¶ VCs' Expectations for Finance Teams
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So hello everybody and welcome to this episode of CFO 4.0 . A really interesting conversation . today I've actually got a David Foreman . he is founder of the Pretura Group and managing director of the venture arm of Pretura , So he is here to talk to us all about what VCs are looking for in a finance team and also in a CFO .
So thank you very much for joining me , David . It's great to have you on the show .
Hi Brilliant .
So tell us a little bit about your background . How did you start and found Pretura , and where has the company come from ?
Okay . So way , way , way way back when I was I sort of I guess I did the finance route . So I was law university accountancy at KPMG . I think I might well be the worst accountant that ever worked at KPMG .
I then went into investment banking and were there for a while And sort of I guess during that time I was advising private equity , mainly floating businesses part of the time . And then we took a sort of strategic direction within the , within the investment bank , to try and help out earlier stage sort of businesses . And I was very , very lucky .
I got to work with the likes of Matt Moulding at the Hutt Group So we raised the first institutional funding for the Hutt Group . I failed to raise money for AO sort of a few years before it floated for 1.3 billion , which suggests I might not be very good at my job .
And I worked with a business called MyProtein which was eventually sold to the Hutt Group but was intentional , was originally intended to be a venture capital business , backed business And sort of . I guess working with those incredible entrepreneurs , i was like this is what I want to do in my life .
I want to sort of back early stage founders and help them build businesses And at the time in Manchester , where I was working , everything was about private equity and nothing was about VC .
So myself and two co founders decided to sort it , quit our jobs , set up ourselves and basically so decided to create a VC business , despite the fact we knew nothing about it and didn't know how we're going to go about , about doing it . So that was kind of the beginning of Pratura . For eight years We raised money on a deal by deal basis .
We backed about 20 companies . We did the usual mix of some good , some bad , some terrible investments . Overall , the trial record hung together . Along the way We also co founded a number of businesses that are now part of the Pratura Group .
So we co founded a business called Pratura Asset Finance , which lends to SMEs against plant machinery and kit , and we created a business called Pratura Commercial Finance , which does invoice discounting as well as doing the early stage sort of investments into other businesses in the venture capital arena .
And then in 2019 , we decided to put all that together into one big shiny group , pratura Group and I set out to kind of build Pratura Ventures into the VC how we wanted it to be one that was focused very much on helping founders post investment to build great businesses , and we , you know , since then have kind of grown our funds And the Pratura Group now is
about 500 million of lending book and AUM 140 people , 30 million of revenue , and I'm not really quite sure how that's kind of happened , but it just kind of has . So today Pratura Ventures is about 220 million of assets under management .
We have 28 businesses in our portfolio And , as I say , the big focus for us is , you know , vc is pretty simple find a back , exceptional founders , help them build the best business they can , and that's really it for VC . So that's what we spend our time focused on .
So you've obviously you've said that you've worked with some brilliant businesses , some not so great ones either . So when you and I guess the question is is like what were you , what ? now you've been through that what would you look ? what do you look for in a finance arm of a business ? What are the key sort of areas where you go ? I must have that .
I think the finance function is not . The finance function will never be the reason to invest in a business , right , but the but the finance function can very much be the reason not to invest in a business .
And what we're looking for in the finance function really is is it appropriate for the stage of the business you're at And is it helping drive the business forward ? So you know , we invest from kind of , i guess , seed stage to Series A . Some of the businesses we back have five people to 10 people in the business . You know they're the early stage .
They're hundreds of thousands of revenue , not millions of revenue .
And the and the finance function requirement there is very , very different from the finance function requirement when you've got a business that 15 million of ARR and backed by the likes of SoftBank , such as a business we back called PKI , or indeed some of the businesses we've , you know we've backed previously and have gone on to float and have got to kind of 20
million of EBITDA and 200 million of a market cap . So I think the first thing is the finance function has to be appropriate . The second part really is by appropriate , it's kind of all about what function does the finance function perform ? And that sounds a really odd thing to say . What function does the finance function perform ?
But you know , at the very basic level , you count in the beans , you're making sure that you know where you are , you know where you stand , you've got some , some basic metrics in place And the business has a capability of operating and running and do what you need to do .
And if a VC invests , the money's not just going to be frittered away into silly places and it's not going to be lost And it's not , you know , it's not . It's going to be used for good purpose Later down the line . The finance function has to be way more than counting the beans . It has to be . You know , a great CFO was thinking before this podcast .
What does a great CFO do ? And to me there's kind of three things . One is very much be a partner to the founder , or CEO or CEO . So you know , taking some of the load off the founder , helping with strategic direction , both where do we want to get to ?
But equally , i think a lot of it is about a business can be defined as much by what it doesn't do as what it does do And then a leader and sort of ethical guardian within the business . The second thing I think of you know a really great CFO would be doing is very much looking forward .
You know , yes , the beans always need to be counted , but you know you should be seeing around corners , you should be thinking , if this , if we do this , then this will happen , or if this , then that .
And then also being able to tell stories with data , So really be able to sort of drive where the business is going and tell the story of the business , but backed up by hard and fast sort of empirical data . And the final thing I think from a great CFO is , you know , being a financial operator , so an operator of the business with a financial head on .
So you know , know what is going on within the business and an intimate level of detail , probably an intimate level of detail that the founder might not have , because they're looking at sort of higher level things . You know , working on things and automation . Make things scalable . Make you know every business starts off doing , doing unscalable things .
