Scaling Stateside Podcast Episode #4 with Maria Palma, General Partner at Freestyle Capital

21:37And so you do sometimes think about it that way, but it's definitely less deliberate than it is intuitive.

21:44Matt Oxley:And once you have, let's say an inbound comes from a trusted referral source, checks all the boxes on your investment thesis, walk us through your evaluation criteria. How do you think about a deal once it comes in? What are the things you really dig into? How do you make decisions about which companies you're going to move forward with versus the ones you're going to pass on? Yeah, it is pretty much only two things. It is people in market and that's it. Like, yes, there's business model. Yes, there's some initial traction. But I kind of have a different take that I think early numbers are usually false friends and bullshit, honestly.

22:15Like, I don't, unless you go zero to eight million in two months. Okay, fine. Maybe the number matters to me. but like most early traction, I feel like the hardest thing to do, and maybe this is good to explain to founders is like, I think before you've been to VC, so many things sound like a good idea and they really are. There's lots of things that are a good idea. But then if you model over the VC math on top of it, like what are the things that you can have enough ownership in that can really go the distance and make power law returns in a way that even though, you know, 40 other percent of your companies end up going to zero, that also have incredible founders that you still make money for your office.

22:49And if that's the lens, it's a different lens in some ways than just saying, this is a great founder, a great idea. I think that's the hard part of the job, but I spend a disproportionate amount of my time on the people side. So I tend to take first conversations in places that maybe other people don't. And if you look at my process and like the sheer percentage of time spent directly with the founder of talking about them versus talking about the business, I spend much more time talking about them. I still do a lot of work on the market and the business, I do it more on my side. So like, I'll do a lot of diligence calls.

23:19If it's a space I know really well, because it's in thesis, like for a long time, I had an agentics payments thesis, which I still do, but I knew exactly what I wanted in agentic payments. And when I met that team, I didn't need to do 10 reference calls in the market because I knew exactly how it was playing out. I almost built a company in that space a year earlier. Like I have a lot of views on agentic payments. They may not be right, by the way, but I have a lot of views. You know, I did a great company called Dash Bio last year I invested in, and it's in the contract research organization space, which is biotech.

23:46It's past drug discovery and drug development, but like, I didn't know that much specifically about bioanalysis. So in the case of that founder, I probably did almost 15 calls in two days on that space. And so for me, it's really team and market. And I have to really believe in both those things. And then the rest, obviously you do think about traction and business model and competitive set and all that. And the competitive set does matter more now than it used to more from like, what are the, who will win this part of the stack is opening eye going to win this for some reason, or is Anthropa going to win this, or can a startup win this?

24:16That does come into play, but it's pretty much for me at the stage that I invest all team and market. And then just digging into that, do you put people before the market? 110%, 175, like 1 ,000%.

24:30Matt Oxley:So talk one thing I found is interesting, Maria. When I start working with startups in Europe and the UK, there's a much greater tendency for those companies to embrace the idea of a broker or third party who's going to magically make your VC introductions and deal flow for you. As a founder in the US, I understand that that's the most important relationship and nothing should ever stay in the middle of that. Kind of talk to your perspective as a VC. If I'm a founder, Matt and I have a company, we think we're really great, we're getting some traction, and we have some third party broker knock on your door versus one of us.

25:03Matt Oxley:Talk to us how you think about that. Well, I don't always have strong opinions. This This is one of them aware I do. So you've touched on one where I feel very strongly. Don't ever work with a broker. It's the worst thing you can do for your company. Just period. No brokers. Like awful, awful, awful, awful idea. Cannot even, we could say awful a hundred times. Maybe in the C and the D, you can do some, it's different as you go to growth rounds. And then there are people who will do those things. And you can use big banks and all that. And that is more kosher. It is always a founder VC relationship.

