EUVC #247: Colin Daymond Hanna, Balderton on purpose, empathy and prioritization

26:12Colin, we'd love to ask you to give a shout out to a co-investor, an angel or an LP for being awesome. And of course, if you can, do share the story behind that awesomeness. That'd be great to do. One of the shout outs I'll have to give is to Point9 Capital. They're Berlin based and And, you know, I got to know both Ricardo and Louis, who are both partners there when they were living in Berlin. And I just really admire and I think I think a lot of the industry shares this. I really admire their their kind of singular sense of focus, the way that they've been able to sort of stay small, but stay excellent at what they do, even as competition has increased.

26:48You know, and they're seeing whether it's sort of large multistage firms or American firms come over and, you know, very much kind of compete with them and what their sweet spot is. but they don't let that sort of phase them. And they're still going about kind of doing the kind of deals that they're known to have done. And I think there's a lot to be said for kind of sticking to your knitting. So I'd like to give a shout out to Ricardo and Louis and Christoph and Paolo at 0.9.

27:15So we just wanted to interject the long road into or rapid hole into Elon Musk that we just did that steered us away from the three biggest learnings in your life. But I want to get back to them because you said, and just to remind our audience, you said the first one was purpose. The second one was prioritization. And the third, communication. Purpose, we spoke about Clue, and we also ended there talking about Isaacson's book, On Elon Musk, which definitely makes sense because he is a person who is driven by a very big purpose, and that's what's seen very much across all of his companies. there's a very strong purpose there.

27:54And in every single decision he makes, it's purpose that's driving them in the end. But prioritization, I'll give you the same challenge just as before, Colin. Tell us how prioritization informs you in your work at Balderton. As an investor, the work is kind of limitless, right? You could kind of speak to an infinite, almost infinite number of people and then look at almost an infinite set of companies. It certainly felt that way over the last couple of years in terms of the level of buoyancy and volumes that we were seeing in the market. But prioritization is really about, I think, identifying for yourself as an investor, where are the quality bars that you're looking for things to clear in terms of the team, in terms of the depth of the market, in terms of the execution on the product side.

28:39And kind of putting like one of these old horses that sort of has blinders on the side and putting those blinders on intentionally and saying, look, I'm just going to focus on the things that meet that bar there in front of me and do the work. Because winning a deal in this market in a high caliber company with a really high quality team requires a huge amount of focus. And I think that focus can only come when you're able to prioritize that small subset of companies versus the rest. And so we're in a position now where I think it's a precision sport. You have to be really, really precise with the investments that you make.

29:17And precision and prioritization, I think for me, kind of go hand in hand. The other thing, I'll kind of say again, going back to being a parent, I have a one-year-old and a three-year-old at home, two sons. And they're trying to raise two young kids as a partnership requires a lot of attention and energy and time. And so you come back to that with your work and you say, look, with the meetings I'm going to do, with the research I'm going to do, with the network I'm going to create, I'm constantly thinking about it in terms of quality and in terms of sort of coming back and trying to level your bar up because you want to make sure that with that kind of network, the output of it in terms of the investments in your own deal flow is at the highest quality.

30:02So that's a little bit how prioritization kind of plays in. Could I ask you, Colin, to also expand? Because I think there might be a lesson for many of our listeners. Obviously, most of our listeners are emerging VCs, right? By default, that's what we have the most in Europe, right? And so our listeners as well. And I'd love to hear you expand a bit on how prioritization plays a role in portfolio management for you. And I'm actually thinking specifically in terms of how you dedicate your time to the different ventures. But there might be other topics. I'd love to hear on that. Yeah. Well, first of all, I mean, I consider myself an emerging venture investor.

30:37I mean, I've been doing it for seven years, but as we know, the time scales are drawn out and learning loops are drawn out too. And so you need to kind of continue to feel like you're learning. And I still very much feel like I'm ramping up. In terms of managing portfolio, I think, you know, the key is to understand, you know, when whatever it is you're going to do is going to move the needle in a positive way for this company and having clarity of that versus, you know, I think there is quite a lot of sort of investor interventions that are of questionable value to the company in terms of an enduring way.

