How VCs evaluate your idea? with Sam Marchant of Hambro Perks

Summary

Learn how VCs evaluate your idea from early stage founder and investor Sam Marchant of Hambro Perks. Get insider tips on how to craft a successful pitch deck and stand out as a first-time founder in the competitive world of startup and CPG brands. Don't miss this valuable advice from an experienced entrepreneur!

Takeaways

1.Observing entrepreneurship in childhood can have a significant impact on one's career path.
2.Consumer product goods (CPG) startups face unique challenges, including the need for innovation and the difficulty of standing out in a crowded market.
3.Consumer companies often require more time and capital to scale, making them less attractive to VC investors.
4.The VC industry has evolved, with a wider range of investors and a focus on different types of returns.

Chapters 

 00:00 Trailer
 01:48 Who is Sam Marchant
 08:00 Learning from SAM: Building to Sold Startup Journey
 13:30 Why Not Work with Friends and Family / Deep Insights about CPG Brands
 26:23 - How VCs add value to startups?
 30:50 Venture Capitalists' Judgment of Founders: An Operator's Perspective
 34:52 Important Characteristics for First-Time Founders
 38:40 VC Pitch Deck Selection Process: A Challenge for Early-Stage Founders (Very Important)
 55:30 How to Create a Pitch Deck: Lessons from a VC
 1:02:10 Calculating Market Size
 1:05:55 Why Venture Capital Money Is SEXY
 1:11:15 Deal Negotiation with Venture Capitalists for Early-Stage Founders
 1:16:50 Most Common Questions from First-Time Founders (Must Watch)
 1:23:10 Ritual Time: Previous Guest's Question for Sam
 1:25:20 Ending

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Transcript

Mudassir (00:00.581)
I have a two years old and he all the time, you know, I start recording and he's like on the door, hey dad, come on, come on. So he does that all the time. So all right. Yeah, yeah. Please do a clap for me, Sam.

Sam Marchant (00:06.142)
Yeah, that makes it fun.

Mudassir (00:16.057)
Awesome. Hey Sam, welcome to the show. How are you doing, sir?

Sam Marchant (00:20.522)
Hey, yeah, no, thank you very much for having me on. I'm doing great. It looks like I'm in some luxurious location right now because it's super sunny, but this is actually London, believe it or not. London in January, and it's, yeah, I know, London in January and it's sunny. So you'll notice I still have a jumper on though, right? The sun means absolutely nothing in the UK. It's still cold, yeah.

Mudassir (00:29.658)
Oh wow.

Mudassir (00:37.317)
Nothing. But still, but still, you know, you did, I think London and sunny, that's a rarity. Like you don't, you really get to see that very often, right?

Sam Marchant (00:48.798)
Yeah, yeah, yeah. It's hugely rare. So, but it makes, it makes everyone a little bit more happier and things go a little bit slower actually I've noticed, which is good. And people aren't rushing around to get from, get out of the cold or get out of the rain. So yeah, everyone seems more chilled. Yeah, it's good. It's good.

Mudassir (01:00.621)
Yeah. How often does it rain in London?

Sam Marchant (01:06.146)
Too often is the answer. I couldn't, yeah, I couldn't give you an answer. I mean, I think it's, it has been dry quite a lot recently, but for me, I noticed the rain more than anyone else, I think, because I'm a massive cyclist. So for me, when it's raining, I'm like, I can't go outside. That's it, I'm done. So I'm locked inside and it just feels absolutely terrible. So yeah, whenever it rains, it's like, okay, that's it. Exercise is gonna have to change and I have to drag myself to the gym and-

Mudassir (01:07.529)
Too often.

Mudassir (01:18.822)
Okay.

Sam Marchant (01:31.314)
lift some weights and I hate doing that. I'm a cyclist. I want to ride my bike.

Mudassir (01:37.285)
Okay, well that's fun. All right, awesome. So every single time, Sam, anybody who has been on the podcast, and this is not actually my idea initially, so the credit goes to Steven Bartlett, one of the only person that I look up to in this entire content entrepreneurship world. And one of the things that I picked up from him is figuring out the context of everybody's life at the beginning of the podcast, because that's gonna narrate, what's the next part of it.

Sam Marchant (01:51.276)
Yeah.

Sam Marchant (01:56.11)
Mm-hmm.

Sam Marchant (02:04.566)
Yeah.

Cool.

Mudassir (02:07.141)
you know, the podcast is going to be like. So give us the earliest, earliest context of your life and how'd you end up becoming the Sam that we're interviewing today? So let's start there.

Sam Marchant (02:16.686)
That's a very, that's a very, very good question. Well, so I think, so I think from a childhood perspective, I look back to, I would look back to my parents and how they worked and how they interacted with each other. You know, my parents got married very, very young. My dad was 18, my mom was 17. They were super young and they've been together ever since, they're now in their mid fifties.

They absolutely love each other to pieces and they do everything together. My dad has always been in tech. So very early on he started at IBM and then he actually went out into a startup based over in Ireland and kind of grew that and then subsequently went on to two other tech firms and had good outcomes with all three of those. So for me, being around business, entrepreneurship and tech in particular was just something that I saw all the time.

I would still profess as a kid, I never knew really what my dad did. Uh, I think my, I think most kids would say that they're like, yeah, no, I don't really understand what he did. Um, but you know, he would, he would always be off building these things, you know, interacting with customers, product, everything. Um, and I look at it now and, uh, I'm only scratching the surface. I think of his knowledge now, you know, whenever I talk to him about startups, I meet where we get into a good debate and, you know, I say, Oh, you know, do you really, do you really understand this? And he's like, dude, I've.

been around for a long while. Yeah. I've seen, I've seen a lot of cycles, a lot more than you have. So yeah, he's, uh, he's great. And then my mom, I mean, I think my mom had the hardest job of, of anything harder than being a tech founder for sure. Yeah. She, she, she raised my, me and my two brothers. So, um, and, and I don't know whether she did a fantastic job or not. I mean, they're, they're too good. They're two good guys. They're doing very well for themselves. So, um, yeah, I would say she, she did a pretty good job, but, you know, having three

three very sporty boys at home who eat lots, were very happy to fight a lot. She did a very good job of making sure that the house didn't fall into absolute chaos. It was fun, but yeah, it was never too crazy. So yeah, so my childhood was full of, yeah, observing entrepreneurship, watching my dad build, watching my mom be this incredible leader and keep everything running smoothly, efficiently.

Sam Marchant (04:33.642)
And then I, and that's when I was really young, I think when I became, you know, kind of teenager, my world revolved around sport. My dad was so keen and my mom was so keen to push us all into sport, to compete at a high level, um, and to just try and master something they didn't, I don't think they, they didn't care about us being the best, what they cared about was us committing to this process of how could we just continually evolve and get better and, and that kind of, um,

That set the foundation, I think, for how we approach school and everything else as well. So, you know, whether it would be, uh, you know, hockey matches on the weekend, we were hyper competitive, uh, me and my brothers. And then actually when we were in school, we were, we were hyper competitive as well. So it just laid a good foundation of like working hard and setting a goal and going after it. So, so yeah, so that, and that kind of played out, I guess, you know, the sport and this love for sport. That translated into me wanting to study.

sports science at uni. Um, so a very non-traditional route for someone who became a founder and, uh, and now an investor. Um, but yeah, I was fascinated by this notion that, you know, you could improve performance with these really small increments and, and at the top, like with, you know, the top kind of one, 0.1% of athletes, you know, how could you actually make them better? Um, what I've come to realize is that founders and entrepreneurs are actually very much the same. You know, they're very similar in, in how they think and how they need to operate and build.

Um, so actually my degree, it doesn't have a huge amount of relevancy to, to startups, but it has a huge amount of relevancy to people. Um, and I think when you're at the early stages and you're investing at the early stages, it's, you know, more about figuring out people learning and how you can help them build and thrive. So, so yeah, so that's, I guess the, the translation there and, um, and how I think about it, but it's an interesting question when you reflect on your childhood, it's probably something that we should all do more often, I think.

Mudassir (06:23.801)
Yeah, I mean, yeah, I think in general, we're like not used to doing that reflection sort of thing as often as we should do. It was good to know that. Thank you for sharing all of that. And I totally wholeheartedly believe being an athlete, ex-athlete myself, so I totally agree. You know, there's so much comparison between being...

Sam Marchant (06:34.593)
No.

Mudassir (06:50.229)
I don't think, you know, when you pay, play it for fun, and then you just kind of compare that with the entrepreneurship, like that's different. But when you get into some sort of a competitive level, could be amateur, could be pro, like whatever that, that is when you can see the similarities, the grit, the stem nas, this hunger to like never give up and all of these things like that replicates like totally. Awesome. So thank you for that. So I want to start us off with.

Sam Marchant (07:08.019)
100%.

Mudassir (07:19.105)
with your founders journey, with the company that you built, and you sold it successfully as well. But the reason I want to start there is because as a founder, now we are seeing a lot of founder-led funds, investment funds or something like that. Previously it was not like that. Previously it was just people coming from investment banking or traditional banking sector, financial sectors. So obviously now we're seeing the change in founder-led funds are even better.

So start us off with the companies you build, and most importantly, why did you build that? And what was the outcome, and how did you go like this entire journey? What was all that about?

Sam Marchant (08:00.146)
Yeah, sure. I mean, I think, you know, from a, from a founder perspective, the business started as a bet at university. It was something that my co founder and I were just really, really passionate about. It was something that, you know, we were studying sports science at the time, really interested in your performance nutrition. And actually that was a, that was a fun way of kind of expressing our degrees and this desire to try to help people to make people better in a totally unique way.

Um, so yeah, we started this, you know, the low sugar cereal bar brand. Um, we made every mistake under the sun, right? Every mistake you could possibly do as a, as a, as a young inexperienced founders. Um, you know, we, we didn't raise enough money. We, we spent money on the wrong things. We had to be scrappy. We were proud about things we really shouldn't have just, we shouldn't have cared about. Um,

Mudassir (08:39.321)
Okay.

Sam Marchant (08:56.214)
But I think one thing we did do always very well was we were happy to put ourselves in right in front of our customers, regardless of whether that was going to be a good thing or a bad thing, whether they would give us positive feedback or negative feedback. We were always there and we were always listening. And that meant that we evolved the product and the business dramatically and saw a lot of changes and how that played out.

You know, there was a model, a pivot to a totally different model that occurred for us, um, that was again, something that came from chatting to other friends in the food and beverage space, you know, we became interested in dark kitchens and licensing and could you build a business kind of with, with that model? Um, and, and the answer to the question is yeah, major food manufacturers do have very similar kind of traits to, to dark kitchens whereby, you know,

these kitchens are incredibly good at producing food, but actually managing a brand and dealing with customers on a front end, so to speak, is very difficult for them to do. And that was where we kind of found our opportunity. So yeah, so we built there and yeah, it was great. It was a real learning experience, I think. It was something that I look back at now and I still on a daily basis when I reflect on it, I go, okay, yeah, actually.

