VC way of thinking is rather unique
“VC way of thinking is rather unique,” says Dominik Zalewski, former CFO for Europe at e.ventures and now founder of Urban Impact, an agency connecting, scouting, and helping urban tech startups to grow. So, why did he quit a prominent role in VC despite being excited about venture capital?
Dominik began his career as a consultant, creating urban development strategies for cities. He also spent a couple of years working as an analyst for Franklin Templeton Investments before joining Point9, now recognized as one of the best early-stage investors in Europe. In 2017 he joined e.ventures as the Chief Financial Officer for their European funds. He quit e.ventures at the end of 2019 after co-founding Urban Impact.
“I never felt like a typical CFO,” Dominik told me during our interview. He also explained what his role looked like when he started in VC and how it evolved over the years. To find out more about being a VC CFO and to learn about Dominik’s motivation to quit, read through the interview below!
Paweł Michalski: Dominik, let’s start with an easy one. How did you get into venture capital?
Dominik Zalewski: I’d say it was a combination of curiosity and luck. I was interested in technology, and I had been working in finance. A friend of mine was offered a job at a startup in Berlin — that’s how I learned about this brave new world — or at least new to me. It was two hours driving from Poznań, where I lived at the time, and yet it emanated different energy! I started looking for an opportunity there and met Paweł Chudziński. He offered me a job in finance, and that was it.
PM: It seems like an understatement to me. After all, you’ve joined one of the leading early-stage funds in Europe.
DZ: The way people perceive VC now, resembles the vibe around investment banking just before the Great Recession. It was not like that when I joined — there was no hype around it. I appreciated that at the time. To tell you the truth: good VCs don’t care about the hype — they keep doing their job.
PM: So, how does the job look like, especially from the perspective of a VC CFO?
DZ: The General Partners are looking for investment targets and creating value for portfolio companies, and the CFO does everything else (laugh). I used to say that my role is to be the Chief Everything Else Officer. After a deal is done, there is a ton of things to do. You have to read through the legal docs to prepare the capital call, make sure the money flows to the investment target, and prepare the investee company for several reporting requirements.
The reporting itself could be time-consuming — quarterly reports, yearly reports, ad hoc information — you have to keep track of all of these. It might not be an issue if you have 5 companies in your portfolio, but managing a portfolio of 60 is another kind of challenge. Different stakeholders require different types of information: GPs, LPs, regulators, auditors. You have to make it useful to them.
Above all this, you have to keep the management company afloat — wages, expenses, taxes — all to be accounted for and paid on time. Somebody has to make it all happen.
PM: Is it how all funds handle this?
DZ: No, there are different types of CFOs, as there are different types of VC funds. In simplified terms, you could think about some of them as coordinators and about some other ones as auditors. The latter group is fluent in tax and accounting, whereas the former consists of financial generalists. I was never particularly fond of doing accounting work, so I considered myself a coordinator. To each his own.
To be fair, who you need at the moment also depends on where you are in the VC lifecycle: do you have one or more funds under management? Who are your LPs, and how strict are their reporting requirements? How many geographies are you covering?
PM: Did you know all that before joining Point9?
DZ: Actually, no, I didn’t. At that time, people followed a hunch, at least in the German ecosystem. One day I got on a plane to London to meet several experienced VC CFOs. I was amazed by their willingness to share. They’d experienced the same problems that I had at that moment, and they knew the answers that I was seeking. I was like a sponge, absorbing every piece of information they had thrown at me.
Back then, the knowledge was scattered. It’s different now. First of all, you don’t have to go to London to find the know-how. Thanks to industry organizations and initiatives like VCLeaders, it’s becoming well organized.
PM: Given what you know and what you’ve experienced — what is the most critical aspect of the CFO’s role at a VC fund?
DZ: Good communication skills, first and foremost. A CFO is basically someone who transfers knowledge from one mind to another. Imagine translating a 200-page long investment agreement into a short e-mail. You have to thoroughly understand the commercial implications of a complicated legal agreement and be able to transmit it as a simple signal to other stakeholders.
Time-management skills are fundamental, especially as your portfolio and thus — the number of tasks to complete — grows.
Last but not least — resilience. As one GP once told me: the most important thing is to show up every day and keep doing your job.
PM: What was the most challenging part of your job?
DZ: Remember this 200-page long investment agreement I’ve mentioned? Well, imagine having 20 or 30 of those, updated continuously and annexed. Sometimes it takes a month to fully understand the history of a single company. These agreements are always in flux: the economic conditions change, people leave, companies miss important milestones — you have to keep track of all these facts and events. And then, you have to know what actions to take and whom to inform. I believe you can automate a lot, but not this part.
PM: Speaking of which, are there any tools that make a CFO’s role easier?
DZ: Nothing that could replace the good ol’ Excel. Many CFOs have been using various tools to automate KPI tracking, but to me, KPIs are frequently too vague to leave for software to decide. At the end of the day, most responsibilities of a CFO are more of an art than a science.
PM: As a CFO, what made you happy?
DZ: Taking care of the big picture. I’ve never felt like a typical CFO, as I always imagined one. I don’t have any accounting or tax background, but instead, I have a good understanding of project management. Every month on the role, I had an increasing number of workstreams. I liked that.
PM: Would you say that there is something like a “VC way of thinking”?
DZ: Yes, it is, and in my opinion, it’s rather unique. Look at the outburst of the coronavirus pandemic. I am sure that VCs have not waited for any official announcement to isolate themselves. They know how exponential growth looks like. They know what to expect. They acted on that. And this is how they operate day to day. I’ve been fortunate to have worked with such outstanding people.
PM: So, why did you quit?
DZ: Working with these outstanding people, I’ve realized what I can do and what I could learn. I believe that I’ve grown professionally over the years. I’ve learned what I may achieve if I follow a reliable process with resilience. It became clear what I could accomplish with my, now more extensive, professional network and newly minted skills.
I studied the economy of cities at the Poznan University of Economics. Urban development has always been my passion. I’ve always wanted to know how cities function from a systemic perspective. Combining this with my interest in technology, it was the logical step to take. I’ve also found the right co-founder.
Also, becoming a father has radically changed my train of thought regarding the timing. I thought: either I’ll start doing it right now or I won’t ever.
PM: In hindsight, was the timing right?
DZ: I think it still is. Let’s see. Some part of me is telling me: boys from the Eastern Bloc will always manage.