Let's try and make some of them really scalable and automated . And then being probably the best way of describing it is the single source of truth , right , if you want to know what is going on , the right person to go to would be the CFO or the finance function , to know that is definitively true .
We've all seen businesses where you speak to the salespeople and they'll tell you one set of facts . You speak to operations , they'll tell you an entirely different set of facts . You speak to the CEO and probably it's an entirely different set of facts , probably with much bigger numbers , and like that's just frustrating because no one knows where they stand .
And actually , you know , a great CFO , finance function is like they are definitively the source of truth And everything reconciles and everything hangs together and nothing kind of sits there and goes . If that is true , that can't be true . You know everything makes sense , relation . We're from a sort of relationship perspective .
So you know things are interrelated or correlated . If one thing is saying this and other things saying that the finance function should be saying like that can't be true or it looks odd , but here it is
¶ Strong Finance Function Importance
why it works . So I think there's , you know there's a lot to be done for a great finance function , a great CFO . We at Seed and Series A stage do not expect that to happen .
You know to be there on day one , but I think a hell of a lot of founders and CEOs in the early stage businesses completely underestimate what is possible with a great finance function .
And in terms of you mentioned , obviously a finance function or you do , the finance aspect can be a reason to walk away . What if you see what are the things that would make you walk away ? If you looked at the finance function and the finance leadership in an organisation , what would make you go ? this isn't for us .
I think a lot of the time it comes down to just not believing that the company knows where it is .
So we're , you know , as a VC , we're internally optimistic , right , we want to believe the great story , we want to believe that this company is going to go from here and it's going to go over there right , but you need to know where you are And so often we see things where you know .
The financial model is obviously fantasy of the start down here and in five years time we're all going to be millionaires . Right , we're all going to be . You know the revenue will . Of course it will be 250 million quid . Of course it will .
You know , yes , we're at £3.80 of revenue today , but in five years time we're going to be pulling down a billion of revenue , whatever it might be , and you know that's rubbish . But what you're hoping for is some of it is based on some truths . Know something you know . You know where you are .
You have some element of sort of grounded in realism of what might a client pay for this , what , how many ? you know how many clients you have . It's amazing how many times the sort of the plans of the business . You start interrogating things and you just like this . This plan has no bearing to where you are today .
You know , it's almost like this is a plan for a business that doesn't exist . And here is the real story and the two just can't mesh like we're all expecting it to be highly ambitious and highly optimistic of what might happen from where we are , but if you don't know where you are today , how do you move that forward ? How do you ?
you know you can't plan for anything because you don't know where you are , and that'd be that'd be a big reason . Another reason would be you know kind of I guess it's not necessarily what's wrong with the finance function , but what's necessarily the position of the CEO and the management team , the leadership team .
Some people just do not and will not ever see the value of a great sort of finance function . You know , why would I spend money on people who count the beans ? Why would I ? why would I spend money ? I want to spend money on sales and tech and death And reality is look at businesses that really scale very often you know .
not very often does that happen when you don't have a competent , you know finance function . you might not have the absolute world's best CFO in place , but you do need a car , you do need a very competent function .
You need to know where you are , you need to have a source of truth , you need to know your metrics and people who , and some founders , just don't believe that . And if that's the case , fine , i hope you build a great business , but you probably won't do it with our money .
I think that's fair , though , isn't it ? Because obviously , the financial investment piece you want to make sure you know . If you it's really interesting this is you say that if they don't know their numbers , then of course you're not going to invest , which makes absolute common sense .
But I can only imagine how many companies come forwards where those business models haven't been well thought through or been through a process .
Yeah , and yeah , it's not that they haven't been well thought through . It's just , i think , in the absence of a great source or someone who's saying you know , come on , this is where we actually are , i think founders start to believe their own stories , right ?
They start to believe that they are doing this and this and this and actually the reality is they're not . You know , and I think there's just a lot It gives you a great deal of comfort as an early stage investor if someone's got their shit together . And you know I say this as someone who you know a KPMG idea I did , i did order and I was .
That was sort of my only time of being an accountant And I was frankly , terrible at it . I nearly swore then to say it emphasized the point , but I'm not very good at it .
I don't see myself as an accountant , i don't see myself really as a finance person , but the training I've done and the sort of unworking people in great businesses show me that for the right person , for the right , you know , the right person in the finance team is massively , massively valuable and can be a real part of how a business develops .
And you know , we've seen it in business , in our portfolio where you know they've changed the CFO or they've brought in a CFO , having only had to move your finance controller or finance director or whatever it might be , and the business is almost transformed overnight .
And I don't know whether it's was transformed overnight or whether the CFO was just able to tell it in a way that is more compelling , because they're using data to back it up , whether it's the fact that you know the founder has now got a partner who can help them drive the business forward , because the CFO is way more than just , as I say , look at finance
and only that . But you know , the introduction of a CFO can be as transformational as the information as the introduction of a great CRO or a great CTO or whatever else . You know what other other function of CFO that you might add to the C-suite right That is . And I think some founders don't believe that .
And then when they go out to recruit , they don't know what they're looking for , because they don't know what gray looks like .
Yeah , it's a hard piece , isn't it ? Like you say , not knowing what good looks like in that CFO role . So you mentioned .
That's really hard .
Yeah , and measuring it if you've not got a finance background is really challenging . I think it's even you know , because accounting especially , i think , for founders can seem a little bit scary . the black at the dark art of finance .
