Lessons from a SaaS investor
From Aerospace Engineering to funding Unicorns such as Collibra, Patrick Polak, Managing Partner Newion Investments, explains his transition, type of companies his funds invest in and learnings from the Tech bubble era on this podcast.
Link to the podcast: https://podcasts.apple.com/in/podcast/the-european-vc-journal/id1464703814
Other interesting questions covered on the podcast:
· Key metrics which excite a VC in B2B software world
· Which books are highly recommended for the founders?
· Different leadership styles of the entrepreneur (working in the company and working on the company), and why working on the company is an absolute must?
Excerpts from the podcast:
· There are so many VCs that appeared after the dot-com bubble burst. Could you please share your battle scars out of those years of investing? What’s your investing style, and what would you suggest to the fellow VCs?
Answer: A couple of fundamentals. I’ve made mistakes, and I try to avoid it. I’m not the head of success I’m head of the failure here. The way I look at the opportunities is as follows:
1. One of the most essential things for investing is a very strict focus. Just to give you some color, the companies at the stage we invest in have very few and very limited data points. The only thing you basically have is the hope and dreams of the entrepreneur. You must be able to bring context to these data points. We are a B2B software investor. If it’s a cool B2C proposition. I can say — Great idea, but I can’t relate to that. So, the critical thing you need to know and that may sound less romantic is to limit the risk elements there are or at least understanding where the risk elements are and try to mitigate them. So, I learned that the hard way. I did some investments outside of our core focus, and they all failed.
2. Is there a possibility for this venture to become a market leader, or is it on its way to the market-leadership?
You need to have that ambition to get there. Before the market leadership comes product-leadership and before that comes thought-leadership. Start with thought leadership. You have to have the best vision on the planet, which others acknowledge. So, not by your mother, not by your colleagues, not by your friends but probably analyst writing about you, competitors are talking about you, early customers are saying “I’ll buy the product from my innovation budget because these guys are awesome. So you need to work on that thought leadership and acknowledgment.
· What is the difference between scaling and growing?
The difference lies in the predictability of the business model. A scale-up is a predictable model which can be replicated.
If I know that it takes four months to convert a suspect into a happy paying customer, and then I look at my sales pipelines, and I know how many people and time is required to build that pipeline. My business is getting predictable. I’ve built my money machine. I built my process. And if I have made that then I can duplicate it, and that’s called scaling, and very few companies are really scaling. They’re growing. They’re not scaling.
Example — If you and I are going to start a company. We go to the Chamber of Commerce, now we have our “cool-company”, and then we go to a café, drink coffee, and we see somebody serving our coffee, and we ask “hey what do you do?” he says “I’m a student”, and then we ask why don’t you come work with us and he agrees. So, did we scale from two to three? Are we a scale-up now? Hell NO NO NO.