25:35And outsourcing that is a horrible decision. and mostly it's a bad signal. Like I would almost never take an intro from a broker, even if it might be a great company, because to me, the fact that they took a broker is a data point in itself. And I've just, I don't think I know of a single company that has ever been big, that has ever gotten a BC through a broker. It's probably, there's probably one somewhere because it's in the data, but especially early stage, having worked in both ecosystems, I don't think it would be considered a good thing in the US and I certainly don't think it would be in Europe either.

26:01So I would not do it. Can we just go back into the people side of it? because you've really captivated me with this. So what do you look for? What characteristics do you look for in the people that you're evaluating? So, I mean, I have thought about this ad nauseum more than I want to think about it, but I really wish there was these like lovely criteria. You could check a box and say, this is it. And there are some of those, right? Like, yes, they're resilient. I like to think about this one called resource magnetism where like they just attract people and things to them. Sometimes because they're big and charismatic comes sometimes because they're quiet and introverted, but they're so good at what they do.

26:41Like they just, people want to take a chance on them. Some of those things are true, but I actually don't think about it like that because I don't think that that really works. I think I know a lot of VCs who have come up with criteria, graded against that criteria. It almost never, I can't find a fund. And if you find one, I would genuinely love to know that has actually done, delivered returns on that a lot. I think at the end of the day, early stage VC is about judgment. So I'm in this role because somebody thinks I have judgment on this. Maybe I don't. We'll find out in 10 years. But I think about it as actually like an LLM.

27:16I think about my gut as its own algorithm. And it's actually very much like an LLM in the sense that I know what the outcome is. And I think I know how I got to that decision. But there's probably parts in the black box that have more weights than I realize they do. But I feel like I've met, you know, whatever, 500 people a year for 10 years. And what I've gotten really good at is spending time on what is a yes for me. And what does that person look like? And it does have to be that at market. Like I probably will later today pass on something that I'm very, it's very painful for me to pass on because I think this person is extraordinary, extraordinary, extraordinary.

27:50But I just can't get there on the market. And I've been fighting with myself all week on this one. But I would say on the gut thing, in everyone that I've backed, I could articulate for you cleanly what it was about that person that I think is super, super, super special. But it's kind of a multiple factor of things. I would just say you have to spend more time on what motivates them and why they are the way they are to get to that gut decision. And then I guess part of your process, as you mentioned earlier, is spending time with those individuals because that's obviously part of your process.

28:24So therefore informs the gut. So therefore you're making obviously better decisions for the fund. In my perfect world, I would spend more time with them. But I also think you don't like I also can run a process in three days and have spent three and a half hours with the founders total or two and a half hours with the founders total. I think it's just like if you if you know it's a fast moving round and you only get so much time that I treat that real estate as like super, super, super, super critical. So like, I'm not going to ask them seven questions about the competitors in their space that I can go do on my own time.

28:58And I kind of already know because, and I don't let them pitch me the deck either. So like I will spend that time where I think I can get the most information that I need for my judgment call. That's fascinating. So you don't make them pitch you the deck because you've already received the deck. I haven't had a founder pitch me the deck in about five years. Wow. Wow. That's because that's a pre-read. That's a, hey, I've taken the time. pre-read I should have some points of view in the space coming in yeah shave on me if I don't that's what I'm gonna hit you with and that's what my line of questioning is gonna be about is surplus questions because you've already done it like I don't want to see your terms slide right I want to dig down like consumer experience all the time and founder experience like I don't know in what world we think it's a good experience for founders for them to pitch the same deck on repeat like 75 ,000 times like that is just an awful experience and they always by the way it's good for them i think in a way so if they want to i will so to be fair i guess i have been pitched the deck once or twice in last year because if they want to i will always let them um it's their meeting so i have in one or two cases had people that really want to pitch the deck and feel more comfortable with the deck and that's fine but i feel like in some cases it's good because they've really thought a lot about that deck and how to present a certain way but you can usually from the pre-read tell what the arc of the deck is and what the narrative is they're trying to go to and probably most investors have like the same questions at the same stopping point.

