The Inquisitive VC: Rob Vickery — Hillfarrance Venture Capital
Rob Vickery is the Founder and Managing Partner at Hillfarrance Venture Capital and an entrepreneur-turned-VC who has been investing at the frontiers of enterprise technology since 2014. Prior to creating Hillfarrance, Rob was the Founding Partner of one of Los Angeles’ most active enterprise software venture funds, Stage Venture Partners.
We talk about his journey to VC and NZ, areas he is excited about, different in NZ & US startups and more!
NA: It would be great to start with your background, going from marketing and ending up where you are now as a venture capitalist.
RV: I got my degree in marketing and economics and my lecturer at the time recommended that I don’t do a job for any longer than 18 months for the first four years of my career. I was like, that sounds very unethical, but okay and I did that. I jumped around, I worked for a very large eCommerce brand in 2004 which was right at the beginning of major e-commerce at the time.
It was my first marketing job. I was the guy building the online platform for a very unique niche insurance company. Following that, I managed to get into the graduate program of Lloyd’s Bank. Lloyd’s is one of Europe’s largest banks.
Within that I got involved in a very early stage startup, that was building a brand-new distribution channel for what is a century-year-old bank. I was part of a team of about four or five people that was white labelling Lloyds and allowing third party brands to become their own quasi-banks, mostly through insurance. Mostly selling personal insurance products.
We turned supermarkets into their own insurance financial providers. We turned charities, the AA of all places, all sorts of things. My role really shifted to more of a data science role.
I was really in charge of customer insight and I was using data to inform how we should adjust the products and how we should target other partners in the future. That’s where I really got my taste of data and love for that. That business did very well and generated lots and lots of revenue, but I was still only a corporate grunt employee.
I had good experience behind me and some exposure to the senior levels of management within Lloyd. There was a role that came up, that was overseas for running the West Coast of the United States for Lloyds. I was 29 and I was one of 400 people to apply for the job and I got it.
I moved in 2010 and I was about 15 years younger than my nearest peer. I had to deal with the whole ageist experience of, “what does this guy he is just a kid”, the usual shit that you go through.
I did that job for a while with really good results. I got promoted to running all of North America at the time for Lloyd’s International. I was in Los Angeles when the Silicon beach phenomenon was happening, and I was becoming interested in angel investing at the time. I was in and around the tech community. I was starting to see things happen.
This was when companies like EdgeCast that recently got sold to Verizon and when Snap was just kind of beginning. This was when it was at its very earliest phase. It was when the angel community dominated the Los Angeles venture scene. Not that dissimilar from what New Zealand probably looked like a few years ago.
I became an angel investor for about three weeks. I liked it so much that I thought I want to do this, but I need some skills to be able to do this. I left Lloyd’s, I got my green card and then looked at the next thing.
I knew, Dave Stewart, who was the co-founder of Eurythmics with Annie Lennox. Dave is an international rock star and celebrity. I was invited into his team and I was really in charge of looking after a whole bunch of his investments and strategy around looking at media and entertainment technology. I was also involved in managing talent, which I came to realize is probably the most critical part of my job as a VC.
I decided to launch a fund which took a year, the firm was called Stage Venture Partners and we invested in some great companies. Then raised a second fund and the rest is history I suppose.
NA: Elaborating a little bit into that first fund. Could you talk about how was the experience of raising as a first-time fund manager? I know you had a few investments behind you, but how was that experience talking to institutional LPs and that whole process?
RV: Institutional LPs didn’t come into play until the second fund and then the one after that. The first fund was all individuals, high net worth individuals, wealth managers, family offices, and in Los Angeles, we have a pretty unique community of individuals called business managers. They look after the investment strategy of high net worth people like celebrities. I used to work with them.
In my second fund, we had 51 LPs. I probably pitched 750 people to get to that. So, you got to keep going. What I learnt is that you can’t sell a rich person money. You have to sell them access.
You sell them something that they don’t have access to, and they can be excited about. This is probably the most exciting asset class a wealthy person can be it because it’s one that you can see and touch and influence. It’s also something you can quite easily boast about at a cocktail night or something because it’s cool.
