Will Orde: Partner at Passion Capital

0:00Will Orde:Hello, welcome back. I'm here with Will from Passion Capital. Will, can you give us a quick introduction? Yeah, sure. So Will, one of the partners at Passion, rather bizarrely, a lifer in the VC space. So I've been doing this for, Christ, 13 years now or something. But just love talking to founders and hearing all of the good, crazy and bad, crazy ideas that they're dedicating their life to. So, yeah, really enjoy it. Can you talk a bit more about passion, you know, size, stage, thesis, that kind of stuff? Yeah, so Passion was kind of really one of the early kind of more US Valley style seed funds here in Europe.

0:37So set up in London in 2009, ran one of the first kind of startup focused co-working spaces before WeWork was a thing in London. So many great startups that began life in White Bay Yard. First fund was from 2011. We've backed, I think, around 110 companies to date. We've had five fintech unicorns come out of that and really just like first money investors into the founders that we back and increasingly focused around fintech and risk and how AI is disrupting these spaces is where we spend most of our time at the moment.

1:10Will Orde:Amazing. I think you joined a couple of years ago. I think you were another VC before that. I think was it was a conviction or Oxford Capital? Yeah, it's a conviction before that. And then probably the biggest chunk of my career was at Oxford Capital. So passion is my kind of fourth fund hat. So I did a really good stint to Oxford Capital at the start. Started there completely wet behind the ears. I think I'd have been absolutely useless to any founders I talk to, but learned by doing, and VC is really an apprenticeship industry. There's nothing that quite prepares you for trying to do the context switching and be useful to founders.

1:39So seeing things go well and seeing things go catastrophically badly, I think is really quite informative for any investor to be useful around there. But got to the point where I deliberately wanted to go and find, see how other people did it. and so move around a bit but no passion's the the place where it's the right fit for me and i think that the the bit in the market i can be most useful with is the kind of day zero how do you help founders with tricky decisions like when's the right time to hire a salesperson probably later than they think kind of how do i get the first customers how do i get people to pay for it and i spend most of my time asking founders right you give me a big long list of things you're going to do which are you're not going to do so you can actually do the other ones well rather than

2:21Will Orde:everything poorly amazing and i guess uh i want to ask two questions firstly why passion and then secondly why day zero you know why is that the area that you found your specialism or your love yeah i mean the i suppose kind of answering them the other way around that we all we're all a bit egotistical and we like to see the impact that we can have and the opportunity to have impact on the trajectory of where a startup is going and being successful or not is bigger when it's so formative and that's when startups are going through like the big pivots where they're like jumping from foot to foot and tackling a problem from all different angles and if i can have a small impact in helping them get the right approach not take the like obvious nice looking path that everybody's tried before them and hasn't worked out and skip forwards to the next step in the the toolkit then it's really rewarding and you can see that impact um and so and that's something that passion's got a demonstrable track record of doing as well as I've been kind of drifting in that direction across my career.

3:24So the two kind of coincided in the right place. And one of the big things that we really believe at Passion and kind of we can dive in, there's more maybe like AI is disrupting VC as much as we're backing AI disruptive tooling. And the bit of VC I think is most interesting is the people-driven network end of VC, not the competition to reach out to people cold on LinkedIn and do more of a kind of formulaic approach to investing. And so that means you've got to be before there's data for AI to carry about.

3:55Will Orde:That's super interesting. So you're saying, yeah, I guess when that comes to like sourcing deals, you're more interested in getting your deals from a network, from your community, I guess. You know, we're seeing so many new tools crop up to help VCs source and kind of like gain alpha, whether that's like someone moves into stealth mode or someone moves into um you know i spoke to a partner last week at chapter one who said that she went for lunch with an an engineering deep mind and all they did was update one of their old uh work statuses and they just put an end date on one of their work you know one of their one of their places of employment and within like five minutes there's like 30 automated emails from vcs in their inbox um which is just like a crazy state of affairs yeah and it's crazy and if you get one of those if you put stealth founder or you put a little kind of robot emoji icon next to your name on linkedin to signify that you might be building or something or you're thinking about doing a bit of consulting on the side and you set up a company on company's house any of these things can flag and set up a data chain and you get automated inbound you get call that kind of pulls you onto a call with an associate and your inbox is flooded and it's not a great experience for founders because they're just trying to like quietly feel their way in the world they've got They don't need all of that distraction on day zero unless they're doing it deliberately to try and kind of fish in the other founders.

