

• 19:46Speaker 01

  Um so I wrote a blog post on this, um which you can find on Medium, um. I mean, the first of advices, don't. Because most people who get recruited into VC get headhunted. Um so sort of chasing it is unlikely to work. Um and I think the best thing to get yourself noticed is to have some form of analytical sort of business experience, whether it's strategy consulting or investment banking, M and A or private equity. Um plus something that shows you're you've got entrepreneurial understanding and a real passion for tech. Um so ideally it would be founding your own startup.

• 20:31Harry Stebbings?

  Mm hmm.

• 20:31Speaker 01

  Um but if not that, then working for a startup or failing that, so they're working for a larger tech company. But then they're kind of biz dev partnership strategy type role. I think that's the sort of the ideal profile, um. And yeah, there's there's more jobs in VC now, but it's also more competitive, like there's more interesting profiles out there, so um yeah.

• 20:54Harry Stebbings?

  Absolutely. Well, do you mind if we then move on into a quickfire round?

• 20:58Speaker 01

  Mm hmm.

• 20:59Harry Stebbings?

  Okay, favourite book and why?

• 21:03Speaker 01

  Um.

• 21:06Speaker 01

  Good question.

• 21:09Speaker 01

  Good question. Um actually, one I I love is The Circle um by Dave Eggers, just because it's it's a great sort of dystopian view of the future of tech.

• 21:18Harry Stebbings?

  Okay, perfect. What advice would you give to yourself ten years ago?

• 21:25Speaker 01

  Um, leave Bain and join a startup.

• 21:30Harry Stebbings?

  Good advice. And when I say success, who's the first person that comes to mind?

• 21:36Speaker 01

  Bill Gates.

• 21:37Harry Stebbings?

  And why?

• 21:39Speaker 01

  He's happy. He's been amazingly successful, but he also seems fairly happy with it. And he's doing some really interesting kind of next step of evolving into being the leading philanthropist worldwide.

• 21:52Harry Stebbings?

  Bitcoin, fly or die?

• 21:56Speaker 01

  Fly, but it's going to take a lot longer than people think.

• 21:59Harry Stebbings?

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

• 22:06Speaker 01

  It's kind of frustrating. There's two that I can't talk about yet, which I'm really excited by. So the most recent one I can talk about is Nutmeg, um, which is, uh, wealth management, um, for the masses. Uh, and I think it's a great way to get people to A, invest in the first place and B, to invest in the right things and not to either sit in a cash ice of doing nothing or blow away their money on day trading.

• 22:32Harry Stebbings?

  And when you see a company like Nutmeg, do you become immediately excited or does it take a little time to get excited and have several meetings before you can really get involved?

• 22:43Speaker 01

  Nutmeg took a long time, actually. I, I knew Nick Hungerford, the founder, for years, um, before we invested. Um, and I, yeah, it took a little while to get it, uh, and then I took a little while to be convinced on how fast it could grow. Um, sometimes it happens much quicker. Sometimes there's a bold inspiration, but normally it's, uh, it's investing in lines, not dots.

• 23:06Harry Stebbings?

  Well, Rob, thank you so much for coming on the show. It's been an absolute pleasure having you on.

• 23:11Speaker 01

  Fantastic. Great to speak to you.

• 23:13Harry Stebbings?

  Now, for all the resources mentioned in today's amazing episode with Rob, you can find them at the blog at www dot the twenty minute V C dot com. And while you're there, check out Hiring Screen, simply the best, most reliable and relevant way to find the most suitable candidates for your job. If you have any questions about the process or anything like that, please do get in touch with me, [email protected]. I used them to hire my assistant Jackie and there's no turning back. Jackie has been incredible. Thank you so much for hiring Screen and we look forward to seeing you in the next episode.