You know, I would do this differently or if I went back and did it again, um, maybe this outcome would have occurred. Um, but I don't regret any, any of it. I think it was, it was, it was great fun. And, you know, my, my co-founder, he, he was exceptional. I mean, I get asked this a lot, right? Whether or not, you know, can you set up a business? Can I do a business on my own? Do I need a co-founder? How do I find a co-founder? You know, I did one of the things that everyone says not to do, which is I went into business with my best mate. Um.

He was excellent, incredible operator. I was the one who was far more salesy, wanted to push things, wanted to be out there and challenging everything. Whereas he was the one who would say, okay, well, how are we gonna do this? How do we actually bring this kind of forward? And he was the mastermind behind that. So yeah, it was a really good compliment. We were very complimentary to each other.

Sam Marchant (11:08.81)
Um, what I will say is I would never do a consumer business again. It's, it's so hard. So, so any consumer founders listening to this, I, I feel your pain. Um, you know, and, and I've seen it, I've seen it change quite dramatically. Now that I sit on the other side of the table, um, I've seen consumer angels and consumer VCs, you know, really change what they look for, how they think about success. Um,

And I also believe that consumer founders have had, it's, it's harder than ever right now to, to try to crack and break through. So, yeah, hats off to anyone who's kind of building in that space, because it's, it's really, really difficult. But yeah, it's, it's a fun side of the table. And I think in a, in a world where, you know, VC is often heavily dominated by people who have finance backgrounds and rightly so, because this is a, an asset class now that's far more established.

There's more capital in this asset class than ever before. And that requires a skillset. And if you think about it in terms of a 360 degree team, you know, you can't have everyone just being ex-founders, right? It would be, it would be far too optimistic most of the time. You know, you need to have a different skillset there and people who look at things and, you know, I'm very fortunate now to work in a team where every single person is super different, has a different level of.

Mudassir (12:18.153)
Hehehe

Sam Marchant (12:31.522)
or different backgrounds. And that means that we bring so many kind of unique perspectives to the teams and to the deals that we look at. So yeah, it's, it's a fun journey. I would encourage anyone if you're in the position to do so to try and be a founder. And that might, that might not be launching a low sugar cereal bar, right? Like that might just be creating a newsletter or a podcast or, you know, a fitness club, you know, with local people like

just something that means you have to go away and put your own dreams and ambitions out into the world so that people can then say, oh, I like this or I don't like this. And then understanding what you think about yourself after that, because yeah, you learn a lot. You learn a lot for sure.

Mudassir (13:16.297)
Absolutely, absolutely. So two questions I wanna ask you on that front. And both question are very personal to me. So I'll ask you these questions. So one is, and I wholeheartedly agree, that you should not build a business, especially with your friends and family, especially with your close, people that are close to you, because it's gonna get ugly. Okay, so that is part of the belief. I don't know if I wholeheartedly support that or not. So that is one. So I wanna take your opinion, because you said one of the things that you did you shouldn't have done

Sam Marchant (13:35.745)
Okay.

Mudassir (13:46.891)
you build a business with your best friend. So why is that a bad thing? And if somebody is already in there, how can they navigate that? And the second one is, it's funny because my brother is building a CPG brand, more specific, a supplement CPG brand. And I am not a whole proponent of this thing. I'm more like, you shouldn't do that. Don't go into food, don't go into consumer package and CPG and all that.

Sam Marchant (14:03.822)
Mm-hmm. Yeah.

Mudassir (14:15.101)
So I wanna take, as an expert, I wanna learn from you why it's so hard to build a CPG food brand. And two, if anybody's building today, what are the challenges ahead for them? Like how can they navigate through that challenges? So two part question.

Sam Marchant (14:31.886)
Two, two, two good questions. Yeah. Okay. So, so on the first question, I mean, I think the, the notion that, okay, yeah, you shouldn't go into business with friends and family is it just comes from the fact that as you said, it's inevitably going to get hard, right. Um, and you know, when those disputes happen or when those challenges happen, um, you want to be able to look at the other person and say, can we have a candid conversation about how we move forward? Like what, what is the actual decision that we move forward here? Um, I don't think that.

going into business with your, with your best friend or family is impossible. I think you just have to be aware of the challenges and the difficulties that lie ahead and also have an open conversation about how you're going to deal with that. Um, you know, Ollie and I had a very good understanding of our areas that we were, we thought we were experts in or thought we were better at than each other in, and if a decision fell down to operations, I always trusted him. I was like, I totally trust you.

Mudassir (15:23.27)
Mm-hmm.

Sam Marchant (15:29.262)
You know, if you're telling me that I'm wrong, I trust you on that. Um, from a sales perspective, you know, he would say, I trust you if you're going to make a decision, I trust you to do that. So I think it comes down to communication ultimately, and being able to, um, detach, compartmentalize, uh, everything that you're going through. Um, you know, realizing that it's very easy for early stage founders for a business to become your identity.

Mudassir (15:41.651)
Hmm.

Sam Marchant (15:57.362)
And I, and I, again, I sit on the fence here when I say, I think there are pros and cons to that. Um, but I think on the, and on the most part, I think you have to be able to detach from that when you're, you know, co-founding with either a best friend or a family member, you know, it's not, it's not your identity. It doesn't define the two of you. It doesn't define your relationship, right? Um, it's just a, uh, a kind of creative endeavor, a creative commercial endeavor that you two are sharing together. So, um,

Mudassir (15:57.437)
Hmm.

Mudassir (16:08.417)
Hmm.

Sam Marchant (16:25.17)
That's how I, that's how I look at that. Um, I would go back and do it again, a hundred percent the same, right? I wouldn't, I wouldn't change anything about the, the co-founding relationship. Um, now in terms of, in terms of CPG, I mean, I, the, the observations that I've had in this space and, you know, having, I guess, gone through it to some degree, um, the, one of the biggest challenges is that innovation in this space.

Mudassir (16:30.234)
Okay.

Sam Marchant (16:51.83)
Like true innovation in this space happens very, very rarely. Right. Um, now, you know, you, you see successful, um, consumer brands kind of coming through and taking all the limelight and glory because often there is a huge level of innovation that they've actually managed to stumble upon. Now, sometimes that's technological. Maybe it could be business model. Um, or often it's, uh, often the success is largely driven now by distribution. Like look at the number of brands that have done incredibly well.

basically because there's celebrities behind them and pushing it, right? That's the challenge. How do you cut through the noise when there's distribution in the markets is fragmented like that. But going back to that previous point, sorry, just about innovation, we have a company in our portfolio, Hamro Perks, a company called Suri. It stands for sustainable rituals. They make the world's first fully 100% fully recyclable toothbrush, right?

which sounds like an obvious idea, right? Like why would it not be fully recyclable and sustainable? But there are a number of reasons. It comes down to not only how the toothbrushes are made, where they're made, what they're made from, how you recycle the batteries, how you recycle the heads, everything that is kind of a touch point for the consumer. That was true innovation in a product, right? The way that they built that product, the way that they redesigned it.

Mudassir (18:11.369)
Okay.

Sam Marchant (18:17.634)
the way that they listen to customers, the way that they saw an emergence in the market that individuals were happy to spend more on things that they touch on a daily basis. So, you know, we all have, or most people have a smartphone, right? That often costs a huge amount of money, but we use that on a daily basis. It's become an integral part of our lives. So things like a toothbrush, you know, it's something that...

most people use on two times a day, hopefully at the minimum. And they figured out that actually if they could improve that user experience by bringing this totally differentiated product to the market, they could capture customers in a totally innovative way. And that has paid true. You know, they are absolutely flying. They're an incredible founding team who again, spend so much time working and evolving with customers.

But that's the biggest challenge in CPG I see, is when I meet CPG founders and they go, I'm building a drinks brand and our differentiator is, we have slightly more protein or we use 100% clean ingredients. The issue is the consumer just doesn't, one, they don't know and two, on the most part, they just don't care. When it comes down to food and beverage, a large amount of the purchasing decision is driven, one, by taste, so how good these things taste, and second of all, on price.

Mudassir (19:32.233)
Exactly.

Sam Marchant (19:42.378)
And when you, from a, from a food and beverage founder, when you can't control the way that the, well, you can, but it's hard to sell food and beverage on e-commerce, especially if it's fresh produce, right? Um, so, so therefore you have to work with retailers and often the experience for, um, consumers and retailers when they're, they're touching a brand for the first time is, is pretty poor. So yeah, it's, it's a very challenging, um, kind of segment or, or

type of startup, I guess, that emerges there. However, the entry point is often relatively low. So, you know, I meet a lot of first time founders who are building consumer brands. And I think it teaches you the fun, it teaches you really some fundamental lessons about building a business, right? It definitely doesn't teach you how to build a SaaS business, but it teaches you how to think about your customers, how to get feedback, how to build supply chains, you know, modeling, everything that you possibly need to do.

Mudassir (20:31.347)
Yep.

Mudassir (20:39.633)
Yeah.

Sam Marchant (20:40.042)
And it's not impossible. You know, I, I do see some incredible consumer founders out there like Suri. Um, another company we have day, um, Valentino, the founder of days is again, incredible thinking about how can we use, um, tampons as a way of kind of gynecological screening, incredible product, incredible vision, the level of innovation is huge. You know, these are the kind of exactly, these are the consumer founders that, you know, you, you want to back, or at least, you know, the ones that cut through the market in the best way. So.

Mudassir (21:01.553)
Yeah, see you soon.

Sam Marchant (21:09.686)
So yeah, not all of that to say it's very challenging, but yeah, I think it always falls back from our perspective as investors now, it falls back to what is the level of innovation.

Mudassir (21:13.321)
Thank you.

Mudassir (21:22.045)
I just want to take a few more minutes on this one particular topic because I just want the audience to understand that clearly this is a viable business and you should be looking if you are into it, you should be looking to building one because one question that comes to my mind, so there's a few of these fragmented thoughts. So first thought is, you would not see, like why we don't see a lot of VC backed?

Sam Marchant (21:25.239)
Alright.

Mudassir (21:51.193)
CPG brands slash especially food brands food and drinks and beverages that kind of a brand like what why is not the case? Maybe because we haven't seen a big outcome big, you know IPOs or something like that, which justifies but the second question is On the same, you know Food and drink and you know, there's one particular category

anybody who gets into this world today, everybody says exactly the same thing, if distribution is the king, but then comes people like liquid death or something like that. And they just absolutely destroy the market, totally annihilate whatever the competition is there. And then they're being so creative and they're just selling what water? The commodities of commodities. So yeah, 2000 there, if anybody would want to do that, how can they be a differentiator?

Sam Marchant (22:38.676)
Yeah.

Mudassir (22:45.489)
without just saying, oh yeah, the source of protein is just different and then maybe 10% more of this thing. And the second one is why we don't see a lot of VCs backing this one particular industry.

Sam Marchant (22:56.842)
Yeah, well, so on the first point, I mean, I think, you know, why?

Sam Marchant (23:04.854)
you have to think about with consumer products in particular, you have to think about human behavior more, right? And I think, you know, I see lots of consumer products that just aren't, they're just not that exciting. They're not additive to someone's day, right? You know, you go, okay, does this person really want 10%, 20% extra protein? It doesn't matter. Like they really don't care.

What they want is not another protein bar. They want a protein cereal or they want it or they want a protein yogurt. I'm just using this as an example. Right. So format becomes a question as well. And studying someone's, uh, you know, a target customers, complete profile and complete day, then you start looking at it and go, okay, well. You know, human behavior actually then comes into how we design products for CPG perspective as well. Um, I think the.