5:21No, we take we take a very different approach. We're very network driven. It's I go and drink tea and coffee with interesting people and I talk about the cool stuff that we've seen in FinTech recently. And then the next time that they're chatting to someone in their network, he's saying, I'm thinking about making the leap. I'm not sure I'm building this. It's something completely different to what I've talked about. They are. Well, he's talking about cool stuff in FinTech. You should go have a coffee with him. and sometimes these coffees are just like friendly advice and sometimes it's bursting someone's bubble and saying you do know there's like five other companies that have just raised big series a and series b rounds doing exactly that and go oh no i didn't realize that and you kind of make sure that if they're going to take the leap they think for the right reason but if you get to see people really early when they're just looking for friendly advice if you think they're great people then we can be preemptive and push push into rounds i mean we so we completed an investment this week we had to wait two days longer than we should have to complete the investment because they had to set up a company to take the money from it and open a bank account

6:18Will Orde:so that's a perfect example where they they hadn't done the things that would trigger the the automated responses interesting uh there was no company set up there's no there's nothing on it's kind of there was there's no data footprint there the network wins in those cases because everyone goes and says i'm thinking about doing this who do i want to talk to in my network and And then they'll talk to us and look, we're a small fund. We don't need to see every single deal in Europe. It'd be great, we did, but we're not going to. And we don't need to, to win. And the best tool that we've got in our arsenal of passion is the fact that we've been doing this for 10, 15 years.

6:53We've got 110 startups we've backed. And all of those founders have other interesting future founders coming to them talking about what they're doing. And if we leave a good impression with them, then they'll send future founders our way. and about half of the deals that we back are directly warm intros from the existing founders

7:10Will Orde:in our portfolio it's amazing validation right i guess the the impact and the relationship that you have with your founders if they're so willing to bring in their friends and other people who are building things um and what's it like investing because you know to to be investing in a company before they've even got a company is very early right before they've officially got a company what are you seeing at that at that kind of that level of ecosystem across europe is it becoming you know a lot of the noises around it becoming very expensive valuations are really high high concentration everybody's chasing the same deals are those things true is that what you're seeing yeah and so look we're not we're trying to stay really disciplined around this and there's a there's certainly a bunch of like proper ai deals that are playing more into the we're doing something novel in ai that are going and raising big chunks of money straight off the bat and you can see i mean the there have been kind of 14 million dollar precedes announced in the last couple of weeks in the fintech space which is a crazy amount of money to be to be raising at that point and and honestly the the bit of advice that i give to all founders is that if you raise that crazy money like you're raising on a hopeless story there's a market norms around dilution it means your valuation is going to be sky high the biggest risk you you you run is that you get to the you get some early traction you're through to the point where you've got half million a million in revenue run rate you're going out to raise and that's probably not enough for a series these days it's a late seed at the next raise and suddenly you've got metrics you can be your valuation can be on if your seed value your preceded number was way up here and your metrics number is way down here you've got a big problem and vc is all about signaling and momentum and if there's not that kind of uplift from the last round on the valuation side it's really hard to pull the round together so i think kind of founders often actually have more space to maneuver if they just start out with a really small amount of money that's just enough to run some traps like show that there's demand there for the product you can get like something that's tangible and looks and feels like the product you're going to end up building out there incredibly fast with five coding these days but it still takes time to build like a proper enterprise product that's sock two compliant with single sign-on integrated and delivering some like genuine ROI and a pain point that the car kind of cold-nosed CFO that's got to sign off from this enterprise purchase is going to be yep okay i can see why we're spending two grand a year on this bit of software but you can't just can't do that overnight and so there's still a chunk of the market where you can get founders will raise small amounts of money they're going to be sensible at valuation because they don't want to create an anchor around their neck for the next round and they just want to go out and build something that tackles a real pain point that's where we're playing not the rounds they're the massive rounds that are designed for the mega funds and not the people who are going to try and like just build something on vibe coding start monetizing immediately when there's no motor defensibility there and what's that like at the moment in fintech you know like you're right some of those big rounds there's crazy valuations pretraction and also crazy revenue growth in like three weeks a lot of that stuff is that kind of the ai application layer but also um you know whatever llms infrastructure the ai world how How is fintech, if at all, being impacted by the general state of the venture ecosystem at the moment?

10:26Yeah. So, I mean, look, we're doing, we're broadly doing two types of deals. Old school fintech deals that they're building faster and better and they're using AI internally, but it's like it's a payments network at the end of the day or something like that. And that's not impacted ginormously by AI other than be able to do more faster and better than you could before. the other bit and where we probably spend more of our time thinking about is the the problems in fintech that haven't been solved by sas and haven't been solved pre-cloud when you can get really precise about things like um how do i classify tax on different invoices from different jurisdictions where there's loads of different rules and i've got a custom internal workflow that i need to put these things into and the answer pre-ai was junior accountants that look stuff up and there's lots of context switching there's different rules in different jurisdictions there's precedent transactions from within your business about how you treat them previously there's feedback from the auditors about where you got it wrong and you had to reclassify stuff that's a problem for ai but you need to build something you can't just throw the chat gpt ai api at that and expect it to work you need to build something really specific like in a specific agentic solution with the right kind of guardrails and evaluators in place if you can solve that well then a customer will turn around and go have also got this problem here next to it and this problem over here and you suddenly find that there's a world that opens up so those kind of tricky things sas hasn't solved that require high context those are the problems that we think are interesting in fintech which is the same as anywhere else in vertical software but we just know how to understand those in fintech i'm sure there's similar problems in like hr or crm or stuff

