How to Pitch a Top VC with Simon Menashy @ MMC Ventures

Simon Menashy is Investment Director at MMC Ventures where he is responsible for leading new and follow on investments as well as supporting existing MMC portfolio companies. He also sits on the board for WeDo, Boticca and Sky Futures and works closely with a number of other B2B and B2C businesses including Growth Intelligence, Mubi, Small World, Somo. Prior to MMC Simon worked in European tech and media consulting, working with clients including the BBC, Virgin Media, BT, Thompson Reuters and Ofcom as part of the Deloitte Strategy team in London Items Mentioned in Today's Show: Base79 Growth Intelligence In Today's Episode You Will Learn: 1.) How Simon made his move from consulting into the world of VCs? 2.)Simon recently tweeted how not to pitch to VCs, so what should founders be doing when pitching? What are the fundamentals in terms of required documentation? 3.) Does Simon agree with Peter Thiel’s opinion that disruption is fundamentally bad for society? What industries does Simon feel will be next disrupted? 4.) With the increasing length of time it takes for venture backed companies to IPO, how does Simon feel the funding path is changing? 5.) How does Simon believe the tech eco system is going in London and what can be done to increase VC funding and engender a silicon valley esque feel to London? Today's episode finishes with a quick fire round where we hear Simon's thoughts on the apple watch, what the biggest red flags are when viewing a pitch and his most recent investment and why he said yes? You can follow Harry, Simon and The Twenty Minute VC on Twitter.

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 39 of the 20 Minute VC with your host, Harry Stebbings, and I am so excited to welcome Simon Menashy to the hot seat today. Simon is an investment director at MMC Ventures, where he is responsible for leading new and follow-on investments, as well as supporting existing MMC portfolio companies. Simon sits on the board at Sky Futures, Boutique and WeDo. But you've heard enough from me, so without further ado, here is Simon Menashy.

• 0:36Speaker 01

  You have now arrived at your destination.

• 0:39Harry Stebbings?

  Simon, welcome to the 20 Minute VC. It's an absolute pleasure to have you on the show.

• 0:43Speaker 02

  Thanks very much for inviting me, Harry. Looking forward to it.

• 0:46Harry Stebbings?

  Let's start by hearing a little about yourself and your background and how you made your move into the venture industry.

• 0:53Speaker 02

  Sure. So I grew up in London and I guess I was one of those kids that was always into technology. You know, I was very lucky to have my first computer when I was four years old and that's something I always sort of carried through as I was a kid. And when I was at university, I guess I added to that a bit of an entrepreneurial urge. And you know, I did a bunch of entrepreneurial type projects. I was leading some societies and organised a big festival. And out of that, I spun a little IT project. I used to do consulting for small businesses and none of that was kind of a big scalable startup, but it gave me a taste for, you know, the world of small business and that sort of stuff. I kept that with me when I was working at Deloitte, which was my first job out of university.

• 1:37Speaker 02

  I was a strategy consultant for my sins, mainly doing technology, media, telecoms kind of work. And it was mainly with big companies rather than small companies, but it really gave me that grounding in, you know, just how business works and being able to look at a commercial problem and get to the heart of it quite quickly and also learn from some quite impressive people amongst my clients and, you know, people much more senior than me, who I could, I could see how they used to, how they would operate and learn from that. I decided over a course of a few years doing that, that it was great experience, but really I wanted to be working with companies that were a bit more fast-moving, a bit more on

• 2:17Speaker 02

  the cutting edge digitally, ultimately smaller companies and entrepreneurs who actually can... You know, so you can suggest something to them and they've implemented it a week later, rather than, you know, you've got to go through some six month political process at a big company.

• 2:32Harry Stebbings?

  Yeah, regulation.

