291. How This Consumer VC at a $1Bn+ AUM Firm Invests w/ Sameer Singh | Speedinvest

17:41Sameer Singh:There are certain things that can be corrected and there are certain things that are just behavior and that you can't really opt for. So that's really what I'm trying to do. I'm not really building, like I might suggest a few product ideas here and there, but a lot of times they can be bullshit because everyone can have ideas. But it's more so understanding what's happening on the user side and understanding how users are reacting to the product, to any new changes.

18:11Amardeep Parmar:That's where I help founders more so. And obviously there's a difference between network effects and simple variety, right? And I think a lot of people are really mixed up. And I think even, for example, when people are talking, you're not being specific enough, you can quite easily just kind of blur the lines there. And how would you separate them out of where someone could be maybe going viral, but not really having not perfect time?

18:33Sameer Singh:I think these definitions have gotten even more modeled in sort of the current frothy environment. So the definition of a network effect is the product gets more useful as more people use it. Virality, or at least product virality, is when people spread the word about a product in process of using it. So let's say Zoom. Let's say I'm the first user who signed up for Zoom and we're having a call and I send you the link. So now you're aware of Zoom. But you could sign up for a Zoom account after that and it won't really affect my life. So there's no network effects there. It's purely virality. And of course there's stuff that just spreads on social media and stuff like that.

19:12Sameer Singh:That's not anything. It's just social virality. like this post went viral, because that's not even repeatable necessarily. At least the Zoom virality example is repeatable. Every single time the product is used by a user, they send the link to someone. So that's at least a repeatable growth flywheel, a viral loop. The stuff that's present on social media, that's not a viral loop at all. That's just, this went viral on social media today. Will it go viral tomorrow? Who knows? Yeah, and with the network effects as well,

19:44Amardeep Parmar:So you said you got the course about it. Yeah. What do you think is some of the stuff that people get wrong a lot or maybe the bits that people don't understand very well?

19:53Sameer Singh:I mean, the basic one is just people tend to use very loose definitions around the stuff. And to me, most investors tend to look at network effects like Joey from Friends. He had a comment in one episode, he's like, you know, you hear a word, you see a thing, that's what you think it is. Unfortunately, that's a lot of how investors view the term network effects, morality. It all sort of gets jumbled up into one thing. So, as an example, in 2021, you had a whole bunch of these scooter companies, 10-minute grocery companies, Opendoor, Home Flippers. and all these companies are like, these companies have network effects.

20:38Sameer Singh:Network effect companies have been super successful. So these will also be successful. None of those companies have network effects. I can buy and rent a scooter. But that doesn't mean that the next user who signs up gets increased value from it because another user signed up. Or because if I rented a scooter out to somebody else, there's two or 20 other companies that can also go buy a bunch of scooters and rent them out. It's not like there's a supply side there. You are the supply Same thing with 10-minute grocery companies. I was buying bananas, sticking them in a warehouse and selling them and delivering them to people.

21:10Sameer Singh:There's no network effects there. Same thing, if I buy and sell a home, there's no multiplayer interaction that creates a network effect. It's just I am buying and selling a home. These are sort of age-old business models. A retailer operates on inventory. Herds operates on renting assets that they have. a lot of home flipping businesses are built on buying and selling homes. None of those companies have had network effects, they're not technology companies. So that was sort of an interesting dynamic. And the same thing is kind of happening in the current environment where a lot of these companies are attributed to have network effects of properties that made a whole bunch of companies massively successful.

21:55Sameer Singh:And when you look closely at how closely on how these businesses work, they don't really have the fundamental elements. It's possible some of them will end up creating them over time, but so far

22:08Amardeep Parmar:there's not a lot there. I feel like a classic complaint as well for people building these kind of areas is that the UK and Europe doesn't understand these effects properly or they're not, they undervalue them maybe on the investment side. Whereas in the US it's more that people feel like if you go to the US you're gonna get investment for this. how much do you think that's true? Do you think there is a cultural difference in how network effects are viewed or valued? I mean there is some difference.

