Christian Gabriel, CEO & Co-Founder @ Capdesk (Acquired by Carta)

Christian Gabriel is the Co-Founder and former CEO of Capdesk (acquired by Carta), a platform that helps people manage equity, build businesses, and invest in the companies of tomorrow. Their mission is to unlock the power of equity ownership for more people in more places. Carta is trusted by more than 40,000 companies, over 5,000 investment funds, and half a million employees for cap table management, compensation management, liquidity venture capital solutions, and more.

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Transcript

0:00

Welcome to the riding unicorns podcast. This is the podcast all about uncovering what it takes to build a unicorn business. On James Pringle. I'm a VC at portfolio ventures. My co-host is Hector Mason. Hector is a B2B investor at episode one ventures.

Hector 0:18

Christian, welcome to Riding Unicorns. It's fantastic to have you on. we would love to start off with hearing about your journey to where you are now. Um, It's not been a, a typical journey, perhaps. You've had lots of varied experiences that led you to, to Capdesk and now CARTA, but we'd love to hear about that journey in your own words.

Christian 0:36

Thank you. Thank you so much. And thanks for having me. I'm from Denmark. So then I started, like I came from high school, like 2008 or something. So 2008 ish, nine ish in Denmark, it's not a very sexy place to do startups. Startups wasn't really an option. I think London is second to the U S but Denmark is just the bottom of everything. So as opposed. I kind of wanted to do something that nobody else was doing, but it led to be obviously quite popular later on. And how that journey came about is I remember just after high school, I got an internship as a graphic designer in San Francisco, came to San Francisco, and I just discovered, you know, I just fell in love with, you know, the tech and mainly the people like just finally, I felt like you could be rewarded for thinking a little bit differently and, and just doing things right. And then I remember one party where. I apparently promised it was a Danish startup called Podio and I met a lot of companies and people there and I apparently promised everybody to make a WordPress website for them because I was back when WordPress was cool. And I drew around next day and actually did WordPress websites and it led to actually people saying, despite me being like, I don't know, 19, 20, they're like, Christian, you're really cool. do you want to be co founder of my startup? And I was like, what? I was like, what is the co founder even just this idea that you could do things for free for a person and they remember and like do things with it. So I pretty much was never at like the internship, which is something like a, it's like I was doing graphic design for an architecture firm. I was just doing around doing. Crazy ideas. And then I got kicked out of the US and ended up back in, of course, I didn't get a visa and ended up back in Copenhagen. and that's when I made something like I made an accelerator because nobody in Copenhagen really knew expats or connected with expats and they didn't really know anything about startups. So I just rented a theater together with the previous ambassador to Canada. in TED format, we just. Live streamed crazy ideas in Copenhagen, we called it Creative Copenhagen, and then people came to fund ideas there. And it was all out of pocket. I was like 20, 21, right? So I didn't have a lot of money. It was all out of pocket, just paying for the theater, which is really, really stupid when you should be thinking about your education and so forth. then I was like, well, While I was doing it, it kind of took off. We had like four or 500 people, those events, and we're finding some ideas. Then I wanted to enroll to study computer science. Cause I was like, well, that's probably a good way to get into do more tech. And the week before I was supposed to start my studies. I got a call from an investment platform in Sweden, similar to Crockett, but in Sweden saying, Christian, what you're doing is really cool. We basically want to take over and buy out all your debt and employ you as the general manager for Denmark. And I was like 22 at the time. Right. And I was supposed to start my education the week after. And I said, yes, and I actually ended up running funded by me. It was called while studying full time uh, on the side. And I always saw myself as. Company first, education second. I think education was fine, but I found it like, like really useless. And I found the mentality really useless there as well. And my last year of university, I had this idea because what happened with the investment platform like CrowdCube is that we were selling equity. And everybody cared so much about these marketplaces. This was back in 15 ish. So Europe was just about marketplaces and it was about sort of payments, but nobody cared about infrastructure and SaaS. Like SaaS and infrastructure was like really boring stuff. So the closer you could be to the action, the better. So these front end marketplaces got a lot of attention. And I just thought, well, once you've sold all the equity, then afterwards you deliver it in the spreadsheet and nobody knows what equity is and can't get in touch with it. So how about we just do put equity on the internet and