I’m strict about making sure that venture capital is only 5% of my LPs overall allocation because it’s very risky. It’s probably the 5% that they care the most about and they get the most involved. So, it’s exciting.
NA: You’ve been a VC for a while now. What would you say is the most difficult thing about being a VC?
RV: The first thing I found most difficult was saying no to people. It’s hard. I love working with entrepreneurs. I love receiving their pitches, I love investing in them, but you probably have one in 250 pitches I’ll invest in. I spend a lot of time saying no, but I always try to find a way to say no with three reasons as to why no.
That was really key. That builds relationship, it builds trust and ultimately that results in loads of value down the line, because those entrepreneurs will come to you again when they have another idea. If the last one didn’t work out or they’ll introduce LPs to you, they’ll introduce their friends' deals to you.
Not being an asshole VC, or not following up, that’s one thing that will kill your reputation or two just saying no and saying goodbye. That’s one surefire way to really hamstring your venture capital career.
The other thing I think aspiring fund GPs need to be aware of is that you’re not going to be rich for a long time. I didn’t take a salary for three years. This is not a quick-rich scheme, especially if you are raising small funds and you have to have to raise small funds at the beginning because you have to prove yourself.
If you’re charging a 2% management fee and you’ve raised a $10 million fund. You’ve got $200K of management fees per year that you get to play with. Instantly people are like, wow, you can pay yourself a shit ton of money. No, you can’t.
Because out of that, you have to pay for travel because we have to go to board meetings, demo days, that’s expensive. You have to pay for sponsorship, events, and marketing and doing dinners and everything else that you need to do to help portfolio companies grow and grow your LP base. Then you’ve got these subscriptions that you need for software products and everything else at the end of it.
At the end of that, you earn a relatively light salary. You have to be prepared that you’re going to either have savings or you need to reduce your expenditure quite considerably for quite a long time.
NA: Before I talk a bit about the New Zealand experience, I wanted to get your thoughts on what areas you are most excited about right now?
RV: Yeah. For one I’m even more pumped about e-commerce at the moment. The world of brands selling in malls is numbered if not gone. There’s this giant arms race to provide software products, to brands, to transact, better, to create a better customer experience to increase upsell. Cross-sell pricing, marketing, all these things are really important and I’m really excited about more tools coming out in that regard.
I’m really just curious about more and more brands that are getting more accustomed to machine learning and training machine learning models and building large proprietary data sets. I’m curious to see what can come from that both into actually what predictions can come off the back of raining those models, but also how we can increase the pace of starting to reach minimum algorithmic performance.
In New Zealand, clearly, new things are happening around agritech. The closure of our borders and the lack of talent being able to come in to help with that will speed up technology dev cycle much quicker because we have to still bring in that harvest. I think robotics is something that’s going to come into that. Lots of AI, lots of hyperspectral imagery to understand the health of that harvest at the time.
I’m really interested in software robotics as well. What we used to call chatbots. Things that are automating customer service, I’m really curious about that.
Finally, there are two others. I’m curious about the application layer of gaming, not titles and not platforms like Steam, but the tools that help developers build better games. Had I been a VC when Unity was a startup, that would have been my favourite investment of all-time, it probably would have been my best investment as well. I want to find the next Unity.
Then lastly, I do think New Zealand’s got a unique space within the aerospace market. I’m keen to see what ideas come out from off the back of people who used to work at rocket lab and others. I’m keen to see what’s happening around the application layer of commercial space travel and launching satellites.
NA: Going to New Zealand now, what are some of the biggest differences you’ve noticed in New Zealand startups vs US startups?
RV: There’s something that Americans have got that a lot of the rest of the world, don’t have, they are trained at public speaking and presenting themselves at a very early age. That means they are wonderful salespeople and they’re very polished and the pitch they producers are in college.
Sometimes that is a wonderful way to disguise a whole bunch of vaporware. I like the humility of the New Zealand pitch and how they are presenting their company, but sometimes they under sales themselves. The last question you should ask any VC at the end of the meeting is for the money.
I think that the ideas that kiwi entrepreneurs have got, locked within them is a gigantic, audacious goal. But again, they are ring-fencing their goal, and their idea in accordance with how culture is over here and the tall poppy syndrome right now.