22:33Sameer Singh:I wouldn't necessarily say it's dramatic. I think it's just that the US has a larger investor ecosystem and so even if the percentage of people who understand this stuff is low, that's like a larger absolute number and in Europe it's just sort of the ecosystem is smaller. So there's probably a difference in percentage to be completely honest with you but i don't think like that's the biggest factor i just think there's like a small group of people who've invested the time and effort to understand the stuff and that will remain to be a small group of people because it takes time and effort to

23:08Amardeep Parmar:understand the stuff and obviously like with speed invest you're leading rounds into consumer companies which you mentioned it was like quite a rare thing in europe as well what gives you the conviction to be able to do that and to people who also don't understand about the difference between leading and following obviously by leading the round you're setting the price you're saying all these different things how what gives you the conviction to have to do that as opposed to obviously so many other people just follow i mean the first one is that you got to do your own work right uh it's one thing to say uh you invest in hot companies it's another thing to say you've

23:42Sameer Singh:done your work in this company and this is kind of what drives conviction and so one of the things I've always tried to do is to make up my own mind on a company and I just think that's kind of how I'm wired.

23:54Amardeep Parmar:I've not been a herd thinker so to speak.

24:02Sameer Singh:And it's kind of hard to be a herd thinker if you're a first principles thinker.

24:05Amardeep Parmar:Usually there are two entirely different

24:09Sameer Singh:ways of thinking. And the same reason why in 2021 I kind of stayed away from all of the hyped companies of the time and I was investing in stuff that made sense to me. Even though I was investing as an angel back then, which made things difficult because you still have to find someone to lead the round. But that's kind of how I'm investing right now as well. I'm just trying to do my work to figure out what is it about this product and this founder and this company that makes sense. Is there something I don't know? What is that? How can I get better understanding that? And just go from there.

24:50Amardeep Parmar:And so I let the market do what it does. When you're investing as an angel versus VC as well, how much of a difference does it make to what you're looking for?

24:58Sameer Singh:For me personally, it doesn't. Because what I'm looking for is outside success. There are some angels who kind of go, you know, I'm going to invest in this company and I'm going to try to sell out at like a certain valuation. I think doing that certainly increases your pool of opportunities because you're not locked into finding a company that's not going all the way. But personally, I've always found that challenging because your fundamental frame of reference at that point changes because then you're kind of moving away from first principles to herd behavior. Because you do need herd behavior to create those near-term exit opportunities.

25:38Sameer Singh:And so that's something I've always personally struggled with. I am someone who's a long-term thinker. I want to see why this company or this founder, do they have what it takes to succeed the test of time? And that's what historically in investing has generated outsized return. Whether you're looking at public markets, private markets it sort of works the same way of getting into the right asset and then holding on for dear life over time and it's just how i think it's not saying it's sort of the right way or the wrong way but that's that's how i like to think and sort of at least in my mind kind of fits what we're doing it gets unpopular at in certain market cycles you might say but like the i think a great investor once said that your investing approach should not be dictated by market cycles.

26:33Sameer Singh:If you invest the same way, whether the market is thinking that every investment is going to be a thousand X or the market thinks that every investment is going to zero, your investor, your investment is generally, if you do your homework and you stay grounded, then we'll

26:52Amardeep Parmar:tend to do reasonably well. And so obviously you started more of an angel and then obviously now gone into VC. Are there any mistakes you made in the early days that now you try to avoid or things you've learned? Yeah, for sure. You've made their own choices.

27:03Sameer Singh:A lot of what I shared is so far a lot of stuff I've learned along the way. Like in my first year of investing, I, in certain cases, did get swayed by, you know, like everyone's trying to invest in this company. This is a really hot deal. And those, in retrospect, turn out to be the worst investments. I don't know, my worst performing investment in my first year of angel investing had nine term sheets from the biggest name investors in Europe. I think some might be some US ones as well. And the best performing one took a very, very, very long time to raise the seed down and that pre-seed was a crowdfund.

27:40Sameer Singh:So very quickly learned that what other investors think does fundamentally does not matter. That's one. Second, I think in some cases I underestimated the importance of distribution and overestimated the importance of product. You kind of need that kind of two sides of the same coin. So, learn to appreciate that a bit more, especially in consumer, organic acquisition is important because a lot of times you're not monetizing right off the bat. And so, the less you're monetizing off the bat, the more organic acquisition is important. The more you're monetizing, the more leeway you have to to experiment with pain, right?

