An exclusive interview with Chris Smith, Managing Partner at Playfair Capital. The interview first aired as the 16th episode of The European VC podcast.
A little bit about Chris Smith
Chris Smith is the managing partner at Playfair Capital where he focuses on seed (and pre-seed) deals in the UK, Europe, and Israel. Chris is particularly interested in autonomous transportation, business, and industrial automation (especially through AI, ML, and computer vision), Healthtech (except diagnostics and therapeutics) and B2B SaaS.
But what gets Chris truly excited is when he can find companies operating in unloved/overlooked sectors that are ripe for disruption.
Close to the publishing of this interview, Chris and Playfair were nominated Top 10 VC by TechRound and Seed Investor of the Year by The UK Business Angels Association.
Some things you’ll learn from Chris Smith:
– Ways to get privileged access to stellar first-time founders.
– How Playfair’s value add strategy goes way beyond the ordinary, drawing on every partner at their team.
– Why Playfair goes beyond the headline-grabbing capital injections and actually cares for its founders’ well-being.
– The motivation to create the Female Founder Office Hours and its impact in deal-flow.
If you’d like to listen to more of these meetings with European VC champions, follow the EUVC Podcast.
Andreas Munk Holm (Andreas): How do you go about finding and approaching first-time founders, given that they’re, by definition, new to the ecosystem?
Chris Smith (Chris): That’s such a good question but I think it’s much harder higher up the capital structure because then you have a finite supply, right? And everyone’s competing with everyone.
The nice thing about where we are is that there are so many founders. And I do think that pre-seed founders now are incredibly savvy and do manage to find their way to us.
One of the metrics that we look at is market coverage. So, we track founders and funding rounds to make sure that we’re seeing the deals that we want to see, it’s a key metric we track. And our coverage is, actually, pretty good. We always want it to be better but we’re doing a reasonably good job of founders knowing who we are, which is important. But I also think there’s quite a lot of noise.
I am not a huge fan of B2C, but some of my team members are. So, I would not actively search in that space, I would search in B2B. I think there’s a targeted approach in terms of which accelerators we want to get to know well, in terms of which events we might go to, in terms of the outbound that we do. So, there’s a kind of, on one hand being this magnet to make sure people know who we are, and on the other being laser-focused on our outbound. Those two dimensions combine and I think we get pretty good coverage doing that.
Andreas: Chris, I’m curious then, do you have any views on scout programmes?
Chris: I would say informal scout networks work as well as formal scout networks. And I’m going to pause for a second now I’ve just thrown that out there [laughs].
We’ve thought about it a lot and I think we have an incredible network. When I joined Playfair, the fund had already been around for several years, so we receive incredible deal flow from several sources: from our founders, we’ve invested in 60 to 70 companies now; from angels that have done deals with us, or that we know and have known for years; from all the student organizations that we’ve mentored and been part of. So, I feel like we have a very good reach into the ecosystem. I think setting up a formal scout program is something that’s always on the agenda, as something we would look at. But it’s probably a huge overhead for a fund our size, and I’m not sure it would deliver much more return than we get from the relationships that we already have. However, I do think that taking a role as a scout is a great opportunity for people looking to learn about VC because it’s a great chance to get feedback from a fund about the deals that they’re bringing.
Andreas: Looking at your website it’s clear to anyone that you’re a young team. You’re also talking about student organizations here – that you’re mentoring them. What are your views on young first-time founders versus more experienced ones?
Chris: We take every founder as they come, to be honest. I think there was a Harvard Business Review article that said that the idea of the young successful founder is effectively a myth perpetuated by Silicon Valley. It also said that the most successful founder stereotype is closer to a 47-year-old, unhealthy guy. I think we tend to ignore that, and we take people as individuals. So, as I said, I don’t think we put too much weight on that. We tend to be more focused on innate character traits. Things like their persistence, and character, and drive, domain expertise, all these things – hundreds of data points we’ve collected over the years to figure out whether we want to work with them – and things like coachability. I think one of the things about Playfair is we’re not necessarily looking for the finished product and just saying here’s the money, go off and build a company. We’re also very happy, and quite excited, to work with those founders and help them get to the next level.
David Cruz e Silva (David): Let me grab that and use it. We’ve been talking a lot about the founder focus, and you’ve just ended on a note of liking to add value and building something, being involved. Can you take us through the value add of Playfair for founders, so we understand a bit more of your role in that relationship?
Chris: Absolutely! It’s the way we tend to work with founders, each of us has an area that we tend to focus on. So, Joe Thornton is our secret weapon. Joe was with Google and Facebook before he moved over to Playfair, and he was our head of talent for a couple of years before crossing over to the investment team. So, what do most founders need when they have some capital? They need to scale their team, and that’s really, really hard! Not just to find people, but to figure out who you need, so Joe will work very hands-on with the founders to figure that out.
