The ultimate lessons come from the deals you make
“The ultimate lessons came from the deals we made. Or the ones we didn’t” says Thomas Wilke, General Partner at 42CAP. Thomas has longstanding experience as an entrepreneur and product leader for complex marketing and e-commerce applications. He founded eCircle, a marketing tech company that he sold to Teradata in 2012. Joining Teradata, he was responsible for the global development of Teradata’s Marketing Cloud Business Unit with 1,500 headcount and was part of the extended global leadership team. He then founded 42CAP with Alex Meyer, his partner since eCircle times.
Now in their second fund, 42CAP invests in early-stage companies across Europe in SaaS and Enterprise Solutions, Marketplaces, eCommerce, Digital Health, and Deep Tech.
Paweł Michalski: Let me start with a nostalgic journey: what were you trying to achieve in your 20s?
Thomas Wilke: I grew up in a very entrepreneurial environment and as far as I remember, I always wanted to be an entrepreneur. I studied business engineering and spent some time doing strategic consulting at Roland Berger before starting my first company. I founded eCircle when I was 25, grasping the opportunity to enter an emerging field of internet marketing technologies. After burning a lot of cash and living through a lot of 18-hour workdays, we became profitable, expanded to €50m in recurring revenue in 11 European countries, and eventually sold the company to Teradata (the world’s leading provider of pervasive data intelligence, data and analytics solutions, and hybrid cloud products — PM).
PM: Reflecting on this experience, what did you learn that stuck with you?
TW: Having lived through two major economic crises in my career — and now preparing for another one — I think that being efficient is really important. You know, building a company these days is less expensive than it used to be. You can do a lot of testing and iterate on the cheap before scaling. So a lesson that stuck with me is: build a great product first, then scale it as fast as possible, but even while you’re doing so — do it in an efficient way.
Another important lesson, especially in our current environment, is to always raise enough money. And be realistic about the financial needs of your company. Surprisingly, many people don’t understand how cash flow works. You definitely should!
PM: How did you transform from an entrepreneur to a VC?
TW: After Teradata bought eCircle we stayed at the company. Teradata’s HQ at that time was in Atlanta, so we were doing long-distance flights to the US at least 10 times a year with Alex, my partner at 42CAP. We contemplated various ideas for our next move: starting something new from scratch, incubating a couple of ideas to find the winning one, or building a professional portfolio. Finally, we decided to proceed with the last one and then started an angel fund as a proof of concept.
PM: If you had a chance to decide again, would your choice be the same?
TW: Absolutely, this has been the best professional experience for me. Obviously, it comes at the top of my entrepreneurial career, so I’ve entered the VC space knowing how to grow a company, how to build and fight for the product-market fit, how to exit to a corporate and then to carry the torch within a bigger organization. I think that experiencing the “getting from zero to one, from one to ten and then from ten to 100” gave me a valuable perspective. I’m often seeing entrepreneurs struggling with that and as a VC I can help them navigate their journeys.
PM: Are these the skills that you believe make the best VCs?
TW: Well, I think having an entrepreneurial background helps a lot in understanding founders and being a helpful partner for them. You need to know how a business works. We feel as peers among entrepreneurs. I don’t think you can learn that kind of a lesson being a VC your entire career. I also think that in order to be successful, you need to pay enough attention to your portfolio companies. We expect to have only 20 investments in one fund rather than build a massive portfolio.
PM: Are there any things you wish you knew before becoming a VC?
TW: I now know that just like a startup, a new VC fund needs to find its operating model. It took us a couple of mistakes and iterations to find ours. The ultimate lessons came from the deals we made. Or the ones we didn’t. After all, you need to be selected by the founders, and that’s a sales job.
There’s also a couple of smaller lessons learned: you need to have a very good deal flow. Your secret sauce in terms of sourcing. You need to have the financial power to stay relevant. You also need to stay curious and be able to learn new things, constantly.
PM: What does a typical day look like for you?
TW: Most of our time — I’d say about 50 percent of it — is spent on getting relevant dealflow. It’s either meeting people, traveling to meet people, or other ways of upkeeping your relationships with people. Deal selection is the second major point on the list. I believe that you have to make good investments first and foremost. Creating value for your portfolio can’t repair a broken or a bad deal although portfolio work is another big block. Last, but not least, fundraising and fund administration eat up to ten percent of our time.
PM: Are there any tools that make your VC life easier?
TW: We automate, as much as possible. We use Streak for CRM, deal flow, and fundraising. We use FullContact for data enrichment and Zoom for conferencing. We’ve prepared a lot of different templates on GSuite, especially for our daily work. We basically outsource administrative, legal, and reporting tasks so we can focus on the core business.
PM: What is the most rewarding part of your job?
TW: I enjoy working with ambitious founders, with great ideas and smart teams. I love to contribute to their growth. I also enjoy not having direct reports these days and not having to travel as much as I did while at Teradata. We’ve been functioning remotely for years, so I am free to choose where and with whom I work.
PM: Is it hard for you to balance your professional and personal life?
TW: It’s actually better than it used to be. I have two kids, and with much less travel than before, it works really well for me.
PM: What advice would you offer to those trying to enter the VC industry?
TW: Work as an investor first, maybe a business angel. Alternatively, try your luck as an associate to see as much as possible.