It's scary , slash , boring , slash . The person who tells them the shit they don't really want to know .
Yeah , and there is an art to being a CFO , to a founder , i suspect , in terms of diploma skills and parenting , maybe . So .
Yeah , there's definitely a way of bringing across that information , because very often the information isn't exactly what you hope it would be right . You hope you grow , and quicker . You hope that you're closing the cash burn gap quicker than you are . You hope that when you win a client that you immediately get that revenue , which might not be the case .
Or suddenly you know a lot of finance information is inherently not what you'd want it to be . More , you want revenue to be higher . You want your growth rate to be quicker . You want the impact of a new client win to happen quicker than it does .
You want all these things to just be quicker or better or higher , and unfortunately for reality there's not the case . So you know there is a skill in how you present that information .
Yeah , absolutely , and obviously you mentioned that you're working with companies all the way from C to Series A . What do you want to see at each of those stages for you to be willing to invest Like ? what is it that you're looking to see in place ?
From a finance perspective or from a business perspective ?
Purely at this stage , from a finance perspective .
I think at the seed stage you're looking for some , you know , for competency . You're looking for something you can rely on , some truths that you can kind of , you know , you can see and touch and feel , and an acknowledgement that there are some things that we do not know because we do not know them .
So we don't know for sure what the end state cost of acquisition will be . We don't know for sure exactly what the lifetime value of a contract will be . We don't know .
You know , we don't know at this stage that if we bring in one salesperson , they're going to do this and then that'll happen At later stages and you know we invest at C and Series A and then obviously trying to take them beyond that . So later stages you're looking for , you know . I think probably the best way for what we're looking for is a .
You know is a . It's almost like a formula for how this business will scale . So if we do this , if we bring in five new salespeople , they'll take them three months to ramp up to full capacity . At full capacity , they should be doing this . Our cost of acquisition is this . Our lifetime value is this .
We can show how the value , you know , how the book of business . This is an ASAS business , but , you know , apply it to anything . Yeah , this is how the book of business will look . This is how the shape of the business will go . That's what will happen to cash flow If we , equally , if we took on 10 people rather than five . We know the cash .
You know the cash dip will be higher , but then the exit rate will be this And it's all those things . And it's like what you're looking for is that you've got confidence that the management team can run the business without making decisions that will eventually make them run into a brick wall .
You know , i think I think the reason we started talking to one of my posts on LinkedIn and I looked back at it one of the things I said a great CFO does is stop the founder running into brick wall , because founders natural in tendency and probably mine is let's go quicker , let's go faster , let's do more .
You know , don't take on five people , take on 10 . Don't take on . You know we can do this project and then we can do this project at the same time And yes , there's cash to go to that and there's cash to go to that . And then suddenly you find that you know , lo and behold , the world is now telling us that those people have made bad decisions .
You know how much layoffs are going on in tech businesses where a week before they were still hiring , like you know . I will not understand that . I appreciate that things change quickly and people you know Ukraine and the sort of inflation cost living crisis and the you know the tightening of the VC market at the top end has happened pretty quickly .
But I will say , you know where , where businesses are hiring one week and firing 20% of the staff the next week , something's gone wrong .
Yeah , there's a lack of foresight .
So something's got , something's gone wrong . Because you don't like , you don't suddenly decide to fire 20% of your workforce . Well , i hope you don't overnight .
Yeah , so either they've , they've not communicated that shift , they've not understood it yet .
Some things yeah , some things gone wrong , right , and yeah , we're not . We're not at that stage where you've got thousands of people in businesses . But you know , i just think that that's something that CFO should be doing a finance fund should be doing is looking around the corners . Let's say , if we do this , then this will happen .
You know that element of understanding this is the acceptable amount of investment we can make . We all want the growth , we all want the end state to be quicker and faster and bigger and better .
But within the constraints we have today , we can only do this because otherwise , yeah , if we take on that 10 people rather than the five people , we get too close to the close to the bottom . And you know what ? it doesn't take a lot to go wrong at that point .
You know we might have supported VCs , but they take a time to get you know to be putting more money in . Or if we want to take on 10 people , let's go and have the preemptive conversation with the VC and say we need , we need more money , or we need to go and do this because that's what we're going to do .
You know , that's what a great CFO does , because the natural inclination we've found there is bigger , faster , quicker , more growth , more growth , more growth . You know better the farm type stuff And we're all about big bets in VC , but there is an element of let's at least stack some of the odds in our favor .
Yeah , you know there is . Yeah , big Bets is great , but there's also a lot of Big Bang , especially at the moment in the current world .
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So , talking of the current environment , tell us a little bit about what you're seeing in the VC market at the moment . You know , because there's a lot of volatility , isn't there ?
Yeah , so what we're seeing is lots of high profile things that everyone's read about you know the soft banks , the Tiger Global , the you know the Kizus , the I don't know Clana .
Clana is the biggest , probably example of just something that was valued at a crazy number and still value a crazy number , but it's a lot smaller crazy number than it used to be And that's what gets the media attention .
¶ VC Market Reflection in 2021
I think what we're seeing is , you know , vc's at the top end , the growth VCs , the sequoias , the you know the Tiger , the soft bank insight probably being a little bit more circumspect , i think there'll be a period of reflection which says you know what , 2021 at the top of VC , where you're paying .