Hector 4:06

I fleshed out the design

Christian 4:08

and got an angel investor to back us. And this is the beginning of the journey. Well, founders beware, like when you whine about the market. Now, I raised a seat round after having 11 products and potential customers for 20, 000 pounds. On a hundred K duration about that. Right. That's how I got started. Right. So how much can you do with that? Like that amount of money in a year? And that meant we had to, and I got that money and I felt maybe a little bit higher, but it was basically raised 20 K. a month later I graduated and the first thing I did after graduation is, you know, I knew I had to work full time in CapTest. So I basically kind of went half a year into CapTest, which is, for those of you who don't know, we are basically equity management platforms. So really unsexy to do in your 20s. um, We basically help fast growing companies manage equity and issue equity to employees on one platform, a capital management platform. So very unsexy. after six months. Doing that and getting traction in Nordics, I decided. Let's go to London. And then I ended up in London and sort of now we're here. So that's how I got started. So I kind of felt like I grew up in my own weird trauma.

Hector 5:15

Yeah. Yeah. No, that's, that's a fantastic journey. I'm interested in this process people go through in finding their calling, what they want to spend their career doing. And I think that, you know, you sort of iterated your way towards CapDesk. I mean, Yeah. Thank you. How would you advise others to, or how, you know, maybe you can speak from your own experience on how you kind of gradually worked out what felt like something you could spend your life doing, I suppose, because you know, it takes people years to find and I don't know whether you found it yet. I don't know whether cap desk and Carter is your calling or whether there's something, something left in the tank, maybe another startup, but how were you kind of thinking about your career through those years? I think that's a

Christian 6:01

really good question actually. And like, it's hard not to sometimes look at the tech sector and I sometimes feel like this is not why I got into it at times because it's, it's become more sort of a Ivy league or like top Oxbridge, uh, instead of doing management consulting, I can get a good. I can go into VC or I can go in and do some tech. And then it doesn't, that curiosity and that sort of, I don't know, creativity sort of lost a little bit. And you end up with these sort of over engineered hypothesis and over funding rounds, like dealing in a really like sector where nobody has a stake in. And it's sort of the magic is lost a little bit to me. So I think well, being too judgmental about it, I think for me, perhaps. That if you're listening, the only, one of the only good advice I got from my dad, he was saying a lot of bad things. Uh, not bad, but like, don't take all this advice. But the one thing he said to me, cause he was, uh, which really took to heart is like Christian, you know, that feeling when like you work late at night and you just get this adrenaline rush and you don't know why you get it. Like you just get an adrenaline rush and it doesn't feel like work. You're just like, you're creating stuff that will go away. Like that will go away. Everything else will come. Money will come. Like everything else will come. Status will come. But that will go away. So treasure it. And I just thought that's the best advice I ever heard. Because now I treat that, like, I call it my kind of curiosity energy. Like, if that's fine. I can do whatever, like keep my costs down, whatever, even after the acquisition now, keep your costs down and just remember to train your curiosity and open mindedness so that you don't end up being like a man, like solving a management consultant problem with a management consultant approach. Cause yes, it might work out, but then that you don't get that kick. So for me, it's all been about where do I get that kick? And how can I contextualize a challenge should get that kick. And then you don't think about time. It's just

Hector 7:46

there. So, yeah, that's really interesting take. I like that. I mean, I suppose that sort of adrenaline that you're talking about, it's, it's kind of dynamic, like it's going to check. I mean, did you ever feel that when you were doing the website building and you sort of, you know, lent into that and then that led you to other things and it was sort of opportunity after opportunity. A

Christian 8:03

hundred percent. That's what brought me into it. I mean, I got into before doing the website stuff. I was even co calling, uh, I had like, I found out I could earn a lot of money by co calling and I was quite good at it. So I was booking meetings at like 200 pounds per meeting I booked. And I was like, I had a rather easy time doing it, but that kick I got out of it was more than money. It was like, Hey, I'm in my teens outperforming a guy who's in their forties. Like this hierarchy. Of who is good and who is bad is not what we are taught by institutions. I can be equally productive in the workforce as a teenager, and I'm showing it. And that gave just extreme confidence that I could actually live on this, you know, like the streets, like I could. Make a living for myself and I could get things to happen. And I think that that was certainly, I know certainly different founders got different paths, but what motivates me is this sort of more the creative approach where you work against yourself and you solve problems and you get that kick, kick out of something. And I think you really have to watch out for that. And that, that drove me and I get as much kick out doing a customer complaint, sometimes I've got the most kick out of solving that, that I got from building a WordPress website, but it changes, right?

