June 12, 2019
Welcome to the first in a series of interviews with notable investors and founders, we’re keen to try to make the investment process as simple as is possible, and we think that education and knowledge sharing is a great way to do that. So without further ado:
Our first guest is David Fogel, Investment Lead over at Accelerated Digital Ventures, and he was kind enough to answer some questions over email. I’ve edited the replies only for the occasional typo or for clarity.
By way of introduction, Accelerated Digital Ventures (ADV for short ) is a rather unusual firm by most people’s standards, and as such they have their own way of doing things. Now this is not a bad thing, but it goes to underline the need to treat investors as individuals, not as monoliths.
I’ve been around VC in some form most of my career and have often been perplexed at their approach to their own brand and marketing. My theory was that they didn’t really need to, they had a silent brand, an exclusivity. But that was 20 years ago, the dot com crash was still fresh, and there’s more VCs, Funds, investors than ever, and best of all, the cost of digital business has been dramatically reduced. As such, VC’s are working harder than ever to differentiate in a crowded market, and in the digital first world they predicted, the best VC’s are using transparency towards process and philosophy online as a way to stand out to founders.
ADV is one such dynamic and progressive fund, with excellent resources for founders, including a guide to your pitch deck, working out unit economics and helping to facilitate introductions ( wait, hang on…😂 ), we’ll get more into their methodology later, but their portfolio speaks volumes about who they are and what they are interested in.
WeFarm -"The worlds largest Farmer To Farmer Network", which connects farmers to other nearby famrers via SMS to facilitate knowledge sharing. CareSourcer - a price comparison and matching tool for care. Or perhaps you've seen ChargiFi on your travels?
Well, let's get in to it!
🤔 Pitch me Accelerated Ventures? What’s great about you? :)
🔥 Our investment methodology is a bit different then the rest - We guarantee feedback to founders from investors within 2 working days
👋 No warm intro needed - you just apply online, we have a blind review process trying to remove unconscious bias - each startup is reviewed by 3 investors
📈 We are looking for Generation Defining Businesses and we want to see that in numbers and also in the deck.
🌲 We are a patient and evergreen investor and are not afraid of big ambition, as long as you can articulate a path to get there
🤔 Do you have an investment thesis that you apply to your investments? And if so, how as that investment thesis changed over your investment career?
My personal view is founder-driven and not focused on market or industry. I believe mission and passion-led founders are the ones to back. Passion and mission are what enable you to keep going even when everyone else said no or looked at you like you’re crazy. The approach has evolved over time and I realized that what differentiates the founders I look for is their clarity of the long-term vision and the ability to articulate it simply. Their ability to imagine the future and find a path in which they and their company will win globally.
🤔Are there any metrics that you think founders or investors overlook, and or, do you think that perhaps metrics are over-used to assess the calibre or quality of the investment?
I believe early-stage investments are not made primarily based on metrics; metrics are lagging indicators of success. My observations show metrics are used by investors to let founders down in a more convenient manner. Almost every founder has heard a version of “sorry but you have not yet reached XXXk MRR or your growth rate isn’t XXX%, your DAU/MAU ratio isn’t… so we will not be taking this forward.” No investor has ever said “we invested in this company because it had 100k MRR and 20% m/m growth” we focus on the vision, the team and the execution. Now that’s not to say metrics aren’t important, however, what really matters is what the team believes are the right metrics for them and why. As founders you should own your metrics and understand what are your KPIs, how do you expect them to develop and what are the levers to operate them for efficiency.
🤔 This, via Twitter, from Andrew Bennett @TheRealBnut - “if you had to base an investment on only two questions, one financial, and one not, what would they be?” hmm that’s a tough one 1. What are the unique insights your team brings which enables you to win the global market and execute faster and better than anyone else 2. Walk me through your unit economics and how it’s going to develop over the next 10 years in pace with your growth
🤔Again, via the tweet tweet, from The Mighty Des (probably not his real name) @kid_desimo “How can we make video games more attractive for investment?”
The video games industry is very attractive for investors, however, the challenge is the Games are predominantly a media business and like with any media business (especially early stage ones) it’s very difficult to predict engagement of users. Even the most experienced team with a great track record can’t guarantee stickiness of a game. Hence all the skills investors develop over time about markets, founders and products aren’t easily transferable to investing in Games. Investors prefer to invest in platforms, tools, and tech which enables better gaming rather than pure games. The only studio I’ve seen come close is Supercell and they have done it by being rigours on the process, A/B testing and willingness to kill lots of projects. Funny enough, 5 years ago I gave a talk about this topic at a Games conference in Israel.
🤔What are the current trends you’ve observed over the last 5 years, and what do you think is an overlooked trend for the next five?
Five years is a lot of time in VC and there have been too many trends to count, that being said I do believe there is an overarching theme cutting across industries and markets and it is community-driven solutions, by that I mean founders building platforms to empower a community rather than exploit it and then grow and scale together. The business becomes the part of the community and growing it helps the community improve and increase the value to its members.
🤔What’s the most common, or the top 3 most common mistakes you see founder’s make either with their pitch decks, their presentations, or even their businesses?
1. Selling the product not the business - There are two stories you need to tell as a CEO, the first is about your product, what’s the problem you solve, how is your product solving it better than all the rest and how will you be making money from it. That is the story for your clients. Investors want to hear the second story, the one of your business which basically is how the money they give you, will grow into more value, how fast, how big is the end goal and why is your team the best one to execute on this and win. When you talk/pitch to investors your company is “the product” you sell.
2. A deck that focuses on the next two years, not on the big vision – Yes the next two years and how you’re using the investment are important but I want to see where are you heading, what’s the big vision? How will the industry and your company look like in 10 years when you win? What is the high-level path to get there? Are you aiming big, what is big for you? Do you understand what it means to build a global tech business?
3. Focusing on the advisory board and not the team - I see this a lot in decks from European founders, I don’t care who your advisors are, at best they spend a day a month with you and at worst a phone call every 6 months. I care about the full-time team working day and night to build this business and what are the skills they bring and how good they are on moving the business forward at pace. When founders put an emphasis on the advisory they are basically saying they need to gain their credibility from these people and don’t think they can stand on their own feet. Don’t get me wrong, good advisors are great to have but I won't make any investment decision based on that.
🤔 If you had to give one piece of advice or “knowledge bomb” to either investors or founders (or both) what would it be?
Don’t feel I can give advice to investors other than generalist ones so will leave that for next time. To founders, I think the most important thing is please make sure you do your own due diligence on your would-be investors. An investment is a partnership for the long term. It’s a commitment to run a marathon together. It’s easier to get a divorce than to get rid of a bad investor. So make sure you are aligned on how you work together and what you both see in the business. Talk to at least 2 founders they invested in, one which succeeded and one that failed and ask those founder how has the investor behaved during the different challenges.
A huge thank you from all of us at OneDeck for David's incredible advice and for talking to us.