You become emotionally attached to the companies you back
One of the first things that you could read on PROfounders website is this: “We believe that investing is more than just a financial commitment — we aim to be partners through the hard times as well as the good times.” Indeed, during my conversation with Joe Bond, one of four investors at the London-based fund, I was constantly reminded that being a good VC is not only about math (although understanding the power law is crucial) but also about being there for the founders, through good times and bad.
Now in their second fund, PROfounders claim to be very close with numerous successful founders, including Andy Phillipps, the founder of Active Hotels (now booking.com), and George Coelho (Founder of Benchmark Capital Europe & Intel Capital). PROfounders portfolio includes busuu (the largest online community for learning languages), GetYourGuide (Berlin-based booking platform for tours, attractions and activities) or Made.com (high quality, high end, made-to-order furniture, at low price) so the number of accomplished founders is poised to grow even further.
Paweł Michalski (PM): How did you get into venture capital?
Joe Bond (JB): The first job I got, right out of university, was strategic consulting at OC&C. Advising fast-growing mid-caps was quite a good apprenticeship. I enjoyed the strategic part of the job, but I was also enamored with dealmaking — we did a few assignments for private equity players at that time.
I was seriously considering joining a PE fund, but the industry was not very inclusive and is quite formalized. Instead, I joined PROfounders as its third team member with a license to go out and make deals.
PM: What was so appealing about PROfounders?
JB: The backing we received from many great entrepreneurs. At the time of its inception, ten years ago, our founders thought about bringing a bit of the Silicon Valley magic to Europe. Back then, venture capital was populated by a lot of bankers and M&A professionals. The idea for PROfounders was quite different: let the experienced tech founders invest in the next generation of tech leaders.
There was (and still is) a huge depth of talent in Europe, but in terms of VC, we are still years behind Silicon Valley. Our value proposition was simple and yet very powerful: we are giving you access to some of the greatest founders in Europe who can help you achieve similar success.
PM: To what extent did it pay off?
JB: We’re now in our second fund, with even more financial power than before, so I would say it was the right bet. We are still laser-focused on finding companies that are creating a step-change in their verticals and fixing broken promises to the customers. We’ve invested in several world-class companies, including Made.com, GetYourGuide, Applifier (merged with Unity: PM), or Small Giant Games (sold to Zynga: PM). And we still count great founders among our LPs.
PM: What do you wish you knew before becoming a VC?
JB: I think it would have been valuable to have entrepreneurial experience. It gives you an additional dose of empathy, especially now, with all the firing, cutting, and so on. I also believe that with this kind of experience, one can offer genuine advice.
Being a VC has made me appreciate the luck component and the right timing more. A lot of people told me that investments are not something you can control — with teams breaking up, fraud, market downturns. But I think you need to learn it yourself.
The biggest lesson for me so far has been to understand the power law effects on returns and to have the discipline to act on that. Ultimately, the money is made on two to three top deals in each fund, so you need to swing for the fences rather than look for safe bets. Even though they might seem appealing.
PM: What has been the most challenging aspect of your job, so far?
JB: It’s saying no, especially to your portfolio companies that are struggling. You become emotionally attached to those you back — you want to give them every chance of success, but at some point, it’s not sensible to give a company another lifeline. It’s a bit easier if you run a fair process and tell them why you won’t invest, but it’s hard nevertheless.
PM: And on the bright side — what has been the most rewarding part?
JB: Oh, it’s definitely celebrating the victories. I guess being able to help people achieve their goals and playing a small part in that makes venture capital so rewarding. I’ve seen several success stories over the course of my brief VC career — just after I’ve joined, we invested in Syft and I joined their board as an observer. This was literally my first week at PROfounders.
I’m going into this board meeting, expecting a grand boardroom with old wise guys in suits and instead, I end up sitting in a rather naked small room with just four of us huddled around a laptop. It creates very different people dynamics. I was able to play a small role supporting the team on how they were presenting their metrics to next round investors which helped them secure a Series A a year later. We exited to Indeed.com with a good result in a short period of time.
PM: How do you know a good VC from a bad one?
JB: The interaction between the board members is key to assess if somebody is good or not. I observe how active they are during meetings. Is he on the phone all the time? Is she reading the board materials? A lot of funds advertise their value add but are not following through with it.
The current market environment will be a huge test for a lot of VCs. Everyone tends to look like a hero in the bull market. People have been rewarded for investing as much as possible. We’ve been much more cautious and selective over the past few years which at times seemed like a mistake. We only do about four deals a year and try to work very closely with the ones we do. But now it is looking like that strategy is paying off as we don’t have a massive portfolio to help manage through the crisis and we have plenty of firepower to find opportunities coming out of this.