Hector 9:07

I think there are a lot of people who sleepwalk through life, and maybe it requires an element of, or a degree of self awareness to be checking in with yourself on these things, like, Am I feeling pumped about what I'm doing? Should I be continuing? Should I be stepping out and completely changing tack? I mean, do you think that... How conscious do you have to be about this?

Christian 9:29

I think for me, it's sort of the main paradox we're going to go through, right? Which I think a lot of people uh, I always tell my employees this, right? our generation right now, we have a paradox. I'm not sure what else to call it. Oh, I'll make a period paper sometimes later in life and call it something, right? But the paradox is that we are the generation will live the longest and therefore have the longest time in work ever. And at the same time, we're the generation that's most impatient. And one things now, right? Like it's just insane, right? So people move around every two years, but in theory, they're gonna work. Maybe let's say we can work until we're like. Let's say we live to a hundred, right? And then you need to have a pension, but let's say 20 years, at least, right? At least, because you don't know how things are going to work out with the markets and so forth. So at least 20 years, so we have to work through 80, right? So you have to work until you're 80 and you get impatient about things. And I think, and then it becomes status more than results or anything else. So I think we're just driven by status. I have a good job. I managed to register as A or B. I work with this guy and you forget about if you feed that. Maybe I'm going on a tangent here, but if you feed that curiosity monkey deep inside of you, and that you see things as creative project rather than a business project, I think you make better results over eight years.

Hector 10:40

I'm really interested in that because I think there's you know, I don't know how much of it is hindsight bias, but your advice is kind of to be patient, right. And to believe iterating towards something that you really, really enjoy and can do for years. Because we've got years ahead of us. But then like, Are you a patient

Christian 10:58

person? I think that's a good question. I was more patient than I expected in CapDesk, right? So after the earn out is finished, I've done CapDesk for 10 years. That's almost a third of my life, right? Which is insane to think about. Like I'll probably be 34 when my earn out is done, right? And I started CapDesk 25. So it's like, it's crazy, like 35 probably. So it's like, it'll be 10 years of my life. But I think I'm impatient in the company. But not outside the company, as in like, the main thing I actually went through in my 20s a lot was people were like, we're so used to this idea of sharing an event, and then rather than expanding on one event, we have to have another event. So it's this event economy in party conversations. So sometimes my friend will be like, Christian. Is still doing that thing you've done it for three years now, like I need to, should you do something else because they have just graduated something, went to a new college somewhere, you know, took an internship somewhere like things were just happening at such a quick speed. And I was like, well, if you got to understand the challenges of math, like I've had to do. had to find a marketer, you know, how to feel figure out how marketing Ryan have to have to like, let go of that person. We built a team, had to do this, had to speak to an investor, but you don't care about it because you just don't. So I think the challenges within there is really, really fun. And I think you have to be impatient and have a certain level of urgency that drives you. I think urgency is such a key component, creativity and urgency, but outside the company, I do think it's weird because. Yeah, I wouldn't, it's like, I think you've got more time to think over a long time, obviously you need to have a living and so forth, but my advice to entrepreneurs be like, are you willing to do something not out of status, but out of genuine creativity, then keep your living costs super low and keep fixing problems. And we're excited about it, but there's so much status elevated into tech right now that that seems to be gone. And people are paying them a huge salary to begin with. And it's like, it has to work now. Or else I'll go directly into a high income role afterwards. And so I think you have to put the pressure of yourself, be happy with getting a 2k a month and then solve problems and be creative and keep, keep humble.