31:12And so I think having the humility to step back and be like, okay, my intuition is to do this, but is that the right intuition here? How does that fit into what the goal of the management team is? And how does that fit into what they're trying to achieve in terms of aligning the team underneath them? And so what's really great is when you can build a relationship of high vulnerability with the founders, and they can really be candid with you about, hey, look, honestly, it wouldn't be helpful if you did this, but this is really what I need your help with, you know, now. And like, let them help you prioritize, right, to some degree.

31:43And I think that you need to have a lot of mutual trust for that kind of relationship to develop. But if you can have that level of mutual trust, and then we care about a lot about that at Ballerton that we feel like, you know, we're, you know, we're one of the, you know, only investors or one of the few investors that the founder really feels like they can confide and be vulnerable with, because that allows you then to spend your time on the things that are really going to matter for the company. Very few funds have the same follow-on capacity as you do. And as such, it's very, very difficult probably as a bulletin investor to be able to tell a founder, we're out of cash.

32:19Or you're always thinking when you do a seed bet, you can take them all the way to see how does that influence your work and how do you think through that and so on. Could you tell us a bit how you map that out and think of it as an investor? Because it's a very a special situation to be in compared to most funds in Europe? We debate and discuss this a lot as a partnership, I would say, firstly. And I think the most important thing, I think you have to set expectations at the outset too, that like, look, when we do a deal with a company, that deal is a point in time, and we invest something in exchange for something else, exchange for shares, and we're investing against sort of a plan or a future, right, that we're trying to achieve together.

33:03and you know any future investment is probably predicated on how well that goes right and how well we sort of are achieving that plan and and working together to get those get to get that done and so there's there shouldn't be this notion and i don't think there is this notion that sort of just because you have a fund like ball listen or something on your cap table that sort of you're going to be funded all the way through it's sort of no matter what happens i mean you need to execute hopefully what we've done well is you know with high conviction investing selecting the right company that's gonna execute, you know, all the way through.

33:31But, you know, we know that it's a hard path and, you know, you need to have perseverance. You need to have a little bit of luck. You need to sort of have, you know, have things break your way. And you need to have investors in a small group of people working on the company together that are sort of working hard to make things happen. So, you know, what, yeah, what I would say is if you're transparent at the outset, it also makes it clear when we're prioritizing, you know, we're not here to kind of prop up companies that aren't, aren't going to be successful. And so, you know, it makes it really clear.

34:00And I think if you, if you have also that transparency and level of trust, then, you know, you can be clear to people, look, you know, this, this hasn't worked the way we thought it would. And our priorities, priorities lead us elsewhere. Right. And, and to do so in sort of a, a, a candid fashion is not to say that that's always easy, but I think if, if you come at it from a, a place of empathy, but also a place of logic, like highly logical, but also highly empathetic, I think usually you kind of get to a good place in the end. I'd love to ask you, Colin, and this is on a different note, because you're arguably one of the most coveted potential co-investors or follow-on investors for many seed funds and pre-seed funds in Europe.

34:40And in that connection, you said it just before, with regards to prioritization exactly, how do you prioritize building your network? So I'd love to ask you, we have a bunch listening in that will all be thinking, how can I connect to Colin at a level where he will take an extra look at my deals when I send them his way? Could you tell us a bit from that perspective of a listener thinking, I'd love to play ball with Colin? How should they think about establishing that connection to both Falterton, but also Colin? It's great to be building relationships and friendships and a network among other investors.

35:18It's really important to do so. And a lot of times we're we're competing and collaborating in our industry. Sometimes I think it's a little bit of a sideshow. I mean, I think like the reality is, I think, you know, when you have investors in place, it's like, look, it's up to you to build a relationship with the founder. I'm not going to really just invest in a company because somebody is invested in the company. Somebody else is, right? It's like, the founder and the company needs to be the central spoke, right? And sort of the hub, I should say. And each investor is sort of a spoke outwards.