12:05Will Orde:and you're focused primarily on that sort of b2b fintech space yeah yeah i'd say most of what we most of what we'd be doing would be in the b2b fintech space i think for the most part the tricky unsolved problems are on that b2b side the there are a few bits in consumer where i think ai could change things and like wealth advice is a great example of that and there's loads of people going after it we just haven't found the right founder story ram dynamics yet that's got us excited about that and it's probably getting harder for us to get excited about it with every new round announcement that we see in that space.

12:38Will Orde:Yeah, I mean, that definitely seems like a super hot space everybody's going after, you know, what they call that, like generational wealth transfer, which I think is definitely really interesting. But yeah, okay, so you're looking for B2B fintech where there's areas where there's still complexity and there's still that real moat, I guess, that a lot of the AI companies don't have. I've seen a lot of people talk about even regulation as a moat in these days. So it's like, you know, if you are a complex regulated fintech, that in itself is a huge moat compared to you know an ai bootstrapped uh vibe code tool that could be doing way more revenue yeah and look often we get we get founders coming and saying we're tackling this problem and here's how we can skirt around the outside of regulation and not need to go fully regulated until we're like 18 months two years into the to the roadmap and i think sometimes that's a mistake like being afraid of the complexity because you could just like barrel in with both feet and go we're going to get regulation on day one we're going to do this properly and it's going to mean we get a better product and we're more likely to succeed yeah and that's always what the founder of revolut has said he always regrets like not not getting the banking license when it was when he was small and early because actually doing it when you're small and early is actually a lot less complex than trying to do it three four years when you've got mess that you've got to read it hasn't gone too poorly for them but yeah yeah no but it's an interesting learning it's like actually the regulation seems i think you want to push away but actually you could doing it early could often be uh could often be an advantage um i want to you know you've been a vc now for 13 years i guess you know you've probably been through a couple cycles it's called you also had a really interesting career moving from firms uh and you know becoming a partner i want to ask what advice would you give to somebody today who wants to break into to vc yeah so so i think kind of most of the like most of the stuff that you get junior people to do can be taught like if you're going into like a series a series b fund and they're asking you to do like go and build out the competition slide or do the market sizing or rip apart the model and see see if it's reasonable do some co-op analysis all that anyone has a decent amount of horsepower and can learn the i think the the bit that when when we're looking for people to join the team and think about that it's the kind of more the eq side can you judge people can you get people to do interesting things for you and do favors and so like just get out there and network and find interesting startups and the difference between being like a great analyst and associate or being promoted up the ladder is finding deals and bringing them to the table and getting founders to want to take your money because the best deals are often competitive and you've got to convince founders that it's not just valuation and check size and stuff is who do i want to be on my board for the next 10 years and how do you what's how do you go about that you know both in your career the various firms you've worked at but also passion what is it that you say to founders look come with me come with us this is what it will mean yeah and like so we make you can make the pitch to founders on the specific bits of value add you might do like hey we're going to help with recruitment or we're going to help with how do you structure your sales funnel or stuff like that but actually the vast majority of your interactions with founders is when they're saying this is what we've got up to this month this is what's gone well and gone gone poorly and then you're giving advice on hey you should tweak this focus more here i think you should put more effort here maybe it's time that we pause this or reassess and i think that the best proxy for founders getting a good read on that is if you're super engaged and know what you're talking about in deal flow meetings when founders are coming and pitching to you it's not just a one-way download where you're sucking information out of them you're commenting and you're trying to ask those insightful questions on well why do you think that tactic go to market will work have you thought about doing this instead of that why are you thinking about building the product this way or that way and i think that we're way more likely to have a founder thinking i want to take their money if they walk away from that those initial conversations thinking that that was interesting i actually that i've something's made me pause for thought there there's some stuff to consider i might want to rejig that slide in the deck other than yeah i slammed through all the slides that went well job done yeah okay so it's about being challenging in a constructive way right and and i guess that's that's the best way for the founder to realize that you know your stuff yeah and ultimately for a founder like they get to pick who they take money from and they may be down to there's i can take money from this person or nobody at all in the business vaults but they still get to pick and if they've run if they're a good founder with a strong proposition they're going to have several and they've run a good process they'll get several funds wanting to come into the round and they can be picking and choosing who do i want to have on the cap table and at the early stage the kind of conversation that i have with founders regularly when we're putting these pre-seed rounds together and we're typically doing like half of a round that we go into so there's