Hector 12:59

I think it's good advice. And there's, there's something you mentioned um, a, something of our times that people are moving on quickly to the next thing. think What you're saying is partly be like patient on a macro level, but be ambitious and move fast and sort of be impatient on a very micro level. So, you know, when you're thinking week to week, get stuff done, but believe in the process and believe in the sort of compounding benefits of those micro tasks. in terms of the big picture. A

Christian 13:28

hundred percent, like you can, like when I hear like, so we see the tenure, that's the lowest, right? It's probably like a CMO, like CSO tenure. I think Howard business view was like, it was like a year. or recruiter, look at recruiters. Like this is absolutely insane. Like recruiters probably tenure is a year like you've recruited. So how do you know? You've done good marketing or a good recruitment. If all your 10 years has been a year, how do you know? Because you hire a person, then you see the results over three years. So when I had to hire, like, I'll just ask them, well, you're a recruiter. how do you know it worked out? Because you haven't spent that for a long time. So I think you move on and you create this sort of, uh. yeah. Pump and dump scheme for yourself in the career, right? Because you're never accountable for anything because you never really solved anything but you always, you get these good locals in the university, me, and I think you can definitely solve a lot of problems in one company and you have to see, and maybe it's, I'm super biased because I've been a CEO, right. And a founder and an operator. So I would like my piece to stay longer, but I do think you get a kick out of solving something. Drive something if you're in it for the mission and then solve it probably and see it end to end and I think that's when you get a kick and then you learn and then that's the first part. I'm speaking intended again and the second part is it's so rare. It's really, really rare. Like ask any of your friends to work with the right people around you. Like finding the right people around you, people who elevate you, people who are smart, people who have good ethics, I'll come to that later. ask any of your friends, it's not Nike is cool, or Leko Barclays is cool, it is, I've got a really cool team. And most people don't like their teams, so when you finally have a good team, stay for as long as possible. Don't leave.

Hector 15:02

That's great, yeah, what were you going to say about ethics? No, I'll probably

Christian 15:05

come to that, but I think, uh, it's because you gave me a task at the end to come with some advice. Right. And like, I think one of the, and then I've got, I assume we like told the VCs listening to this and some of the founders, you absolutely hate me for this. And I hope I don't get shamed in the, in the community for saying this, but was never take advice from people you wouldn't trade business with. Right. So it's quite out there. Right. And that's because. You don't know what success looks like and neither do your VCs, but you can look at a person and be like, you managed to get everything I wanted, and that's just not money wise, that's like, you have a company I like, you have a team that I like, you have a family that I like, you operate so smoothly, you might give me the dumbest advice and be like, Hey Christian, how about you start a Facebook page, but I'll over index that advice so much more than a guy who might be really, you know, earned a lot of money and all that kind of stuff, but the rest of his lifestyle, how his team is around or behaves is like not something you want. And he could say something like very clever saying like, let go of yourself personally, don't read your assaults, but I won't listen to it. I'm just biased to be like, no, I don't want to be like you. But the other guy, and once you are working with those people who you respect and like, and have good ethics, everything just becomes easier. And I think that whole thing, it's such a taboo in the system that, people just expect you to take advice. No, like advice is very, very precious thing. And surrounding yourself with people, mentors or whatever, who you respect that much. Like holistically and take advice from, I would just say that's very rare. You should stick. So that's why I said it might be

Hector 16:33

no great advice. And um, moving on to the kind of cap desk journey. What was that Joe? What, what were the, perhaps the sort of highlights low lights of that journey? I think, you know, seven years to exit to Carter, which was valued in an end of last year at eight and a half billion dollars. So huge, huge company that you exited to. Yeah. What was the sort of company building experience that you had? Any key lessons, tough points, any anecdotes that you have from that journey? Well, yeah, I think that's

