Balderton Capital's 25 Year Anniversary: An Interview with Bernard Liautaud and Suranga Chandratillake

20:14Bernard Liautaud:Yeah, of course. And, you know, of course, you mentioned Revolut, Europe's largest privately held company, recently founded 75 billion. That was, I think, looked at Fund 5, it came out, which was like a 300 billion dollar fund. Can you share anything about the metrics of that fund? Because from, you know, I've done some numbers myself. It looks like to me it's got to be one of the best performing funds that is, you know, a European fund invested in Europe. is there anything that you can share about that fund? I don't think we can share any numbers unfortunately because of the sort of because of the agreements we have with our LPs and everything else but no it's obviously a fantastic fund it's obviously a fantastic fund and you know in many ways it's a great example of you know like the way the venture capital model works when it works interestingly that that fund has a number of other really fantastic businesses in it but But the power law means that you do find these companies that are just so phenomenally successful that on their own, they can return a fund many times.

21:21Suranga Chandratillake:I think the important point is we invested in Revolut at Seed and Series A. So we were the first institutional investor in that company. And it was 12 years ago. You can imagine 12 years ago, we invested in a company that had five people. It was an enormous valuation. So the returns that we can get on such a company are extraordinary. But thanks to the extraordinary genius of Nick and Vlad and the entire team. So we've been great beneficiary of that. So, yes, that fund is once in a lifetime fund because of that one company, for sure.

22:01Bernard Liautaud:And is there anything that you've learned from both investing in that company, but also following their journey that you're then applying either into other investments or you're giving to other founders as they hope to replicate that success? I think, look, I think every company is very different and successful companies are, you know, wildly different and sort of famously different. And this has always been the way if you if you spend time in Silicon Valley, as Bernard and I have, you know, famously, the culture at, I don't know, Meta is totally different to the culture of Google and totally different to the culture at Microsoft, for example.

22:38Bernard Liautaud:And yet they are all incredibly successful companies. So I think it's important not to sort of completely copycat things. But I think, you know, some of the things that have worked brilliantly for Revolut are, you know, an obsessive focus on their product. The product is the core of everything they do. And they think about that all the time. Another key thing that they have is this kind of like urgency around the cadence at which they operate. So when they have ideas, they're just not, you know, they're relentless about wanting and, you know, wanting to get those ideas into reality as quickly as possible.

23:12Bernard Liautaud:And it's in order to then learn from that very, very quickly. And, you know, many of their ideas end up not being good ideas, but they learn about that really quickly and then can absorb the learnings and move on. Whereas I think there are a lot of companies where they can have this grand unified theory and spend three, four years building towards it. If it doesn't work, then you're really stuck. Right. So there's things like that that I think are critical. but most importantly for me I think the the most important lesson to learn from Revolut I would say is it shows that you can build global defining generation defining companies right here in Europe you know that's what Nick and Vlad have done they built it right here in London they've got teams everywhere now of course but this is their base and and if they can do it others can too and I hope that you know if that can create the inspiration to another thousand entrepreneurs that would be the best gift they could give to the ecosystem, I think.

24:02Bernard Liautaud:And I think what's unusual about Revolut is that now they're focusing heavily on US expansion in the way that other companies are told to expand to the US very, very early. I think both of you in your entrepreneurial journeys both experienced that where you sort of build in Europe, but you sell to the US. And of course, Revolut's a different business. But is that advice that you give to your portfolio founders? Is it sort of like build in Europe, but scale to the US as soon as you possibly can? No, I think that really depends on the company, honestly. So, you know, I think that's very much traditionally the model for sort of a B2B software business.

24:38Bernard Liautaud:The reason for that is because, you know, the software market in the US is huge, both state and private, you know, people that a lot of software is just bought in America. American corporations and the American government are just very big buyers of software. So if you are building a security company or some kind of knowledge management company or a talent software company or a finance software company, then yes, you're probably going to have the US pretty early in your journey. But actually, when you think about particularly some of these regulated businesses, things like financial services, so a fintech like Revolut, then actually Europe is a huge market and maybe a better place to start.