35:48But you need to all be connected to that central hub, which is the founder, which is the purpose of the company, which is, you know, your depth of understanding of the company, right? So, that's the first thing I sort of say at the outset. I think that the second thing is obviously having a strong network of people you trust who work within the industry can be a really helpful filtering layer in terms of, you know, when you sort of respect somebody's investor acumen, you know, you kind of say, okay, well, you know, I'm paying attention to what they're doing and, oh, what do they see here? Maybe it wasn't apparent to me at the first go, but I'm going to spend a little bit of extra time trying to understand because I really respect their own acumen and their track record.

36:24So, you know, what I would say in terms of just in general, trying to sort of build relationships with other, you know, with other investors is, you know, the best thing you can do is focus on your own book first thing and just sort of, you know, try to build your own track record and build your own investment acumen and your own framework such that, you know, it will be apparent to people that you are someone who they, you know, they should, they should try to be connecting to and trying to sort of understand what their portfolio is. Right. And then that will come, that will happen organically.

36:54Yeah, with a lot of work. So now you were a bit more specific on the communication part before, but just because we've gone through the three, let's rehash and give us your view on communication, how that plays into how you invest at Baldwin. Yeah, I think it comes maybe a bit ties into something else, but we can't take for granted, as I said, but we can't take for granted that everybody understands your own compute machine in your own head, right? And the own context that you have. we are a democratic organization at Balderton. We sort of make decisions collectively as a partnership and as an investment team.

37:30And we have sort of a big open table where, you know, it doesn't matter sort of whether you're an analyst or a managing partner, you can air your views and have them debated on the basis of their logic. And I think that, you know, having that is really, really key because, you know, we work as a team. We win deals as a team. Kind of we grow companies together as a team. And we run the firm as a team. And you need to do that professionally by, you know, by having really strong communication channels, by discussing things collectively around the table, by kind of being available for that, you know, for chats.

38:03You know, we have a culture, I think, where people can just kind of, you know, you get off the meeting with a founder and you just call each other or you kind of pull each other to the side and you debrief together one, you know, very, very quickly. The other really important thing is when it comes to sort of delegating and working together as a team, and again, this is something as you sort of level up and start managing people, is having the clarity that everybody understands your set of goals, again, your sequence of prioritization and why that is, you can only over-communicate. And I think it's sort of the ocean that everybody connected to.

38:39And if you start to realize you haven't communicated enough, it's a little bit too late at that point. At that point, the ships have sort of moved off in completely different directions and you have to really work to bring them back together. But if you had sort of a strong layer of communication in between once another and a strong layer of vulnerability in that communication, right? Like not just sort of posturing, but really telling people like this is exactly how I think it is and showing weakness there. I think that's really, really key. I love that, Colin. Actually, yesterday I was driving and I was thinking in my mind, I was thinking, you know, that I was really thankful that my partner did something.

39:14And then I thought, oh, shit, I should verbalize it. You're fucking thinking it, but you're not saying it. And I think it's such an important thing to keep in mind and to bear in mind professionally and personally. right just there's no such thing in my view as as as community over communication right if you if you keep on communicating the message gets through so i love that you brought it up and thank you for sharing i want to ask a completely unrelated question colin which is am i right in saying that you used to be an olympics trials roller i competed in the olympic trials in the united states in 2008 um so that basically just meant that i i qualified for the meet that in the united States, that meet and how you perform in that meet dictates whether or not you join the Olympic team.

39:58And I qualified and swam in that meet. That's quite high level. Competitively speaking, that's quite high level. I'm right in saying that, right? Yeah, it took a lot of work to get there, I'd say. It definitely took a lot of work to get there. And I view it as something I'm proud to have achieved in my life, for sure. And it's cool also because my mom qualified for the Olympic trials in 1976. So I was able to kind of go 32 years later. And we both sort of have that, which is great. Is that something that you feel has also shaped you professionally and personally, and even today as an investor?