Christian 17:04

like, it was several things. I think the main thing is that we had to, capital management, which is what we do was something that every investor was fascinated about, but also had. I'd be like, I've tried to make my own captive software, but here are the reasons why I didn't, right. And then you have to listen to the thesis about why it's a shit business. Right. So it was extremely hard. And then Seth was just not cool. So it was really, really hard with the amount of funding we had to turn it around into momentum. And that kind of became a challenge also later on as we went along. But it also did some good things. so in the beginning it was just about how do we hack our way into capital management because it's very costly. You don't use a capital software that can't do everything and you just won't use it. So you've got the barrier to entry is quite high from an ID point of view, product point of view. So we used to hack it. So we actually started out the first two years offering a free product to crowdfunding companies. because everybody cared so much about investment platforms, how we hacked our goods market was basically what's one retail investor worth for a wealth manager, right? And we came to a number, which is like 5, 000 euros or something. That's, that's what they will be having. That's probably very low. And they were like, all right, so 5, 000 euro. It's what we sort of theoretically earn every time we sign up an agent investor on our platform. So we would just bias ourselves to that metric. And then we would go out to companies with many, many investors, like some of these coffee companies, right? They have like thousands. Right. And then we would say we came. So our first half year, we actually went to market super quickly, like within two started a cap desk in August ish, July ish. Officially, I think August is in 15 and we went live with the platform in December and we went live with four companies with 5, 000 investors. So we had a slide saying six months went from zero to 6, 000. That's right now. Give us a little bit more money. Topped up around now I'm going to go to UK and I'm going to go from 6, 000 to like 50, 000, right? that was a great way to hack sort of the mentality of. Investors, because we're so low. And like, we just couldn't raise any big rounds. The first round, as I said, was 20 K. The second round we did was 150 K. Uh, So that, that won't even buy your uh, early seed uh, founder salary now. and we were a team of four, four founders, right. In the beginning. So it was just the scars of money. So we had to hack that around into actually building a capital management platform. And then we actually managed at one point after that to go out and say. That's where we raised our third seed round, which was 1 million pounds from a VC. And we managed to say like, Hey, we've been signing up all these investors. Now we would like to do a secondary market because the secondary market, everybody cared about, nobody got to have a cap table, but in order to get to the secondary market, we need to build a cap table. So it's going to take us three, four years to build the cap table. And then we're ready for the secondary market, but then the market opportunity of the secondary market is huge. that's kind of how we hacked it. And then we started. Work with Secret Escapes and Nutmeg and some great CEOs about how to get, build a cap table software for the UK. And then when we launched that, especially increase their plans out of it, that's when it started to take off with revenue. And then that became our core business, despite us having sold a vision of signing on investors and then afterwards doing secondaries just because we needed money. And then after doing quite well in that space. Three years later, what do I get? Hey, Kata just became a unicorn. Aren't you afraid of Kata? And I'm like, are you kidding me? I've just spent the last three years telling me that I shouldn't build this. So I had to invent all these other KPIs in order to do it. And now you're saying that it made me as competitive as a unicorn. yeah, I always felt like we had to sort of hack our way in there. And then when Kata became a unicorn, obviously it was great. And it sort of took off there. It was easy to get funding. Like, yeah.

Hector 20:40

Yeah. Yeah. No. And just for listeners who don't know what a cap table is, I probably should have said this before, but it's basically a lecture of people who own a company, right? That's probably the simplest way to explain it. were there any moments where you guys were sort of. Existentially threatened where you thought this just isn't going to work like we're going to have to change something here But what were the really tough moments for you as the CEO and founder?

Christian 21:06

You know several I think the first time happened this the first year actually all budget were relying on a grant we thought we would get a grant, a government grant in Denmark and it, we did get that grant, but it got a little bit delayed to what we expect. So we had to go to a meeting with like no revenue, bad metrics on investors and, and basically say, we're going to go bankrupt because of bad budgets in two months time ish. And can we have some more? That was really bad. Then COVID happened as well. Like when I was, when we finally got traction, a lot of traction, we had to raise our series A. And I got some term sheets and everything was looking well. We got like a lot of hype also in the VC scene creating some offers. And then, then COVID happened that February, March We just lost, I've never seen anybody pull out, pull away from a term sheet, but people pulling out term sheet because the market just crashed, which is the worst timing ever. And then three months later, the market took off. But that time there, we, we just didn't know where we're going to survive or not and what will happen. and we just thought it was a secondary product as well, which was the bad. Yeah. It was

Hector 22:09

just, yeah, it was bad. Yeah. What's the knock on effect of that? I mean, when your business is going through such a. Tumultuous time. You as an individual, are you, are you suffering and is that, is that carrying over into your, into your home life? Is that, are you suffering as an individual at that point?