I think what most people understand by this is that, maybe, you’ll get a kind of playbook or pdf with some instructions, or maybe a phone call with some tips. Joe will screen CVs on a Sunday night for our founders. With one of our companies – Aero Cloud – he hired 12 people and he’s running that process: screening CVs, first-round interviews, actually running and driving the process to the point where the company is big enough to hire a head of people to then take that forward. To me, that’s probably the most tangible thing to help the companies scale. I, tend to get involved a lot with sales, marketing, and PR.
A lot of our companies are deep tech. They will spend a lot of time building data sets, refining models, figuring out their product, and then they’ll get to a point where they need to sell it. Some of our founders have little commercial experience and they need to figure out how exactly are they going to approach the market. What does a good outbound email look like? What does a good sales deck look like? And how do I incentivize the sales team? I tend to work quite a lot on that, whether it’s half-day strategy sessions or a weekly check-in with the sales team. And then Henrik Wetter-Sanchez and Jeevan Sunner do a lot of work: financial modelling, budgeting, or working on the deck for the next round. We do a huge amount to bring that all together, so we will have either full-day or half-day strategy days with the companies. Usually, I would say, at their request.
Occasionally, we will see a company that’s just at this critical point where something is not quite right, and we think: “what if we just have half a day with them to focus on something we think can avoid a potential problem”? We’ll suggest that gently to them and then they’ll come into Warner Yard [Playfair’s headquarters], or we’ll jump on a video call, and we’ll do that session.
David: Can you expand on that line of thought but regarding founder well-being?
Chris: I think being a founder is just the hardest job. You’re constantly working, you’re constantly under pressure, you’re managing your team, you’re managing your investors, you’re thinking about your runway… It’s an incredibly stressful job and quite lonely as well, particularly if you’re the sole founder. So, we’re available to our founders, we’re on WhatsApp with them, they can call us anytime and I think that’s really important. It’s ingrained in our relationship with them. And we set up a wellness program with one of our portfolio companies, Heka, and said to our founders: “here are 50 pounds a month for each, to spend with Heka on any kind of well-being experience that you want”. Heka has about 3 000 different experiences, it’s very customized. From Yoga and Pilates to mental well-being experiences. Or you can get food like Hello Fresh delivered, or whatever you need to feel a little bit looked after and to take some pressure off. And the uptake’s been amazing, most of our founders in the UK are using it.
Andreas: It’s not just the due diligence and the decision to invest, but also adding value afterwards. Did I understand that correctly? I know that that’s different from many VC firms.
Chris: That’s right! Someone from our team will take a board seat but the founders have access to all of us. So, they will get access to the full team for whatever they need, whenever they need it. What tends to happen is: there are periods of very intense work with the founders, and then there are periods where they need us a lot less or even not at all.
Now, from the 16 companies in the Fund 2 portfolio, there’s probably 5 that fit in the category of working with all of us: having strategy days, using all of us for sales, for hiring and everything else.
And that’s what we enjoy. There’s a difference between wanting to do what I would consider half the role – finding the companies, doing the deal, giving them the cash – and doing the other half – working with them, helping them grow the company, and then getting to the next level.
Andreas: How do you think, at Playfair, about the differences between the stars and those who turn out not so great in your portfolio, regarding money and time investment?
Chris: I think our time allocation is really important. In this fund, we’re going to do about 25 investments and we’re 16 in so far. The amount of attention the companies are going to need versus the time we initially invest when they go through this intense period showed we were a little bit under-resourced. That was one of the reasons why we hired Jeevan, back in September.
I think there will be crunch points with several fundraisings going on simultaneously and we might get a little bit stretched. But, in theory, a lot of those companies start to graduate from needing intense support and, if we get it right, we should be able to support all of them. Regarding their performance, it’s kind of inverse. The ones that perform well don’t need our help anymore. The ones performing less well need more of our help but probably shouldn’t get as much of our time because it doesn’t make any business sense. That’s a classic VC issue that we must deal with and it’s part of our daily stand-up as a team, to make sure that we’re spending our time in the right places.
David: Chris, we started this off by highlighting the Female Founder Office Hours. I would love to give you the time to explain the access challenge that led to that initiative.
Chris: We need to go back to the middle of 2019 when we invested in a company called VineHealth, and two amazing founders: Rayna Patel and Georgina Kirby. I just remember the day I was sitting in Warner Yard, and I received the draft press release for the funding announcement, and it just hit me. First, VineHealth was the company that had raised the most ever from EF for an all-female founder team. At 1.2 million for the round, it’s a good round but didn’t seem that huge. Secondly, there was this statistic that only one penny in every pound goes to all-female founder teams. And I remember turning to my team and going: “That can’t be right”! I had just had no idea of that and so we said: “we need to do something about this, this is absolutely crazy! Why is this happening? Can we try and figure out what the problem is?”