a whole bunch of co-investors coming out of the cap table other small funds and angel investors and what i usually say to the founders is like ignore check size just think and just think about the next 12 months who's going to be the most useful to you in the next 12 months rank them and just keep going down the line until you've filled out the round size that you want to raise and that person we think god they're a really interesting person they're going to be super valuable in two years time when i'm going into this second product vertical or when i'm expanding to the us and i want to put boots on the ground there right keep the relationship warm go back to them then and get the value from them then but you want to focus on who's going to like who's going to move the needle for you in the next 12 months so that you can go out and raise the next round or you can get to break even or you can get product into market that much faster and try and get the most helpful people onto the cap deal if you're out of helpful people get people who won't be damaging if you're out people who won't be damaging then get the money and you're gonna have to work harder with it and so that's great advice for founders who are who are getting to choose right who have got to the point where they've got money they've got offers on the table they look great investors what about someone who's just starting off the process you know what would be your like top one two three tips of somebody who is about to kick up a fundraising process what's the best way that they can go about it yeah so the key the key is in the word process there so like this you look at all the stats that people share and you look at founder stories about fundraising it's going to be all of your life and so you're gonna and the goal is that you should be in basically like back-to-back VC calls for two or three weeks and so you're going to need to do your research ahead of time you're going to need to have your list if you want to talk to you're going to need to prime your network to make sure that the intros go out at the right time but like it's a battle go into this with a plan be structured about it think about what your funnel looks like we do this meeting with me doing the initial prep and then i'm going to send over like a loom with some product demo afterwards i'm going to protect my co-founder cto till later on in the process so that they're actually doing some building and stuff while i'm completely distracted from running the business but yeah and the great thing about vc is that like vcs are discoverable we all want to be found by founders and if you go and talk talk to your network and talk to other founders like by and large founders are pretty happy to say oh these are the great angels i've got on my cap table and other angels are great at saying these are the other angels that i've co-invested alongside so like work the network but don't start in dribs and drabs try and do it like a campaign in one go because especially when you're a pre-seed kind of founder or really early stage founder and you don't know if this is really going to work or not and you you it's really hard if the first time sheet you get is from someone where you've got kind of a middling appetite for having them on your cap table it's incredibly hard to say no for that money and say no i'm going to roll the dice i'm going to keep fundraising so i think i'm going to find someone better to go on board so you don't want to go and start with the a couple of easy hit conversations and get the term sheet from a middling person out there when you're like i wanted these people all along and i never quite got around to reaching out to them or never found the node in the network to get that introduction from yeah yeah okay to keep a yeah yeah it must be such a time consuming process two to three weeks back to back you just got to nail it get it done in that time and i guess that creates a lot of the hype and the excitement right if you if you've got back to back meetings um yeah and vcs share deal flow with each other all the time like i'm making intros to other to other vcs saying hey here's a deal that we're really excited about do you want to come in and do the round with us so if you get excited the word will go around and you'll get that that bit of kind of hype around it and as soon as someone's committed you can start leaning on them to to get intros and say who do you think would be the right person to have around the table and like intro is a currency for me so if you're a cool founder and i'm excited about what you're building and you're giving me the opportunity to go and show that to a bunch of other vcs fantastic so i know that i'll get that back in a couple of months time when they're seeing something else interesting that i haven't seen yet yeah yeah got it okay so you you you actively want to share the deals right you want you know yeah the only caveat that i put is that so i think there's two ways that vcs approach deal sharing they either do it really early in the funnel hey here's someone we just met we haven't followed full opinion but it looks cool do you want an intro or it's we're doing it on intro well i want i always feel that i have to avoid saying to like doing an intro midway through the process to find a way we're pretty excited about it and then if i don't end up doing the deal i feel i've got to then update everyone say oh that intro i made we didn't actually end up investing because of xyz it it poisons those intros so i'll either do it really early or really late in the process yeah that makes sense yeah yeah you want to be you either want to be unaware if you're going to go all in or not like completely unaware but it seems interesting or you're like, this is a hell yes from us.

22:16Will Orde:We're going in, come in with us. Super interesting. Well, Will, we're out of time, but it's been such a great chat. Thank you so much for joining me. Super interesting. Yeah, you know, I started my kind of content journey all about fintech. I love speaking to fintech people. It's just like one of London's like strongest suits and there's still so much left on the table, it feels, of like amazing companies that can still be built. So yeah, thank you for taking the time. Glad to be here. Amazing, thank you.

22:47Thank you.