• 2:34Speaker 02

  Yeah, exactly. So I, I decided I wanted to move into venture capital or something entrepreneurial. And I basically spent about six months trying to meet as many people as I could, network my way into the space a little bit. And ultimately, I got introduced to MMC through a recruiter. And there are certain recruiters that are quite good for venture capital roles. There aren't that many roles, so there aren't that many recruiters. But, you know, I got signposted in the right direction by a few other people. And I had a few interviews at a few different VCs and ultimately ended up at MMC. So I guess it's as traditional route as there is, you know, strategy consulting,

• 3:14Speaker 02

  recruitment consultant and then VC. But, you know, it worked for me.

• 3:21Harry Stebbings?

  And you said about networking within the industry. That's often a problem for founders, just getting to the door of VCs. How would you recommend networking within the VC community?

• 3:31Speaker 02

  Well, for me, trying to get a job in VC, it was much more about using the network that I already had. So, you know, I wasn't in VC, but I did have colleagues and clients who knew people in that world. And I was able to get a few introductions. And really, I'd recommend that when founders are trying to pitch VCs, it's the same story. You may not have a little black book with all the VCs in it, but you probably do business with people or you have earlier stage investors or you have a peer network that can get you some good introductions to VCs. It's not true that getting introduced in a warm referral to a VC is the only way to get investment, but it's absolutely true that it helps. We certainly, most of our investments are people that we've known for a few years.

• 4:14Speaker 02

  By the time we invest, all their people that have come through are really a person that we trust. And it makes us pay more attention and get that person in front of us quicker.

• 4:23Harry Stebbings?

  And you recently tweeted about how not to pitch to VCs, leading me to reverse this and ask, what should founders be doing when pitching? And what are the fundamentals could be in terms of documentation that you require in a meeting? And even to the most basic thing of what to wear?

• 4:40Speaker 02

  What to wear? I would say honestly, whatever you normally wear for your job. You know, I don't want an entrepreneur who's doing a cool kind of East London tech company feeling like they need to put on a tie to come and pitch to me. But no, I recently tweeted about somebody who had, they'd emailed something like eighty different VCs, all in one email, all in capital letters. It didn't make sense. You know, that's absolutely not the way to do it.

• 5:06Harry Stebbings?

  Something wrong about that one.

• 5:07Speaker 02

  I think so. I mean, honestly, I think a lot of founders make the mistake of thinking that they need to come up with a really big formal pitch. They need to fill an hour. They produce a big IM.

• 5:21Speaker 02

  You know, and they kind of over-prepare on the documentation and the format and they under-prepare on just being ready for questions.

• 5:28Harry Stebbings?

  So what is the documentation you'd like to see then?

• 5:32Speaker 02

  Honestly, in the first meeting, I would be much happier with eight to ten, eight to twelve slides, or even a couple of slides on a piece of paper that we can sit down and talk to. Because I think really first pitch meetings are not formal pitches that last an hour. They quickly devolve into question and answers. And I think the best founders go with that and love the challenge and rise to it. And you come out of the meeting feeling you've had a great conversation. I think the mistake some people often make is they get thrown very quickly when the VC asks a question and goes off track.

• 6:07Harry Stebbings?

  Sure.

• 6:08Speaker 02

  Yeah. I think the reality is that a VC is testing you. They're testing your thinking. They're testing, you know, really is the business model going to work? Really is the market as big as we all think it is? And is that really addressable? And you need to know the answers to that stuff. And not really the answers, because nobody really knows. But you need to be able to think around it, have data to back it up, and all that good stuff. And often, that will take you off your slides, and that's fine.

• 6:35Harry Stebbings?

  And how long do you like a meeting to go on for? I mean, you know, you might book in an hour, but does it vary entirely?

• 6:42Speaker 02

  It does, yeah. Lots of hour-long meetings go on for slightly more than an hour, and that's a pain for everybody. It throws people off schedule. It's a case of preparing for the hour. I would much rather that a founder comes in with fifteen, twenty-minute presentation prepared, which probably takes half an hour because, you know, I'll ask some questions and we'll have a nice chat around a few things. And then we have lots of time to delve into different areas or talk about a particular challenge that I might have in the rest of the hour. So I think the best meetings probably are an hour long, but that's because it started shorter and it got longer because it was interesting.

• 7:21Harry Stebbings?

