#7 Tech or treat
October 2021 | Practical content about venture capital investment and the startup ecosystem curated by and for entrepreneurs
Trick-or-treating — dressing in costumes and going door-to-door for treats — has been a tradition in the United States (and increasingly in other countries) for more than a century. Today, technology is everywhere… including Halloween (e.g. AR apps to carve pumpkins)! Tech is becoming the new treat, and this issue spotlights two amazing firms operating in this space.
In this seventh issue of ¡Alirón! we talk to Lightspeed, one of the most reputable Silicon Valley VCs, and to Seedtag, our portfolio startup and the leading contextual advertising company, which has recently raised a €34M funding round to continue its global expansion.
WORDS OF VC-ISDOM Paul Murphy, Partner @ Lightspeed
In our “Words of VC-isdom” section, good friends of ours at other top international VCs tell us about what they do, what they look for, what they think about Spain as an investment destination, and share valuable do’s and don’ts with the entrepreneurial community.
ABOUT LIGHTSPEED
Lightspeed was founded in 2000 amid the dot-com bubble bust when six investors from Weiss Peck & Greer Venture Partners created a $1 billion fund for early-stage investments. Today, Lightspeed is one of the most well-known Silicon Valley venture capital firms that has backed the likes of Calm, Snapchat, and Epic Games. 20 years after its foundation and in the middle of the COVID19 pandemic, Lightspeed closed on $4.2 billion in new capital across three funds. The firm has nine offices globally and a rapidly expanding team. Let’s meet Paul Murphy, their newest European partner!
Introduce Lightspeed — who you are, your investment thesis including in what sectors, models, and stages you invest, what makes you different, etc…
Lightspeed is a multi-stage venture capital firm focused on accelerating disruptive innovations and trends in the enterprise, consumer, and health sectors. Over the past two decades, the Lightspeed team has backed hundreds of entrepreneurs and helped build more than 400+ companies globally, including Snap, Nest, Nutanix, AppDynamics, MuleSoft, OYO, Guardant, StitchFix, and GrubHub.
Lightspeed and its affiliates currently manage $10.5B across the global Lightspeed platform, with investment professionals and advisors in Silicon Valley, Israel, India, China, Southeast Asia, and Europe.
The European tech ecosystem has grown significantly in recent years. How do you see Europe as an investment destination? Are there any particular European geographies you focus on? How much do you invest internationally vs in your home country?
We believe founders in Europe have every bit the same opportunity as founders in the US, and as such investing out of the same fund. We will deploy as much capital into Europe as we find an opportunity.
Is Spain a geography you are interested in and that you are actively looking into? Why is that? What are your views on the Spanish entrepreneurial ecosystem as a whole and its state of development? How does it compare to those in other European countries?
Spain is one of the top talent markets in Europe and a focus for Lightspeed. Top early-stage funds, universities, business schools, hubs for global gaming, and other tech companies all create the ideal environment for startups to form and grow.
In light of your broad investment track record and experience, what is your opinion about the Spanish entrepreneurs vis-à-vis those in other countries?
We are keenly aware that some of the most successful founders globally emerged from Spain.
What is a must-have in the projects in which you invest?
We look for purpose-driven founders, not founders looking to reverse engineer an exit or fast follow a US market leader without some fundamental innovation.
What are the most common mistakes that you typically see among founders looking into raising capital from VCs?
Even pre-seed startups can find some proxy for market need/fit relative to the product they want to build. Get some validation, however, you have to get it. It will give you a conviction you can’t fake, which is contagious when pitching for talent and investment.
If you were to give just one piece of advice to any entrepreneur, what would that be?
Focus on the problem and purpose, not the solution. Your solution will change over time.
What is the best way for entrepreneurs to contact the Lightspeed team?
Twitter is actually a highly effective channel for us because as a founder, you can see what topics energize us. We are a distributed and diverse set of partners so it’s always best to find the right fit. I’m @paulbz, others at Lightspeed can be easily found.
LEARNING WITH… Albert Nieto and Jorge Poyatos, co-founders & co-CEOs @ Seedtag
In our “Learning with…” section, entrepreneurs we have backed, put some of their hits, mistakes, and learnings when building and scaling their companies at the disposal of the ¡Alirón! community.
ABOUT SEEDTAG
Ex-Googlers Albert Nieto and Jorge Poyatos founded Seedtag in 2014 and built what today is the leading contextual advertising company in Europe and Latin America. Seven years later, they have a team with more than 200 people and count many top brands such as Microsoft, eBay, Samsung, Universal, and Adidas among their customers.