40:31Because that's something we hear a lot from former professional athletes in whatever professional area they are, right? That need to be top level all the time, that need to be in the grunt every single day to be able to then perform at a specific day i'd love to hear you expand on that on that if there's anything there to be expanded on i feel just kind of really immense gratitude for having grown up with the with the kind of athletic background that i had and a lot of it i think actually i put to my mom and my dad my dad was a diver at berkeley the part of the great aquatic program they have over at berkeley my mom as i said it was before they had the institutionalized women's sports team so unfortunately title nine wasn't yet in place in the ncaa and so she wasn't able to swim to that level in college, but she was a phenomenal swimmer.

41:16And they both kind of imbued within me, just like, you know, doing all sorts of sports growing up and then really focusing on swimming as something that I was maybe particularly had a little bit of more talent in. A lot of life has become, you know, easier, I think, because of the trials that I sort of put myself through and my coaches. I have a lot of great gratitude to the coaches that sort of, you know, trained me when I was, you know, starting, you know, Anne-Marie Monk when I was 13 and my mom was a coach for a while. And then Paul Stafford and Ray Mitchell with the Terrapins program. Um, and then my coach at Princeton, Rob Orr, they were all like great people who were, you know, shaped and cultivated my own character and demanded a lot out of you.

41:54Um, but did so in a way that sort of, yeah, I just, I, it means that sort of, you understand like, there's no shortcut to the swimming. Like if, if you want to get the output, you've got to have the input, but that's just how it works. It's been difficult maybe adjusting to something like, I talked about learning loops, and what's really great about swimming is variables are very, very tightly controlled. And so when you hit that wall and you look up at the clock, you know that, first of all, that's a very, very clear feedback loop. This is what I did, and this is the time, right? And the second thing you know is it's all pretty much up to me.

42:30I don't have a referee to blame. I don't have a teammate who messed up a pass or something like this. It's up to me. right and so you have to take accountability and put it on your own shoulders and swimming can be brutal that way swimming can be really you can be sort of you know in tears right this happens a lot you hit the wall and you put everything in and you're in tears because he's just you didn't achieve what you wanted to achieve venture investing in that sense is totally different because you i mean you wish you could you know you kind of you invest the term you sign the term sheet you look up at the wall like no idea right no idea but you have to trust i think that that You got to put in the inputs and you got to keep working day after day.

43:11You got to go to practice. You got to, got to, got to do the miles. And, you know, over time, you got to trust that, that that process is going to lead to the outcomes that you, that you're looking for. So he had the little non-VC related shout out there, which I'm really happy we managed to get in. Colin, final question from my side before, before we wrap things up is we didn't talk at all about an initiative within Balderton, which is the Sustainable Future Goals Initiative, right? And I'd love to ask you to expand a bit about it, but maybe more interestingly, at least from where I stand, this is obviously something that's somewhat connected to the SDGs, I venture to say.

43:51And I'd love to ask you as well, personally as an investor, within the space of sustainability and SDGs, what gets you excited? right and and really thinking from with the investment lens here i'm no i'm really glad we get to speak about it because these are something that um are really really important to us i mean bena my partner bena i was it was kind of 2019 2020 and we realized we sort of need this to level up here we're really really lucky to have a head of impact and sustainability called led led broad who joined us about a year ago but really what the sfgs we call them a sustainable future goals are about is really, it's like first and foremost, a recognition, I think, that we're all confronted with like a set of global challenges these days, right?

44:34Whether it's sort of around how we want to govern ourselves as a society, whether it's climate change, this is lack of biodiversity. And we just wanted to get out there and say, look, we don't feel like we just are sort of a European venture capital firm. We just want to optimize our IRRs. That's how we measure ourselves. That's our yardstick for success. But it's not the only thing that's important to us. We also sort of want to say, we feel like we have a role to play somehow. And it's not about sort of any sort of checklist. It's about sort of saying, look, these are the things that we feel like we want to get behind.