  And I'm intrigued. What rounds are you most interested in being involved with and why?

• 7:27Speaker 02

  So at NMC, we're typically investing in the Series A round. So for us, that means a company that's got some initial traction, it's got customers, customers that are willing to pay and that are demonstrably getting some kind of value or ROI out of the product, even if it's not a huge number of customers yet. And it's also a company that can take or is looking to take kind of one to five million pounds typically. We do a little bit of pre-series A as well. So I would think of that as a company that's probably twelve months away from their Series A and looking to prove the metrics to get there. But typically, we're in and around the Series A sort of stage.

• 8:08Harry Stebbings?

  And a topic much discussed at the moment is the idea of disruption and disruptive industries. Do you agree with Pete Steele's opinion that disruption is actually fundamentally bad for society? And what industries do you feel are next to be disrupted?

• 8:23Speaker 02

  Yeah, it's interesting. I mean, I think when a lot of people say disruption, what they really mean is a new technology or a new way of doing things or a new approach that makes something ten times better or ten times faster or ten times cheaper. And that's normally ten times better, faster or cheaper for some sort of customer, whether it's a consumer or a business. And I think that's always got to be a good thing. It's not always a good thing if you're the producer who's currently serving that customer. And it's not a good thing also, I think for society, if the customer isn't everybody. So in an ideal world, there's lots of disruptive businesses and ultimately everybody in society is being helped by at least some of those.

• 9:04Harry Stebbings?

  What would you say about Uber then? It's replacing black cabs.

• 9:09Harry Stebbings?

  Potentially making thousands of people unemployed, but it is arguably a more effective, more cost-effective replacement available to everyone.

• 9:18Speaker 02

  I don't think it's replacing black cabs. There may be a little bit of replacement in the short term, but I think it's enabling totally new journeys. So for me, I probably get cabs twice or three times as often as I used to two years ago before Uber came along. And I'll get them for those slightly marginal journeys that I probably would have taken some other mode of transport home. I would have taken a night bus or something like that. So for me, it's about, they've made it so much better, easier and cheaper that suddenly it's an option where it wasn't an option before. So really, they're disrupting, you know, inefficient train companies or, you know, lack of choice on transport at night and or going down a less safe route than you might otherwise have. So I think

• 10:01Speaker 02

  it's, it's, it's good for society. It's good for consumers. It's good for people. And I think as long as businesses is across the gamut of companies that are getting funded by VC, everybody's getting a share of that. By which I mean, everybody's the customer for somebody, then I think that's fine.

• 10:21Harry Stebbings?

  And then what industries do you feel are next to be disrupted?

• 10:24Speaker 02

  I think we're, we're moving away from a world where big means efficient. So big companies do lots of things in an okay way. Because I think now technology is enabling people to do very niche things in just as good way as a big company can, can do that. And we've seen that a lot in, in lots of industries. And I think the next industries that we're going to see it in is where it's been too difficult to do so far. So in industries like health, in industries like fintech where there are a lot of regulatory barriers, in industries like travel and logistics where there are a lot of physical things involved, so it hasn't just been a software problem until now. Those sorts of industries where we've had less headway to date, but now there's a new generation of startups that are starting

• 11:09Speaker 02

  to, to really change the way that some of those big, slower and quite comfortable industries work.

• 11:17Harry Stebbings?

  And talking fintech then, why do you think London is the fintech hub that it is?

• 11:24Speaker 02

  I think London's always been a financial services hub, or at least for the last few decades. So it's more a matter of technology changing every industry and the financial services industry being in London. So London has that great combination of a financial services industry that's already up and running and a lot of that world happens here, combined with a great environment for tech companies. So I think we'll see London continue to thrive there as long as we we and the government can create the right environment and continue to have the right environment around funding, regulation, support for small business, all that sort of stuff. And there's been a good story in all of those fronts in the last few years and we've seen it as London has really emerged as a technology capital.

• 12:09Harry Stebbings?

  And what do you think the government can do to further this atmosphere and engender this almost Silicon Valley-esque feel to London?