The question I'm probably more qualified to answer on the VC side, right around why do we not see as many consumer backed VC or VC backed consumer companies. The answer to the I think the answer to the question, there's two big things. One, actually, I think that's three, sorry. One is that these businesses take a long time to scale, right? Often, unless there's a distribution hack, you know, unless there's a media play, look at the likes of prime.

Mudassir (24:07.098)
Yeah.

Mudassir (24:26.269)
Hmm

Sam Marchant (24:30.122)
you know, look at the likes of Tala as well, where, you know, you have incredible founders with, with big followings, um, who are able to get to a customer set very, very quickly and, and they understand that customer set and bring value. Right. Um, if, so it looks like it's taken a short amount of time for those businesses to grow, but actually if you go back and you, I mean, take Tala and Grace Beverly, for example, you know, how, how many years was Grace building her, building her platform and building her channel before that, that product was actually able to be launched and she knew the customer set better than anyone else.

Mudassir (24:41.545)
Mm-hmm.

Sam Marchant (25:00.078)
Um, you know, it's, so again, it's the timeframe thing. Um, you know, if a VC fund is operating on a, you know, seven to 10 year kind of payback cycle, um, you go, these businesses don't fit, right? They just don't fit the length of time it takes to deliver the returns that a VC ultimately, you know, needs and wants. Um, the second thing I think is actually the multiples that are paid for these businesses. Um, you know, BCB SaaS has long been, uh, a kind of category where

Mudassir (25:13.736)
Hmm.

Sam Marchant (25:29.698)
You know, you could get anywhere from eight to 12 as an average, eight to 12 times revenue, right. As a multiple quite comfortably. Um, I'm not going to comment on 2021 when everything went crazy and there were ridiculous multiples floating around, but the, the point is that, you know, these businesses, they, um, you know, they receive much larger multiples on for returns than, than any other type of business. And that is attractive to an investor, right? You know, if you're a VC fund and you're.

Mudassir (25:44.544)
Yeah.

Sam Marchant (25:58.87)
say hypothetically, you've got 100 million pound fund. You know, if I invest in a company, you know, and I make an investment and I have 10% of the company, assuming that company never raises again, you know, to return the fund, which is the kind of golden metric, you know, that company needs to be worth a billion, right? Like that's the basic numbers. Exactly. So what does a consumer company need to do to actually return that amount of money? Well,

Mudassir (26:19.272)
Exactly.

Mudassir (26:26.109)
than a moment.

Sam Marchant (26:27.314)
Exactly. If you're, if you're looking at the revenue multiples across consumer companies, and I don't have accurate figures off the, off the top of my head for consumer, um, but it's just far harder, right? It's far harder to deliver those returns. So that's the second reason why I think VCs kind of tend to steer away. Um, and the last thing I think is actually just the amount of capital that's required to get these businesses one off the ground and two to a growth rate that either means they

Mudassir (26:51.032)
Hmm.

Yeah.

Sam Marchant (26:55.186)
they outlast those 10, 15, 20 year long windows that are needed to then get to those incredible valuations that the market demands or the VC market demands. It requires a huge amount of capital. And on the most part, that means you're asking investors to be very patient, to consistently invest and put more cash in. And that's hard. That's hard for most investors to look at. If you look at a side-by-side comparison of a...

Mudassir (26:59.079)
Mm-hmm.

Sam Marchant (27:22.526)
you know, BSP SaaS startup or a consumer startup, you send to go, okay, the capital requirements are very, very different. Um, and actually the time it takes to actually get an exit or return any kind of capital back to the fund is totally different again. So, you know, it is a challenging environment, but, you know, there are some incredible consumer funds out there that have done very, very well, you know, the likes of jam jar, the likes of red rice.

You know, those funds are exceptional funds that have continued to invest in really, really strong consumer companies and deliver great returns. So, you know, there are always outliers and that's the world of startups and the world of venture capital is that there are always outliers and they're the ones we're trying to find.

Mudassir (27:54.141)
Hmm.

Mudassir (28:02.565)
Yeah. Yeah, absolutely. Absolutely. I think I had a question on, you know, this entire investment thesis, which I was thinking about asking you there, but now that you brought it up, so I'm going to ask you now.

Sam Marchant (28:15.202)
Mm.

Mudassir (28:17.341)
Any founder that you would, sorry, not founders, VC or investor could be Angel, could be anybody who gets into this entire investment game. The goal is always an exit, right? Like you would never want to be the last money and you would always want to be a follow-up round. You would always want to be an IPO, like whatever that thing is.

Sam Marchant (28:27.214)
Mm-hmm.

Mm-hmm.

Mudassir (28:37.465)
Do you believe that there's an aspect in this entire VC space or I'm using VC, which maybe could be wrong because there's tons of other ways of raising capital, but do you think there's an aspect of this entire capital market that they are not providing value, but just chasing fund returners or the home runners or one out of 10 or whatever that number is? So do you think that is true?

Sam Marchant (28:47.373)
Mm.

Sam Marchant (29:05.71)
Yeah, I do. I mean, I think just I'm picking the question there. I mean, you got to understand that this is a, you know, like quite a lot of things. This is a this is a power law dominated or driven asset class, right? Where one or two investments are going to return, you know, the majority of the capital from a fund.

Mudassir (29:14.693)
Yeah.

Sam Marchant (29:23.734)
that's just because not only a startup's incredibly difficult and hard to do, but if you think about concentrating a portfolio into an area, even if you know that area, the likelihood of success is very slim as any startup founder or VC will admit. I think what I've learned over my very short time in VC, what I've observed, I should say, and the conversations I have with people who are far more experienced than me

the VC as an asset class has changed dramatically over the last 10, even, you know, 1520 years, there's more capital than ever before. There are more, there's a broader range of LPs who are investing in this in this asset class, who have different expectations of returns. And actually, there's this kind of widening gap now between what I would consider

very structured, very value add, very strategic investors versus those that are just trying to return capital by, for lack of a better term, a spray and pray method, totally index over the entire market and hope that the power law comes true and that you get one or two winners. But then again, defining the returns is quite key here. I meet lots of CVCs, lots of corporate venture capital funds who invest because they want to acquire

talent or they want to acquire technology that has been built that could be, you know, another revenue line for them or additive to their existing product stack. Um, that's a great reason to invest, right? But so is wanting to have financial returns. Um, that's, that's equally as justifiable, um, but the approach is, is slightly different. So, yeah, I think, you know, the conversations I have with, you know, more experienced investors than me is that, you know, the, the space has changed quite dramatically and

the notion of whether or not you can be value add, even that is pretty commoditized because, you know, most investors get, see the same deals. They know the same companies where founders, you know, tend to come out of. They know the same research organizations, you know, they can attract these individuals in very similar ways. And then on the other side, so once an investment's been executed, you know, most funds know the same people to open doors.

Sam Marchant (31:47.214)
create networks, build connections, distribution sales, or have some sort of kind of proprietary experience. The real unique piece here is actually in the decision-making and the gap in between. And that's what makes truly great investors great, is their ability to spot outliers on a more consistent basis. I used to think that was a pattern recognition thing.

Mudassir (32:15.1)
Mm-hmm.

Sam Marchant (32:15.698)
And that actually you could do that over and over again and you understood, but actually my thinking on that has changed. And that in the same way startups, you know, product market fit is not achieved once and then you've got it. It doesn't work like that. It's a constant evolution. Yeah. It's the same for VCs. You know, every deal is unique. Every founder is unique. Um, the, the definition of an outlier in a specific market or technology or, you know, even market cycle. So timing.

You know, that all comes into play and your ability to make good decisions, you know, that's what all of us as VCs should be aspiring to is to make incredible decisions on a consistent basis. Because either side of that decision making is rough, pretty much commoditized, right? Everyone has the same, same network, the same the same skills.

Mudassir (33:06.297)
Exactly. Okay. So just one last question on your previous startup before we get on this journey of, you know, early stage founders and startups and all that stuff. So you guys exit that business right. Two thoughts on that. So like one How did you figure it out like okay now is the time to exit that business or there's interest out there. So that is one and I have this question prepared because later on in interview. I'm going to ask you this thing like what exactly happens.

Sam Marchant (33:16.482)
Mm.

Mudassir (33:36.165)
when a startup goes into the acquisition stage because it's easy to say, oh, we got acquired. There's a whole bunch of nuances that happens behind the scenes, right? So the last question that I have is, what was the thought process behind exiting that one business? Yeah, like what was the thought process behind exiting that business?

Sam Marchant (33:56.685)
Oh, sorry, minister, it dropped out there.

Am I back?

Sam Marchant (34:27.42)
Sorry, I don't know what happened there. It told me to go out and rejoin, sorry.

Mudassir (34:29.35)
Yeah.

Yeah, no problem. I can ask you again. No problem at all.

Sam Marchant (34:35.408)
Is that good? I was going to say, sorry, just, just on this point. So, um, you know, from a, from a startup perspective, we, we had a good outcome. We wouldn't consider it an, a full exit, an exit at all really. Um, and like, this is a point that actually I don't, I appreciate we didn't discuss this before the, the call in the off-rate, but I don't really want to talk about this like openly, um, on, on the episode. So if it's all right with you, I like, can we jump over that question? And, um, yeah, only because, you know, I'm, I'm.

Mudassir (34:42.065)
Can I? Can I, can I? Oh yeah, go ahead please. Sorry, yeah, you just kind of froze. Yeah, go ahead.

Mudassir (34:58.565)
Okay. Yeah, totally fine. Totally fine.

Sam Marchant (35:04.38)
building something new. And I think, yeah, for me, it's one of those points that I'm like, yeah, I just want to keep it. Keep that as a, you know, we had a good outcome. And that was that.

Mudassir (35:12.43)
Yeah, totally fine.

Mudassir (35:16.577)
Okay, okay. You comfortable with asking, yeah. Comfortable asking the same question later on, like, you know, what exactly happens when one of the portfolio company gets acquired? Like, what's the founder site? But like, we should exit, you know, totally remove that.

Sam Marchant (35:17.626)
Legend.

Sam Marchant (35:30.128)
Yeah, yeah, we could. Yeah, we could. Yeah, we can talk about that. Yeah, that's totally fine. Because I'll do it from a perspective as a VC. Yeah. So yeah, it's just our experience. We Yeah, it's one of those things that yeah, like it's thinking about our jobs now. They don't really like us talking about it. And for me, it's like, yeah, it's not a thing. Yeah.

Mudassir (35:42.997)
Perfect.

Mudassir (35:47.273)
Okay, perfect, all right, no problem. Rolling again. So let me go back, okay, so all right, cool. So thank you for sharing all those insights into your startup and all the things that you mentioned at the beginning. I just wanna pivot a little bit more because the thesis that we have for the podcast, like a thesis that you guys have as an investment, is we want to focus on early stage founders, very much the thesis that you guys have, like you want to work with early stage founders as well.

Sam Marchant (35:49.192)
Awesome.

Sam Marchant (36:05.441)
Mm.

