The Future of Pre-seed Investing
I am a futurist. This means that when I just interviewed Magnus Grimeland, CEO and founder of Antler, the early-stage VC, currently #1 VC according to Crunchbase, we hit on the big drivers of change. We talk about trigger points to achieve greatness, promising startups, the globalization of venture capital, and the importance of finding founders with drive, spike, and grit.
What’s happening in the pre-seed space right now?
It’s probably one of the fast, fastest growing parts of the global economy. More and more truly exceptional individuals that choose to spend their time and really all their time solving important problems and opportunities. And, you know, it, it is the best time ever for people to do that.
What was your hunch early on? What kind of model were you going for?
We work with exceptional founders from day one, supporting their business from the very beginning, supporting, putting together the co-founding team, validating the business model, literally investing time, energy and resource [even] before incorporation.
How to you go about matching talent?
We get about 50,000 applicants per year now. We also headhunt people ourselves. We select the top 3% of them who are excited about building their next great business. Some of them will have a very advanced view on what they’re going to build. Others have just decided that, okay, now I’m going to go out there and build the next great thing. Some of them we’ll partner up with others. If one is a great operator and the other is a great product builder, they will partner and build a very, even stronger co-founding team. We focus a lot on the business model validation early on. One of the things that irritates me the most is if I see an exceptional team working on something that really doesn’t make sense, and they’re wasting three to four or five years of their life to do that. That’s just a waste of tremendous talent and a waste of a lot of other people’s money.
You have offices in New York, London, Singapore, Sydney, Amsterdam, Stockholm, Nairobi, and Oslo. You are currently notably absent from Silicon Valley. Just explain all of this. I mean, certainly Silicon Valley, wasn’t your first thought? Where are you expanding and why?
The world’s best experts within a field, say battery technology, they can be anywhere. They could be in Japan or they can be in Boston, or they can be in in Sydney. You just don’t know.
What’s an example of what you do for these founders and startups?
We put this company together a couple of years ago in Stockholm called Skycraft, which is a tremendous drone AI company which flies over infrastructure to alert support crews about maintenance issues. In their first week of operation, we put them in touch with utility companies in 20 markets.
What about your organizational model?
We built this as a partnership and not as a top down hierarchical organization. When you set it up you have to give a lot of way. That means that whoever comes in and is leading a new location should have a similar type upside. When we add the new locations, 10% of the upside of that goes into this common pool.
What are your thoughts on the founder’s mindset?
There are three things we look at when we look to find great founders. We look at having a tremendous spike, something you are just amazing at. We look at the drive you have as an individual, like the ability to make things happen. And then we look at grit. I think those three things are just incredibly important. Most great founders whether you know their public image or you know them in person, I think you [universally] will find that they’re quite quirky characters [because] that they have these three characteristics. If you go over to some of your founders, you will expect them to only talk about their business for three hours. You may not even [get the chance to] mention anything else. So there is this one track mindset.
Why are founders so important and what happens to them later in the process?
Every week, you have a hundred hours available to yourself. Those hundred hours is everything that will determine the success of your business. Two to three years from now, you might have a thousand employees and your hundred hours shouldn’t be as impactful as they are now, because then you would have made a lot of wrong hiring decisions.
You say failure is not an option for good founders, what do you mean by that?
A lot of [coffee drinking] founders go to 20 meetups a week and and eat free pizza every day. They typically say things like: ”I started building this business which failed, but I learned a lot. Worse case scenario, it is a great learning journey. If I fail, at least I learned a tremendous amount.” If you go in with that type of mindset, as an entrepreneur, you’re just going to fail. Even the best businesses out there have had tremendous difficulty getting to where they are. You need to be aware of that. Conversely, the people who spend time putting together great teams and spend time validating the business models, and have a failure is not an option mindset, probably remove most of that systematic risk. The chance of failure is probably reduced to like 20-30% instead of being 93%, which is the norm.
I understand 40% of Antler’s portfolio companies happen to have a female co-founder and 78% of those have a female CEO. So my question to you then was, you know, did this happen by, by chance? Or, was it basically affirmative action?
We have an open application process. The criteria is the same for everyone. We just select the very, very best people that we find by headhunting or who applied. So there is no affirmative action whatsoever. What we do though, is we do spend two to four months with our founders initially, before we invest to put together a great to help them put together a great co-founding team to validate the business model. Throughout that process, you end up getting to know people incredibly well. You end up investing much more based on the intrinsics of the co-founding team and less on an hour’s pitch and [best case] a few follow-up meetings.
You can listen to the whole interview on The Future of Pre-seed Investing. A full transcript will shortly be available on https://trondundheim.com/podcast/