Seed stage venture capital was about giant audacious visions. It takes me a little bit of time to sometimes chip away at everything to get to what is the audacious idea and how big and amazing that is.
Americans are particularly really good at kind of giving you that right upfront. That makes the pitch really go well because your mind just starts to travel into the potential of this thing. Would love to see a bit more of that from New Zealand, easy fixes.
The availability of capital is a clear one. I do think that the investment community in New Zealand has done a wonderful job of getting New Zealand to what I think is a version 1.0 of venture capital and startups.
NA: Those are all interesting points. I’ve heard that NZ founders need to be a bit more audacious, it’s great to hear it again. How are you aiming to bridge that gap between the NZ and US?
RV: Yeah, that’s a good question. it’s key. You look in the world of venture capital when you start raising from institutional funds, the first question they ask you is what is your edge? Defining what is your edge is defining what is your strategy, your sales materials, right? Capital is the biggest commodity in the world everyone’s dollars look exactly the same, its what you do with those dollars that is important. Right now there are not any funds in New Zealand that have got networks and experience of trading and scaling startups in North America.
That falls on me, which I’m glad to be. There’s a couple of ways I’m doing that. Firstly my greatest asset is my LP base. I’m very fortunate that I have some of the finest VCs and entrepreneurs in the US as investors in my fund. They want to get involved, they want to help startups, they want to offer advice, they want to have a coffee with them.
I intend to use my LP base to kind of provide some of the softer qualitative advice. I’ve also got a content channel called Wayfinder and I’m really reserving the guests on that to be people who can help New Zealand startups to provide content for free on how to extend into North America if they want to. This includes accountants, recruiters, investors, customers, people like that.
Then finally and I’m happy to announce this with you, is that the third and final leg of my strategy is something called “The Village”. As you know how parents is named after my village at home in the UK. This consists of a collection of residents of my village, who can help our portfolio grow, one of which is growing into North America.
I’ve created a joint venture with a team of unique superheroes in the United States, who can help our portfolio and provide a soft landing for when they come into America, to help them with establishing a company in North America, sorting out the accounting, making sure the legal stuff is done, hiring pool, helping them find customers and help them decide where they want to base.
It shouldn’t always be Silicon Valley. If you’re selling into the FMCG market, you should be based in the middle. You should probably be based in Chicago or maybe somewhere in Colorado or maybe Atlanta. That’s a new thing that I’m about to launch and I’ll have the names of the residents in my village pretty soon.
One example is I developed a relationship with an organization called Elephant Venture and they are a team of MIT engineers and people who have worked in the defence sector who can help startups accelerate their product roadmap. They’re not writing code for them. I don’t want that. I don’t want any code to be outsourced. What they’re doing is just helping the engineers to write code cleaner, quicker, better. Augmenting the existing technical capabilities of the company. All of it’s subsidized by us. That’s my third leg and I’m really excited about that. So that’s going to be announced shortly.
NA: What is the latest publicly announced investment you’ve made and why did you actually make it?
RV: Our most recent investment is in a company called Kwotimation, which is our first pre-seed portfolio company.
One of my first jobs, when I graduated from University, was as a Marketing Manager for Screwfix Direct, which is one of the leading suppliers of tools and fixings to the trade and DIY enthusiasts. My role was to scope and launch a new distribution channel and to continue to deepen share of wallet with their trade clientele.
When I met Josh and Jarome through the Kōkiri Māori accelerator program, my experiences of building strategies for this often overlooked segment of professionals came rushing back to me and I knew I had to dig deeper into their business. Kwotimation has built an Online Pricing System that automates the pricing, quoting and sales process for tiling businesses.
Josh and Jarome beta-tested this on their own tiling business, tiling.co.nz which validated the concept and led them to building out the product. We are very excited about this!
I also invested in Partly, for which Blackbird was the lead. I joined the board as an observer and excited for them too. I love the founders, they’re really good humans, really smart. And are looking at the problem in a different way coming from an engineering background.
NA: Sounds like you have been very active! I appreciate you taking the time out to do this Rob, it was a great chat!
RV: No problem Nawaz, thanks for having me on!