• 12:18Speaker 02

  I'm not sure it's entirely within the government's gift, but there's a lot that the government has done and can do and really successive governments of all of all colours. So E I S is a fantastic example that has made London one of the best places and the UK generally one of the best places to raise venture capital funding in Europe. And it's brought a lot more capital into the market from sources that might otherwise not be looking to invest in in young businesses or private companies or technology. And that's a scheme that most startups certainly that go the venture capital route have benefited from at some point in their life cycle. And that we're lucky that successive government has protected or enhanced that scheme rather than changed it. And I think that's always a risk.

• 13:04Speaker 02

  I think R and D tax credits has also had a big impact. I think generally making good noises and a good buzz around things like Tech City and the sharing economy have been helpful, although there's less practical help, I think, there.

• 13:18Speaker 02

  But it's it's down to creating an environment in which entrepreneurs and VCs and other other participants can can create a great community. The government can't do it on its own.

• 13:28Harry Stebbings?

  And with the increasing length of time it's taking for venture backed companies to IPO, how would you say that the funding path for startups is changing?

• 13:38Speaker 02

  I think at the IPO end, when you're talking about very large startups or startups that aren't really startups anymore, the market's changed quite a lot and you're seeing a lot more private capital. And again, that's the sort of capital that might not have been investing in startups before flooding into the market. And Uber that we talked about before is a great example of that. But generally, large tech companies raising mega rounds, it's private capital sort of replacing what the stock market might have done in the past. But I don't think that's impacting too much what's happening on the earlier stage. I think at seeds, we've got a lot more small VC funds, a lot more angels, a lot more business people who are interested in backing startups that are in their domain of knowledge. And

• 14:22Speaker 02

  we've seen a real explosion of seed availability and people are raising, I think, smaller initially, but more frequent rounds. And then there's a good availability of capital up to one, two million pounds, something like that. Unfortunately, I'm not seeing the landscape changing all that much once you get to the series A sort of stage. There's actually not that much more capital in that market than there ever was, really.

• 14:46Harry Stebbings?

  So would you agree with the barbell analogy that there's a lot of capital at the seed stage and a lot of the later just pre-IPO stage, but then there's the thinning out in the series A, series B?

• 14:57Speaker 02

  I think that's how we're seeing it practically, yes. So a lot of the series A and series B money, ultimately, the LPs and those funds are still institutions, pension funds, insurance companies, and traditional LPs. And they're probably not making any more of an asset allocation to VC than they ever were. And in fact, because so much of the rest of their portfolio is done poorly, and the percentage of VC has always stayed the same, the absolute amount of pounds they're putting into VC has probably come down. And really, what that means on the ground is there's just not that many VCs. I could probably name you 10 VCs in London who can write a good series A check and will do more than a couple of those a year. And that's a problem for the community, I think.

• 15:41Harry Stebbings?

  What would you say is a good series A?

• 15:44Speaker 02

  So companies raising anything from sort of one to five million where they're probably doing something along the lines of half a million to a few million of run rate revenue. They've figured out they're scalable or they're starting to figure out their scalable customer acquisition channels, they're starting to get their KPIs in shape and things are moving in the right direction and they know that they can deploy money into acquisition, hiring of salespeople and all that, go to market side of the business as well as technology and see a return on it in terms of increasing the valuation of the company over the next couple of years. And normally we see companies, frankly, they do a couple of series A rounds

• 16:26Speaker 02

  or they do, you know, a bridge, something like that, because it's taking longer for those companies then to get to series B.

• 16:34Harry Stebbings?

  And if it's okay with you, do you mind if we move into a quickfire round?

• 16:38Speaker 02

  Sure.

• 16:39Harry Stebbings?

  So what's the biggest red flag when being pitched to by a startup?

• 16:44Speaker 02

  I would say defensiveness, so not being willing to engage in challenge and conversation. There's probably a couple of others, I don't know, naivety is okay.

• 16:55Harry Stebbings?

  Is that nervousness? Are people defensive because they're nervous? Is it defensive because their idea is being attacked?