25:14Bernard Liautaud:So it really depends on the business. so we and again you know like we work with our founders right so of course we provide you know we provide kind of experience from what we've seen elsewhere but ultimately most of them have a pretty you know meaningful view on on kind of where they want to go and how quickly they want to go somewhere and so we generally are supporting that rather than trying to sort of change their minds and go somewhere else. That makes sense and going back to the funds quickly so I think Revolut was fund five. I wanted to ask two questions. How instrumental has that company and that fund been or how much easier has it made raising future funds when you have that track record?

25:57Suranga Chandratillake:You know, it's obviously, it puts a halo effect on Walden.

26:05Suranga Chandratillake:But, and as you said, I think it's going to be a once in a generation fund. But what LPs are looking for is consistency as well, is the ability to have amazing funds, but also to find performance in future funds. Because for someone who is deciding to invest now in fund nine or the future fund, fund 10 and growth, our success in the past is just an indicator that we are able to find these great companies. But we have to perform in Fund 9 and 10 and 11 like we perform in Fund 5. And that is based on building a way of investing that is very attractive to entrepreneurs. It's the platform that we build.

26:57Suranga Chandratillake:It's in order to win deals, you have to hustle. So you have to be really in the ecosystem. You have to be leaning forward. And that culture is what I think defines Bolton. And so Revolut is just a constant reminder that if we are in it, it's because we hustled, we were there at the very beginning and we made the bet. And we need to have that same spirit for the next 20 years.

27:27Bernard Liautaud:Yeah. So I guess like never, never stay complacent or never get complacent. And when I look at the portfolio from the early days, from Contentful, Depop, Talons, GoCardless, through to the Revoluts, and even more recently, Wave, Clio, you've won in the earliest stages some really amazing deals. How is Baldurton or how are the partners able to kind of get access and fight their case and win those deals, which I imagine were not always easy to win? So I think there's two things, finding them and winning them. So finding them is about just being honest about what the job really is. I think it's easy when you're successful as a firm to sort of sit back on your laurels a little bit and, you know, expect that great founders will come to you.

28:09Bernard Liautaud:You know, maybe build a huge team of people who can help source for you. And, you know, you can sit back in your nice office and sort of have emails sent to you. And the reality is that doesn't work in venture. It's just not that kind of business. Maybe you can do that in the public markets because every trade is a click away. But in our world, actually, you kind of have to be, as I mentioned earlier, on the street. You have to have coffee with random angels and founders out there because that's where they are when they start. And it's not clear at all. So that's the first thing. You've got to stay very engaged into the ecosystem itself and between us as a partnership.

28:42Bernard Liautaud:I mean, of course, we have an amazing team of associates and principals who help us with this. But we are all constantly out there, you know, just meeting people and understanding what's happening and getting a sense of, you know, who's building what and why they're building it and so on. So that's the finding it. And you just have to keep doing that. You can't stop doing that. You know, our partner, Daniel, who actually led the investment into Revolut, for example, was just spent the last two Sundays in a row in Berlin. You know, he lives in the UK, but he flew there two Sundays in a row to spend the whole day there because he's pursuing an entrepreneur that he really, really wants to invest in.

29:14Bernard Liautaud:The first Sunday was all about discover the company, wanted to really understand it and meet the whole team. The second Sunday was having convinced himself he's out there winning the investment. And so that doesn't go away and you can't stop doing that. The second piece of it is, like you say, winning those investments once you've found them. And that really is all about our ability to sort of a bit like Bernard and I have done today, explain to founders how we're going to be there for them for the journey and how it's much more than just a check. Interestingly, some of the best investments we've made have not been that competitive when we made those investments.

29:50Bernard Liautaud:When you invest as early as we do, you know, it's the reality is some of the best companies or the things that end up being the biggest companies can be quite contrarian at the time. And they may not be. You listed a whole bunch of them there. Some of those were very competitive and we had to fight to win. Some of those no one else was going to invest anyway. And so, you know, that's the that's the dream, I guess, but it doesn't always happen. And are there any companies where, I mean, I'm sure there are, but I guess what are the biggest companies where you either didn't win and they end up being huge or you had the opportunity to invest, but you didn't and it was a mistake?

30:25Bernard Liautaud:Well, the one that Spotify has to be the one that we have to mention. Like, you know, so I think the firm looked at Spotify maybe twice in the very early stages. And, you know, we blew it. I mean, that's an amazing company. You know, Europe's first or sorry, second hundred billion dollar tech company after SAP. And I think still has a way to go. You know, incredible founder who's still there and still very engaged. And it's I mean, I mean, as a European, I'm really proud of that company. Right. I mean, it defines that sector, that industry completely. All the big tech companies around it just copy it.