Christian 22:25

I don't think so. I think you become a little bit stoic. Uh, Yeah, I like to, I like, I'm a history buff, so I would like to spend the night reading about like sort of wars of the past and like the gruesome details. I'd be like, Oh, thank God I'm not dead. Yeah, exactly. That kind of stuff, right? So, and then again, I think it's, it's, I don't know, I've got some great, great co founders, right? And it's fun to solve problems with them. Like we get a problem and it's like, I kind of like when the stakes are high because there's more to win. So. I don't think it affected me that much at home. Uh, There was also, I think the COVID, there was also a lot of, unfortunately, other much more personal things that happened some nurses in the family and that kind of stuff, which just like that more affected my work because you had to attend the funeral on Zoom and literally five minutes later, pitch a VC. that's like that happened. Right. That was like, Jesus Christ. And then the VC would say something about how they kept the office open and you'd lost a family member to COVID. Right. And it's like, you had to be excited and sort of lick the ass of that VC. That's like, really, that was, and then you go off to afterwards. Right. And I fortunately had to attend another funeral and then you go in a town hall to say things are going to be all right. And nobody really asks about, you know, And you do all these things that you think are right for the company, right? Measure, if you communicate correctly and then people Don't know what's going on. So they just expect more from you and more salary. And you kind of feel like actually it's the other way around that a company we're solving big challenges. You need to maybe like, maybe there's some stuff going on, going another way around. So I would say that company was the easy part. Yeah,

Hector 23:57

that's, yeah, I mean, you just never, you never know what's going on. I mean, it's extraordinary to doing investigations straight after a funeral is not easy, but it's one of the things that's interesting here is just the importance of co founders. I think being a sole founder through these times must be an incredibly lonely place.

Christian 24:15

Yeah. I mean, I couldn't, I would say like, I wouldn't, and it's, I would never do a startup alone. for me, it's about solving, elevating yourself and finding the right team and working with them and solving problems together and yeah, growing as a person learning from others. So yeah, I'm very grateful for my co founders and I would, I would never do it alone and I would never even had a greatest idea and highest funding if I didn't like, if I didn't feel that we could solve problems together, like I would just not do it. So I 100 percent agree. Yeah. And,

Hector 24:42

um, uh, moving on to the kind of time, Carter approached you, how did that come about? And were you ready for that? Had you planned it?

Christian 24:50

I kind of like to use that analogy with funding rounds and maybe this is kind of my, my street smart mentality, but I like to think of funding rounds, like who wants to be a millionaire, you can take the question to a hundred thousand pounds, or you can just be happy with the 75, 000 pounds, but if you don't answer the answer correctly, you go all the way back to 5, 000, right. And when you get a valuation, most founders don't know this, right. But you get a sort of, you have to grow into that valuation, right. So you have to use VC against itself to an extent and be like, well, we want to raise the funding around where we evaluate at 20 million. All right. That's great. The VC wants you to three X that at minimum. So that's 60 next time. Or if it's 20 million, great job. See if you can catch out on that price. That's right. I mean, that's amazing. Um, why not? I actually was always quite good at like reaching out to acquirers all the time and cold emailing them and so forth and letting them know we were fundraising. And I had spoken to Kata, I mean, since Kata came out, I was so happy Cause it meant I wasn't an idiot. So when Kata began getting hype and so forth, I was like the biggest fan. I was like, yes, I was sharing all my friends. Like, look, it's not just me. There is a real pain. and when I first, first got to speak to Kata in 17 uh, when the co founder, not Henry, the other guy was um, it's called Kumar, I think it's called, uh, was there in town, really liked him, we were way too early, he was like, came back to like, this guy, he's early 20s, he's got no clue what he's doing, like, he's in London, he's over, he's up to his ears and, problems, so let's wait a little bit. And then doing COVID 2020 uh, I finally got to speak to Henry. And we said, you know, I'd like to acquire you. like, well, it just raised around, so you have to pay three X the price and then it was like, that's too high. Yeah, I know. So that sucks. Yeah, that sucks. And then in 2022, we were doing our. January, February, just before like the market really crashed VCs. We didn't even want to reach out to VCs, but we reached out to a lot of cheating investors which was the plan. The plan was to show the board, the board was like, don't fundraise. And we were like, well, we can get some term sheets, hold my beer. And then we went down to strategics and we ended up getting. Never, ever probably shouldn't say this to the investors, but I've never really had competitive tension in a deal. Sorry, all VCs invested. Sorry, something I told you. I've never really shopped around term sheets and seeing prices go up and so forth. But apparently that happened in January, February, which is just very surprising. They each thought there were different parties and we just said there were strategics and it just worked. Right. And then. Luck would have it that Cato was in town and we're just, we're speaking to strategics. They want to invest in us. Do you want to invest? And then I met Henry and then I just think, well, worked out really well and do interrupt me. But I think what we're real, it's like speed and certainty, like that. So advice I got from my board as well, when acquisition that most acquisitions fail, speed and certainty. So getting to speak to a founder and CEO that you like, not like The guy head of M& A, like the actual CEO and founder of a company you really like with a lot of synergy that for me was just like as long as my investors were happy, I would have done it because it would just be the perfect way to exit. And then I managed to get the other guys to sort of compete. And then I just said to Henry. You got to get your best offer. By Thursday, he sent me an offer and then the other guy speak that offer and I'm like, Henry, I don't want to speak, just make it super easy for my board meeting. And then he just made an offer that blew everything out of it. everybody out in the room. it was just amazing. So, for me, there's learning is there that even if the board members tell you not to do it, just built those like VC's built those early stage relationships with your competitors so that you can get acquired if you need to.