Seedtag’s innovative AI-driven technology helps brands and publishers place digital ads based on the content that the reader is consuming without the need to store cookies. In September 2021, Seedtag closed a €34M funding round led by Oakley Capital with participation from All Iron Ventures and Adara Ventures, which will be used to expand to the US market.
Tell us about why and how you decided to launch Seedtag and where you guys are today
Back in 2014, Seedtag originated with the idea of being able to add in-image tags for users to be able to click and purchase items directly from the image itself. After some time of trial and error, we concluded that the approach wasn’t going to be successful, so we decided to reposition ourselves in the market. We knew that images were still highly valuable assets, but then we found that some advertisers wanted to use those images in a way that would drive their brand awareness and attention. This changed the game, leading us to develop LIZ©, our contextual artificial intelligence technology, offering a successful solution to our clients, and the rest is history.
What we did, and continue to do, was generate a technology able to convert visual media content into usable advertising inventory, creating a win-win scenario: the publisher increases its revenue by monetizing in-content placements with our technology through careful and respectful formats for its readers, the advertiser has at its disposal a new way of reaching its customers that presents exceptional metrics and the user consumes advertising that is 100% related to the content they consume and fully respectful of their privacy.
Fast forward to today, we are continuing to make bold moves and strategic decisions to lead the contextual advertising industry worldwide. We have a global mission and will continue growing and challenging the market until our contextual advertising solutions are seen everywhere. To become the first choice in contextual partners for brands and publishers, you need to continue innovating and elevating the bar — we recognize this, always seeking to maximize impact as we combine brainpower and technology to take advertising into a new era.
What is an average day like for you as co-CEOs? How do you manage to lead Seedtag and still find a work-life balance?
With Seedtag, we’re at an important stage where it’s key to maintain a growth mindset. We’ve changed from start-up to scale-up, growing rapidly and preparing the organization to absorb the growth we are having. Investing in the central team and bringing new central team heads to support the business growth has been a key focus for us.
Another key aspect is how to maintain the company culture while your team is more than doubling year after year. We’ve worked hard with our People team to be sure everybody knows what we want to do, why we want to do it, how they can contribute to this mission, and ensuring they feel engaged and excited about it.
As CEOs, it is tough to disconnect as there are always things to improve and everything is your responsibility at the end of the day. Being part of Endeavor, sharing our journey with other CEOs who are facing similar challenges, and having a coach/mentor for yourself are some of the things that make it easier for us.
How would you define your leadership style? What are you good at? What do you need to improve? What has been your major learning in this area?
Some may say working together on this journey has been a test of our compatibility as joint leaders. We’re lucky to have worked really well together these past seven years. We learned a lot from working at Google, and we brought a few things from there to our leadership style. We’d like to define it as challenging but fun while allowing plenty of time to work together with the teams to mentor them and move things forward. Our collective culture is defined as: “We are self-starters that make data-driven decisions to maximize impact.” So, anyone that joins our company really reflects this.
We, as co-CEOs, are happy to complement each other pretty well, at least we believe so and from what we’ve heard from our team it must be true. We’ve utilized a divide and conquer approach: Albert is more into the business side of things, focusing on marketing, growth, sales, and finance, while Jorge is more into the vision, operations, and tech side of the company. We are aligning together every day these two sides to make the most of it, but having two of us is really advantageous, serving the teams more effectively than if there was just one of us. We keep all the strategic decisions to be agreed upon between us and I think the mere fact of having to convince one another improves the decision-making process a lot, which is critical in a company of our size.
One of the major learnings we got is the blend of talent from people that came along in the very first days, plus the hiring of experienced leaders that incorporate new synergies from previous companies. This blend creates unique movement forces that give us quite an edge.
What has been your roadmap to define Seedtag’s strategic priorities over time when you have so much on the table?
Being two founders and co-CEOs definitely helps at this point. How we divide the workload and set strategic priorities is a common question for us, but, at the end of the day, it’s easier for us to do it together than alone. It relieves some of the CEO pressure while allowing us to reflect on our next steps together, and we believe it prompts us to avoid making mistakes that one brain alone could make.