30:19So like they're just living Groundhog's Day. So actually for me, it's super advantageous to not give them another Groundhog's Day anyway. You know, what are you learning from that? Just repeating that story and over and over again, take that time, hone in, get to know them, throw them curveballs, right? You know, I think it's about digesting to, to therefore inform your gut. It's, it's fascinating. Yeah. I think being off script on both sides is a much more honest way to get to know someone. Yeah, because this is going to be, you know, I singly think about it, right? The kind of VCs we brought on, they are some of the most important relationships and decisions that we made in our tenure.

30:58Like we're 14 years old. Yeah, it's one of the downsides of Zoom. I mean, I really hate when people use data analogies in regards to founder conversations, so maybe I shouldn't do that. We may edit this out later. But I do think it's kind of like, I don't know, As an analogy, not because it is anything like dating. If you were to go on a first date with someone and like they had a prearranged pitch and then you have a bunch of boxes of like, oh, do they want kids or do they like this? Like, that's a pretty horrible experience versus if you just like understand and go off on a tangent conversation and see how that feels and see what this person thinks about and what they care about.

31:33It's a very different type of conversation. Because one of the things that I'm fascinated about and also trying to bring to the fore here is the human side of VC and the human side of being a founder okay because I think a lot of these things are based on metrics mechanics like business models etc but you're working with humans at the end of the day and the individuals that sit on boards are humans like who have children and this is their profession so it's how do we get to those like deeper relationships yes they're always going to be professional, but how do we get that kind of mutual respect?

32:14You know, that, that, that's kind of like something that as my years go on in, in, in venture and being an entrepreneur, I always come back to, it's like, we, you know, I'd love, I love your point of view. Yeah. I also think it's like, I've changed the way I think about this in the past 10 years of venture too, but it's, um, I think at the end of the day, it's the most important decision you make. Right. And I always tell founders this, I was just advising a really smart first time founder two days ago on this because we're looking at his company and we're putting it through a process. We'll see where we net out.

32:43But in the first conversation, he asked me, how would you put yourself? What can you do to help me? And I said, I'm going to ask those questions two ways. I said, one, I will answer your direct question, which is, here's what I think I could do to help, given what phase you're under there. Typical answer. And I said, but second, I know you didn't ask this, but I actually wouldn't think about it that way. I said, at the end of the day, I really believe BCs help on the margin, but the best founders are going to do it anyway. Maybe we get you an introduction faster than you would have gotten. Maybe we get you talent faster than you would have gotten it.

33:13But like the best people just blow through these walls anyway. And so choosing someone because they can make three bank introductions now that you can get anyway is actually the wrong decision. Choose someone that you're going to want on your board for the next 10 years that's going to actually not make you feel like shit when things go wrong and help you. and be the type of person that is a good person on the building journey with you and that knows what they know and what they don't know. This is another difference between the US and the UK, which, or Europe, is like, I think, ex-operating experience.

33:39We can come back to that in a second, but it's like, has a pro and a con in a VC. But I think if you have no operating experience, sometimes you get way more prescriptive when you shouldn't as a VC. And I think that's one of the biggest things I've changed in the past 10 years. I think when I was an early VC, it's not like I was overly prescriptive if you talk to my founders, but I probably was more, I was definitely more prescriptive. I was more like, oh, hey, all the playbooks say do this, so you should do this. Or like, oh, we should focus because we're doing too many things. Like there's a lot of conventional wisdom.

34:05First of all, in this moment in time, all that conventional wisdom is dead. So it doesn't matter anyway in an AI world. But second of all, it's like, it's not really my judgment call. I think my judgment call is to find the absolute back, best people I can find. And just if I find exceptional humans, it's actually just getting to know that person better to help them thrive. And like the way that I think about my job for the next 15 years with them is it's so different. The way I support founders, like you will find founders who I speak to all the time and you will find founders who I leave alone because it's really about what that founder wants and what I think that founder needs to thrive.

