3 Lessons from Jyri Engeström of Yes VC
A few weeks ago, we sat down with the Co-Founder of Yes VC, Jyri Engeström, to talk about his mission of creating a better world, angel investing, and how entrepreneurship can be the “soda straw” between different communities.
Jyri graduated from the University of Helsinki with a Master’s degree in sociology. His expertise in sociology has helped him to understand how humans work and how technology is changing the way we live. Jyri creates innovations that support social movements. Prior to founding Yes VC with Caterina Fake, he founded 2 mobile consumer companies: Jaiku, a social network which was acquired by Google, and Ditto, a local recommendation app which was acquired by Groupon.
What makes this episode so unique is Jyri’s knowledge about human social relationships, which is a perspective that not many VCs talk about on our podcasts.
Here are my 3 takeaways.
Angel Investors VS Venture Capitalists
Being an angel investor is very different from being a venture capitalist. When you are an angel investor, you don’t have to care as much about having an outsized return from your investment. You can invest in a company because you support the mission or the founders of the company. Jyri has made investments that only had returns of 1x or 2x and he is happy about it.
However, being at True Ventures for 4-years had taught him a different story about investing. A high rate of return is the most important factor when making an investment decision at a Venture Capital fund.
The Return Theory
Let’s say there are 10 portfolio companies in the fund, in most cases, 6 companies fail, 3 companies balance the investment, and 1 company returns the entire fund. Therefore, VCs are constantly pushing their companies to use their funding and scale faster, which can be exhausting and harmful for some startups if they are not ready to scale.
This brings us to the next point.
Align and be Clear About Expectations
Lean startup guru Steve Blank once said, “When you take money from a VC, their business model becomes your business model.” Expectation misalignment is the downfall of a startup and VC partnership. Many startups joined VCs before they were ready for rapid growth and they ended up being these “walking zombies” that didn’t know where and how to scale.
Therefore, founders need to do their research and to understand what the VCs are expecting from them. Expectations about the minimum respectable return, the gross internal rate of return, target revenue, etc. are things that founders need to understand very well before taking funding from a VC.
Invest in a Social Movement
Jyri brought up an interesting analogy- the “soda straw”.
A soda straw is an entity that connects two communities in the same social network but are not connected to each other. Like one of the Yes VC’s portfolio companies, HipCamp, a web platform for discovering and booking private or public sites for camping (basically the Airbnb for campers), is the soda straw between the camper and the tech community.
They are the type of company that Jyri is interested in. Before making an investment, he always asks, “Is it a social movement?”, “Is there a shift in human interactions that calls for such innovation?”, “What are the communities the product is supporting or connecting?”.
What is your soda straw?
Want to Learn More?
You can watch Jyri’s full video interview on our Demo Day website, or listen to his full episode on Apple Podcasts and Spotify.
Tune in next week as I share more learnings from Demo Day. Sending love from the entire CoEfficient Labs Team!
Go follow Demo Day Instagram for more tips and tools from the top-tier VCs.
Thanks Summer Yim for putting together these insights :)
