Why Most VCs Are Failing Founders: Rebuilding the Venture Model - Sam Tidswell-Norrish

0:00VC should not stand for venture capital. That's obvious. That's table stakes. That's what every firm has. 100 % of them have capital. You know what none of them have? What VC should really stand for. Value creation capability. Sitting on a board or a structured investment is not a capability. Being at the end of a phone to solve a problem is not a capability. That is Sam Titswill-Nourish. Sam was part of the founding of a private equity platform that has growth, venture and buyout products as part of the near 10 billion of AUM. The firm innovated the value creation model with a radical platform approach.

0:38Today, Sam is chair and founder of Opus, a community of early stage entrepreneurs that rewrites the VC model. But here, it stands for value creation. What inspired me most in our conversation with Sam was his obsession to question existing norms with an approach of radical empathy and reciprocity. They said, the only stuff that you've ever achieved, Sam, has been because of other people. The sooner you realize that, the sooner everything becomes easier. And it's true. Anything you or I have ever achieved is because of others. I unplugged myself from the Matrix, took the blue pill and off we went.

1:12This is the Venture Lab podcast and I'm your host, Luis. Ladies and gentlemen, by way of introduction... Sen, I'm strongly convinced that people are very much shaped by their earliest experiences and also by the context of their upbringing. What is your earliest memory or experience that has an impact on what you're doing today?

1:37Good question. And thanks for having me, Luis. Yeah, I'm a big admirer of what you're up to. first memory god knows can't remember I mean it's it's certainly not as young as some but the most impactful thing I think from an early age was I went to boarding school at the age of seven I've got a five-year-old son now he's definitely not ready to go to boarding school in two years and that's too young to send someone but it it shapes you it's a tough environment I wrote two letters home a day for two years and it creates a sense of social pressure um a sense of survival of the fittest I think that um that definitely shaped who I am today and um whilst I wouldn't send my kids to boarding school at that age uh and I think there's probably a little bit of resentment that I did go that early and left home um it's uh it's definitely instilled some qualities that I don't hate.

2:42What are those qualities? I think this kind of standout one is probably a degree of, it's one of those things you say and everyone who's watching goes, the fact that you're saying that means you don't have it, is social awareness. I think people who talk about social awareness are terrible. But when you're seven years old and you're in an environment surrounded by people, young kids and peer pressure and old kids kicking the crap out of you. You change, you adapt, you learn to survive and you learn to fit in quickly. And there's a ton of examples and shallow scars that you have from when you didn't fit in or when you did something wrong, when you got beaten up by the big kid.

3:31And that happened a lot back then. That was 30 years ago. We had we had all sorts of crazy practices at boarding school back then. And I think I think that ability to socially adapt and to fit in is something that you can't teach many people later in life. and so it's definitely helped and particularly helped I think as it relates to relationship building trust building you know the broader bucket of networking for sure yeah also I guess when you don't really fit in at the beginning you also need to try to understand people trying to like read them in a way that probably others can't which then relates to the relationship and building deeper connections so this is also the context in which you're making use of those early experiences right now?

4:25Yeah, absolutely. And you've hit the nail on the head there, which is you have to, in any given social environment, immediately put yourself in the other person's shoes. When you're making a decision or taking an action, what does it mean for the other person? How will they react? And most importantly, how will they feel? Everything is about emotion. and people forget that they forget it in every context a brand isn't just what you stand for it's not just your values it's not just what your proposition does a brand in a business that you build is how you make people feel and that I think it comes from the best marketers are people who are hyper socially aware I think yeah boarding school can help I wouldn't advocate for it and your career took a phenomenal path very early on can you walk me through this through the different steps I certainly can walk you through it I don't think it's been phenomenal it certainly doesn't feel that way it feels like it's been been a lot of work Yeah, I began it.

5:40I did a postgraduate in business and I did that because my undergraduate was relatively easy. I did a social policy undergrad degree. I'm not a big advocate for the British further education system. I think it's fundamentally broken. I think the US system is far better at that stage. and so I did the postgrad and then went into banking initially in the technology role and then in a trading role at Barclays Capital and I was no good at it and I didn't enjoy it in fact I hated it and I wasn't designed I don't think to be plugged into the matrix working in a large organization yeah so at the first opportunity I got after I'd done a reasonable amount of time I I think four, four and a half years.

