Tiny VC partner Philipp Moehring on when to take money off the table

0:00Hello, dear listeners, Amy here. Just a note before we get into today's podcast, we are currently between studios, which means our sound might not be quite as pristine as usual. So our apologies for that. Hello, and welcome back to another Sifted podcast. Today, we're breaking our streak of female guests, which we've kept up since the start of the year, but for a very good reason. Joining me from Berlin is Philipp Moehring, partner at Tiny VC. Philip started Tiny with Andy Chung almost a decade ago to invest in super early stage companies in Europe. Its portfolio of 450 plus startups includes several European leaders, including self-driving car company Wave, AI-powered video creator Synthesia, Legal Tech Law Hive and Workflow Automation Platform NAN.

0:47But unlike many VCs, Tiny doesn't join boards or lead rounds and doesn't really do media. So we're pretty lucky to have Philip with us today. It last raised its third fund of£53 million in 2023 and was crowned 20VC's top European micro fund earlier this year. Before starting tiny, Philip was AngelList's first hire in Europe and an investor at SeedCamp. Philip, welcome to the show. Hi, Amy. It's great to be here finally. Now let's start talking about founders. What's the most notable change you've seen in the founders you meet and the pictures you see over the past year, would you say? Very interestingly, I just had a conversation about this over lunch.

1:36I think there is a general trend, I think, for people to do the thing that an entrepreneur should be doing more and more. and not everybody is an entrepreneur that does this, but people just do the thing they want to do. And it is, I think, both, let's stick with the entrepreneurial community. It is something where we have incredible role models for people basically of all ages, of all backgrounds, from all countries, cities, in all kinds of business models, technologies and whatnot. And it is really great to see people to see founders to say, hey, this other person did it. They come where I'm coming from.

2:23They did what I am doing. Maybe they look like I look and they just did it. So I can also just do it, which is incredible. And I think that is what makes an entrepreneur. And I think the thing that has changed over the past year, because this is a change that has been going on for the last decade or more. The thing that really changed in the last year is that we have tools available that just exploded in that capabilities. And I'm not even talking about the last 12 months. I'm probably talking about the last three to six months when suddenly it's not just, hey, you can put together a front end for something.

3:06No, you can put together fully working apps. You can automate things. You can just get things done in a way that wasn't possible before. and that has unlocked agency in people, which I feel is amazing to see. Does that make it noisier than ever, though, because the kind of barriers to entry are lower or are there just different ways you now assess and benchmark early stage companies and founders? Yes, that definitely makes it noisier, but it's never been really quiet. So the stuff that I've done at Seedcam, but even before Seedcam, but certainly during those years, and then when I was at AngelList, was to look at hundreds and thousands of companies every month.

3:59At Seekend, we had these applications coming in, and I read all of those. At Ageless, we also had some sort of applications, and this was back when Ageless was selling, a little bit of a different beast, just wrapped through hundreds and hundreds of profiles of new companies, new founders. And so that's sort of always been part of how I looked at things, so I don't really threatened by that. I think the one thing more often than not I was carrying through my career was to tell someone, no, you should maybe start a company around this. Maybe you can raise venture for this. Maybe you can hire that great co-founder.

4:41Maybe you can hire your first team because this is a good idea. And I think just having the ability to try something and take it out of your head and putting it into a product or a prototype or just a workflow makes people realize what they can do and what they maybe can't go all the way on their own. But I think people founding companies and solving problems for themselves is an amazing thing. We can't have enough of that. You know, is every one of those supposed to be venture funders? Can it be? Will it be a venture funder? This is obviously a different question. but yeah I think it's an age of entrepreneurship that is just getting stronger and that is super exciting.

5:26And yes as you pointed out throughout your career working in this kind of I don't know if you call it indexing the market but at least sort of looking at a huge amount of what's coming through you must have sort of attributes you look for in founders what what What are they and have any new ones been added in this sort of AI supercharged era? Yeah, I think speed is a thing that used to be a little easier to spot. And, you know, this hurdle for agency, this hurdle for just doing something was higher. That doesn't always mean the people who took that hurdle were better suited to actually run a company afterwards.