Mudassir (36:14.505)
And the reason is because I believe early stage founders need the most help, the most support, the most guidance, like all of the stuff. So a few thoughts on that. So how do you think as an operator you help a new company which is starting out as an investor but also having that operator background? So how does that, I don't want to use the word differentiate because I want to be very respectful of the word. So how does that, you know...

Sam Marchant (36:42.763)
Yeah.

Mudassir (36:44.201)
how being an operator adds a value while being an investor as well.

Sam Marchant (36:51.376)
Yeah, it's a great question. And it's one that I get asked a lot. And I've pondered on a lot. And I think there's a so there's an emotional benefit or advantage, which is from an empathy perspective, you are far more empathetic to founders having gone through it yourself. And that comes out.

consciously and unconsciously as well. It comes out consciously in respect that, every call you have with the founder, whether that's a board meeting or just really informally, one of the first questions you ask is, okay, how are you? And they give you, what you'll find is most founders go, yeah, I'm great, the business is doing this, we're doing that. And then you go, yeah, okay, cool, I'm not interested in the business here. What I'm really interested in is you as a person, how are you?

And then you go and then they go, yeah, it's been, it's been quite busy. It's been quite full on and you find out they haven't slept much or they haven't eaten much or, you know, family life is difficult and, and all of these things, this is, you know, a total unknown, right for you when you're an investor and you're, you're investing. Um, you know, you, you have to figure people out, but you can't overstep the mark and being like, I want your entire life history. I mean, I know some investors do that. I think, you know, we.

We like to talk to founders in a way that means we can understand them. But you know, we, we're not going to be investigative or, you know, like detectives, right? It's not, it's not like that. Um, so I think that's the first thing, right? You have this emotional empathy with founders that often some people just don't have, cause they don't realize how hard it actually is, um, the psychological toll that it takes on you and how that plays out. Um, the second thing is, is just more practical. Um, you know, operators tend to be.

very, very good at knowing the steps, knowing the process, knowing the areas at which you should focus your energy, your time, your money, those components that you should focus them on, especially when you're starting out. And that's one thing that again, when I meet early stage founders or first time founders, they say, yeah, we're gonna do all of these things. I'm like, let's just pick three things that are the biggest additive measures towards this business, and let's just do them really, really well.

Sam Marchant (39:01.744)
Um, and you know, what you find is that those three things tend to be hiring exceptional people. So acquiring amazing talent, um, spending time with customers, enough time with customers that you can develop a product that actually delivers value and is actually super sticky to them. Um, and then the third is actually thinking about, okay, sales, your sales motion, um, when you go and you create something of value, well, you know,

the aim of the game here is to create enough value that people pay you for it. Right. And over the last, you know, three years, it sounds crazy to say, but, you know, there've been startups that have been funded that have been really cool technologies, but actually value created was limited and therefore the money that was returned was limited too. So yeah, it's, it's a tricky one. Um, but it gives you that it gives you an emotional, so the emotional side is the empathy and the deep understanding.

Mudassir (39:35.985)
Yes.

Mudassir (39:47.13)
Yep.

Limited.

Sam Marchant (39:58.94)
And then I think on a practical side, it's, it's knowing those kind of three key areas that you want to go away and focus on, but every founder is different. Right. You know, there's every founder has their own strengths, their own, um, there are different stages of their journey. There are different stages of their development of the startup and, you know, it's not the same, you can't think that there's a blueprint that you put on every startup or every founder doesn't work like that. Um, it's far more nuanced. You have to, to understand the intricacies of the individual and the business. Um,

Mudassir (40:22.313)
Exactly.

Sam Marchant (40:28.412)
So yeah, those are the big things I noticed from an operator perspective. That's a big difference.

Mudassir (40:35.261)
Okay, awesome. So one question that I was already planning, another thing that you mentioned. So I always have like two thoughts on everything. I don't know why. So thought number one is, you mentioned this thing, like every founder is different. You have seen all kinds of people, like people who have managed to build so-called unicorn because that's the statement you can say that, like, okay, so successful company is a unicorn or a Decacon or something like that. So.

Sam Marchant (40:41.312)
Mm.

Sam Marchant (40:44.511)
Love it.

Mudassir (41:03.397)
If you were to pick, you know, you were to look at all these founders, what is that one or two characteristics? Do you think like, okay, all of these people, they're different in many ways. They're different in their own ways, but that one or two things are like consistent throughout whatever they have done. Like that one characteristics.

Sam Marchant (41:21.089)
One characteristic that's super hard.

Sam Marchant (41:27.684)
Wow, thinking about one is incredibly difficult. Um

Sam Marchant (41:39.376)
What would I say? I could say so many things. Okay, if I, if I'm gonna say, I'm gonna, I'm gonna up it to three, right? If you care, if that's okay with you. Once too hard. The first is, is grit, right? And being gritty, turning up day in day out, every single founder, every successful founder I've met, regardless of whether it's positive or negative, they still showed up, right?

Mudassir (41:42.457)
Okay, so many even better.

Mudassir (41:49.593)
Okay, yeah, go ahead, go ahead, go ahead. One's too hard, okay.

Sam Marchant (42:08.752)
The reasons for showing up often are different. You know, some people it's because, you know, for them, this is ride or die. You know, it's ego. It's their own brand. Um, others, it's their team. Yeah. Others, it's external factors. It's the, the family that are dependent on them. Um, but there's, there's grit, right? So there's some level of motivation that pushes people to just turn up day in, day out, regardless of it being rubbish. Um, the second thing is that these founders are incredibly observant.

or reflective. You know, they're constantly looking for opportunities. So, you know, they're very good at spotting gaps, listening to customers listening to other people in the market, you know, taking in as much information as possible and saying, Okay, well, how do I forge a successful way forward here? How do I build something unique of value of service to this customer set, you know, they're very observant, and they reflect on that constantly.

And the last thing I would say is that they are, I don't know how you put this into one word, but they are incredibly good at spotting exceptional talent and attracting that talent to their mission and their vision. And it's, I get asked this a lot by founders, they say, well, how do we communicate our mission or our vision to our team, right? In a way that gets them excited. And the answer is you don't, right? You,

Mudassir (43:17.797)
Yep.

Sam Marchant (43:34.296)
you can state your mission, your vision, your dream, but that individual has to have either the same, the same kind of thoughts, you know, you can't convince people it they're just not going to be as bought in, you know, so you have to say they have to have the same thoughts and be thinking about things, you know, in a similar way, but coming at it from their unique angle and their perspective, you know, you might find that there's an opportunity in the market or vertical sector and

Mudassir (43:42.777)
Yeah. Yep. Exactly.

Mudassir (43:55.795)
Hmm.

Sam Marchant (44:00.924)
You know, a founder is very technical, so they built something very quickly. But there's another individual who is also looking at that opportunity going. Well, if you build, you know, uh, if you had a different business model, you'd also be able to, you know, generate more revenue or, you know, that we would be able to go to market faster. So there are different ways of looking at it, but exceptional founders are always, I've just found this as just a blanket.

Mudassir (44:16.614)
Yeah.

Sam Marchant (44:25.912)
statement. If I again, drilling into one thing, a blanket statement, exceptional founders and unicorn founders are always most proud and most excited by the teams that they built above anything else. That's that's they're just golden. You know, they look back at it and they reflect and they go, Oh, it was so good. We had this group of people and everyone was just there. It was just special. It was that you know, it's that kind of team, I guess.

Mudassir (44:35.201)
Mm-hmm. Yeah.

Sam Marchant (44:52.572)
people start up fit for lack of a better term. That's how it kind of plays out.

Mudassir (44:57.573)
Yeah. Awesome. No, you know, it's good that you answer that in three characteristics because all of them are super important, super, you know, super spot on as well. So the next, the question that I was planning to ask you is when you get a startup and you, like, in terms of a page, in terms of a cold page, warm intro, like whatever that is, but you get a pitch deck, you get a startup in front of you.

Sam Marchant (45:09.246)
Yeah.

Mudassir (45:23.021)
What's your thought process is? Like how much thought do you give to the idea? You give to the people, you give to the market, traction. I don't think traction matters because you invest in early stages. So there's not a whole lot of traction. But then again, how do you allocate your mind and importance to all of these different minds? Okay, 40% of the idea, cool. Like idea is a killer. Our team sucks, so maybe not. So how do you do that? What's the...

I don't want to say a formula because there's probably not a formula behind that, but what's the logical explanation behind, let's just go there and let's just not do that? Because it can't be emotional. So yeah.

Sam Marchant (46:01.848)
Yeah, it's yeah, I totally agree. I mean, it can't be I think, again, I love this, like just being able to think in threes. So so for me, there are three logical things that I'm always on a first call with a founder that I'm always like, okay, this is important. And number one, is this actually like, is this a big enough problem to solve? Right? Is this a big enough problem? Is this a big enough opportunity?

Mudassir (46:15.598)
Okay.

Sam Marchant (46:27.996)
You meet founders who are building and this isn't to say that they're, what they're building is wrong, but they're just building things that are very, very niche or very small, um, or it's a problem that they have felt that maybe others haven't or actually to other people, they have a different perspective. It's not a problem. Actually to some people, it might be a good thing. Right. And that's, you know, a big question for founders. So I say, okay, well, is this problem big enough, right? Is this something that can go after? The second thing is, um, I say.

Is this the person to ultimately actually be the one to execute and build a solution to this? Like, what are they, what are they telling me about themselves that shows that they can execute and get stuff done? Um, you know, often, I think we give a bad rep to people who've, you know, had long kind of maybe corporate careers and you say, well, what have they actually executed on? Well, actually you can find some exceptional individuals who've built teams, they've moved to new markets, they've launched new products.

you know, just saying, oh, they were a corporate, that's, that's unfair. And it, and it takes away, you know, a lot of the execution that they, that they actually go through. So that's point two, execution is execution is key and is king. Um, and then the last point for me is actually, um, does the market really care? Um, cause again, it kind of comes back to that problem, you know, is this a problem worth solving? If the market isn't looking for a solution, you know, often it's very hard to try and bring it one.

and the timing is just going to be off. And that makes it very difficult to try and scale and to try and build.

Mudassir (48:01.833)
Awesome. Again, two thoughts on that. So one is the thing that you mentioned at the end, which is does the market actually care? I was, I think, when I started my first company, or it was not a first company, it was a project that I mistook, and I was like, oh, that's a company that I'm building, and three months later, we had to shut it down. So wild, wild story that way. But at that point in time, I read the Blue Ocean strategy thing, like just go and just avoid the competition and stuff like that.

Sam Marchant (48:21.821)
Hahaha

Sam Marchant (48:25.277)
Yeah.

Mudassir (48:31.505)
That was a thinking that I kind of grew up in because I was like, yeah, I mean, look what nobody else is doing. And then I actually built something which nobody else is doing and we were like one of the first people, you know, building something. And that is a very hard lesson that I learned from somebody who actually runs a couple hundred million dollar funds. And he taught me this thing. When you build something like these, you need to spend so much money into first educating people.

and then educating that this is a problem, and then educating yours is the solution. So you're gonna burn money so much by the time somebody will start using your product. So competition is a good thing. This is a lesson that I've learned in that way. So the question I wanna ask you is, what's your opinion on startups? Because we also say these are innovative startups, nobody else is doing that, so they're doing that, so that's innovation, right? So what are your thoughts on?