We don’t know all the reasons why this is happening but one of the key ones seems to be the reliance on warm introductions and existing networks, as well as a lack of mentorship and access to investors. So, we decided to do the tried and tested office hours, but we’re going to make it for female founders. We held a couple of events at Warner Yard with about 40 founders and 15 investors. Our friends who are investors came along, we invited founders to come in and pitch their businesses, or have mentoring sessions, and it was great. It started conversations between founders who may not have got the opportunity to meet investors and created some mentoring relationships that wouldn’t have happened otherwise.
It was incredibly noisy in one yard, but it was a very productive day. We started to think if this was having an impact and then the pandemic happened. That forced us to put Female Founder Office Hours online, we met Tech Nation, also Microsoft for start-ups and Google for start-ups, who have subsequently become partners as well. And, by going online, this whole thing exploded because we could give access not just to London but also to UK wide female founders. The fifth edition took place on the 6th of May and now it’s 90 investors and 250 founders, and it has become much more structured: it’s four 15-minute sessions that are either mentoring or pitching.
And we’re starting to see true results. About 18% of the founders who have come through the programme have subsequently been funded and we have several success stories. It has got so much bigger than we ever expected, which is incredible.
There aren’t many good side effects of the pandemic but maybe this is one of them. It forced us to go online, which gave access to more founders and, as a result, it’s having more of an impact than we could ever have hoped for.
Andreas: Everyone knows how pricey it is to run a physical event. It takes a lot of resources internally and the reach just isn’t the same as if you do it online. Has this affected the way you think about events?
Chris: I think this event is always going to be remote. And I think there’s an extra consideration here: I distinctly remember a founder who, at one of our first in-person events, had travelled from Cornwall just to be there. And when you’re trying to reach people who are at the outset of their journey on being a founder, who might be excluded because of the cost of travelling, because they need to get childcare, or something like that, why not just remove the friction and hold it online? I also think that these one-on-one video sessions are just as impactful and intimate. You can form just as good a relationship at the outset as you can in person, and it’s not as noisy. So, from that perspective, it’s probably even better.
Andreas: What would you like to say to the VC world, where there is a prevalence of male investors, regarding female founders and the myths around them?
Chris: I think one of the main problems is people’s reliance on their network and familiarity with their network. We have an open pitch form for that exact reason. This is much more than about female founders, this is about founders from every possible background. I think that if the industry continues to rely on warm introductions from friends and connections, we’re going to keep investing in the same people that are already in the industry. So, I would encourage people to have a much broader perspective on who’s out there and who’s building companies. I would, also, ask people to challenge their thinking and challenge their perceptions.
During the Female Founder Office Hours, some founders expressed concerns such as: “I feel very uncomfortable when I’m pitching to a group of men at a fund if it’s a Femtech business”. And that really shouldn’t be the case, you must be able to look at a business beyond your personal experiences. We’re not very good investors if all we do is extrapolate our own experience of the world. So, I’d encourage everyone to look at things from different perspectives.
David: For the final section of our conversation, we have the quickfire round: a set of questions with up to 60 seconds to answer each. Are you ready?
Chris: Let’s do it!
David: What would you personally like to change about VC in Europe?
Chris: Stop comparing ourselves to the US, it’s just unnecessary! A lot of US’ VCs keep telling us that all, or many, of the big future companies, are being built in Europe. The Americans keep saying that, yet we keep thinking we’re inferior to the US. We’re not!
David: What is an unloved sector that you think is particularly ripe for disruption?
Chris: Waste management. And I am going to plug one of our own companies here, called Recycleye. I think waste management and dealing with plastics and pollution, particularly in the oceans, is a huge issue. A lot of entrepreneurs don’t find that a particularly sexy or attractive space to get involved with, but there are huge opportunities there to make a positive impact and build big companies.
David: What do you strongly believe in that most people around you don’t?
Chris: The cold inbound is just as good as a warm introduction!
David: What can we expect in the future from Playfair and, from Chris Smith?
Chris: I think more of the same. The thing I’m most excited about is that we’re launching a founder’s studio. We have a dedicated space in our building, which we’re launching in the next couple of months. COVID secured everyone miles apart now, but we recognize that many of our founders have given up their office space. It makes no sense to have a full-term lease, but they do want to get together for short periods, so that’s why we’re launching this. And then for me, they’re going to carry me out of Playfair in a box! I’m here for the long run.
Andreas: Chris, thank you for being so generous with your time, we really appreciated having you on The European VC.
Chris: Thank you so much, guys!
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