6:36I unplugged myself from the Matrix, took the blue pill, and off we went. And I met a guy who took me on in an initially, I think, unpaid role in a fintech company. And that guy became a great friend and great mentor. And we grew this fintech company a long time ago, before fintech was really a thing. it did mobile banking software one of the first we grew up to a two billion sterling market cap publicly listed to 2 000 people went through a terrible time in the public markets ended up taking it private cutting the staff down to 400 people selling it not for two billion but for 70 million sterling but through that met someone who wanted to work with us in our next chapter a guy called Rob and we we went to in September 2015 to New York to design a new model for private equity and that's what we did we built a new model for private equity specialist investing and when I say new model I think maybe we're giving ourselves too much credit there but definitely a differentiated model where we combined investors operators and innovators and built a platform that had not tens of people, but hundreds of people on it, building value within portfolio companies, specifically in financial technology.

8:08And we had a good degree of success. We put a brand that was recognized in the market over quite a short period of time. That firm today manages, I think, just shy of 10 billion of AUM and operates across venture growth and buyout. And then within that, I had an opportunity to do an operating partner type role running with a team of people, a portfolio company, a large data business called Dun & Bradstreet. I was on point for various activities within the private equity firm, like the fundraising, coverage, marketing, brand, communications, business development type stuff. I've had an amazing run but it was an amazing privilege and I left that business on the 1st of January.

9:00And I remained a shareholder and an LP but not an employee. But the biggest advocate for what those guys are doing. It's been an amazing journey and they're going to do an amazing job. Wow, there were so many things, like some things I need to come back to. Like I'm interested in the differentiation of the private equity model that you established. So you, instead of like just providing the value of capital allocation, you also provided a platform and a network to the portfolio companies. Is that correct? Yeah. And the model investing, operating, innovating really mirrors how the industry has transformed.

9:41When everyone forgets the alternative investing industry, particularly private markets, is still relatively nascent, call it 50, 60 years old. and it began with the KKR leverage buyout, investing. Capital was table stakes. Then the table stakes evolved to be firms with an operating capability. If you don't have an operating capability as a private equity firm, you should probably rethink your model. And then the next wave thereafter was an innovation capability. How deeply can you understand technology? A couple of the big reasons that deals go south are management teams aren't evolved quick enough and technology requirements are underestimated.

10:26So how do you build that capability in-house so that when you go through a diligence, value creation, planning and execution exercise, you know exactly where the efficiencies are and where the opportunities are through technology? And that's never been more prevalent today. Every private equity firm, in my view, should have an in-house AI capability, people focused, not side of desk, but focused on how do we build an AI core that we can roll out assessments and capabilities in every portfolio company. And this was also your selling point towards LPs and founders then, this special model that you developed?

11:06Yeah, and with it, I think a deep specialization, smaller or younger firms can't invest in everything. And at Motiv Partners, we invested in financial technology. We have a great team of super talented investors, operators, innovators who are uniquely qualified in the financial technology space. and all you have to do is look at the leadership team and the profiles on the website to see how qualified those people are. They're the best of the best in the industry and with that comes unique experience through highs and lows in different markets, unique experience around new technologies and unique relationships that you can exploit.

11:51And so when it comes to positioning the platform and capital from Motive Partners to a founder that's a very unique proposition that a generalist investor can't offer. And therefore, generalist investors knock on the door of the specialist investors asking for partnership in transactions as well. And you often see that GP's partnering where one GP has a different type of edge to another. So it becomes a very reciprocating capability, I think, in the industry. Yeah, it definitely makes you stand out and provide additional value to companies. In preparation for this conversation, one thing that really stood out to me was your ability to build deep relationships and also a very strong network.