You know , i think I saw something from A16Z which was you know it was regular for a $20 million ARR business to be valued at $2 billion . That's nuts . So I think a lot of people look back at 2021 and go clearly , that was insane . And people who've made a lot of big bets in that market , i'm not sure how good their returns will be .
But in the real world of VC in the UK , you know it's affected things , but it's not massively affected things . Valuations are a little bit lower today . Expectations from founders are a little bit lower than they would be .
I suspect round sizes will probably be similar size or maybe even larger , but expected to last longer , because people don't want to be fundraising in the middle of 2023 . Whereas , you know , in very good times , people have had to take more risky bets around .
Well , we'll fund it for a year because you know what it'll grow And then in a year's time we'll be able to go and raise more money because it's grown . I suspect people who have VC's and I'll say well , generally , we want to have two years worth of runway rather than one year's worth of runway , because you can't guarantee the funding in a year's time .
But for every massive story of Clana being worth $6 billion today and $46 billion last year , that's not replicated all the way down the food chain . We're at the pretty early stage . We're in Manchester . We're focused on backing founders in the north of England predominantly , and we're a bit insulated from that .
We've never been like paying silly , silly valuations for something that manifestly didn't deserve it . You know , and we're not massively changing our strategy today We're trying to still , you know . I see that the current market is being an opportunity to continue to invest , to accumulate assets .
We're in the growing funds and accumulating assets phase of our business And that's what we intend to do .
So I think that was an incredibly long-winded way of saying the press makes a lot of something because those stories are interesting in and of themselves , but that's not necessarily the entire VC market , and it sounds like there's different levels even within that VC market as well . Massively Yeah , massively at the early stage .
You know , i just don't think people are doing those silly sort of 100XAR deals . That's just ridiculous And therefore I think you're within a tighter tolerance . You know , and every now and again you'll have seen last year , you know businesses that didn't deserve it getting an amazing exit or an amazing , you know , ipl or a SPAC exit or something like that .
That's great and fair play to them . But I think the world's just kind of returned to normal . If you drew a line in , if you drew a line from 2019 , sort of 2018 to 2017 , 2018 , 2019 , ignored what happened in 2020 and 2021 , you'd be kind of way expected to be in 2022 .
It just so happens that we had a massive spike and bubble in 2020 and 2021 and that's come off again And it's because it was never really justified .
Yeah , it was a short term spike rather than it being a drop now necessarily .
Yeah , it's a drop now , but only relative to the only relative to the nuts situation of 2021 .
That's a really nice way to put it .
¶ Changing VC Landscape and Diversity
And then , in terms of out of interest , has what you look for changed over the last sort of 12 , even last six months ? but given the market , No , not really .
I think we're constantly . We're in early stage VC , we're building our business , we're growing rapidly ourselves , we're refining what we do and we're always trying to learn and be better at what we do . But fundamentally , what we're looking for is the same today as it was in 2021 , is the same as it was in 2020 .
I don't think we categorise ourselves as unicorn chasing , so not every business we back in fact , i suspect quite a small proportion will be gone but we're trying to become unicorns . That's not what we're trying to do . We're trying to back early stage founders who have a reasonable chance or a good chance of creating a great business .
If that ends up stopping and it's worth 20 million or 30 million or 50 million or 100 million , that's okay . We should have priced that in the beginning . But we're not saying every single deal has to be . We put the money in and next year has to be unicorns . It's just not affected us massively . I don't think .
I wish I had a more interesting and retrospective answer that said , yeah , it's massively changed everything because the world's changed , but the reality is not the case . I don't think we were crazy before this year and I'm hoping we're not crazy this year .
Yeah no , and I guess it's your philosophy on investing . It sounds like it's pretty grounded , in fact , in reality , which is interesting .
I'm a pretty pragmatic northern right , So I'm an optimistic , pragmatic northern who probably at one point in his life might have been an accountant . So , yeah , it's not massively changed . I still get super excited by backing great founders doing amazing things . It's the best job in the world for I think VC is the best job in the world .
You get to participate and hopefully play a role in helping founders build great businesses And therefore we're going to carry on doing exactly that .
And talking of being a northerner . So I'm based near Chester , so I kind of bridge . I've got one foot in Wales , one foot in Manchester , so I'm somewhere in the middle .
Let's say honestly , if we back to business in that region , it's definitely not Anything else I'd learn .
Anything else I'd learn in this northern So , how is ?
We're back to business in Nottingham which got rebranded as Northern That's not quite yet .
I'm not sure you can get away with that one , but out of in .
Oh , we did .
Oh my God , How does the funding compare ? like London versus Northern , Is the Northern starting to get their fair share ? do you think of the VC market ?
The North is getting better . It's not getting its fair share . It's probably the easiest way of thinking about it .
So just taking Manchester to the market , i've sort of worked in all my life Manchester has always had sort of a great number of fantastic private equity firms , so sort of mid-market private equity , massive amount of sort of private equity money in Manchester and the North of England VC for some reason has always been a London thing .
Pretty much throughout the UK There aren't many VC funds , if any . There are a few Headquartered outside of London . The vast majority I reckon it would be greater than 90% of VC funds are sort of at least located or focused on London And that means that founders outside of London have a more difficult task than they should have .
There's great businesses being created and founded and scaled in the North of England And they've had to fight a bit harder to get funding . It's the same but different to . You know , female founders have had to fight a bit harder to get funding and the stats for female founded VC-backed businesses is dreadful .
