I wanted to be different, I wanted to be in a position to make decisions

Dan Lupu is one of the venture capital pioneers in the CEE region. His experience at Intel Capital and now at Earlybird Venture Capital gives him every right to brag. Earlybird’s Digital East Fund gathered a lot of media buzz recently, after Peak, one of their portfolio companies, was bought by Zynga. Another one — UI Path, a company that Dan backed at the fund — has been one of the most celebrated CEE-started enterprises of the past years.

And yet, Dan remains humble and straightforward. I promised him that this interview would not be about any particular company. As Dan told us: you never know for sure how successful your investment will be. Thus, as with life in general, it’s important to draw lessons from both successes and failures.

Paweł Michalski (PM):
Dan, what did you do when you were in your twenties?

Dan Lupu (DL):
I was studying computer science, for petty reasons. You might be surprised, but in the communist era, many offices did not have any heating in the winter and no air conditioning in the summer. But sure enough, the offices where computers were located did have those. Jokes aside — back in those days, having a CS degree was a sure way to get a decent job. You were assigned a posting in a city and that seemed like an interesting career at that time.

During the last year of my studies, I found out that there was an MBA program in cooperation with some Canadian universities. I got accepted into it and started discovering these super interesting things about finance, marketing, or even accounting. I was lucky to participate in it, because sure enough — I found out that those fields are more attractive to me than CS.

So, despite the apparent benefits of a career as a computer scientist I never pursued this path. Immediately after getting my degree, I was hired as an equity analyst in Bucharest (1997 was a boom year for the Bucharest Stock Exchange) and spent a few years covering various sectors: from retail to steel manufacturing. Actually, if a company was publicly traded on the Romanian market I had some understanding of it.

Eventually, I came to the conclusion that I wanted to be closer to decision making, and made the transition to private equity. All of a sudden, I was not just offering advice but had to make investment decisions. However, it was not the best time to get into PE, because it turned out 2005–2007 was the peak of a bubble. In a matter of months, a lot of capital was chasing a few deals. What was even more frustrating was the fact that I joined when the fund was still in the fundraising stage, and it was not easy to close.

PM:
Was the timing better when you were hired by Intel?

DL:
Yes, when I joined Intel, there was, I believe, no other VC investor in the CEE region. Apart from Intel’s balance sheet and branding, we also benefited from the first-mover advantage.

PM
: What drove you to a decision to join a VC fund?

DL:
It was my interest in technology, that was somewhat kept on the side during my equity research years. I consider myself lucky to get a job on the buy-side — it was fairly different from what I learned on the sell-side. A role at Intel enabled me to build on my passion for tech, the ability to quickly learn about a new type of business, and my PE experience.

PM
: Didn’t this kind of background make you an ideal candidate for a role in venture capital?

DL
: I’m not sure. First of all, the odds of getting a job in VC are really small, close to 0. When I started investing, I knew nothing about venture capital. I think what helped me get into VC was a combination of an analytical mindset I got out of my CS studies and the ability to quickly understand the growth drivers behind various industries and businesses.

PM
: Now that you’re a partner at Earlybird Venture Capital, one of the most successful European VCs, I’m really curious — what do you believe is the biggest difference between Intel and Earlybird, a pair of very different kinds of an animal?

DL
: To me, it boils down to a difference between being at the table versus making the decisions. At Intel, every deal we made had to be accepted by committees upon committees whereas at Earlybird I need to make my own bed.

I think this is one of the critical factors in the investing space. A lot of people overlook the distinction between a willingness versus the ability to make a decision. I would argue that 90 percent of people want to be managers and just about 10 percent want to make decisions. You need to understand the differences and be honest about where you want to be.

I realized that early on when I was working in equity research — regardless of how good my idea was and how well I presented it, I was still just a talking head trying to influence somebody. I wanted to be different, I wanted to be in the position to make decisions.

PM:
Is making decisions easy for you as a VC?

DL:
Making decisions in the face of imperfect information is the hardest part of the VC job. You never know the full picture, you never know if somebody else is already working on this great idea you’ve just found out about — and you most probably never will! You still need to make a judgment call. So, you assume the risk and move forward. In the VC business, you aim for being quick and being right enough: will the product be desirable? Will a client make a buying decision? Don’t end up in the analysis — paralysis mode.

PM
: Apart from the ability to make decisions, what do you believe are the skills that make the best VCs?

DL
: It’s a very personal business and so the rapport that you establish with founders really matters. You need to be open and honest, both when you say “yes” and “no”. I personally try to be as direct, pragmatic, and realistic with founders as possible. I’m never sugarcoating my feedback.

PM
: Are there any tools that make your VC life easier?

DL
: I don’t think you can live without Excel as a VC. Besides, if you look at how the VC investment processes are run, you need to both standardize and be flexible. Things are evolving, markets are competitive, people join and quit businesses. I haven’t seen any tool as flexible as Excel.

PM:
Did any particular deal change the way you look at your job?

DL
: Not really. We had good deals and less successful ones. You learn from every single deal you make. Every investment — including the most successful ones — brings about something you didn’t expect. It’s worth comparing the notes you take before making a deal and the post-deal reality.

PM
: What is the most rewarding part of your job?

DL
: I like it when things are moving forward: people are being hired, teams are successful.

PM
: And what do you do to maintain balance?

DL
: I do a lot of sports — despite having a full schedule I always find some time for it. I might wake up earlier or do it late at night.