12:40And I saw that you said that you're on a mission to be the greatest connector and creator of opportunity in the world. Where do you think this is coming from that you value personal relationships so highly? And why do you think it's so important to build and to have a strong network? Yeah, I don't know where I publicly said that, but it sounds like it's the thing I'd say. It's on your website. Wow, there we go. So, yes, in short, that is my life's mission. And with it, you know, I have a couple of two, in fact, significant industry theses that I'm going to spend the rest of my career focused on.

13:24One is the lower middle market space and private equity. And I'm thinking through how to work on that over time. And the other is something I've been very focused on this year, which is the evolution of the venture capital space. And we'll talk about that. The wrapper around all of that and the thing that I think I can have a differentiated perspective on is the role of relationships yeah and what that means for other people i i don't necessarily want to go out there and just have loads of friends i don't need to go for for beers with lots of people um it's more around if someone's going to invest time or want to spend time with me how can i make it worth their time what are the tools in my kit bag the capabilities that mean that I have got something to offer them that can be useful.

14:21I don't think there's anyone I've met or I know that if they asked for my support in something, I couldn't give a very good run at trying to help them with. Because there's a suite of tools now that I and we have built that allow us to go out to a wider distribution capability to help solve that. and and that for me is is a point of differentiation i can be an access point into a whole new universe for anyone that that that i value and and values me and and have you had a special experiences like yourself um that showed you the power of human relationships and led you to this uh quite yeah profound appreciation yeah absolutely it was a realization that a very well-known business leader said to me it was said in quite stark contrast but they said the only stuff that you've ever achieved Sam have been because of other people the sooner you realize that the sooner everything becomes easier and it's true anything you or i have ever achieved is because of others because of others saying yes because of others ideas because of other support because of all sorts of things in the you know fabric of humanity and when you realize that um the the game becomes much much clearer um you you have to think through what um in any given desire or goal that you have what the sequence of people in that in that ecosystem are to to make it happen and Marc Andreessen said something not long ago around if you have a goal if you have a desire and you push hard enough the world just moves around you and I believe that's true but it moves around you much more effectively if you're thinking about what it means for other people and you're accepting of the fact that it won't happen because you're just pushing it will happen because other people are allowing you to push and other people are allowing you to do something so always putting yourself in the perspective of of the onlooker yeah because you also mentioned that um to build those relationships like you first need to figure out what it is that the other person wants and And then secondly, help them achieve that.

17:02But how do you do this? Like, how do you find someone's underlying motivation in a conversation? I don't think it needs to be Machiavellian. I think we should ask. Before you and I finish this podcast, I would have asked in five different ways, what's important to you? How can I help you on your journey? um before we started this podcast i learned more about where you want to take it and what your your passions are how you've gone from architecture to uncovering the venture capital space and where you see your your path in the future you and i aren't going to do this podcast and never speak again this is the beginning of of a relationship that can be reciprocal um so it just it just requires you to be inquisitive and to invest the time in it relationships and being thoughtful and good at building relationships is massively labor intensive it's not for the lazy and and there's no way to cut corners on it there's no AI to help you build relationships more effectively and so you've got to be willing to invest the time and you've got to be passionate and impatient about about getting to know people um unfortunately it requires being glued to a phone most people say you can't build relationships digitally you can't but you can absolutely enhance them yeah you can absolutely um show someone you care with a message in the morning you can absolutely show someone that you've you're thinking about them when you give them a call and out the blue and tell them you've got an idea for them but you've got to be proactive and so if we if we move on from this like you mentioned that um at the beginning of the year you left your position at motive partners and you jumped to build opus with full capacity um what is the mission that you're on with opus yeah well thank you for asking the question um In the same way that we experienced the private equity industry changing, and I had the fortune with some talented people to build a value creation capability, I believe that the venture capital space has been very slow to adopt the mindset that you have to have capability as well as capital.

19:33vc should not stand for venture capital that's obvious that's table stakes that's what every firm has a hundred percent of them have capital yeah you know what none of them have what vc should really stand for value creation capability sitting on a board or a structured investment is not a capability being at the end of a phone to solve a problem is not a capability A capability is the ability to distribute, the ability to problem solve. It's an intentional way of building an investment platform. And there aren't many firms that are doing that today. And that's where I think the industry is going.