6:17I think in general, that is the number one thing that makes an entrepreneur. And that makes a team of entrepreneurs too, because it's not a founder or one or two founders. It is usually the first, let's say, dozen people in an organization sort of need to be shaped that way to get stuff done. I think, yeah, having seen so many companies and founders over the years, it's kind of frustratingly pulling back just the people. And on the way you sort of think you found a little loophole or glitch in the metric where like, oh, I can just look for X, Y, or Z, maybe where they studied or where they work or what they built or how many GitHub stars they were able to rack up.

7:07whatever. And all of those things are either temporary nature or not really predictor of success. And what is a relatively, in my view, constant predictor of success is someone being able to get something done, is someone being able to act under pressure. And then, yeah, shrugging off failure and doing the next thing. So I think that is super important. And then you obviously this is sort of highly general people in general. And you add an inside problem that exists in the world, and suddenly you have a business. Because if that problem, if it's a small problem, it's a small business. If it's a huge problem, it's a business.

7:53And then you have to connect the two dots of identifying that, being able to take it forward, and hopefully all the way, building a huge business. And yet that comes back to the person saying, I see this vision, I see this small version of this here, and I'm going to go and solve this. And then being able to learn, being able to connect with people is important, obviously, for the content of it. It's also very important for being able to grow it and bring the right people on board. But so, yeah, unfortunately, it just got simpler. Simpler in the formula, which doesn't actually make it simpler.

8:37Yeah. You do, Tiny, you do about one or two deals a week. What's landing on your desk a lot at the moment, whether that's sectors or from certain geographies, certain hubs? What are you seeing a lot of?

8:54so um all of it i would say um that's the cool thing um we see in terms of sectors let's maybe start there obviously everything sort of is touched by ai i mean that is either in the research that could be in finding um a new way to solve a problem that can be applying ai just to a process which to be fair was the criticism of many sort of GPT rappers early on. I think that soon means they can build interesting businesses. It is often AI as a core principle of what companies are doing and as in fact companies like Wave and Synthesia who have for years worked on the underlying technology and are now commercializing those.

9:50And then the interesting part that's happening today is we have an idea of how LLM's work. And now we're thinking about how we can apply the same technology or the same principles of that technology to other areas. And I'm sure you've had many guests on who talked about biology or medicine or robots or other physical stuff. And that is all happening. That is all sort of happening at once in every industry from the workflow to the underlying models. And in between, there is a lot of infrastructure that needs to be built or changed. And all of those currently fundraising or like followers are building in all of those areas.

10:35And I think redesigning the whole full stack of how a technology company exists is madly exciting. And that's why we get back so many different people working just in the way of how a company gets built. but then obviously also where a technology or a company is applying their product in an industry or maybe a pretty niche industry first and then something broader. We are generalists and we love being generalists because this is kind of stuff that you can't predict with a fund thesis. There are very few people who could really say this is going to happen. when Nathan just raised his huge fund and he has been one of very few people who've been on AI and the developments super, super early and very steadfast.

11:35There are always some really good niche investors, but most new innovations over the years have for us just been pretty broad and that's why we're very happy to be able to invest on those. On that point about, you mentioned Nathan, Nathan Benayak, Air Street Capital, he's just raised a$232 million fund, so pretty big. And I spoke to him and one of the reasons he said he's sort of doubled the size of his fund is because AI is obviously super hypey and some of these rounds are incredibly big, incredibly early AMI labs in Paris, $1 billion seed round. You're doing pretty small checks in comparison, and 200 ,000, 250 ,000-ish pounds.

12:27Do you find yourself getting priced out of lots of rounds or is that a very small segment of the overall early-stage market? Yeah, thankfully, the billion-dollar seed round is not quite yet the standard across Europe. For sure. That would be quite concerning for, I think, anybody's fund model.

