I was lucky enough to get my first VC job in September 2009.
Scarily it’s now 2019, and I’m just embarking on my third VC role.
Switching VC jobs is “complicated” — you have the half-truths, the limbo, the pain of letting down the founders of companies you’ve invested in. The frustration of being “out of the market”. And the ups and downs of soul-searching and purpose-finding.
I’ve picked the brains of countless people smarter than me in this industry, from Shenzhen to San Francisco, for advice on my next step. Skipping lots, but I’m grateful to Mark Evans, Alex Gezelius, Kathryn Mayne, Shan Drummond, Harry Stebbings, Check Warner, Charlie Songhurst, Erik Serrano Berntsen, Madeleine Todd, Charles Seely, Ed Haddon, Chrys Chrysanthou, Rob Moffat, Dan Jones, Taavet Hinrikus, James Morgon, Niamh Gavin, Ben Holmes, Pat Grady, Shak Khan,Trevor Oelschig, Scott Sage, Fred Destin, Duncan Turner, Mike Chalfen, Robin Klein, Christopher Spray, Greg Marsh, Alex Brunicki, Lawrence Barclay, Max Niederhofer, Hampus Jakobsson, Leila Zegna, Jason Pinto, Eric Collins, Michelle Ashworth, Jon Coker, and of course Wendy Tan White & Rory Stirling.
The emerging picture is that whilst European VC has clearly changed dramatically this last decade, it’s poised to change even more in the next…
For one thing, the scale of tech entrepreneurship and VC investment has skyrocketed. To put it bluntly, there’s way more money, and way more funds, backing way more founders. Between 2009 and 2018, annual VC investment in Europe more than quadrupled, from €4.5 billion to €20.5 billion.
The Seed landscape has been transformed — by accelerators, Apple’s AppStore, AWS and Angellist — and by new brand-name Seed funds such as Point Nine, LocalGlobe, Cherry, Lifeline, Blue Yard, Connect and Kindred.
The big European Series A/B funds remain the same as in 2009 — Index, Accel, Balderton and Atomico — but they’ve been beefed up with operations teams, content strategies, events programmes and swankier offices. Several European rivals are expanding (Northzone, EQT, Creandum, Mosaic, Felix), but it’s the US funds — Sequoia, Benchmark, Bessemer et al — that are really threatening their dominance, creeping up the alphabet of VC rounds.
Later stage growth capital has arrived too — in a big way — with the likes of Vitruvian (2008), DST (2009), and Softbank’s vision fund(2016).
Happily, the exits have confounded many of the sceptics.
The noughties produced slim pickings in European venture — Skype, MySQL, TeleAtlas, TomTom, Rightmove. But this decade has fostered 61 European “unicorns”, and at least ten €5billion+ exits since 2014 (see below). It’s exits like these that help create an ecosystem.
Of course plenty of things haven’t changed. VC is still too male and pale —initiatives like Diversity.vc are catalysing change at last, but there remains a chasm to cross. We remain mostly late-adopters of technology in how we run our businesses. The egos of VCs still often exceed our value — particularly at this point in the cycle when pretty much every VC has a positive track record on paper. And the Limited Partner base of European VC remains fragmented, opaque and risk-averse — most VCs still take 18 to 24 months to raise a fund, trundling around the same family offices and endowments.
It all feels a little old-fashioned…
Venture may be scaling fast, but despite quadrupling to around $600 billion of global assets under management this decade, it’s still dwarfed by, say, Hedge funds ($3.2 trillion) or Private Equity ($1.6 trillion).
Naysayers are calling the top of the VC bubble — and of course we could see a correction. But we also know that technological disruption is transforming every industry — and we’re still only at the beginning. And the scale of those industries is gobsmacking: if a company as vast as Amazon can emerge from the smallest category below — retail — imagine what might be possible in some of the larger categories.
I believe VC is now at a tipping point. It could follow a similar path to hedge funds, which expanded from a $100 billion industry in the 1990s to one managing trillions by mid-2000s. First came a flood of new funds, then a painful shake-out, then the emergence of a few global giants, dominating the industry with superior technology, talent and resources, and tapping into global pools of capital.