20:16Why is the industry going there? Because as companies, young companies become less capital intensive because technology becomes more affordable. the fact that you and i could build a dating app by the end of this podcast for 50 bucks a month instead of 10 million dollars over two years a decade ago yeah tells you all you need to know and and in a moment we can talk about seed strapping but vc firms are going to have to move downstream they're going to have to go from series c's and b's to a's c's and pre's and and they're going to be very competitive and if you don't have capability you're not going to get the allocation if you're a founder you should not once you've got the queue of vcs out the door um don't accept the first people that come along or just the best terms ask what are you going to do the the power dynamic is shifting into the hands of the quality founders and do you also think that the venture capital model is broken um in the direction that uh the the whole exit model is basically kind of changing right now because the public markets are getting much more unattractive for companies.

21:31And we have seen, especially in last week, also massive private rounds. So how do you think will this affect the venture capital model? Yeah, it's a good question. I mean, the world is moving super fast. Obviously, we've had an environment over the last two to five years where the secondary and continuation vehicle environment has become much more prevalent. And I don't think that slows down. And the public markets become less attractive over time, particularly in a choppy environment. The reality that I think is we're probably moving to a world where there's a lot more smaller profitable businesses.

22:21The topic that people aren't talking, at least I'm not hearing a lot of people talk about is what does longer term cash flowing ownership look like? The fact that you raise a fund that has a 10 to 12 year life cycle and a five to 10 year hold on an investment is, I think, probably a model that's going to have to shift as well. Yeah. And it's not just an investment strategy shift. It's an entire shift in how allocators are thinking about ownership. If a company that's building a dating app originally was, you know,$10 million to start, $2 million, sorry, two years to ship the product. And a decade later is burning 50 million bucks a year with 500 staff.

23:19Today, that can be a 10-person team that's profitable within 18 months. That's a very real change in company dynamic. and that can be a cash-flying business quickly. It can be a business that pays dividends. And so models like that reward the patient capital model. I think we're going to see, and particularly in the family office space, a shift in how people want to engage in the early stage market. And looking for quick exits is probably going to be a part of a strategy, but not the only strategy. Yeah. Yeah. So people don't want to sacrifice liquidity anymore for revenue. I suppose it's also a change.

24:08Great. And where do you position Opus in this landscape? So, for instance, is it do you see it more as a venture studio or an accelerator, a community and incubator? How do you position it in the field? Opus is the VC for everyone. but VC doesn't stand for venture capital stands for value creation and we're building a distribution capability a value creation capability that hinges on community so that when Luis joins as a founder your knowledge network access experience has just been multiplied by the thousand two thousand five thousand people that are all around the world part of the community.

24:57When you have a problem because you're having a fallout with a co-founder, our AI tool that connects you into the network through our app can help you speak to 10 people that have had a similar problem or speak to one of our law firm partners for free that will lay out your options or join any number of events each week where you can share and talk about your challenge and crowdsource the knowledge to help solve that challenge. And that's the same whether you've got a talent problem, a funding problem, a commercial challenge, a marketing opportunity, technology, operations, wellness, whatever it might be.

25:38We've created a system to categorize the challenge area, to create distribution into a way to solve that problem and to do it through community. Think of it like a network state. When Luis joins from Dusseldorf or Sarah joins from South Africa or Ahmed joins from the UAE or Jimmy in New York. Everyone brings different experiences, knowledge, networks, capabilities to that platform and strengthens it for others. And that's what we're building. And we're wrapping that founder community with the VC community. and maybe at some point we have our own investment capability but but right now we're just focused on the value creation capability yeah the one that the vcs haven't been focused on yeah i really love this approach and something that reminds me of that earlier this week i've been to an event where tsnl like a ceo from monzo uh gave a talk and he said something that really stuck with me which is don't put your heart into the company, but put it into the problems of your customers.