Same for people from ethnic minorities , manchester in no way the same sort of level of disparity . But the North does not get its fair share of VC dollars . Vc dollars are concentrated in London , backing businesses founded and scaled in London , predominantly by white males . That's just the way the landscape is . It needs to change .
No , i couldn't agree with you more . I remember when I first obviously coming into tech business when I was in my early 20s , i was very often one of the few females in the room And whilst I've seen a big improvement in tech generally there's a massive push It's amazing how bad it was back then . I don't think when I reflect , i realise how bad it was .
It's incredible You know the industries I've worked in investment banking and now VC incredible the amount of old boys network that exists , the amount that is male dominated . You know , when I first joined the investment bank and this is , you know , it's dreadful to think this And it's dreadful to think that I didn't even think anything of it .
The only females working there were in admin support .
Yeah .
Horrendous right .
But you don't think about it , right ? I just , and you just assume that that is normal , but it you know , it shouldn't be the norm , And I think that's the worst thing .
Yeah , back in the day you didn't think of it . Yeah , didn't think anything of it . I now would think very much of it . And one of the things that we're , you know , very sort of keen to do with impriture is make sure that some of that imbalance is is rectified . So , you know , 20% of the founders we backed a female .
Not happened because we've said , you know we're going to , we want to back more and more females . It's happened because we've opened up the . You know , we've effectively tried to remove our inherent , inherent bias and make sure anyone who applies to us gets treated on the merits of the business , not on the gender of the founder .
Similarly , we've you know , we've recruited a lot of people into our investment team . So I think , as of the latest person who joined us , i think we're more than 50% or 50% female within our investment team .
That's something we have worked on and that's something that's important to us , because I just think anything where there is an imbalance is just it doesn't feel right to me And I think there's an opportunity to do things differently . It's part of the reason why we focus on backing founders in the North England . There just isn't enough VC dollars going this way .
You can look at that across a couple of things . Morally it's the right thing to do , ethically it's the right thing to do , but equally it's an opportunity , because if there's less people looking to find those exceptional founders in the North , hopefully we can back more and more of them and then they can go and do great things .
If we can buy locally and sell nationally and internationally to use a very colloquial phrase hopefully there's a valuation arbitrage in that .
Absolutely You guys win . you have more opportunities , I guess , to speak to founders , more good founders , and then hopefully you get to pick the cream of the crop .
It's very saturated in London .
And then in terms , i guess how much pressure do you put on the organisations that you work with to encourage diversity ? Is that a conversation that you have , because obviously you talked about founders , but does that come up at all ? in terms of how they develop and how they grow , is diversity a key conversation ?
It's a conversation . It's not . I wouldn't say it's a key conversation , because you know what we find . I think as a VC , you kind of end up backing people who have shared a similar worldview to yourself , and so naturally , we find a lot of the portfolio businesses . Diversity is absolutely critical to what they do .
The founders think it's very important as a thing for them to focus on as they're building the business . So it's not . We're trying to help founders build great businesses .
We're not here to tell people how to do their job , but the happy coincidence is that we have a natural affinity for people who generally want to look at things like this , who want to make the world better . We have backed a number of businesses that are tech for goods .
We've backed founders who are speaking to one of our founders the other day and I think they worked out that within their office there was something like 20 oddish nationalities and 40 languages spoken . It's just like that's awesome .
I don't remember the exact numbers , but it was a big number of nationalities and an even bigger number of languages , and I think we've just naturally found that they're the kind of people we want to work with And we've long had a view that I think we call it the colloquially no dickhead policy , which is a kind of interesting way of saying what we want to do
is we want to work with people who we want to work with , who we like , who we have an interesting , a shared worldview of what's right and what's wrong , and what that means is we're going to be a great fit for certain founders and we're not going to be a great fit for other founders , and that's perfectly OK .
It doesn't mean anything about where the business will get to , but we want to back people who we want to spend time with and people we want to spend time with generally care about these things And therefore it's not something we have to have a big conversation about . It just is part of the normal conversation .
That's really interesting . I love that whole no dickhead policy .
Life's just too short , that needs to go on a mug .
That is definitely a muggable quote .
Yeah , life is just too short to deal with that . That's one thing I have . That is one thing I've learned . I think one thing for founders and CFOs anybody who's listening to this right just don't put it with them . If there's dickheads , just don't put it with them . No matter how good they are , just don't put it with them .
The knock-on effect of the brilliant dickhead is massive . That will apply to CFOs who are working with a founder . If they don't get on , go and be a CFO somewhere else . If you've got a person in the team who's not there , they can go and work somewhere else . Life is far too short to deal with it .
I made that mistake when I was younger of putting up with stuff and hiring people on their CV and what you think they can achieve for you . The reality is it's never worth it .
No , I can genuinely say that I don't hire people that I wouldn't want to personally recommend to a friend or a family member . That's kind of my role .
Yeah , that sounds like the more PC way of saying no dickheads .
I'm really glad we don't have a rating on this podcast . That's all I have to say .
There was a podcast . I went on the other day . That had to be an explicit notice because I'd sworn far too many times . I think we're doing well .
I have to say that's probably the worst word you've come out with so far . We're doing all right .
I can't promise that last .
That's brilliant . We'll keep going , then , and hopefully steer away from anything more dramatic , should we say . One interesting point you made there was about , obviously , cfos and founders . For you , what is the sign of a healthy CFO and founder relationship ? What does it look like ?