12:52this is definitely changing and I think there are two parts here which is one the opportunity and the opportunity not just in the outcomes the outcomes are growing you know the outcomes are more and more shaped by fewer firms and that is something that has been happening all over the place but because these biggest outcomes are shaped by firms that also means the next level down there are a few great exams and the next level down from that and so it is in a way something where the whole market is changing in size and in impact because the technology even without ai just has become so much more important the last decade and i think jimini saw that in the 21 22 um that boom we saw a pretty strong pullback from that in business activity or maybe valuations in stock market valuations but we didn't see that pullback in our daily lives i think everybody who's listening to this podcast say the amount of technology and the depth of technology they're using today is wildly different from even from i think that whole story is happening the ai story is happening where obviously now a lot of the technology industry is going that direction in which I think Nathan is doing exactly what he should be doing for his approach and his angle on what the market offers.

14:25The changes and maybe the you know, call it a hype-y situation, you might call it maybe a bit of an overindulgence and maybe an overly strong belief on what the outcomes can be. I think that generally happens. The fallout of that is negative in many ways, but also very often it's the baseline for the next wave of technology that is going to come. So as very early investors, we can look at what's happening in the series Ds and Es and what all, and hopefully we have companies riding there that we can sell, but it doesn't really impact what is happening at the very, very early stages. Yes, of course, these firms are getting more expensive and maybe they're getting bigger.

15:19We're raising slightly bigger funds. We're investing slightly more over time. I think that is relatively normal inflation that is happening there but it is happening in that picture of everything is becoming technology and everything is being touched by technology. It's to be expected. it okay you mentioned um sort of when to sell to tiny have a sort of um a theory a playbook on you know at what point do you do secondaries do you exit companies which ones do you stick around in even if they're you know wave for example raising huge amounts of money these days yeah in general We're trying to be really good guests to a party.

16:05So we come early and we leave late. That is how you make money in venture. That's how you make the most money in venture. Sometimes you have to leave a bit early or go to a quiet room at a party. When something's extremely valuable, it is for all investors nowadays a much more normal thing to take some money off the table. This is something that has been drilled into us from a lot of people that we learned from along the way. It's not really difficult to sell something on the way up. It's actually really easy because someone else will want to buy it. Obviously, founders want to control a little bit who's selling for signaling and for how the cap table shapes up.

16:56But on the way up, it's generally easier to sell. And so then it becomes a question of, do you sell to early, to late? Are you good at timing this? Are you good at sizing this? I think we've done a pretty good job at doing that for our investors. I think the difficult side of selling is A, when it delights with ego. So the general idea of venture capital is you come in early and you leave at the IPO. Maybe you stick around a little bit longer after the IPO. Although that theory, I think, has been discredited. Anyways, so you do stick around and you want to stick around for your winners because there are only so few winners in any one portfolio.

17:42I think it's important to be realistic about the role that we have as both investors and fund managers and insurance of other people's money. And so it is good to take some money off the table. It's the greatest feeling to return money to your IPs as a venture investor. And then you've got to make sure that you don't miss out on the big wins when they come later because these companies take a long time. And it's, you know, most fun cycles are sort of 10 years. Maybe you have an extension or two in the legal docs, but actually they run for 15, 16, 17 years. And so that takes... But do you have a kind of...

18:22a formula you know when a company has increased in valuation by x we sell a third or you know have you tested out anything like that yeah we do have a formula i'd rather not share it with everybody because it's pretty great formula um but it's it's it's close to what you say um i think realistically we need to say what is an amazing outcome for fun like ours in what is an okay outcome for a bunch like ours. And in a company where we're able to sell something before there's an exit, because if there's an exit, it's not that we can sell something, it gets sold. Like, you know, decision, the founder decides, or the board decides to sell the company.

19:09But in a decision that we make before other people or that we make independently of other people, we tend to say, do we feel like this is well valued at this pace? So if there were multiple rounds following each other that quickly ratcheted up the price, is that the invisible client pricing the asset to where it should be? Or is that maybe a little bit of exuberance by some individuals? And this is not really a liquid market. So there is no correction price downward like in the stock market. And so the latter scenario can absolutely occur and does absolutely occur. And then it's sometimes the idea to take a table.