Hector 28:24

Yeah, that's an awesome story. I mean, I think there's, there's not enough focus on exits exit opportunities among early stage startups, because it's really hard to sell a business. Really, really hard. And a bit like, VCs are more likely to invest in a company that they've gotten to know over a period of time, ideally years. And they've seen how the founders have executed, how the products evolved and all of that other progress. Acquirers are the same, you know, like, it's very difficult for an incumbent or any other acquirer to. See a deck and within a month or three months say, yeah, we want to buy this company. That's a really, really hard thing to do. You haven't built the trust with the founders. You don't know the ins and outs of a company. I think it's a really sensible thing to be thinking about exit very early, actually. And there's a stigma attached to it, particularly in the VC world. VCs, quite rightly, don't want to be backing companies that are going to exit prematurely. I think there's a difference between prematurely and early. I think it's sad when a business that has a huge potential exits when it hasn't. You know, tested that opportunity and, and really scaled, but I think. Exiting early can also be a sensible thing. So I mean, it's interesting that you spoke to the CEO of the business, you know, that is, that is probably an atypical approach and I think a very sensible one. But what was your strategy for building these relationships with acquirers?

Christian 29:56

Well, I didn't really think that way. The first uh, first story, which is hilarious, uh, I went to the pub, with my previous co founder. We were four in the beginning and now we're three and then had way too many pints and I just decided to DM on LinkedIn the CEO, group CEO of Euro uh, no, sorry, with a computer share, which is, for those of you who don't know, the largest, uh, handler of, uh, of securities for listed companies in the world, listed on the Australian stock market. And I was like, I just do it. This is Christian from London. I'm building a company. I'm taking over your business. We should meet and like something like that. Right. I was like 36 and 88. Like, right. And guess what? I got a reply saying 2 months later. It's like, Hey, Christian. I heard you reached out. I'm in London. Do you want to meet up? And I was sitting with this execs and we're like. What's going on? And I asked him, is it like can I look at it in all funding rounds and I looked at it in all funding rounds and he replied, I'm happy to take a look at it. I'll take a look at it and so forth. And that was just one stakeholder. So I think just ask really like VCs, like ask and then come out and understand your market, like computer share is such a niche company that when you see such a niche, like at the time cap table software as we're pretty much the first capital software to doing anything like. Really? I also had something called Captable IO, but it wasn't really a Captable software. So we're pretty much one of the first Captable softwares together with Kana. So when they hear about this, they, they're excited because that's their business. Right. And then I had like a, I can probably say that about this now because I'm acquired. So I suppose that all ideas and so forth, it's like out the window. I don't know. I'll come for us, but we actually spoke to Euronext as well at one point and they were actually wanting to acquire us. So as part of our seed round, I had also reached out to Euronext. And right after our seed round, they actually started investments as acquisition uh, track. yeah, the VC who just invested were a little bit unimpressed that we're entertaining it, but also like maybe Christian, it works. And then we're sitting with all these strange bureaucrats and like, it just, like this budget they're working on and this spreadsheet just got bigger and bigger and bigger and more stakeholders came on top of it. And like their terms just got more and more ridiculous. And then they were like, we left it, but it was a really cool experience to, to know how it looks like.