31:02Bernard Liautaud:And we should have invested in that one.

31:05Suranga Chandratillake:And we made a number of mistakes. we have a big anti-portfolio like every firm if you take it all the great European champions who have built enormous amounts of value the reality is that we saw most of these companies and so the ones that we have not invested in they were all mistaken it didn't mean that we necessarily would have won if we had put the bid in and some of them we have lost against a competitor So, yeah, I think we know it's part of the game in venture that you're going to make a number of bets. You're going to miss a number. And that's why we also feel like, OK, if we missed it early, maybe we can get it a bit later.

31:54Suranga Chandratillake:But we're very humble vis-a-vis this and our ability to pick the best companies.

32:02Bernard Liautaud:Got it. And, yeah, you've been in the ecosystem now. Borders has been in the ecosystem for 25 years. Before you both became VCs, you were both builders rooted in Europe. Both as your experience as VCs and as kind of builders and entrepreneurs, what have you seen change across the European ecosystem?

32:21Suranga Chandratillake:I mean, to me, it's being an entrepreneur is now something that lots and lots of young people want to be. It's viewed as a fantastic way to change the world, as a fantastic way to create wealth, not just individual wealth, but economic wealth for Europe. It's recognized not only by these entrepreneurs, but by many other stakeholders, the governments, all the ecosystem around. So we have now a full ecosystem with all the ingredients and the participants to create these amazing companies. So when Soranga started this company or when I started Business Object, in 1990, there were very, very few. We were the first ever European company to go public on NASDAQ in 1994.

33:14Suranga Chandratillake:This today is an ambition of many, many, hundreds of entrepreneurs here. So it's a bigger system. It's more competitive. But I think there's a recognition that the engine of growth of Europe is technology. And technology has been created in startups. so we have the chance to be at the heart of it.

33:36Bernard Liautaud:I want to touch on the public markets. You mentioned taking business objects public in the US and you took Blinks public as well. How are you thinking about the public markets? There's a lot of conversations or noise about the lack of capital markets, the lack of an exit opportunity at the IPO for companies here in Europe. Is that something that you take a view on with your portfolio of companies? Are you saying to them, look, the capital markets are not opening up in the UK and Europe, but they are in the US. need to be thinking about that opportunity? Or I guess, is that a role that you play?

34:07Bernard Liautaud:And how are you thinking about it across the ecosystem more broadly?

34:10Suranga Chandratillake:Yeah, I mean, I think we have to take a pragmatic approach. The pragmatic approach is that we, for a company in our portfolio, will direct them towards the market that enables them to fulfill their ambition and value them at the right level. The stock market in Europe are not quite where they should be compared to the US. The US has developed over decades. But I think there is something that has now existed in the US for a very long time that still needs to be developed is that traditional investors know that they have to invest in technology. They have to invest in venture firms. They understand that it needs to be part of their portfolio.

34:58Suranga Chandratillake:So it's a given. It's not like if, it's more like how much. And so we have way more firms in the US, financial firms, that will put a number of or amount of their money into tech companies in the stock market or in tech companies in the private market. And then it's fueled this whole thing for a very long time. And obviously it paid handsomely because you look at the top market caps in the world, they're all tech companies. And it's not the case yet in Europe. So we have to get on and all the ecosystem needs to work. The one piece that to me is still a bit missing is the appetite of the large institutional European investors to put a larger part of their assets into technology, whether it's private or public, and do it in a long-term fashion.

35:55Suranga Chandratillake:So be a long-term investor who are going to be at the side of these great companies when they grow from, you know, 100 million of revenue all the way to several billion dollars of revenue. And once we have that, that will fuel the public markets in Europe.

36:14Bernard Liautaud:One of your portfolio founders, Barney, was talking over the weekend about how, you know, Europe is now building these amazing tech giants, but we're losing them to the US. And because, you know, that late stage or the institutional capital isn't there, a lot of the upside is being captured and a lot of European giants end up moving to the US and they get investment from the US and they become almost US companies. Do you think that that's damaging to the European ecosystem? So I think Bonnie and I have discussed this many times. And I think losing is a slightly emotive way of framing it. the reality is there are like many different ways in which a company impacts the ecosystem it grows up in and and you can lose some elements but still benefit a lot so you know from a jobs perspective even if a company goes public you know a good example in a portfolio company of ours dark trace they went public in the uk but even if they'd gone public on nasdaq the the team vast majority of the jobs and so on stayed in the UK and particularly on the R &D side, which now, you know, now that the company has exited even further to a private equity firm, it's created a situation where a number of the people who are in the R &D team are off, you know, building their own businesses.