19:54However, the whole point of venture is that there's someone who says, no, I think this continues going up and they're right. And then they make a lot of money. So balance those two views and hopefully do it right. But yeah, it's a very, very nice problem to have. You've painted a very sort of positive, optimistic picture for founders and investors at the moment. What would you say are the biggest headaches for founders in your portfolio at the moment? the biggest headaches for founders often come from other people not really understanding what the founders want or what they're doing and and that sounds it sounds a bit childish maybe um but in the end the founder is trying to build a business along their vision.

20:58There are also many founders who make mistakes on the way, or I don't think there's any founder who has not made mistakes on the way. I think the biggest headache is if a founder feels like there's somebody around them who's supposed to support them, who's not supportive. I think that is the biggest drain of energy for founders. So maybe an early investor being a little bit annoying or any investor being annoying for me it'll vary. I think that is difficult.

21:38Certainly negative, whether that is press or that is in social media, negative stories that are very often, I think this is today a problem that we didn't have as much when we were a much smaller industry, just things being very loudly announced and spoken about, and then obviously on social media things, taking their own, finding their own way without any context, without any ability to respond or answer to a certain, whether that's an allegation or whether that's just a story about a company. I think those are the things that annoy the founders the most, which also makes sense because those are things the founders can't control.

22:25And founders like can probably think that's why they wanted to take things in their own hands. And then, you know, like we can always talk about bureaucracy. We can talk about all of that. That's, you know, no level annoying, but I don't think it stops anybody from being successful. On the point about social media, I feel like we're in a different era than we were before. I mean, we always had kind of big personalities on Twitter, but I feel like LinkedIn has really come into its own now in the world of AI. There's some founders who are really using it to their advantage, aren't they? Like talking about, you know, all the posts about ARR make me laugh.

23:07What are your kind of pet peeves with whether it's other investors or founders' social media habits at the moment? Yeah. Yeah. You said this earlier, we don't do a lot of press work. And the reason we don't do that is we learned something from Naval, who founded AngelList, which was you show and you don't tell. You bin something and then you announce it. You don't announce it before you bin. And that sort of carried through our work. And then when we started, Andy and I were very busy. and so we're like yeah let's press this just work and then it turned out to maybe even help us because we were a little bit um less harder to find so folks who found us had a little bit more time with us um i think social media is basically a fight for who screams the loudest and i was marking earlier when you when you mentioned LinkedIn, I think the stuff that's happening on LinkedIn makes me very anxious.

24:25So when I open LinkedIn, I read three announcements of somebody announcing an investment or their new fund or an exit or I don't know how they cooked their coffee this morning and it makes me really anxious about how mediocre I am. I think it's just very toxic. And I think Then comes as an entrepreneur and maybe also as a fund manager of a smaller outfit, there comes doubt, am I doing the right thing? Am I out there enough? If that person is talking so much about their great success, shouldn't I also do that? Because then maybe they will get the funding or they might get the customer or they might get the hire that I was struggling to get.

25:10And obviously that is the circle that we've all been caught in. so I think that's not helpful to anybody I love writing I really love reading and I think yeah there are definitely a lot of people where I make their writing better I don't know that's the writing I wanted to read in the first place so I think there is something where we're going to have to deal with flop basically and everything I don't know I'm getting so many cold inbound emails with free follow-ups. They're all worded in a way that basically make me anxious to read them in my own inbox. That's my inbox. I'm in control of that.

25:55I think that's just going to follow us everywhere. And I don't think that's a great direction. What have you seen amongst maybe founders? What are their good practices so they don't get affected by the hype around other companies, perhaps, that they can just sort of put their heads down and keep working. If you even think that's the right thing to be doing, maybe it is important to be paying a certain amount of attention to what your competitors are up to. I don't think it's healthy. I mean, of course you're going to pay attention to what your competitors are doing. I think, if anything, everybody overanalyzes it.

26:37I think there's almost nobody where you can see it Maybe you should look a little bit more at what other people are doing because these founders are already hyper-competitive. They're already very aware of what's going on. I think a lot of the best founders look at what other people are doing and they're able to put that into context. They see a product and they realize they've already went down that rabbit hole. They tried that way of finding a new customer. They tried that feature and they can explain to you why it didn't work and what the dynamic of that is. That is, I think, what the best founders are doing.