Sam Marchant (49:23.473)
Yeah.

Mudassir (49:27.833)
what I've learned, so what's your thought on that? And the second one is when you mentioned, like I remember a LinkedIn post that you put together and that's very close to me, and I was like talking to somebody the other day and I was like referring to your post, which was why you, why this problem, why this solution and why now? So you put a four piece together, and I love that because that is, I think, essential to any founder who's building whatever in this entire world. What's the thought process behind putting that post out?

Sam Marchant (49:59.056)
Yeah, good, very good questions. Um, so on, on the first piece, you know, um, I, I think in terms of building and demonstrating value, if you know, it, it's a very difficult one, um, for, for most VCs to, to get behind and get involved with, um, you know, it, you have to understand that, you know, we're, we're not often most people in this space aren't on super unique, right.

And actually, you know, and I mean that sorry, from a, from an investment perspective, there are unique perspectives, but there's often a lot of herd mentality that kind of goes on. So that original thought process is, is what defines, you know, exceptional investors, you know, they're able to look at opportunities and look at founders who are, as you say, in that blue sky thinking in that blue ocean, you know, blue ocean space, they are. They are so far out there and removed from.

the rest of the herd that they're able to spot an opportunity in a totally different way. And thinking independently is not only very hard to do, but it's something that you have to be able to do to try and win in this space. I think it's often easier for founders who haven't been in a vertical or a sector for a long time to think about new ways of approaching it.

Mudassir (50:58.193)
Mm-hmm.

Mudassir (51:02.568)
Yeah.

Sam Marchant (51:23.324)
So we have a company in the portfolio, you know, an incredible company called Aid, who are looking at how can you manage patient care, right? For, you know, co-morbid conditions. So individuals who have heart disease, but also maybe have diabetes. This has been done before, right? People have tried to build products and platforms for this problem. The issue is that most of those people have been doctors.

Mudassir (51:43.533)
Mm.

Sam Marchant (51:49.5)
Right. So they have not been able to build a product that is actually just truly beautiful, truly easy to use. And that a user goes, Oh, I get something from this, you know, it looks great. It looks like it's, you know, been built by Apple. I love it. Right. This, this makes sense. And that's the way that you kind of come at these problems and you approach things in a totally different way with a fresh perspective, with original thinking and independent thinking. And that's where you kind of create value and you only drive value from. So. I think.

Mudassir (51:55.165)
Yep.

Sam Marchant (52:18.804)
You know, that, that they're a great example. And, and, you know, the founding team, you know, they're not clinicians. Um, but, you know, they've, they've spent enough time now around clinicians to understand their problems. And, and what's interesting is when you speak to Ian and Brian, who are the founders of age, you know, they go, well, what we understand about clinicians is, you know, the, the state of the market, how they want to help in, uh, how they helped to help the, how they want to help these patients, how they want to manage these conditions, but what we bring is this knowledge of how to build a product.

and how to actually get individuals engaged and excited about managing their conditions and the end goal of, you know, living a healthier life. Right. And that fresh perspective is something that's often missed. Um, so that's, I think on the, on the first point and the original thought place in, in terms of the, the post, you know, the, um, it, it's, so for me, I think, you know, uh, a post like that, breaking it down into four things, really what I want to do is I just want to get founders to think, right.

and think in a different way. I think as investors, we're bombarded on a daily basis at HP, we probably get at least 15 to 20 pitch decks a day. 2023, we saw over 5,000 pitch decks kind of coming through the door. It's a lot, right? Yeah. And because of that, we're going through them as a team and it's very easy to get lost.

in your pitch deck when you write it as a founder to go super detailed, to really look at these kind of one or 2% minute kind of pieces of value that you create rather than just zooming out and saying, boom, here it is on the high level. Um, and, and the pitch deck for me in particular, a pitch deck is a way of getting in the door. It's not the, it's not the thing I'm going to write an investment memo and then write you a check on it. That's not the case. All right. It's, it's just to get a call and to explain something. So.

Mudassir (54:11.601)
Hmm.

Sam Marchant (54:14.288)
So I like that kind of, you know, the, the four wise that just because I think it answers quite a lot of the key questions that, you know, most founders. Try to get across in pitch decks and the current structure, but failed to do. Um, and then it also is, it brings up one point, which is why now, which is something that most founders overlook all the time, you know, um, you know, that there were other taxi, you know, ride hailing apps, uh, floating around before Uber, right? But the issue was.

Mudassir (54:34.626)
Yep.

Sam Marchant (54:43.324)
you know, geolocation technology was poor, right? The, from a regulation perspective, it just made sense to be with taxi companies, right? So when you have these kinds of convergence of things, you know, and then the second thing was, oh, sorry, the third thing was that, you know, people were happy to pay, like digitally, right? You could pay through your phone. People were happy to do that. The convergence of these things meant, three things meant that the Y now for Uber was just incredible.

Right. And then that's what we, you know, that's what we like to say as VCs is, you know, oh, it's a huge tailwind, a huge market tailwind, behavior tailwinds, you know, these kinds of things. So, so yeah, that's the, the kind of question on the why now piece, but that's the one that often founders find the most difficult to answer, which is always a telltale sign for me that you, that a founder, you know, might not be as tapped into their, their market or, you know, they're kind of the market cycle customer set as, as they probably should be.

Mudassir (55:09.733)
Yeah.

Mudassir (55:38.489)
I think because the team was doing research on you, we were coming to the podcast, so I was just going through the comments that you have under that post and a few other posts. And surprisingly, now that you mentioned that you know what the biggest pain point is, most of the people were thinking slash focusing on why you. So people were thinking, oh, so why am I the best person to create these microphones? So people were focusing on that.

Sam Marchant (55:49.211)
Mm.

Sam Marchant (56:00.816)
Yeah.

Mudassir (56:06.917)
It's the market size actually. It's the market side of the thing that nobody's focusing. Because you could be like whoever, building whatever, and if nobody's willing to pay for that, there's no point in building whatever you're building, right? Okay.

Sam Marchant (56:09.937)
Yeah.

Sam Marchant (56:19.28)
Yeah, 100%. And execution is incredibly important. I'm not taking that away from the why you. The thing with the why you is that it feels personal. And that's why most founders, as you see in the comments, most founders are like, well, I'm gonna explain the why me, because it feels like it's a personal attack on me. And again, this comes back to my earlier point around the business being part of your identity and how that ultimately impacts your psychological thought process around.

Mudassir (56:22.288)
Exactly.

Sam Marchant (56:48.648)
around this startup when you're building it.

Mudassir (56:50.961)
Yeah, so I'm genuinely, genuinely curious because you mentioned you guys get like 5,000 pictures. My god, like that's, but on a good side, on a good side, so I'm happy to see like there's so many people building something new. So that's a good side of that, right? On the other side of the thing is, which I wanna know from you personally, like what is your attention span looks like? What's the VC attention span is like? Because if, I mean, my god, you know, if you just have to screen through 5,000,

Sam Marchant (57:05.68)
Yeah, yeah.

Sam Marchant (57:13.16)
Yeah

Sam Marchant (57:19.496)
Mm.

Mudassir (57:20.397)
that's going to take ages. And I know you guys got the teams and all of the processes in place and stuff, but how much time do you actually spend on a pitch deck?

Sam Marchant (57:30.596)
Yeah. I mean, I, I couldn't give you a specific figure per minute or something like that. I, that would be, that would be very difficult to do. You know, what I will say is that we, you know, we look through decks in a very specific way and it's almost like this layered approach, right? So the first thing is, okay, who's the founder, right? Well, actually, no, a step above that. It's, is this a sector where we, we're aware of?

Mudassir (57:39.519)
Yeah.

Sam Marchant (57:59.6)
we have some sort of expertise and some sort of advantage. And that's not because of a knowledge thing, but that's because if this founder is exceptional and this is a market that we don't know, what is our likelihood of winning this deal? Because there are gonna be other investors in this space who know this space better than us. So if we're not gonna come to the table saying, hey, we have a network or knowledge or proprietary thinking around this space, how are we gonna win this deal? And that's...

Mudassir (58:00.073)
Hmm.

Mudassir (58:13.725)
Hmm.

Mudassir (58:17.413)
Yeah.

Sam Marchant (58:27.92)
you know, a part of the part of the kind of the game as well. Um, so you're immediately thinking about those things. The second thing is that you automatically go to team and you go and you look at the team and you say, okay, cool. What's the caliber of this team? Like, um, can they show execution ability? Is there something unique? Is there something different about them? Um, how formed is the team, you know, where are they at? Um, and I, and I see all sorts of different things. I see, you know, team slides where there's 20, 30 people, or there's maybe

to people, right? It really varies. But you just want to kind of get an understanding of the person. And then I often go to, I often go to next the problem before anything else. And the reason that I do that is because, you know, again, coming back to my earlier point about is this a big enough problem to solve? You know, if it's not, you can write it off there and then right, you know, very quickly.

So let's assume that it is a big problem and that it's something that we think, oh yeah, this really needs to be solved. There's a unique piece of insight on a market opportunity here. You know, you then go to the solution. And the thing is with the solution, the problem will change, but it changes less frequently than the solution. So, you know, you go to a solution and you say, okay, that might be MVP one or MVP two or pivot one or pivot two, you know, these things are gonna change over time. We know that, we're not unrealistic to that.

Mudassir (59:43.503)
Yeah.

Sam Marchant (59:51.124)
Um, so that's the kind of last point that I think I, I kind of pick up on, but yeah, I mean, to give you, you know, to give you a figure on minutes, it's, I genuinely would say if, if it's more, and I'm not, I'm not going to lie and I'm not going to say, oh yeah, it's half an hour on every deck because you can do the math, you know, that that's a lot of hours in the office. Um, you know, if you're, if you're doing more than four minutes on a deck, I, I'm very surprised that's just the, the truth, you know, cause you're, you're flicking through and you're going through to the, um,

Mudassir (01:00:21.07)
This slides pretty quickly, yeah.

Sam Marchant (01:00:21.244)
You know, you're-

Mudassir (01:00:31.378)
I think I lost you.

Sam Marchant (01:00:46.778)
my back.

Sam Marchant (01:00:50.621)
Hey.

Sam Marchant (01:00:54.341)
Is it better now? Oh, I can't hear you. Why can I not hear you?

Mudassir (01:00:58.781)
Can you hear me now?

Mudassir (01:01:02.729)
Can you hear me?

Sam Marchant (01:01:08.949)
Sit back now.

Mudassir (01:01:11.213)
Yeah, yeah, you're back. Yeah, no problem.

Sam Marchant (01:01:12.469)
Okay, there you go, I can hear you. Sorry. So I don't, again, it just said no, I mean, the internet's fine, and then it just said no internet connection, so sorry.

Mudassir (01:01:21.841)
Yeah, no problem at all. No problem. I was asking you about, like we were talking about the detention span and we're like moving towards it. Okay, cool. All right, rolling again. So one thing that, you know, just tell me this one particular thing. So you explained that your layered approach, like, you know, how you evaluate all these pitches and stuff like that. But what's the process like, you know?

Sam Marchant (01:01:32.744)
Yeah.