37:26Bernard Liautaud:We've seen a number of sort of spin outs and so on. So, you know, you could argue that it's been lost because it's been acquired by a sort of primarily US private equity firm. But actually, I would argue that a lot of the value has still been captured and kept here. But it's true that, you know, in the long run, it will be great for Europe to be able to do everything from host a company in the ecosystem, let it grow there, have the right talent to be based there. And yet also, you know, raise all of its capital from there and in the end, maybe go public there and stay in. And some of our companies have done that, right?

37:59Bernard Liautaud:We've had multiple companies who have listed in European on European stock exchanges and had a great run as a result of it. we could do with more of it but I think you know we just need to keep working at that and I think this sort of vocabulary of like it's a binary thing of losing it or not is not actually necessarily very accurate.

38:18Suranga Chandratillake:I think the mentality is changing by the way and we're seeing more and more companies that have determined that they will keep the headquarters here because the talent is great because they can develop all the way from Europe. And that has been a change. I think what's happening also in the US with visas and the overall political situation is making Europeans want to be staying here and building strength from here, as well as the need of Europe to build sovereignty in many, many sectors. And in particular, it's AI infrastructure. All these are elements that will continue to drive the growth of European company from European soil.

39:04Bernard Liautaud:And so do you think it's just time? You think given enough time we will develop the ecosystem that we will be able to have our European companies list here? And I guess to your point, ultimately you don't think it matters too much. You think it's okay the way that it is and we capture most of the value here.

39:19Suranga Chandratillake:Yeah, I think the most important is that a lot of the core forces of the companies stay here because you build an ecosystem when the The people who leave these companies to create their own business do it here. And then you reinvest. So the value that you've created gets reinvested in the same place. That's how Silicon Valley got started and developed so much, is that it's constant reinjection and the system that feeds on itself. We need to have this here. And I think we're starting to see a lot of it. We did here the 10 years of Revolut just a couple of weeks ago, and we had 30 plus entrepreneurs who are Revolut alumni here.

40:08Suranga Chandratillake:And so this value is getting created and recreated over time now.

40:13Bernard Liautaud:Yeah, that's amazing. Yes, the flywheel, they call it, right? You meet these unicorn factories to churn out more and more founders. I also wanted to kind of ask one final question on the ecosystem as a whole. You've both been building, investing for decades now. Bulletin was born just off the back of the dot-com bubble crash. We saw the 2008 financial crisis. We saw sort of like the 2001 bubble. We're now in a sort of AI hype world. Are we in a bubble? I thought we were going to get through this without the bubble question, but I guess I was wrong. It's really hard to tell because no one knows in these situations.

40:51Bernard Liautaud:I think my view on this, so I studied computer science at university. I specialized in what you would now call AI in my final year. I worked for an iconic AI company when I first came out of college, and then my own company had AI at the heart of it. So I feel like I've been thinking about AI for a long time. And what I can say, like from a very technical perspective, almost, is that the potential for this latest generation of AI, particularly built on top of the transformer architecture, is tremendous. It's a tremendous opportunity. It allows you to solve a class of problems that computers couldn't really touch properly before.

41:33Bernard Liautaud:and suddenly they can. I think even now it's far too early to tell exactly which applications of solutions to those problems are going to be the most profitable ones and even harder to tell which business model is the right way to exploit them and where the value will land, like down some foundational layer, somewhere in between, or maybe just in the customer. And so it's really difficult to sort of answer some of those questions. And I think the uncertainty of those things is what may cause wobbles in this boom that we're seeing. Because there'll be times where people will say, oh, I thought the value was here in this system model, but it turns out that didn't work.