28:21Sameer Singh:So that's another thing that we'll learn to appreciate after that first year of angel investing.

28:25Amardeep Parmar:You mentioned as well how the different layers of metrics you look at, monetization was at the bottom. How do you think about that in terms of when is the right time to start digital monetization? Is it just very nuanced for each company or is there some signals you look for?

28:37Sameer Singh:It is specific to each product and company, right? So if this is meant to be a product that you use with other people, it's very hard, unless it's a marketplace that's transactional, for you to monetize off the bat. Because often what can happen is your attempts to monetize can prevent adoption, which is actually harming the value of the product. And so in those cases, you have to kind of go, right, this is the product that way you'll have to prove engagement retention first before you monetize. There are certain other types of products, things that are single-player tools are an example where monetization, you can monetize a product, because it doesn't harm the value of the product.

29:18Sameer Singh:Or transactional marketplaces, because by virtue of proving out the fact that you have liquidity in the marketplace, you have to monetize. Otherwise if you create a marketplace that doesn't have any monetization, you might be getting false signals on the liquidity as well. Maybe people aren't willing to transact if you add a take rate in there. So those are things where it's more natural within the business model to monetize.

29:41Amardeep Parmar:And we mentioned how about a few times now, right? Are there any of the companies you like one spot that you think have done network effects really well within your portfolio?

29:49Sameer Singh:I mean, how about probably certainly up there. It's kind of hard to find a company that has cracked as well as them. They're probably one of the, within this timeline, one of the companies that, one of the best mass market products that's come out of Europe with millions of users. Apart from that, there are smaller companies that I think have done a good job. They're earlier in their journey. There's Blind Mate in Europe that I think is doing a really good job. There's Revise in France that are moving into the UK right now. They're doing an interesting job. there's Home Cooks here in the UK that is on a very interesting trajectory in particular this year that's doing well and so there's a few companies that are a bit earlier in the cycle but are learning and sort of carving out a few niches for themselves where they can expand out from there but Hubbard is probably the biggest mass market one

30:47Amardeep Parmar:and so I don't know if you explained

30:48Sameer Singh:what Hubbard is for the Uniswap so the simple version is that it's a social calendar so if you're at work and you want to find out when your co-worker is free so you can grab some time with them you can quickly take a look but if you want to find out when your friends are free that's not possible so Hubbard brings you that Google Calendar experience for your friends and also has a lot of social feed where you can get a quick sense of what their weeks are like, like what are they doing right, what are they up to right now.

31:17Amardeep Parmar:And then looking forward as well, is there anywhere any particular sectors you're looking at as where there could be a next breakout company or even more widely.

31:25Sameer Singh:I think by nature of being a consumer and network effects investor, it's hard to pick a particular sector. And also because as an investor, you're less close to the problem than founders are. So you're trying to be too opinionated on that can backfire sometimes. So I usually try and focus on, how does the product work? there's always a real problem is their behavior there or there is there a route for this company to be truly scalable and defensible as opposed to trying to say you know what i want to be i want to invest in something that is bringing like a social experience to i don't know like a note taking or something right there you can quickly run it wrong so yeah much more open about sort of what these products look like.

32:18Sameer Singh:Increasingly looking at more multiplayer products that have AI under the hood, where every engagement does not require inference. So you're more insulated against input shocks. So that's one broad interest area that I'm looking at. But outside of that, I generally would not be too specific about the kinds of problems that I'm

32:43Amardeep Parmar:Do you see as well, is there, because obviously there's fewer consumer investors than say B2B investors in Europe, do you see a similar number of deal phone you're having to filter more aggressively or are there fewer consumer companies out there in Europe as well? I think it's probably, there are sort of a smaller group of consumer investors for sure,

33:03Sameer Singh:especially at this stage. There's a few generalist investors that do everything, but in terms of consumer-consumer, it's a smaller group. but in general i think the number of consumer companies will be smaller than the number of b2b companies because there's more b2b investors so you know whenever there's supply and demand shows up to match it and the other way around in 2021 was a bit of an aberration where there were a lot of consumer companies because that was the year everyone's investing in consumer right so i think that's corrected over time and so yeah that does it's not that there's hundreds of companies that show up every day and you have to super aggressively filter there are i think a lot of consumer AI companies.