Mudassir (01:01:50.333)
from the operations standpoint, because I have absolutely no idea, no knowledge of, like okay, so you like a pitch deck, what do you do with that? Like do you email the founders, do you send it to somebody, you guys get a discussion, you guys get a call, like what's the process from VC stands look like? Because from the founder's side, I totally understand that, like you know, got a pitch deck, somebody's gonna send you, like okay, let's just have a 25, 30 minutes call, like that's the one that you get actually. So like from your perspective,

What do you do with that? Like you got so many pitch decks. Like what do you guys do after like you like, okay cool one so, yeah

Sam Marchant (01:02:29.073)
Yeah, great question. Yeah. I mean, the, the process is that we have, we have a nice big CRM that's becoming more and more advanced, you know, um, as technology advances, um, we're able to look into that data much better. We're able to, to create trends. We're able to put, um, you know, we get a lot of decks solving the same problem, many different solutions, but solving the same problem. Um, that's a really interesting learning for us, you know, so we try and kind of derive an insight from that as well.

Mudassir (01:02:37.873)
Okay. Yeah.

Sam Marchant (01:02:59.537)
Um, in terms of, you know, the process into like getting on a call, I mean, I think, you know, yeah, it tends to be 30 minute calls in the first instance. Um, I'm always one for introducing Hambrough Perks as a firm. I think it's, you know, I think it's not only polite, but I think it's important that founders know who we are, um, how we do things because, you know, sometimes there's not an alignment and that's fine. Right. You know, there's, you know, many other VCs and many other founders out there and, you know, if we're going to go on this 10 year journey together.

you know, you want to be aligned. So I think it's important that you kind of introduce yourself and talk about that. Um, then when you get on a call, you know, I like to keep it very open. I really like to know what founders, you know, who are the founders, how did they meet, um, what, what is their totally unique insight and position? And then for me, a first call is about really understanding how well they know the customer or the problem, like what level of research has gone into this. Um,

Cause what I find is that, uh, founders who have spent limited time with customers or limited time really drilling into every single component of the problem. They build products. You know, that, that really either have too many features or features that don't matter or, you know, there's a lot of distractions and a lot of weight in these products, um, and if they haven't built products, you know, they then go, okay, yeah, we need more resources to go away and build this stuff. And it's just.

Yeah, on the most part, it's like this just doesn't, doesn't work. It's not, it's not really what people want. So, so yeah, so for me, the first call is always about understanding the founder and then figuring out, okay. Um, from a, uh, from a problem perspective, what do you know? Like, how do you see this problem differently from maybe other people I've seen before, or, you know, um, you know, yeah, what, what do you bring? That's totally unique to this, um, to, to this problem.

Mudassir (01:04:54.341)
Yeah, okay. Okay, awesome. So just wanna focus a little bit more on the pitch deck, the structures and the problems that most of the guys, most of the founders still faces today. So one of the things that you and I were talking before the recording was there's so many of these agencies out there that tell people how to create a better pitch deck. There's like so many of these. And then people are just telling you need to learn the art of storytelling, which is important. I'm not gonna say that it's not important, but...

Sam Marchant (01:05:03.752)
Mm-hmm.

Sam Marchant (01:05:23.283)
Yeah.

Mudassir (01:05:24.477)
that there's so much money that goes into creating those pitch deck and even then founders don't raise successfully. So my question to you is, somebody who has done like hundreds of those deals, in your mind, what's the ideal structure looks like? I'm not asking about like the specifics, but a structure, okay, so you should start with this thing, you should have a narrative, you should have a story, get the problem, all that stuff. So what that structure looks like to you?

Sam Marchant (01:05:52.357)
Yeah. I mean, again, it's very difficult because, you know, each business has like different moments of, or different components of brilliance from, from the next. So, so putting it down into a template, I think is very hard. Um, for me, I always like to know who the founders are in the first, the first slide, right? So, you know, intro slide, or sorry, you're just front cover, bang, team straight away, right? Who are these people? Um, what is it about them? That's

Mudassir (01:05:59.211)
Mm-hmm.

Mudassir (01:06:02.705)
Yep.

Sam Marchant (01:06:23.49)
The second thing is, it's got to be about the problem or the opportunity. You know, too often I see market sizing really far up the star. Market sizing is also just a really, you can learn a lot about a founder by how they size a market. You know, some are more opportunistic than others, but often, you know, on the most part, they're wrong. This is just the market sizing is just wrong. And as VCs, we go away and do our own anyway, you know, it's...

it's, and I'm not saying you should get rid of it. I think it's important. But you know, on the most part, we're looking at it in totally different ways. So I like to kind of come into a story about the problem. And in that problem, you know, you can weave in, you know, what is the pain that is felt? Where is this, you know, little wedge that you can create value? And how does that open up a broader opportunity? Why?

Why now? What, what, like, what is it about the problem now? That's, you know, people actually care about, you know, why are all of a sudden people really bothered by this thing that you're going to try and solve? Why has it become super painful? Um, and then also, and then really, then it comes into the solution, or I guess where the founder is at right now. Um, you know, on the most part, on the most part, if you think about it, what we're doing is we're backing exceptional people.

to go away and solve big problems. That's all we're doing. The way that they solve those problems, that changes. It will change with technology, it will change with expertise within the team, all of these things and good VCs know that they're on a journey with founders like that. So yeah, and that's the art of early stage investing is finding founders who think about problems in a totally unique way, as we've already discussed, totally fresh perspectives.

Mudassir (01:07:53.425)
Hmm.

Sam Marchant (01:08:16.229)
and founders who are just absolutely so in the detail about this space and this problem, that it's like a, it's a passion for them. Like, they just wanna solve this thing. Like that's part of their, that's part of their kind of makeup. So yeah, that's the structure, I guess. I think, you can put in an investment ask, you can do that kind of stuff. Again, I don't think it's really essential. I think,

it's, it's lazy, it's lazy behavior from a VC side to say, oh, there's a standard template that needs to be done for pitches over and over again. Um, that's just it. Yeah, that's just, it shows that people aren't reading and aren't thinking about what, you know, what this found that who this founder is and what they're presenting to them. Um, it just shows that there's this process and it's just like a factory line.

Mudassir (01:09:03.566)
Hmm.

Sam Marchant (01:09:09.009)
And I found that to not be the case. You know, it's never the case if you want to invest in, you know, these outsiders, these, you know, totally unique opportunities to create huge amounts of value, then there's never a standard blueprint for that.

Mudassir (01:09:24.849)
What's the value? Because I get this question a lot. Like, you know, are you creating any value? What's the value problem? What is the value?

Sam Marchant (01:09:28.873)
Hehehe

Sam Marchant (01:09:35.549)
So value to me is a customer getting a level of increase. And I use that word quite intentionally, a level of increase that they can't get either they can't get with their own skillset or the products that exist at the moment. And I think it's the job of every founder to inspire this increase within their customers, but also within their teams.

Mudassir (01:09:54.842)
Hmm.

Sam Marchant (01:10:03.365)
but mainly within their customer set. And this really, when you think about this, you go, okay, well, that puts you in a totally creative position, right? You need to be in a position where you're exploring an opportunity and a problem, and you're coming up with a creative solution for it. Some startups generate lots of revenue by solving problems and making things cheaper. The issue is, I'm not sure.

I'm not sure that making things cheaper and making things possible are the same thing. They're two very different things. And there's two very different values there. And one of them is more enduring than the other. You know, making things possible is far more exciting. You know, why do people order Ubers? Well, it's because it's just easier. It's now possible for me to get a cab right to my door. I don't have to go around trying to find someone, you know, and I know what the price is gonna be, right?

Mudassir (01:10:44.617)
Exactly.

Mudassir (01:10:48.41)
Yeah.

Mudassir (01:10:53.629)
Yep.

Sam Marchant (01:11:03.209)
Is it because, am I excited by the fact it's cheaper? For some people that will be the case, yes. But for most users it's actually that convenience and the fact that it gives an increase to them, which in this instance is convenience.

Mudassir (01:11:17.841)
I think you're totally spot on when you said convenience and accessibility and possibility, but when there's more players in the market, that is when prices and you don't, like for example, you got Uber and you got Lyft and you got somebody else, and then now you got this, in a way, ability to compare the prices and you might wanna say, okay, so it's gonna take 10 pounds, it's gonna take five, might as well use this one. And, but even then, value.

differs from just being cheaper. Totally agree to that. Great answer to that. So, you know, I think that you mentioned, so this was just very, you know, impromptu, but I think that you mentioned, you know, when you were describing the pitch deck stuff was market size. So I have seen of a very few deals slash angel investment decks, like whatever I've seen, everybody

Sam Marchant (01:11:50.437)
Yeah.

Sam Marchant (01:12:05.99)
Mm.

Mudassir (01:12:14.993)
It's going to sound funny. So every single pitch deck that I have ever received or I have ever had the privilege of seeing, the market value is at least a couple billion dollars. At least, I'm just like, I'm not kidding at all, right? It's usually like tens of billions of dollars. So my question to you is, what is exact, what's the right way of calculating a value, sorry, of a market size? Like what's the way of calculating a market size? So for example, I'll give you this example.

So to my mind, like somebody told me this thing before, the market size or total addressable market, like let's say TAM for the lack of better wording, for liquid death is gonna be trillions because like every packaged water bottle is their market size, right? Like this is how you could calculate that. But, and then the SAM and SAM comes in, so that is all okay. But how do you guys, you know, as VCs, how do you guys calculate, like okay, so.

Sam Marchant (01:12:54.578)
Mm.

Mudassir (01:13:13.926)
Now, not tens of billions, probably a million. So how do you do that?

Sam Marchant (01:13:19.333)
Yeah, it's a good, it's a good question. And I mean, it's very case by case, right. So it really depends on the market, the product, etc. You know, for us, we look at, we look at target customers or initial customers, right. And then we kind of work out from there. I'm trying to think of an example I can give. So, you know, let's talk about like, generative AI, right.

You know, theoretically, anyone in the world who has access to the internet or a computer or, you know, even now a phone, you know, could use generative AI. Does that mean that the TAM is, you know, every single person in the world or everyone who has that technology or access to it? No, it doesn't, right? Because, and the reason for that is because there's actually a purchasing decision that needs to be made. And that's the key thing here is people...

founders often assume that a total addressable market is just anyone who can access a product, just use it. And they don't take into account that, there is a purchasing decision that needs to be made. There's a resource allocation that needs to be put towards actually getting this over the line. So it doesn't work. So, what we do is we look at, we would look at the price point of the product, the business model of the product. We would look at that kind of ICP set.

And then we would drill into the fact that, okay, in that customer market right now, what are we, what are they already spending on? And how much are they spending on either similar products? Um, you know, whether it be the same business model, same kind of, um, you know, sales motion, um, or, um, actually what does this kind of, from, you know, from a dollar figure, like, what does this save those, save those, those customers, you know, and then you would kind of calculate the market from there.