When setting the roadmap for Seedtag, there have been many different steps according to the various phases that the company has faced in the past. The common ground for Seedtag looking forward has been what we defined in the early days, which mainly got more ambitious and audacious over time. These were the main pillars of Seedtag itself: first, understand consumer interests (using the latest AI technology); second, contextual creatives that resonate with consumers; and third, integrate messages into the most premium publishers at scale. These three pillars drove over decisions when thinking of M&A opportunities, international expansion, or even hiring the talented people we needed to achieve our utter mission -to become the global contextual partner for brands and publishers.
Lastly, when we do have a lot on the table, we know we can rely on our team, allowing us to step back a bit, look at the big picture and redefine our strategic priorities 1–2 years in the future. Having such a supportive team and being able to rely on them is key to not burning out in our everyday tasks. Our team is our backbone, giving us the necessary support to be able to deliver on one of the most important duties of any CEO: strategizing and prioritizing for the company.
When did you decide to scale internationally? How did you define that process?
We decided to begin internationalization once we were consolidated in the Spanish market. This happened in 2016, two years after creating the company, when we had already achieved a turnover of more than 2 million in this market. It was then that we decided to expand to other countries as a company, opening in France, Italy, and Mexico. Today, we are present in nine countries and our next big goal is to expand to the United States, one which we are already working toward.
The whole process of scaling internationally aligns really well with our vision and how we want to serve our customers on a global scale. So, it was paramount from day one to expand our frontiers and look for publishers, and customers overseas that can benefit from economies of scale.
Like any process, it takes a lot of trial and error, but, what was incredibly helpful was receiving valuable advice from people who have experience in this area. Having great VCs on our back and a network of like-minded people, supported us in crafting a unique playbook to internationalize the company country after country. This playbook is constantly being tested in new markets and while at the beginning it was organically growing, nowadays we are also testing and looking at how M&A works for us when thinking about new markets, but that’s a different story.
Building a great team is critical for any startup’s success. What has been your magic recipe to do that? What is the greatest challenge Seedtag faces in this area?
The key to success is to have a reliable team to delegate to so that the company does not have to rely solely on the CEOs. This is incredibly important for a start-up-style business, especially when reaching the stage of rapid growth and internalization that we are currently in, which not all companies in the same boat realize.
That being said, our strategy is to combine the development and promotion of our internal talent with the hiring of key executives. Building a high-level executive team would take executive pressure off of us on a day-to-day basis. With that in mind, we incorporated a Head of Growth, as well as experienced heads for the Marketing, People, and Design departments. Additionally, we added a position to manage international campaigns, supporting our growth in other markets.
In short, we have created a solid layer of top management underneath us that will allow us to absorb the rapid growth we are experiencing. This strategy will support us as we continue to climb the ladder of success, transitioning from a start-up to a scale-up.
What main piece of advice would you give to other entrepreneurs raising capital based on your own learnings?
What worked best for us has been being able to choose the VC that would help us the most in each stage. We believe that when raising capital, it’s not just about the money, but about which partner can better support your growth plans. That’s why through Seed, Series A, and Series B we got different VC profiles that were crucial at each stage.
To achieve what we think any entrepreneur needs to start raising money even when they don’t necessarily need to, so cash in the bank is not a pressure to sign a deal that might not be in the best interest of the company. Also, interview different investors to see which can align the best with your goals and help the most with the business plan.
Any other recommendations you have for current or aspiring entrepreneurs?
We would advise them to talk to as many entrepreneurs as they can, and ensure they truly understand what entrepreneurship means before getting started. Once they understand the field, they can decide whether or not it is for them.
Entrepreneurship is not a 100-meter sprint, and there is nothing further from the truth than the belief that the success of a new business happens overnight. Entrepreneurship is a marathon based on years of hard work. You need commitment. It’s a different way of life with pros and cons, and therefore it will depend on your situation and your tastes and interests whether it will pay off or not. Trial and error are normal, but it’s important to build your foundation strong to support you in your growth.
There are plenty more useful tips, such as looking for complementary founders, distributing the equity appropriately, having a good partners’ agreement, etc. Still, all these things do not guarantee success, but they can save a good project from failure. It’s important to not give up, just as we started on a different path than we are currently on, as the possibilities to grow from a small start-up to a scalable business are endless.
Latest AIV portfolio rounds
Just a quick note on some of the most recent transactions relating to our portfolio companies
- SPOTAHOME: Mid to long-term residential rental platform
SPAIN | $29M round led by 14W with the participation of Kleiner Perkins, Seaya Ventures, Passion Capital, and Alma Mundi Ventures.
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