It looks like a partnership , but one that is based on open and transparent communication . The CFO should be able to say I don't think you're right about this because of this or this or that . Similarly , the CEO should be able to challenge the CFO and say it's great , i hear all of that stuff , but I'm either going to do this or I think we should do this .
It should be a healthy relationship . It should be one where the yin and yang of it all is that the combination is better than each one on their own .
I think a great relationship there is where you can kind of see when you're talking to them and looking at them from a VC perspective There's a lot of talk of we and the group and the team and we're doing this .
¶ The Dynamics of CEO-CFO Relationships
You feel there's a real unity between the CFO and the CEO . You don't ask the CEO and he answers it one way , and then the CFO jumps in and says well , what he means or she means is this It's a very different answer .
I think they should be able to have their internal discussion where it is Frank , exchange of views and respect both sides of the coin , but when a decision is made , they should be marching forward together , not kind of having different agendas . We've even seen it where there's a point scoring between the CEO and the CFO .
I don't think it's the case that one of them wants the other to fail , but I think they've obviously not resolved their differences of opinion . You have your differences of opinion . If that's what you need , you make a decision .
It could be one person's decision , it could be a compromise , it could be the other person's decision , but once you've made it , you go on board and you try and execute that for the best you best of your ability , and I think that's where a great relationship is made .
Where it's not , you see , kind of and you do sometimes see this there's almost a fight between finance and everyone else , or between finance and sales or whatever it is .
Because And when that happens , you kind of get into this position where Finance spends all the time to improve that right because they have the data , and everyone else tries to spend their time proving that they're wrong because They're looking at it wrong or they're looking at they're not looking commercially or they're not .
You know , they're not thinking strategically . Those are all things that used to be Finance people around the head . Right ? You guys not . You're not commercial enough , you're not strategic enough , you're not optimistic enough , you're not growth focused enough . Yeah , we've even seen a little bit with politics now with Boris Johnson and Rishi Sunak .
You know very much a case of . You know All the stuff that was yesterday around . You know Love the Treasury , but you know they get it wrong . That's a . That's a really bad example of oh , that's a really good example of a bad relationship .
And you see , in companies all the time and A great one would be where everyone's marching in complete alignment to what they're trying to achieve , knowing that in private , between themselves , you know , between the SMT or between go the X , the exact board or whatever it is Disagreement is absolutely allowed and should be encouraged and should be .
You know everyone's viewpoint should be heard .
So one of the posts that actually asked , you know caught my eye and I think was one of the reasons I asked in the podcast , david was about the whole No doesn't always mean no conversation .
My found that really interesting because there is a feeling isn't there once you get a rejection , you don't want , don't necessarily want to go to the same place and experience that . So can you just give us some context around that ?
Yeah , okay . So I actually posed quite a lot about this because I think contextualizing a no from anybody or contextualizing a no from BC is really important , because It feels like the end of the world and the reality is it's not , you know .
So I think for people who are going through that process , you know , i think it helps firstly to understand why a VC does know and what the maths are right .
So If you think BC's entire job pretty much is to say no , you know , we see we're a tiny little VC in the , in the scheme of VC , we are tiny , right , and that's we're hoping to be good , but we're tiny right now . You know we saw three billion of funding opportunities last year . In 2021 . We see 200 a month . We invest in about .
We invest in about one , the one thing , one new deal a month , right , so 200 goes to one . I think the actual stats are about point five percent of what we look at we invest in .
So For most conversations , we're gonna say no thousands of times a year and I Think when people get that no thing is really important to understand that a we have to say no to so many . It doesn't mean it's not good business , doesn't mean it's not good opportunity . It just means it's not pretty . The group the best fit .
We can see that fits our fun thesis and what we're trying to invest in . That's the first thing . The second thing is we'll get loads of those no decisions wrong and businesses that we've said no to will go on and be awesome and Create massive returns .
And you know , i promise you we all have and I definitely have the shadow portfolio of those things That either said no to and I've gone on to do great things . All that , all that chose a different funder , different VC house , and I've gone on to great things right .
So the this , the second thing for people who get told no , really important on this is it does not mean anything about the business , or that that means there's anything wrong with the business , or that we know we're right . We're not .
We're just people who are trying to our job , which is to take a big number of opportunities and turn them into a few number of the opportunities that we invest in . You're hopefully picking exceptional founders to back and then help them build great businesses . So that's , those are the first things .
And the second thing then , once you've kind of accepted that , you know what a No from a VC means nothing in the in the sort of in the history of the business . A know from Petura Ventures , a know from any VC , means , frankly , nothing . The other thing to remember is it's a know now , but it doesn't mean that it's forever .
And oh , so we're , you know , one , these we turn . We've just recently invested in the modern Milton , which is a great business in the pandemic has gone from Pretty much zero revenues to about 50 million of revenue in the case in the states of two years Phenomenal . We said no right at the beginning and that now looks like a terrible decision .
We've now Reinvested it . We've now invested in them because now it feels right to invest in them , you know , and we're very lucky to be able to be part of that , because it's obviously a , you know , fantastic story . But there are plenty of businesses where we've looked at it , you know , in 2019 or 2020 , and it wasn't right for us in 2021 , in 2022 .
It's right for us , it's at the right stage , it's proved , approved a few things , you know . We've got more money now to invest than we did in 2019 , so we can do more deals , you know what . So there's lots of reasons why it might be a no today , but actually what is important to understand is if you can have a great , if you have a great experience .