33:40Sameer Singh:But yeah, that's an interesting sort of dynamic. Anytime a space gets hot, you get a lot of volume there all of a sudden. But that's not always a good thing because people jump in for the wrong reasons. So you have to do some aggressive filtering of the founders.

33:53Amardeep Parmar:And what does your general process look like? Is it, I think with Speed Invest, you have the form online, right? We do.

33:59Sameer Singh:Although I'm pretty open about how founders can contact me or ping me on LinkedIn, drop me an email, go for it. I list my email on my LinkedIn. For me, it's hard to respond to every single email, but if I see something interesting, I'll get back to it. The first filter is just a first call, if I like what I'm seeing, to get a sense of what's your motivation, what's driving this, what's your story of how you got to this point. And after that, give me a step-by-step breakdown of how the product works, product demos are ideal because then you can kind of see where the network effects are or aren't or you can see what makes it defensible or what doesn't make it defensible.

34:43Sameer Singh:That's usually pretty deeply embedded in the product itself and then getting a sense of what's the mode of distribution for this product? What are you experimenting so far? So that's broadly what I'm trying to get a sense of in the first call and after that next step for me is to dig into behavior. So what are we seeing so far? What's working? What's not working? There's some things that you expect to be broken at that stage, those things are fixed, that's fantastic, but I'm not expecting those to be fixed. There's other things that are non-negotiables that I'm expecting to see. If those are not there, I'm like, okay, either it's too early for me or there's something here that fundamentally doesn't work.

35:21Something about the core assumptions behind

35:24Sameer Singh:the product is something broken there. It's very hard to separate those two early on. And this is where I always caution investors from making too many assumptions for what people will do.

35:33Amardeep Parmar:And what we're doing now, so getting people on say every two years roughly, so this will be episode I think was 290 something, so if we get you back on 490 something, what would you love to be able to say in that time you've done?

35:47Sameer Singh:That I've made my first robotics investment and I see a path to network effects for that product. That to me is a big one. Another one would be like, we probably went through an economic crisis and we survived it. That's a good one because it does seem like that is inevitable at this point. But yeah, that's a big one for me. I think robotics is, hobbyist robotics is probably the most fascinating space right now looking forward for the next couple of years. Do I think I'll make an investment in the next one year? Probably not. two years out, I hope I get to make at least one. And then sort of increasingly more going forward.

36:31Amardeep Parmar:So we're going to go to wrap up questions now. So the first one is, who are free Asians in Britain you think are doing incredible work? And do you want to shout them out?

36:39Sameer Singh:In Britain, I mean, first, Neil from Harvard. He's probably my favourite. That's my favourite founding team of all time. So definitely him number one. Dipali, this is partly my speed invest bias. She's a fantastic person. She's always going to help you. I think most people who've met her love her because she's helpful. Third tricky one, but I'll probably say Reese. Obviously, he's probably one of the most popular shout out. He's probably well deserved. He's surprisingly helpful, especially for someone who's had so much success and surprisingly down to earth.

37:15Amardeep Parmar:Great guy. Awesome. I think that gives Reese his 10th shout out. The first one to get to 10. Yeah. And then, so you mentioned how people can reach out to you through LinkedIn and email, or if you want to find out more about speed investing, about what you invest in too, what's the best way for them to do that?

37:29Sameer Singh:I mean, I'm usually pretty loud about what I like. You can check out the Speed Invest website. I've probably got a few blogs on the Speed Invest blog on what I like to see. I also have a personal blog, breadcrumb.vc, where I write a lot about what I like and what I'm scared about and what I'm fearful of. So yeah, you can find my work usually on LinkedIn.

37:49Amardeep Parmar:So you can look at that. And is it in a way that the audience could help you today?

37:53Sameer Singh:I mean, if you are building something interesting in consumer technology, just feel free to reach out. Or if you know someone interesting building something in

38:02Amardeep Parmar:consumer technology, send them my way. So thank you so much for coming on.

38:05Sameer Singh:Thank you for having me on.

38:06Amardeep Parmar:Any final words? No, that's everything.

38:13Hey!