• 17:03Speaker 02

  I think people who aren't willing to entertain the idea that they don't have everything a hundred percent right or ready are a difficult kind of person to invest in. You know, all of our companies go through challenge and evolution of their business model and experimentation and a great VC founder relationship is about support and challenge and figuring things out together and debate. And if a founder doesn't seem willing to engage in that right from the start, then I think it's going to be difficult to have that sort of relationship. And also we've got to work with that person for, you know, it could be three to 10 years.

• 17:46Harry Stebbings?

  What's your typical, what's your typical investment length? I mean, they typically say a seven-year marriage, but what would you say yours at MMC would be?

• 17:55Speaker 02

  It's difficult to say. So we sold a business last year called Base 79, which we had in our portfolio for five years. We've got a couple of companies that have been in our portfolio for only two or three years that are getting quite significant inbound interest in acquisition, although the debate for us is to continue to invest and grow it or to think about those now. But then equally, we have a company in our portfolio that's been there for more than 10 years. They've done super well. It's a very valuable company now, but it hasn't been the right thing to sell it yet. So I think we're coming out of a period where it was very hard to sell companies for a few years after in the financial crisis.

• 18:36Harry Stebbings?

  Absolutely.

• 18:36Speaker 02

  And we sort of need to see and establish a new normal for a holding period. So I hope it will come back to three to seven years. But right now, it's certainly at the upper end of that.

• 18:50Harry Stebbings?

  Okay. And Apple Watch, success or failure? Why are you pinning it?

• 18:56Speaker 02

  It's always, it's dangerous to bet against Apple on these sorts of things. My personal view, I would say version one is going to be rubbish but still sell a lot. And version two will be much better and a big success.

• 19:09Harry Stebbings?

  And will you be buying one?

• 19:11Speaker 02

  I will not be buying one, but somebody else in the office has already ordered one.

• 19:14Harry Stebbings?

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

• 19:20Speaker 02

  So we closed in February an investment in a business called Growth Intelligence. And it's a company that uses machine learning and big data techniques to solve a pretty simple problem, actually, which is if you're a business selling B two B, how can your salespeople make much better targeted calls and ultimately improve the conversion rate of the approaches they're making to potential clients? And we liked it because it's a big market, it's a big problem, it's a problem that goes across all sorts of industries. And it's an example of using really smart, cutting-edge technology and analytics, but actually it's a relatively simple message to sell to companies that you can improve the performance of their salespeople.

• 20:03Harry Stebbings?

  And we always hear about the Importance of markets, but we almost a ten minutes ago or so identified that Uber had slightly created their own market potentially in that quasi range of not getting a bus and not getting a black cab and getting that middle range. So do you look for a market specifically or do you appreciate that there is the potential for market creation?

• 20:26Speaker 02

  I I think very much the potential for market creation, but um depends what you're talking about in terms of a market. Often a market can be um money coming out of a consumer's pocket. So it's coming out of their pocket for your thing instead of the other thing. Um it might not be totally the same market, but it's uh it's the same pounds and pennies that you're talking about. Um and often uh you're selling into what might be quite established pace, but you're doing it in a really um new way. And you might use the established market as a good benchmark for how big it's likely to be, but you've got to deviate it from that as you get better and figure out really who you're selling to and how big that is. So I think existing markets are useful to look at, certainly useful to look at

• 21:08Speaker 02

  um in the early days, but over time, hopefully you can create your own market for some companies.

• 21:14Harry Stebbings?

  Well, Simon, thank you so much for coming on the show. It's been an absolute pleasure chatting to you.

• 21:19Speaker 02

  I really enjoyed it. Thanks a lot, Harry.

• 21:20Harry Stebbings?

  Thank you so much for listening to today's episode of the Twenty Minute VC and you can follow Simon on Twitter at Simon Menashy. And you can follow the Twenty Minute VC on Twitter at Twenty Minute VC, all in letters. And we would love to hear what you think. So please don't hesitate to email any future questions you'd like to be asked to harry at the twenty minute vc dot com. Thank you so much and we can't wait to see you in the next episode.