42:13Bernard Liautaud:That means the whole of AI doesn't work. And markets are markets. They will generally overreact in both directions in that sort of situation. But it doesn't worry me because I think, like I say, that fundamental underlying driver here is tremendous. I mean, it's a scale of change that is, in my opinion, bigger than the mobile shift. I think more akin to the cloud shift in that it's infrastructural and it will be fundamental to everything and how it's done. And it opens up, like I say, this whole new vista of what a machine can do that we didn't think it could do before. So yeah, long run, I think this will be fine.

42:49Bernard Liautaud:Of course, we'll have wobbles in between. But you think the upside will be big enough that I guess it's okay where we're at today? Yeah, I think the hardest bit today is predicting. where that upside is going to be and which companies will really matter in 10 years time, which is, by the way, the same as with the dot-com boom. Right. I mean, you know, during the dot-com 99, 2000, there were all these investments and some of those investments turned out to be the best investments. You know, some of those companies, Google, Amazon, et cetera, that were in that period, which, you know, you could have easily ignored in the dot-com crash and said they weren't interesting, actually have gone on to be, you know, multi-trillion dollar companies 20 years later.

43:29Bernard Liautaud:And I think there will absolutely be a whole bunch of those again in 20 years time, or I think possibly sooner in this case. But knowing which one, that's the game. But I guess that doesn't, it doesn't change your job at all, right? You still have to find, pick and win the winners, irrespective of the market dynamics. Yeah.

43:47Suranga Chandratillake:Yeah, I know. Absolutely. I think the, just the scale has changed almost by a factor of 10. Yeah. Yeah. I have to invest more money to begin with because of the competition. even if what you invest in is still an idea. You may have to pay a lot more, but the price at the end is a lot more as well. So the upside continues to be amazing, but the risk is bigger for sure. But what we see is that the speed at which a company can reach hundreds of millions of revenue now, it can be achieved in less than a couple of years. And therefore, the attainment of value is a lot faster.

44:32Bernard Liautaud:And do you have to react as a firm quickly? You know, prices are going up, browns are getting bigger. Are you adjusting your ticket sizes, the number of investments that you're making? Or are you trying to stay, I don't know, disciplined or consistent across the tickets that you write into certain valuations?

44:48Suranga Chandratillake:We have to adapt. We have to be really agile. we have a chance to have great investors who have given us their trust. And so we have, even in early stages, we discussed just 600 million is a lot of money that they haven't trusted us with. And so we can adapt to do more deals smaller or less deals bigger. And so we have a lot of agility and flexibility, but we want to participate into this incredible revolution. And for that, we have everything that we need in terms of the scale of financial resources.

45:26Bernard Liautaud:Amazing. We've only got a few minutes left. I want to talk about, you've done 25 years, the future of Balderton. One of the specific questions I wanted to ask was, you know, I mentioned Index, Excel. You know, we've seen Index become the European VC that have gone to the US and they've opened offices in New York and San Francisco. Would you ever see a US expansion in Baldur's future?

45:49Suranga Chandratillake:Well, this is something that we have debated a lot. We have chosen not to do so, to be truly a pure investor in an asset class, which we feel is growing extraordinarily well. I think it served us really well because when an entrepreneur talks to us, they know exactly who we are and they know the value that we can provide. They know that we're going to be close to them. We're in their corner with a really strong understanding of what it takes for an entrepreneur in Europe to succeed on a global basis. That's our specialty. And we have helped dozens of companies do this and go across the pond and becoming successful there.

46:44Suranga Chandratillake:So at this stage, we're very happy because that purity of our business model has enabled us to really take advantage of this incredible growth that we've seen in the European ecosystem. We'll see if we want to do things differently in the future. But for now, we're really focused.

47:04Bernard Liautaud:You're staying in Europe. Amazing. And final question, what does Balderton need to do to make sure that it is still one of the top firms in Europe in 25 years time?

47:13Suranga Chandratillake:We need to be good pickers. I think we need to also, first and foremost, I think be at the service of our founders. provide them with the things that they really want understand that we we can help them but they're the ones who deserve the credit and I think if we if we stay the most attractive place for an investor to find for an entrepreneur to find money then we'll be very successful because again entrepreneurs the best entrepreneurs in Europe have the choice they will pick us so So we need to be the most compelling investor for them at the end of the day.

48:02Bernard Liautaud:Amazing. Well, thank you both so much for your time. It's been a pleasure. And congratulations on an amazing 25 years.

48:08Suranga Chandratillake:Thanks so much.