27:19The folks who maybe have the most anxiety about what other people are doing, you know, it's a pretty old trope in startups. If you just build what someone else is building, you're behind by definition because they're already working on the next feature. And so that really doesn't help. So I think most founders should spend a lot more time talking to their customers. They should talk to their team. They should talk to their founder friends. I think founders having founder friends and supporting each other in a positive way and being open about the struggles they go through is probably, from a mental health perspective, for a founder, the best thing that can happen.

28:01Because those are people who go through the same problems. Then you could say, yes, I know that is going on. but it's also going on for me. And when the founder talks to a non-founder, these people usually have great ideas that have absolutely no relevance for what a founder is doing. So Sifted has found itself in the midst of a bit of a LinkedIn storm this week that we're recording it because we wrote an article on the return of the tech bro last week for which we've received quite a lot of praise but also criticism. them do you think the bro is back is the bro bad i think the bro's bad

28:46i mean i'm i'm i'm the dude so i think it's easy for me to smile about this then you know women in the industry female founders um i think there's a very bad criticism of the tech bro screaming louder and you know like trying to look bigger than they are and whatnot um i think it's really hard to have a great answer to this to be honest i think um the reality of entrepreneurs is entrepreneurs are people who like ignore reality in a way and so every entrepreneur whether a male or a female, not everybody, very, very many entrepreneurs, male or female, definitely have a higher opinion of themselves than the average person does.

29:36And so, you know, so that happens. I think what's definitely happening is that there is a swing, and this always goes in waves. I think culture goes in ways, whether that's on a micro or macro scale. And so we did have, you know, whether you call it walk or you call it any other name, but we had a big forward swing and there's a counter swing that's happening. And hopefully we can find a healthy equilibrium over time. the fact that people are now just able to do something hopefully gives a lot more people a stronger belief in themselves that is maybe the positive hope I have here yeah and I think the fact that there are more student entrepreneurs and entrepreneurs right out of university than ever before I don't know I'm pretty sure that is the case younger folks are maybe often a little bit less reflective and mature in their views and so maybe that is where some of that comes from i i i'm not the arbiter on this but i think there's definitely a resurgence is it so bad or is it not i think that's you know the negative side of the tech process is obviously very easy to understand.

31:08On the other hand, we have a lot of successful people here in Europe that finally are sort of taking the chair on stage and that are competing with U.S. folks. And I think we do have a need for more support for those successful outpours. And if I'm from Berlin or someone else is from Stockholm, let's not just cheer on the people that went to the same school or that are from the same neighborhood. Let's cheer on the people that are in Madrid, that are, you know, that are in Paris, that are in any other place in Europe. Because I think this is where eventually we're going to build this ecosystem and where we will have colleagues and investors and co-founders.

31:56I think the macroization of celebration is not great. like the micro-ization or whatever, the pullback to, oh, no, Stockholm is the AI hub. Oh, no, London is the AI hub. Oh, no, Munich is the AI hub. And Netflix is Paris. I think that's a bit ludicrous. I think all those locations finally show what we've been building for over the last two decades. And that is just really positive to see. I can emphasize with that side as well that we should celebrate those successes and we should all be proud of those successes. you said you mentioned that there are maybe more younger founders than ever and i feel like that's something that's maybe being more publicly encouraged by whether it's investors or things like um project europe which you know is a is accelerated with a you know specific uh mandate to invest in very young founders do you think that's a good thing or what are the what are the downsides maybe of such young people who've maybe never even worked in another company before starting that's great it's amazing people who never worked in another company aren't aren't ground down into compliance with stupid ideas uh young people are awesome founders um because they can go about things with enthusiasm and they do go about things with enthusiasm um yeah i think young founders are ridiculously cool and people who ignore some rules and all the baby customs make for make for strong and fresh and i think yeah i don't think there's a problem with it and also you know like what do you do you go and you're working a crappy job out of college for a couple of years not really making a lot of money not really learning much because you're just doing stuff for the older people.