We feel like there's a connection between the VC and the and the and the CEO , the founder , the CFO or whatever it might be . You can revisit that . It's not a no forever . We don't have a list that says we've said no once . That's it black . That blacklist did never talk to them ever again .
You know , and I don't think founders should , but it feels like they feel that way And I think part of that is There's a . There seems to be a trend at the moment where everyone should everyone should get lots and lots of feedback and If you , if you apply to a video , get funding from a VC , they should give you massively detailed feedback .
And the reality is a lot of times It's a gut feel as to why you might not invest , but because everyone's desperate for feedback , vc spend a lot of time writing things about what's wrong with the business To justify what they've said no , when the reality is they've just said no because right now It doesn't feel like the best thing we can invest our money into
Doesn't mean there's anything wrong with the business . Doesn't mean it's a business We would never invest in doesn't mean anything other than the decision point . Today We have decided to say no .
That could be because we're currently actually Rammed full of other opportunities that we're really excited about , or it could be that There are smidgen too early or smidgen too late , or or it just doesn't quite fit the investment thesis for the fund , or it doesn't make a great portfolio Sort of construction for the fund where you've got good diversification .
We might have been looking at a business that's very , very similar to that business at that time and you pick one and you go down that route . There's so many reasons , but Most VC feedback focuses on what's wrong with the business and , and that gives founders the wrong impression that there is anything wrong with their business . It's just a case of this .
Right now , today , this VC is not going to invest in this business . That's it . End of story . That's all it is . It's a decision point at a moment in time , not a . We will never , ever go near you ever again , you know , in the future , because you're terrible and we hate you . It's not that , it's just today . We're not , we're not going to .
¶ Tips for Finding the Right VC
So I think there's lots of there's a whole , you know a whole thing around sort of nose from VCs .
But the important point from from founders , i think , is that it's not Necessarily because there's anything wrong with the business , it's not because the business on it is uninvestable , and it's not a know that lasts forever , it's a know that lasts for a short period of time .
So that's you know . That's obviously a really important part of you know . Having persistence is obviously key , and Finding the right VC from what you're saying is really key . So , just to finish up , what are your top tips for CFOs out there that are listening to this and going right Well , how do I find the right VC for us as a , as an organization ?
What have you got any top tips that you can share ?
Yeah , obviously the first thing to do is go to ProchureAvengerscom and see if you see if we might be the right one . That's the first , that's , that's the first thing to say .
I think it is just about fit right and it , i Think , with people are looking for funding and if you are in that position today , there's a temptation to just throw mud against walls , like if you , if you knock on a thousand doors , you know someone will say yes , type approach , and I see lots of bullshit on these on LinkedIn about you know The next no is
just one closer to a yes , and all that Absolute bullshit like it is nonsense . Right , the best way to raise money for it from a founder and a CFO of you're in that journey . Find a number of VCs who definitively , categorically invest in people who in companies that look like your company not . Yeah , if you're raising half a million quid , don't go to Sequoia .
They won't invest half a million quid , right , if you're investing , if you're looking for 200 grand , don't go to ProchureAvengers , because we are minimum checkers a million pounds equal . If you look at the 10 million quid , probably don't go to ProchureAvengers because , well , a maximum we can do is three , right it .
Find 20 VCs who definitively , categorically invest in things that look like what you're trying to build . Build a proper pipeline process for going to speak to those people .
Apply in the way they want you to apply and this is why people get pissed off with application process , because they're trying to apply to 1000 companies of 1000 VCs right , apply to the 20 in the way they want you to do it . So , if they want , i think warm intro is a bullshit . But if that's what they want , find it .
Don't just like , don't carpet bond them by sending their deck to , you know , the partners of the firm on LinkedIn , because That isn't the best way of getting to a VC . No one says what I want , these loads of stuff in my LinkedIn inbox because , believe me , all that means is you're sat in amongst Tons of people . Try to sell you something .
So you know , don't Find the right VCs . Approach it in a methodical , planned way . Um , and then , when you get the opportunity to speak to people , build relationships , tell your story in a compelling way . Don't Just read your slide out to them , because we've already decided . Don't Try to battle them with science .
Don't try and tell them that you're gonna be a unicorn , for no , you know that's not interesting . What's interesting is what are you trying to build ? why is that great ? why do people need it ? If that is the case , you may well go on to become a unicorn . But saying I'm building a unicorn , will they like who cares ?
You probably not , and that's not interesting because it's just a statement . I could say I'm building a unicorn , i'm not , but I could because it's just a . It's just a bunch of words , right ? So find 2025 vcs who definitively do what you're trying to do , who invest the right amount of money , that what you're trying to raise .
Go and tell them your story in the most compelling way you can . That's interesting . This story led this telling people why you're doing it and what's really important to you and what you think you can achieve and why people want it . And out of that , i would like to think that a few people will be interested .
Maybe all 25 will be , maybe only one , be only one to two to do the round right . So And then work with them to try and make the round as efficient and fair and equitable as you possibly can . There's tons of stuff like not to do in BC fundraising . One of them is go to everybody or carpet bomb people on LinkedIn . It just doesn't work .
No one's in , no , it's just not the way to do it .
And in terms of how you find those , they find and profile those vcs . Is there a , is there a directory that people should be looking at or how do you figure out ? There isn't .