34:37And when I'm doing reference calls on a founder, I think I'm going to invest in a bunch of it is like the typical, we need this for the memo or like, I want to understand what are the pros and cons and blah, blah, blah. But I spend a probably disproportionate amount of that reference call understanding the best way to help this person thrive. Because if I'm on a reference call, I'm probably about to give them a term sheet. And I want to know the best way to work with them. And it's quite different for each person. And if you've ever managed teams successfully, which I was lucky to do in my early career, which didn't start good, by the way, like I didn't start as a manager, that is a journey of its own.

35:07You really do tailor your management style to different people to help them thrive. And like, I think that is really my job. Maria, as you start talking to companies specifically

35:17Matt Oxley:in the UK or Europe, right? Talk to us about how you think about the US market or the US expansion process, timing, should they, should they not, should the founder come? Talk to us about how you as a VC sitting in San Francisco, who's previously worked in London, how you think about that whole topic. Yeah, I don't, I mean, again, this is one where there's certainly not a prescription because it's so company by company. So I think Daniel Glazier put us in touch and he's wonderful. If you're a European founder or UK founder and you think about going to the U.S., call it Daniel Glazer. And it's kind of a joke, but it's actually real because he's thought about this a lot.

35:51He's done it with a lot of companies. I think just talk to people who've done it and decide. What I would say is you really have to know where your market is. And maybe I'm counter to some on this, but I don't believe you can only build companies in the U.S. I'm an early investor, Unlovable. I have some great performing companies. I just invested in three companies in Europe. That's why I was on a crazy whirlwind tour through Europe last week. I do believe there's incredible talent in Europe. There is everywhere around the world. So like, I don't believe in this, you can only build companies in the U.S.

36:17thing. Now, are there structural advantages that make some things way better to grow in the U.S.? 110%, right? Like, there are definitely industries for which you have to grow in the U.S. So I think you need to know what your market is. And are you really like, if you're a payments company in Europe and your whole value prop is that you do this cross-currency, cross-different, you know, Polish banking rails, then you probably don't need to go to the U.S. If you are a SaaS company selling a customer service product that's going to be, you know, mostly selling to U.S. enterprises, you probably should go to the U.S.

36:47I think it's so specific. The one kind of piece of advice that I would give from all the different ones I've seen is that I think if you think the U.S. market is really where you win, don't wait too long. I think every company that I've seen come from the U.S. to Europe, actually every single one, yeah, that kind of ultimately knew their market was in the U.S., every single one has told me we should have done that two years earlier. Like every single one has been like, we should have done that earlier. So I think if you really feel like that's where you scale, you should find a way to do it. And I think there's lots of ways to do that from move a co-founder, start a team, get the customers, whatever.

37:21There's a lot of ways to do it. But I think if you think that's where your market is, you should find ways to spend significant time and resource there. If you don't need that, then it's a different story. Yep.

37:32Matt Oxley:Excellent. Give us some advice. We're coming up on time here. You've kind of been through the process on multiple continents across multiple firms. You've obviously, hopefully, learned a lot along the way. What advice would you give UK or EU founders who are wanting to make the US expansion journey? And a lot of them are honestly thinking about, I want to do that because I want to raise in the US. So just if you're a founder sitting in Europe and you're having those thoughts, what advice would you give them around the US expansion process or raising venture capital in the U.S. at a macro level.

38:09Yeah. I think if your market is in the U.S., I think it's great. I think it's a very great signal to raise from the U.S. Like, I would be lying to you if I was a founder in Europe. I've seen this in Paris. Like, in Paris, it used to be the best French funds won. And now a lot of U.S. funds are in Paris. And it is, I haven't seen it be a bad signal. I think actually, like, for your first check, your preceded seed, you could argue it's good and bad because you do want people that are close to you. So, but you could argue that both are good, but I think U.S. signal does mean something in Europe, especially if it's where your market is.

38:41I think it's more for local talent and local customers because the hard thing, if you start hiring in the U.S. and you have no one U.S. on the cap table, U.S. talent is pretty sophisticated on that front and they will know if they recognize a U.S. fund, it will just bring more legitimacy. So, that doesn't mean it's a yes or no, but it helps you. So, I would spend time in the U.S. and get to know U.S. investors earlier, especially like the best time to get to know VCs is when you're not raising. So if you're like, Hey, I'm an interesting founder, I'll do my A in the U S, but I'm here, you know, just getting to know people.