I could be wrong, of course. It’s an industry cliché that VC “doesn’t scale”. It’s a people business, where relationships, judgment and trust matter.
But VC is steadily becoming more transparent, powered by data insights that mean investors don’t need to be as physically close to their companies as they once did. Benchmark discovered Elasticsearch before Dutch — or London — funds did. Bessemer probably has more data on European SAAS companies than any European fund. With LinkedIn and Angellist, founders are only a connection away whether they’re in Berkeley or Bucharest. Top funds can build unfair advantage through technology, spotting the most promising companies earlier in their journeys, and using their global footprint to assess companies against a global bar.
They’re also becoming global brands: A16Z has 330,000 Twitter followers (2M if you add Marc Andreessen, Ben Horowitz and Benedict Evans), and 350,000 monthly web visitors, around half of which are outside the US, according to Similarweb. For many founders, these global brands will trump local relationships.
To compete in the new VC climate, you have a choice: either go super-local and super-early-stage — building on-the-ground relationships with founders before they show up in the data. Or go global, investing in technology, brand, and network to surface the most promising companies and investments, and help them scale across continents.
What fascinated me about OMERS is that they’ve seen this dynamic play out in three asset classes already. OMERS manages nearly CAD$100 billion of assets and has had to innovate continually to sustain defined benefit pension returns for its 500,000 members.
OMERS spotted the potential of infrastructure investments in the late 1990s, rapidly becoming one of the most respected global investors in the sector, with assets today including London City Airport, Thames Water, Associated British Ports. Meanwhile, OMERS’ private equity arm has grown to $15 billion assets under management, with particular strengths in healthcare and business services. And Oxford Properties, wholly owned by OMERS since 2003, manages $50B of real estate assets from Sydney to St. James’s. All have grown into global players in their field, by attracting superb talent, taking a long-term view on world-class assets, and generating sector-leading returns.
So can OMERS repeat the trick in VC?
I believe we can.
First, OMERS has a clear mission: to deliver secure and sustainable pensions to 500,000 Ontario municipal retirees: the people who run Ontario’s emergency services, transit systems, electrical utilities and municipalities. If we do well, we benefit people who’ve devoted their working lives to their communities. In a world where great founders are increasingly mission-driven and conscious of their impact on society, I believe this will be a significant differentiation.
Second, OMERS is a global platform with vast assets and insights. For company founders striving to transform industries, OMERS’ deep experience and connections across the likes of mobility, healthcare and real estate will be a huge advantage — whilst our Ventures’ perspective on disruptive startups can help inform investments by the rest of OMERS.
Third, OMERS Ventures already has a reputation for backing winners. Since launching in Toronto in 2011, they’ve made bold investments such as Hootsuite, Hopper and Shopify — the latter a mega-exit, with a market cap of $22 billion at time of writing.
Last, there’s the team. Everyone I’ve met at OMERS has shared certain values and character traits. Intellectual curiosity. Integrity. Humility. Growth mindset. Open-mindedness. Bias to action. Willingness to roll up sleeves and help. In Damien, Tara and Henry, I have three colleagues who combine acute insight with a genuine desire to do the right thing.
We have a tonne to do – more people to hire, technology to build, European network to nurture, reputation to establish.
But if we can build a culture of low-ego, high-integrity, high-conviction investors, with great technology and the OMERS global network behind us, I believe we really could make a dent in this crazy industry in which I’m still incredibly lucky to play a part.
I dug out this passage from my journal a while back — it still feels apt…
“Apprehensive but excited. Excited because we have a great opportunity: a big fund, a reasonably blank sheet of paper, and we get to start afresh choosing the entrepreneurs and companies we really want to work with.
Can we keep the bar really high? Can we build our reputations as a team who genuinely make a difference to every entrepreneur — who make our minds up quickly, have the humility to admit what we don’t know, and always respect every founder? Can I build up the emotional strength to trust my instincts more? Can we be a great team, supporting each other’s decisions, challenging each other to be better, learning, evolving every day?”
To quote the late great Ingvar Kamprad:
“The most dangerous poison is the feeling of achievement.
The antidote is to every evening think what can be done better tomorrow.”