There's not one directory I can talk to and say this is , this is the definitive list . There's things like landscape BC , which you know have a list of things like which is interesting . I think the best way is to look round and say , right , who ? Things like sifted things , like UK TN will talk about the deals that have been done .
You know , there's there's awards , there's , there's there's ways of means of getting a rough , crude list together . And then the other way of looking at it so , right , who do ? I know that , look , who's raised a fund raised around ? that looks a little bit like what I'm trying to do Go and find out who their backers are .
I mean , there's , i think , again , people are looking for , kind of , you know , this definitive list that makes it really really easy . But Finding venture capital shouldn't be that easy . It shouldn't be like here's my list that's ended to 20 people and then you know , two months later money lands in my account .
Right , it's difficult , because You're talking about asking people to buy a part of your company for millions of pounds on the hope that you go and build a great business .
It kind of has to be a bit difficult and you kind of have to put a bit of work into it and then you think it should be a walk in the park is probably not living in in the real world . So is there a list ?
no , not really , but I don't think it would take you more than an hour of googling to find The people who would invest in seed and series A or series B or series C .
Once you go the food chain as well , to be fair , it becomes really obvious because your VCs you probably have these season series A and they'll know all the people who are at series C and D . So the really difficult one is seed and precede and series A . Right there the difficult ones , because There's just more options and no one there to guide you .
So the first VC round should be really difficult , is likely to be the most difficult . The next round there after is like to be easier , the round there after the BZ . But yeah , i don't think it's , don't think it would take you very long to do . Yeah , couple of hours of googling and you'd have a list of fifty which you can go and whittle down .
And you know every VC has a portfolio page on their website . So go and look at those portfolio companies and go . Does that Like what I'm trying to do ?
you know if , if you go to a VCs website and all they seem to back is direct to consumer brands and you're building a B2B SAS business , they're probably not going to invest in you because they're their investment thesis about backing DC brands .
If you go to portfolio company where a web page of a VC and their portfolio is all Yeah , sustainability , opportunities , climate , tech , and you're building a super car business , they're not going to invest in you . Like it's quite , i think . Maybe , maybe this is gonna be a bit sort of controversial , but I just think there's so much bullshit right about VC .
It's almost like this mythical , mystical people who Can see the future is just not . It's a bunch of people who raise some capital and one investing great founders who can build great businesses .
It's really simple , but most of them have a view of what great founder and great business looks like , because you can't just go to an LP or an investor and say , please give me money . I'm a VC , i want to be able to invest in every type of business and every type of founder in every single convertible , because then no one will do that .
So it just It , and most VCs Want everyone to know about them . So it's not like we're hiding ? is it like one of my job is to go and tell people about mature ventures and what we invest in which , for the benefit of the people who are listening , see to series , a 1 million to 3 million investment into generally tech and health ?
like My job is to go and tell as many people as we possibly can about what we do , and every VC is doing the same . So it's not . It's not a deeper mystical art .
We're trying to find as many people who might be looking , who might be looking for funding , who , who sort of are looking for that range of funding , and then we're trying to pick the best ones out of that funnel . And if I can make the funnel bigger , great , there's great chance of finding great founders in a bigger pipeline than a smaller pipeline .
I think every VC is doing that . So people are saying I don't know how to find VCs . How do you find anything ? Google it , google , read articles , go on LinkedIn , go on Twitter , look at people who look a little bit like you and see who about them . Go on sifted , go on UK TN . It's not that hard , so you almost .
¶ Mature Ventures and Financial Transformation Partner
My next question if what people want to know about what you know about mature ventures , where do they find it ? so , just just if anyone didn't catch it earlier , how do they find out about you and about prettier ventures ?
Your event is not calm is our website . Followed me on LinkedIn . So , david Foreman , i generally talk about stuff that's going on in BC land and I think if you follow us and our LinkedIn and things like that , then you'd get a pretty good sense of who we are and what we're trying to be .
I think what we're really about is we're just trying to be really pragmatic and simple about what VCs , because isn't what people write about . It's way simpler . We do not have a yeah , we do not have a crystal ball that we can see the future .
We're trying to do really simple things find and back exceptional founders , help them build the best business they can . Everything else will take care of itself .
Well , thank you so much , david . It's been amazing and some amazing , some brilliant tips . Right , and I apologize for running slightly over . Normally I say that these , these sessions , normally point minutes , but we've gone over and it's been well worth it . So thank you so much for joining me today and really appreciate the time .
Thank you really enjoy the thanks very much . Enjoy the thanks very much . Enjoy the thanks very much . Enjoy the thanks very much .
So I always find it really hard to explain to people why they should choose itas as their financial transformation or sage partner . So rather than me tell you how awesome we are , i'm gonna let our customers do it .
So we decided to go with itas because , when we were looking for a partner , we felt that they not only took the time to understand our business and they knew the needs of everyone on the team or everyone that would be using the system , but they also were very transparent in kind of what they could do , what they couldn't do and , prior to having us , you
know , sign anything or make any agreements , they held meetings with us to walk them through our processes in our business , so that they really understood everything that would need to be done and give us realistic timelines as well . And another thing was because we were so new and we didn't have a current system going .
We were looking for something that we could implement rather quickly but also do it correctly , and we felt that I test would be able to do achieve both of those in terms of , yeah , understanding our business and and implementing it how we wanted it , but also doing it in our rather quick timeline .