I mean, I think the, you know, the, the TAM Sam and some is great. And it's a nice clear three, you know, three steps structure to focus on. But one of the things that I find myself defaulting to now when I speak to founders is actually, um, how can you get what, uh, I use this as like a IAM, right, which is this immediate addressable market. And I know a lot of people have spoken about this before, but I think it's brilliant because, you know,

Sam Marchant (01:15:40.177)
You go, okay, well, how quickly can you get from zero to 10 million of ARR? Right. And all of the learnings and the journeys on that process, like that immediate addressable market is often, often more important than saying, okay, there's this huge number, you know, billions, trillions, whatever it may be from a, from a TAM perspective. Um, and I think that's, that's more exciting from a founder perspective to go away and figure that out. Right. Is, is how do you, what is the immediately addressable market and how do you actually reach that?

Um, yeah, the calculation is, um, is always dependent on the startup, the type of product, but we find that many founders overlook this, uh, this notion that, you know, people have to pay for this, right. And, and, and is there any sign that they're paying for similar products or services right now? If there's not, then it's just wrong to assume that you can take, you know, multiplication of total number of people and price of product.

Mudassir (01:16:30.921)
Hmm.

Sam Marchant (01:16:37.777)
and give a market figure. It doesn't work like that.

Mudassir (01:16:37.913)
Yeah, yeah, yeah. And most of the time, most of the founders would just throw the number like that. Like, oh, wow, like, just a huge opportunity. Yeah, awesome. So thank you so much for just explaining that. I just wanna take one or two more questions and then I'll just, you know, I'll be more than happy to go over some of the questions that our audience sent. So just wanna, you know, take a few more minutes on that. So one is you talk a lot about

Sam Marchant (01:16:47.706)
Exactly. Yeah.

Mudassir (01:17:07.749)
non-conventional VC funding. So you talk about family offices, you talk about wealthy individuals, angel investors, and people like that. So question number one is, why VC money is considered or so-called sexy money or something like that? Like why is everybody chasing that? Like why is that so?

Sam Marchant (01:17:31.361)
Um, I think it's because, um, historically VCs and venture capitalists have been the ones backing exceptional companies, right? That have grown into huge category generational, you know, generation defining businesses. Um, and people assume that, you know, if, if they've backed that company before, well, and they're backing my company, well, we're on the same path to success. We're on the same road.

Um, and that's why it's, it's seen as, you know, sexy or, you know, that, that kind of, um, every founder would, would want it. Um, it's funny though, because when you speak to founders who've been VC backed before, regardless of whether it went well or it went wrong, often, a lot of them say, yeah, I'm going to do things differently this time round, you know, they say I'm either, yeah, I'm either going to look for a VC who knows my sector a bit better, or I'm going to think more about.

Mudassir (01:18:12.829)
Mm-hmm.

Mudassir (01:18:20.209)
Yeah.

Mudassir (01:18:25.33)
Yeah.

Sam Marchant (01:18:26.749)
terms, or I'm going to think more about the amount I raise, you know, when I raise, there's, there's always kind of lessons that I guess, I learned going through that process. Um, but unfortunately, I think it just comes down to, to brand, right. And, and, and I've, I have pondered on this a lot. And I think when you're a startup founder, you know, if, if you're someone who likes feedback and positive feedback very quickly and very frequently, it's not, it's, it's not good for you, right.

Mudassir (01:18:32.19)
Hmm.

Mudassir (01:18:35.977)
Yeah.

Sam Marchant (01:18:56.573)
Um, you're, you're going to get a lot of negative feedback very, very quickly. And you, and you've got to be comfortable with the fact that feedback is good, whether it's positive or bad, right? Like, you know, you can iterate and you develop, but the point is here, you know, um, it can often be seen when you raise from a VC from a founder's perspective. It's a positive thing, you know, and in 2021, it was one of those things where, you know, okay, we had a crazy market environment that every round is being done. It's being done with crazy valuations, crazy amounts of capital.

Mudassir (01:18:58.809)
Yeah.

Mudassir (01:19:03.633)
But yeah.

Sam Marchant (01:19:26.161)
Right. You look at all of these things and you go, yeah, people were using that as a validation metric to say, yeah, my startup's doing really well. Or I'm doing really well, really well. Um, and that's, that's a, you know, it's a house of cards. It's not a sign that the business is doing well. It's a, it's a sign that someone believes in your vision and they believe in you. But it doesn't necessarily mean that the business is performing well. Um, especially in 2021, that wasn't the case. So.

So yeah, it's, and I also think it's just an attachment to the press, right? Um, you know, the way that these things are shared, you know, when was the last time you heard of, you know, a founder who raised a hundred or 200 grand from, from angel investors, um, you know, even though that's all the money they need to go away and build a great business that's going to sell for 5 million pounds. Like you don't hear of those people. And, and, and that's, that, that's an issue. Um, and I think it's an issue because, you know, it's a very select pool of individuals.

Mudassir (01:20:08.434)
they need yet.

Mudassir (01:20:13.017)
Yeah, exactly.

Sam Marchant (01:20:22.297)
Um, select is the long-term, sorry. It's, it's a very, just a very small pool of individuals who, who raised from VCs. And, you know, there's nothing to say that those individuals are better than anyone else building a company that hasn't been VC backed. Um, it just comes down to this definition of success and how you perceive, you know, what you perceive a business to be. Um, so yeah, it's a, it's a funny question though, cause I've thought about it quite a lot, as you can probably tell.

Mudassir (01:20:22.319)
Hmm.

Mudassir (01:20:53.138)
Yeah, absolutely. And the last, I always have like a lot of thoughts on these things. I had Peter Walker of Karda on the podcast and he was just throwing all these numbers like what 2021 was like and then what 2023 was like and how disastrous that was. And I have this theory which not many people would want to agree to, but I think 2023 is one of the best things that has happened in the recent startup ecosystem. And the reason why I say that is because...

when there's a market like 2021, you can have any whatever nonsense sort of an idea and you're gonna get a million dollars. That essentially means that people who are doing hard work, making something very important, adding value and doing something like that, you're just adding more competition to them, useless competition. And companies who are built sustainably, they will see this market comes back up and this entire cycle and they'll be still around.

Sam Marchant (01:21:40.163)
Yeah.

Mudassir (01:21:50.597)
all these nonsense ideas, they're already bankrupted or like they're gonna be out of the business if they're not already. So I think this last year especially, and I think 2024 is gonna be pretty much the same as well. So I think this timeframe have taught a few things to the founders. So one is raise what you need, don't just go crazy. And the second thing is focus on customers, focus on selling, focus on building, and maybe...

just grow a little sustainably rather than just kind of going crazy like everybody else was doing that in 2021. So these are the few thoughts that I have. The last question that I want to take on, you know, the one that I have for you is...

As an operator, as a former founder, and now you work with hundreds of founders and you just educate them, teach them, LinkedIn, not just investment statement, but the other way around. My question is, what sort of a leverage a founder has actually when they're negotiating a VC deal, a timesheet deal, or whatever that is? Like what sort of a leverage do they have? Because all we talk about is, we got a timesheet, we got a timesheet, we're getting a timesheet, and everybody's way over in their heads.

But how can founders actually be taking it towards the other side of the table? So how can founders actually negotiate a better deals from themselves? Like what leverage do they have?

Sam Marchant (01:23:13.459)
Yeah.

Sam Marchant (01:23:19.529)
I mean, I think so. So the best, the best form of leverage, right. Is, is not needing investment in the first place. And I know that sounds like so blindingly obvious. Um, and it's really just terrible advice because it's just really, really low level of thinking. Um, but it is true. Um, you know, I, I meet exceptional founders, um, on a weekly basis who.

Mudassir (01:23:30.455)
Yeah.

Sam Marchant (01:23:45.149)
really don't want to raise VC funding because they're like, look, you can't add anything. They're like, you know, we have an amazing team. We have, we're amazing founders. We back ourselves. We've done this before. You know, what do you actually add outside of money? And you go, hmm, yeah, okay. We're going to have to work really, really hard if we want to try and get into this deal. So that's the biggest form of leverage. In terms of negotiating a good deal, you know, when you're at the table with a VC, I think the first thing is you've got to understand that this is a long-term relationship.

And with any negotiation, you know, you're always going to end up in a middle point. Um, you know, there are things that founders always go back to when, when I'm negotiating with them, things like vesting, that's always a point of contention. People go, I don't want to work for a year and not have any equity. I've thought I've put two years into this business already in my own money. Now you're taking it away from me. The answer to that question is we're not, VCs aren't taking it away from you. You know that.

You can always speed up the process. And in the long form docs, it says, you know, any point, the board can just remove that cliff, right. And, and, and it can all be issued and it's there. Um, the key point there is it just protects the VC from you leaving, right. And, and, and no one winning. And it also protects you from other team members who have equity as well. And that's quite a key point. And I think when you look at it like that, most founders, most rational founders go, okay, yeah, I understand that. I understand that. And I think that's, that's logical. Um,

So there's that point. I think, um, often I have seen in 2021 founders would negotiate quite hard on, uh, valuation. That's not the case anymore. Um, founders negotiate more on dilution than, than valuation. And that's interesting because that also has to do with how much you raise. Um, and, and I think so.

Mudassir (01:25:18.684)
Hmm.

Mudassir (01:25:22.141)
Hmm.

Mudassir (01:25:27.497)
Yeah. Is that a good thing? Sorry to interrupt. Is that a good thing? Because I think it's better that now they're not focusing on valuation. That was not a good thing. Totally not.

Sam Marchant (01:25:39.077)
Yeah, I think it is a good thing. I think, you know, because ultimately what it says is it says, okay, I'm thinking about my cap table in the future. And what that means is you're thinking about the relationship that you're building, you know, the team that you're building, you know, investors are an extension of the team that's there on a daily basis. If you're using your investor network properly, that's how it should be.

Mudassir (01:25:49.981)
Hmm.

Mudassir (01:25:53.581)
Yeah. Hmm.

Mudassir (01:25:59.258)
Yeah.

Mm-hmm.

Sam Marchant (01:26:03.985)
So I think, yeah, negotiating on dilution is a smart thing, especially when you understand subsequent rounds and investment rounds that are happening. So there's definitely that. I think the last thing I'd say that people negotiate on, and it's, they do and they don't, because you've got to remember that the raises and things like instruments like safes, they're becoming very, very popular now, because people want.

Mudassir (01:26:07.429)
Good thing.

Mudassir (01:26:29.129)
Hmm. Yep.

Sam Marchant (01:26:31.689)
things to be quickly, you know, move quick. You know, we're a pre-seed startup. Why would we want, you know, why would we want all of these controls and all of this stuff, you know? Well, ultimately getting good docs in place at the start is a really key thing. You know, if you have really strong, and this is a key thing for us at Hamburg Perks is making sure that we set our companies up for success right from the get-go, you know, so that when they go out to raise the next round, you know, they're in a really good position.

Mudassir (01:26:44.869)
Yeah.

Mudassir (01:26:55.356)
Hmm.

Sam Marchant (01:27:00.037)
All of the long form docs are, are water side, you know, all of the, uh, individuals, the team members, everyone is bought in, everyone is incentivized in the right way. Um, everything is a, you know, on the table, we all know what's going on. Um, there's no hidden, there's nothing hidden. There's nothing that could jump out and scare anyone. Right. That, and, and often, you know, founders who want to raise quick and just get back to building, that's something that they overlook. So, so yeah, it's, it's definitely changed the deal making process. Um,

Mudassir (01:27:27.488)
Mm-hmm.