39:08Like, I'm curious what metrics you look for, what you think is good. And series A funds do care about metrics. So like, understand that. Um, I think that would be a good thing to do. And I think mostly like building a company is not for the faint of heart and it's not, not easy. So if you're doing it, cause you think it sounded cool and everyone wants to be founder of these days, maybe do something else. If you're doing it because you just feel like this thing has to exist and you really want to build the same for your customers, I always say this, just don't give a shit too much what VCs think.

39:38It doesn't really matter. At the end of the day, build a great, if you build a great product that your customers love and you find a way to grow it, you will find a way to get money. Traditional venture, not traditional venture or whatever. So like if you are a founder and I feel like sometimes one of the best things, there's such different advantages to the U.S. and the U.K. and Europe. And I think about this as I raise my children because like there's things that I want them to grow up in the U.S. for and there's things that I want them to grow up in Europe for. But one of the things about the U.S.

40:03is optimism and just like can-do attitude and like we can go get this shit. Sorry, I like swear a lot and I usually tone it down on podcasts. But, you know, it was a rough morning with the children and now here I am. I mean, it was fun, but it was like I'm now swearing more than I should be on a podcast, but You can keep that in. It's fine. But truly, truly, if you are building something you believe in, I want to bring a little American optimism to the European founders here, because sometimes Europe has a background of a culture where the tallest snail gets hammered down, right? In certain countries, for sure.

40:34and I think it's changing and honestly I think the the most important thing for European tech no one's even talking about which is that all the best talent is funneling into tech because if you grew up in Germany and I lived in Germany I was 16 you have the avatar and you're going to marketing good luck doing anything else do you know what if you go to a startup you can do marketing you can do customer success you can keep growing like there is no better career path for anyone in Europe than a startup working at them founding them so what's happening is the best talent is going to tech. And that is a beautiful thing to see.

41:02So I'm very bullish on where the ecosystem goes from here for a lot of reasons, that being the first one. But I say this because I think as it's newer on the VC side, don't listen to too much to what VCs say. And if you really believe in building this, like this is where I'll bring some optimism, just build it. You'll be fine. You'll figure it out. You really will.

41:21Matt Oxley:Wow. That's some great advice. And that is some nice American optimism. Thanks for the shout out. Maria, this has been really great. We really appreciate you making time to talk with us. I think you mentioned earlier, if someone listening thinks that they are a great fit for your investment thesis, you said your contact information is on the website. That's the best place to find you. Yep. So by the way, I should say, I don't always respond in like the first five hours. Like I will get to it. Sometimes it takes a couple of days, but I usually do like 13 meetings a day. So it's a little intense.

41:50But I would say that if you go to the website, I basically have an email you can contact me at with a title and you basically talk about something like a leadership journey that you've had. So actually I got, I got in a beautiful argument one time with someone as we were both caring about diversity and inclusion and underrepresented founders. And he was pushing me in a good way to be like, well, everyone should have a way to get in touch with you. You should do like, basically he had like a very specific crypto lens and he had like technical developers. He's like, I make everyone do this test.

42:19And I'm like, well, I'm a generalist investor. So I can't make everyone do a test. Like I can't think of a test that would be true for all my founders. And then I realized I care about the people side. And so I care about how they view their own transformation. And so that the question on the website to get in touch with me is much more about send me your deck, but also send me how you've changed as a leader and what you think about yourself. But I am pretty picky on it. If you don't title it the right way, then I don't feel like I have to get back to you. Because I'm like, if we can't even read the instructions, I'm not going to respond to this.

42:47But if you write me an email with that response, I will respond.

42:51Matt Oxley:Great. Well, Maria, thank you so much. It's been great having you on the show today. Really appreciate your time and look forward to keeping in touch and hopefully seeing you in person on one coast or the other. Sounds great. Thanks for having me. Thanks again. Thank you so much.