45:06And so we actually use the SDGs from the UN because we thought like, you know, that's a great kind of set of humanity's goals. And we wanted that we kind of interpreted them and say, well, which of these are actually important and relevant to us as a European venture firm? And we went ahead and we kind of, we adapted them to us and we have these 10 sustainable future goals and you know bernard is a big okr fan and we're kind of big believers in sort of having clear metrics and so what we did is we actually created and we and we have full reports to sort of very very transparently report against these every year is we took those 10 goals which are like urgent climate action you know gender equality data governance and data privacy are really important you know these kind of big kind of lofty goals, but we broke them down into small, like, you know, smaller and smaller little bits of like small little OKRs, like how many taxi trips are we taking as an investment team every year?

45:55Or, you know, how many of the founders who come and present to us are women versus men, right? And we had all those metrics and we're tracking all that data and reporting against it every year. And it's a way for us just to say, look, how are we doing? It's a scorecard, it's a report card that we can kind of report against on an annual basis. and it was nice. I got the chances to hear Michelle Obama speak at Bits and Pretzels a couple of weeks ago and she underscored the point to me that I think sometimes gets lost, which is people are talking about ESG and whether or not things are too heavy handed.

46:25And it's like, sometimes I think you lose the forest for the trees. And what the forest is for me is like, we have a responsibility to help confront these global challenges. We're gonna try to do it in our own way and what's important to us. And we're just happy to be super transparent about how we're trying to go about achieving those things. I actually want to share some love because I checked out the report that you guys put out. It refers to last year, right? And I think it's a really interesting read for anyone who's in the venture industry. Of course, you know, you show that you've achieved some stuff, but I like also the fact that you are transparent about what you haven't achieved.

46:57And I think it's kind of cool also how you think about, you know, companies that are actively, I don't know what's the exact word you guys use, but like proactively or championing exactly, that they're championing a sustainable future goal. And I think it's a good benchmark. So thank you for putting it out and just sharing some love there. Yeah, well, that comes back to the purpose alignment, right? And, you know, I think what we found is us being a little bit transparent and vocal and over communicating about what are these missions or these goals or objectives are really important to us. It's actually helped us attract founders who I think feel like the companies that they're starting and what they're trying to achieve has some alignment with them.

47:33So it's been constructive that way. If you look at your portfolio of investments all across it, how many of them would you say fall within one of the SDGs? My viewpoint is that the reason why I love Ventress, because even if I'm not investing in a fund that's an impact fund, a lot of the capital in the end are going to help solve inefficiencies. And many, many of the opportunities are somehow within democratization or open access to more things and so on. So I'd love to ask you, what is your overall view on the state of tech as a broad group represented as your portfolio, right? And whether they are positive or negative have contributed to betterment of society.

48:25In 2021, 26 % of the companies that presented to the investment committee were sort of definitely championing one of the SFGs. In 2022, that number went up a little bit to 27%. And I think in 2022, we invested in, yeah, about, we made nine investments in companies that were sort of championing one or more of the SFGs. And as a proportion of sort of new investments, that was roughly the same, I think a little bit higher proportion. So actually you had a higher chance of sort of clearing the IC if you were especially championing them. And that sounds about right. That it's sort of like, does everybody in every company we need to invest in need to be expressly aligned with us?

49:01No. We're not an impact fund. What we are is we're an IRR-driven fund or a returns-driven fund. We feel like there's a good chance. And to your point, Andreas, I really believe that the best founders starting new companies in 2023 are often driven by these sort of lofty ambitions from a purpose perspective. And some of them will really align with and some of them we won't. And that won't stop us investing in them when they won't. But maybe it gives an extra push when they are aligned. I'm a bit surprised that it's only 30%, actually. uh not not from a from a perspective of aren't you doing more but more from a perspective of i would have said on the on the on the whole that's also contingent on where you where you put the bar right we try to keep the bar high one of the points is expressly like it's like the founder themselves need to be like this is why i started this company it can't just be like oh like one of the because there's there's you know you kind of have three consultants who started a company and they're like, oh, I could tell you about in this report, like, you know, one of the positive externalities of our business is XXX, right?