Sam Marchant (01:27:28.301)
And I think it will continue to evolve, right? As we see, you know, especially here in the UK, as we see, you know, the, the rules around angel investors potentially changing, it'll be interesting to see how it evolves, you know, whether that brings, it won't bring more angel investors to the table. I think it'll bring a select group of angel investors to the table. And I'm not necessarily sure. I don't believe that's a good thing. Cause I think it, it will price out a more diverse.

Mudassir (01:27:52.253)
Hmm.

Sam Marchant (01:27:57.129)
pool of angel investors and more experienced angel investors. So operators basically. So yeah, that's a tricky one, but look, that will evolve over time. And hopefully, you know, I mean, we're recording this in late Jan, right? Hopefully the government will turn back on that decision, but let's see.

Mudassir (01:28:07.123)
Yeah.

Mudassir (01:28:14.385)
This is going to go live sometime in March. So just keep in mind. Okay. Awesome. I really appreciate it, Sam. Thank you so much for the candor information knowledge. So what we do is we have a decently bigger community now, so I'm very, very happy to have that. We're almost touching 100K downloads in less than nine months. So we're like kind of crazy. Yeah. But we're in top 20 entrepreneurship podcasts in the UK.

Sam Marchant (01:28:19.537)
Yeah, there we go.

Sam Marchant (01:28:37.161)
Wow, that's epic.

Mudassir (01:28:42.893)
and top 20 in the US. So very, very happy, very, very happy with everybody who listens to this thing and everybody who joins us. So one of the things that we do is we send out this newsletter to thousands of people, LinkedIn and all of that stuff. So we send out this message, Sam is coming on the podcast tomorrow, send us your questions. So we get all kinds of crappy questions. But we also get some kind of good questions as well. There's all kinds of weird questions. Yeah, nonsense.

Sam Marchant (01:28:43.079)
Epic.

Sam Marchant (01:29:02.281)
Not cool.

Sam Marchant (01:29:06.857)
Cool.

Sam Marchant (01:29:11.325)
Which ones are we doing? The crap ones or the good ones? Which one are we?

Mudassir (01:29:14.973)
Oh, we're doing the good ones. We're doing the good ones. Yeah, the crap ones are like horrible. OK, so I'll start with a few of these, OK? So there's only a select of those. There was a lot, but we just managed to pick a few. So the first one is, when you reject a pitch or when you reject an idea, do you share the candid feedback with the founders?

Sam Marchant (01:29:16.964)
Okay, okay, okay.

Sam Marchant (01:29:39.313)
Yeah, I think anyone who's received a feedback from me, I would hope would say he was honest and he didn't give us the, it's too early for us or come back when you have traction. I don't think I've ever written that. I think I try and be as honest as I can be with founders. The difficulty is when you look at a founder, you see that as a skill gap.

Mudassir (01:29:53.969)
Hahaha.

Sam Marchant (01:30:08.541)
Right. And, and you know, this founder has poured their entire energy into this startup and you go, look, I think you're amazing at this one or two things, but you really need help here. And often some people don't want to hear that, but I think it's important that they do. And so yeah, I'm always as open and honest as I can be. But I don't know, maybe we need to ask the founders and see what they say.

Mudassir (01:30:30.733)
Yeah, absolutely. Okay, so the next one is, what's the best thing about your job? The thing that you absolutely love now.

Sam Marchant (01:30:38.645)
I mean, everyone says this, but this is like genuinely true is, is spending time with founders. Um, I absolutely love just, you know, when, when you find founders who are like incredibly passionate, really switched on, ready to go, you know, there's just an energy and I, and I love it. I, and I just sit there and I get absorbed and then I go, Oh, you know, I wish I could, you could do this or how could I help or, Oh, I know this person. You should speak to this person.

Mudassir (01:30:43.698)
Hmm.

Sam Marchant (01:31:07.517)
Like that for me is just, I absolutely love that part of the process. Um, that that's the best feeling in the world, right?

Mudassir (01:31:15.189)
Absolutely, absolutely. This is my favorite actually. I think I asked that one a long time ago to a VC who was from the UK as well. So somebody just actually copy the same idea. So one fundamental belief when it comes to venture capital, so one fundamental belief that you disagree with in the venture capital world.

Sam Marchant (01:31:28.02)
Okay.

Sam Marchant (01:31:38.477)
One fundamental belief that I disagree with, that all startups should raise VC money. Although maybe other VCs agree with that. So maybe that's not a fundamental belief. Okay, my fundamental, actually, okay, here's a fundamental belief, is that second time founders always do it better. I disagree with that.

Mudassir (01:31:47.102)
Hmm.

Mudassir (01:32:04.627)
Okay, you disagree with that. Okay.

Sam Marchant (01:32:07.681)
because you know, it can often be, if we think about market timing, you know, and why now, and often a lot of luck can come out on these things. It can also be someone was operating in a geography with a certain group of people and a certain technology at the right time. It doesn't mean that the next business is going to be a huge success. The chance is more likely, but yeah, it doesn't guarantee.

Mudassir (01:32:28.849)
Great, awesome. Yeah, doesn't mean anything, yeah. The last one that I have is, how can anyone get into the VC world? Become a VC, yeah.

Sam Marchant (01:32:40.71)
Great question. Yeah, yeah, I honestly, I get this a lot because I'm someone, I'm very fortunate to be in this role. I'm very grateful to be in this role. I don't have all of the traditional background, both from a experience perspective and an educational perspective. So for me, I think it's about, there are, again, three things. I'm gonna put it down three things. One, building a network of founders and startup operators.

Mudassir (01:32:58.369)
Mm-hmm.

Sam Marchant (01:33:07.889)
who you get along with and understanding them. Start doing that, start being in the community, start being present and just bringing value to those individuals. And that will make you someone that people wanna be around. The second thing is understand how venture capital works as an asset class, right? It's not all sunshine and rainbows. We know that eight or nine out of 10 things that we do, it's gonna fail.

Exactly. So it's a difficult process. You've got to be aware of that. Um, so that's the second thing. And I think the last thing is, um, try and immerse yourself with operational skills as much as possible, whether that be, you know, shadowing an FD for a bit and understanding the financial component of a business, studying, going in and being with the product team, being in front of customers, understanding sales. Because.

It's less about trying to build up skill sets in every area, but it's about finding out what you're really good at, what you really enjoy, what's your superpower. And then you can go to, you know, a VC and say, Hey, you know, or when there's it, when there's an opening at a VC, you say, Hey, this is what I'm really good at. This is what I can assess. This is what I can find. I can find founders who have this trait, this special trait. I can find exceptional people. I can do that better than anyone else.

And that's what sets you apart. You know, I look at the team that I worked with at Hamburg Perks and incredible group of individuals and we're all very, very different. Loads of different expertise, different experience, different backgrounds, you know, but we work. And that's that again, you know, coming from a totally different sphere of life experiences and thinking and being operational, right? That is very additive.

Mudassir (01:34:41.061)
Yeah.

Mudassir (01:34:53.501)
Mm-hmm.

Sam Marchant (01:35:00.529)
additives to an organization. So it's important that, you know, you recognize what you're really good at and how you can bring that to a team.

Mudassir (01:35:09.389)
Great, awesome. So one small ritual that we have on the podcast, we ask all our guests a question for our next guest without telling who the next guest is going to be. So we got a question for you. And then obviously going to take a question for the next guest. So the question that the previous guest left for you is, it's an easy one, I think. What are the three best channels for lead generation for tech companies in 2024 in your mind? Because now it's a content world and content is evolving and everybody's just.

Sam Marchant (01:35:18.429)
with that.

Sam Marchant (01:35:27.677)
Okay.

Sam Marchant (01:35:37.749)
It is a content world. Yeah. It's a content world, but it has to be valuable content. And I, I've learned that. I mean, um, best lead gen tools. I mean, look, I think all of the automated writing tools are rubbish, right. Um, and all of this automated outreach is rubbish.

Mudassir (01:35:38.914)
Yeah, it's different now.

Oh yeah, oh yeah.

Mudassir (01:35:53.713)
Hmm, I wholeheartedly agree. I swear to God. Yep. All of them Regardless of regardless of whatever you're doing with them regardless of that. They're all wasted of time

Sam Marchant (01:36:00.442)
Yeah, I...

Sam Marchant (01:36:04.537)
Yeah. You have to build genuine relationships and it takes time and that's fine. It takes time and it's tough to scale. And yeah, sure. Those tools on the back end can help but it's hard. I would say right now LinkedIn is really, really interesting and is going through a really a big growing up phase almost or a big change phase because we're seeing a lot of people move from X over to LinkedIn because X is the wild west now.

Mudassir (01:36:11.346)
Yeah.

Mudassir (01:36:24.041)
Mm-hmm.

Mudassir (01:36:30.289)
Yep.

Sam Marchant (01:36:33.577)
So people want to be there and want to connect with others. Um, but for me, I don't, I don't think I need three things. I think actually it's just one, which is just creating valuable content, understanding who you want to target and bringing value to them through the posts that you write. And, you know, a lot of people will say to me, Oh, you know, you write a lot on LinkedIn, you know, how do you think of these things or what do you do? Yeah. Everything I write comes from conversations with founders and is me going, Oh,

Mudassir (01:36:36.679)
Yeah.

Mudassir (01:36:44.169)
content.

Mm.

Mudassir (01:37:00.072)
Yep.

Sam Marchant (01:37:02.085)
You know, I wonder if this would be helpful to the entire founder community. Let's see, let's put it out. And some things are, some things aren't right. And that's fine. You know, it's, it's not, I'm not ego about these things and how that plays out.

Mudassir (01:37:05.341)
community.

Mudassir (01:37:10.321)
Thank you.

Mudassir (01:37:14.925)
Yeah, awesome. Question for the next guest, sir.

Sam Marchant (01:37:19.593)
Question for the next guess. What's one company you wish you could have invested in at pre-seed stage?

Mudassir (01:37:27.366)
Okay.

Sam Marchant (01:37:29.913)
And I asked that because it'll be interesting to see if that person goes, Oh, this company, because it would have made me loads of money, or this company, because I want to be close to the founder, or this company, because I love their impact. I think it'll be interesting. Whoever that guest is, I mean, good luck. That's a fun question.

Mudassir (01:37:46.405)
Yeah, no, that is a very, very fun question. I think, who do we have? OK. All right, OK. He's a deep tech VC, so we'll think about that. How that one will go. Yeah, yeah. Awesome. Let's say the bias and close the recording, and then please stay on the call after that, OK? OK. All right, Sam, thank you so much. One of the best episodes that I've ever recorded has such a fun time talking to you.

Sam Marchant (01:37:48.925)
If you

Sam Marchant (01:37:57.657)
Ah, okay, that'll be fun. That'll be fun. Awesome.

Sam Marchant (01:38:05.621)
Mm-hmm. Sounds good. Awesome.

Mudassir (01:38:16.253)
people will find it valuable. So thank you so much for the candor, for the time, knowledge, sharing all these stories with us.

Sam Marchant (01:38:22.401)
Likewise, very, very kind words of you. I've really enjoyed it. It's been great fun. So yeah, thank you for having me on and hopefully it's helpful.

Mudassir (01:38:29.81)
Awesome.