26:47I mean, you already touched on this in the previous answer, but what are the problems that the founders, the people you're working with are experiencing? It's super varied, but we're a community designed for early stage entrepreneurs. idea to series A and cross-sector all sectors you could be in the food and beverage space you could be building a software business and it's as long as you're not doing anything nefarious you're you're eligible and as long as you're a backable business so you're not a sole trader a one-man-bound fraction or something if your business is backable and your idea to series A you're eligible to join and in that space people's problems have a huge amount of overlap there's um yeah there's a real uh level of similarity irrespective of what you're building and therefore the the ability to collectively solve those challenges uh is relatively um well, not easy, but relatively feasible.

27:58Yeah. Yeah. I can imagine with this approach, you get a lot of, and also with the value proposition that you built, like you get a lot of applications. So how do you, like, what are the criteria or how do you select the ones where you think that will be a great fit to work with and to join the community? So we have a process. There's a wait list, an application, an interview, and an onboarding. We're live in the UK for Europe, UAE for Middle East and South Africa for Africa. And we'll be live in New York for North America later this year, early next year. And that process allows us to see if someone's the right DNA.

28:42The right DNA is someone who really understands reciprocity. Someone who understands that to take, you have to also give. kindness is also a quality that that we really value um because and it's kindness in the face of adversity it's easy to be kind when things are good but when you're having a really shit day can you still be kind that's a test of someone's someone's real quality um we have a zero tolerance policy for assholes if someone's rude to someone or a dick they're gone uh it doesn't doesn't matter how special they think they are um they're out because bad apples spoil the pack so um you know there's there's a there's a very very very strong community ethos that's quite special you join and it feels good yeah and that's how it should be because everyone's there to help each other this is this is very cool um sam we we have a closing tradition on this podcast which is called the open letter so you can address a one sentence open letter to a specific person or group so for instance to your younger self to future entrepreneurs to the opus community um who would that be and what would you say gosh uh you know you you put this in the brief you kindly sent but I haven't given it a lot of thought.

30:05I thought it was going to come to me instantly.

30:11I'm just thinking about some of my favourite quotes. I'm a big quote person.

30:18I think Henry Ford was one of the great innovators of our time, well, of the last century or so. And he said a number of quotes. some of his quotes are the best the best out there um that i've adopted and tried to live by and i'll tell you two of them um one of them is if you always do what you've always done you'll always get what you've always got and that's um yeah the embrace change and push yourself out your comfort zone the the second is whether you believe you can or you can't you will always be right that that one is for sure us is very different to the uk the us is very different to europe in america they believe they can they can do anything and they celebrate the failure with it it's really important um you know one of the greatest i believe living inventors you've got tim berners-lee who created the web um who i've had the fortune of working with on their foundation.

31:26But you've also got a guy who you probably haven't heard of, a guy called Mark Porat. Mark founded a company called General Magic in the early 90s. He created the iPhone. He created Cloud, the Emoji, Intelligent Agentics, all before it existed, 12 years before it existed. They say, and Steve Jobs said directly, without the work that Mark and the general magic team did, the iPhone wouldn't exist. Android wouldn't exist. And so the reason I bring him up is he's sort of famous for the phrase, failure isn't the end, it's the beginning. And that's how we have to view this world. People get concerned about risk.

32:18If you're in a first world country and you fail in building a business, you're not going to end up under a bridge starving. It's almost a zero chance of that happening. But people get into a comfort zone. They believe their risks are higher than they are. And they don't go and build with bravery. In the US, they think hugely unencumbered. And they get way more obsessed. In the UK, the nine to five, five day a week, work week, it's a real thing. In the US, obsession takes over. And that's why they build some of the greatest companies, I think. So hard work pays off is probably the final statement, I would say, in this montage of quotes and cliches.

33:09Thank you so much for this conversation, Sam. It's really stunning to me how you have mastered the art of relationship building. But yeah, as you mentioned, not so much in a transactional sense, but more creating like genuine connection and reciprocity with people. And yeah, I must say I experienced it now myself. And I think you really do have an exceptional talent in this. So yeah, please keep sharing this. Thank you. Congratulations with what you're building. As I said before, I look forward to helping you wherever I can and keep it up. You've had some amazing people on here. myself excluded and thank you for having me.

33:49Thank you so much.