50:07And if you, but if that's where the bar is, like you end up sort of creating a rationale or justifying every investment you have, it was positive because this could be one of the positive externalities. But so we said expressly championing that goal. And so we want to keep that bar high. But it's pretty funny because If you asked Elon with SpaceX, is that expressly targeted any of the SDGs? Probably not, right? But then they end up creating Starlink, which is probably going to be one of the most important factors allowing us to democratize access to the internet, right? Yeah. So, you know, us getting the Mars didn't make it on the SFGs.

50:45We could argue if that was sort of the wrong or right. But, you know, so SpaceX sort of wouldn't qualify. and one of the externalities of SpaceX is to create Starlink, but Starlink is really, you know, it's a product in the service of getting the Mars, I suppose. So it wouldn't, you know, wouldn't need to buy. Yeah, that's super interesting. But that also goes to show that the 30 % is definitely, then we're pretty sure that, or 27%, then we're pretty sure that they are definitely SDG compliant or SDG ambitious. Very cool. Now let's go into the quickfire.

51:30so colin quick fire quick answer questions 30 60 seconds each what advice would you give your 10 year younger self no advice uh you know the reality is i i think i've been happy with my past both the failures and the successes the risks i've taken it's sort of one of those things if If you were in a science fiction book and I got into a time machine, would I go back in time? But if you change one thing, who knows what else you change? There might be sort of this butterfly effect. So honestly, 10 years ago, I took a big risk when I left New York and I moved to Berlin. And if I was hesitating on that, I would have taken the plunge.

52:02But the reality is I took the plunge. So I wouldn't give, maybe controversially, I wouldn't give myself any advice. What are your top tips for emerging VCs across Europe who are now fundraising? People need to understand what their own wheelhouse is. I often talk about ventures like you're kind of mining gold veins. And once you find that gold vein, whether that's a particular kind of insight you have on a market or a smart, like a network that you have, double down on it. Double down on your own weirdness. Double down on your own experience set. Run against the crowd. Yeah, be contrarian and sort of don't look over your shoulder too much.

52:38I think we as an industry do that too much. And that's the advice that gives any emerging investors. And what's the most counterintuitive thing you've learned since you've been in venture? Valuations don't matter. Dive into that one because everyone's discussing it, right? And I think that we've all just, or maybe I'd rather say not everyone's discussing it, but maybe rather everyone is right now running away from that statement, right? We set it all up towards the top, the peak of the bubble where everyone was thinking exactly what you're saying. And now I think the one thing we've heard on this show consistently since…

53:18Maybe I need to clarify. What I need to clarify is I don't mean that you should invest in companies like independent valuation, just to be clear. What I mean is as founders and as companies and as board members and as investors, chasing higher and higher valuations really is not constructive. Yeah, it's, you know, these valuations are a mark. It's sort of one private investor has decided. And maybe the founder has agreed with that private investor, but there's very little signal in that mark. And in particular, I think the media industry are in, you know, we sort of chase the fundraise headlines and the valuation headlines.

53:55But, you know, building an enduring, important company, you know, happens over a long period of time. A lot of things need to go right. And sort of whether you have a high valuation or a low valuation is really independent of a lot of those things. To be clear, as an investor, the entry price that you pay for shares does matter. I believe that it does. But I think sort of when you're on the journey of kind of building a big company, chasing after that headline valuation and, you know, you're not going to be issuing, you know, hopefully too much equity over the course of the journey. So you have to think about your cost of equity, but don't think about it too much.

54:30Think more about the people around the table or what it is you need to achieve to sort of really create that product and service that's going to achieve the purpose you set out to do. And the valuation is a little bit of a sideshow.

54:44Thank you so much, Colin, for joining us for this episode of the European VC podcast. To everyone listening in, do drop us a review if you enjoyed the show. Also, make sure to follow the pod and subscribe at eu.vc. And now, some words from our beloved sponsor. Attention folks, on December the 11th, we're hosting our virtual roundtable, mastering non-dilutive funding in Europe on LinkedIn. Sign up to eu.vc. Discover cutting-edge approaches and best practices in leveraging non-dilutive funding, a crucial tool for both your startup portfolio and if you have the flexibility. even your own investment strategy.

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