Hector 31:59

How a VC behaves in that situation is a topic that should be discussed because I think naturally the incentives aren't, well, I think people believe the incentives aren't quite aligned because VCs want the huge VC style outcome, the a hundred X, whereas founders, you know, their, their, their risk is highly concentrated in their own company. I think that is Not actually entirely true when you peel back the layers of the situation, because I think the temptation for a VC to persuade a founder. Or even to force a founder not to sell if they're able to do that is counterproductive. Like who wants to be an investor in a company where the founders are demotivated and pissed off with the investors? And actually, I think you can suggest, make suggestions as a VC and you can kind of, make the available options clear, but it has to be the founder's decision in the end, whether they go for exit or funding round. Yeah. I feel

Christian 32:53

like there's some, uh, quote or probably I don't know who said it mentioned it to this and this happened with the cards acquisition as well, because there was a lot of boardroom, like it wasn't just an easy boardroom decision. There was a lot of, is this the right thing? if you go for the King, you better kill him, right? I'm not sure how the code goes. And it's a little bit the same thing with uh, with selling the company, like you phone, you can only say. Guys, this is it, I'm selling, I'm not demotivated because if it doesn't, like if you don't kill the king, right, then you're stuck with people who know, okay, you're demotivated now. All right, great. I am an investor in a board where the founder, like the founders just started. So you've got to be very careful with that approach. And at the same time, I feel like this is also, I think, good to be seized. And this is another side of the story, having to be very transparent about it. But one of the downsides about starting a company very early. In your life when it's very unhyped in a small market is the illusion you take from the journey. Like you just get diluted by these small rounds because when I saw a pulley our competitor in the U S they raised a seed round. They raised 10 million and a hundred million dollar valuation in the seed round, right? That was the first round we raised 20, 000 pounds, right? It's like, and then our second round was 100, 120, 000 pounds. It's like, how could we ever compete with that amount of funding? Right. And we never got that kind of tech darling. Valorations really, and funding uh, we were always struggling. I never had more than 12 months run rate, never. Right. It was always full month run rate. So you have to recruit, see if they work out, fire or recruit again. And then fundraise. Within a year. It's like, it's crazy. So dealing with though, maybe probably 18, 18 months. That was the longest I had, but it's just that amount of stress. So it ended up with my dilution being very low. And then I think as a VC, you can exercise hard and soft power and the soft power you exercise is like, okay, if you really believe in this business, you want to take radical decisions to make sure the capsule works some way somehow, that's the soft power you can sort of use in the background to make sure that it hums and there's sort of unspoken thing that. We're not doing it right now. Let's wait and see. But, and then hard powers like this, don't do that. Do that. Oh, I hate you. I love you. And that kind of stuff. Right. But in my board, like that didn't have that soft power with, there wasn't anything that was happening. And especially with the economy going down where I could see it'd be worth my while to continue. Right. So I think they know that. And then it gradually, it's something you don't speak about and it just happens. Yeah. And that's one of the problems.

Hector 35:15

Yeah, no, that that's um, interesting to hear your, your perspective, the founder's perspective. Um, uh, and Christian, where, um, I mean, I think we could talk all day about this. There's so many interesting topics to discuss, but we do have our kind of standard questions that often raise even more conversation. So, what are three actionable bits of insight that you would give to our listeners today?

Christian 35:38

Uh, So the first one I know was somebody told me this. There are only two types of problems, people, problems, and problems. You don't know a people problems. I really liked that one because Either it's very obvious or it's not very obvious, but it's always a people problem, no matter what it is. That's the root, the root cause of many problems. And I think just having that respect and humble, like humbleness about what works most doesn't work with the people. Uh, It's just something I'll just always start with at any time. Same thing with management. I always say, like, my main job as a manager is just, are the right players in the pitch and are they motivated and happy, and do they know what to do? And that's very, very hard. It's easier to fix that up on email.

Hector 36:16

if you assume that that piece of advice is correct, and that you know, those are the only two kinds of problems, but if you assume you're facing a problem that is the latter, and you don't realize it's a people problem how does that impact how you would make? Take action. you think about things in a different way with that assumption? I

Christian 36:35

think it's like stress, right? Like there's two types of stress, stress, where you're just overworked, but you know what to do, and then you're stressed with things you don't, you don't know what to do, and the latter is the harder one. And the first one is just a, it's just a time constraint, a problem. when you don't know what the problems are like that, that hits you. bUt. I think knowing that it's most likely a people problem somewhere, it's a good hunch. And then you know where to start. And then you seek out people and hear their opinions rather than seeing you can put a metric against spreadsheet that will change the goods market as an example.

Hector 37:07

Yeah. Any other bits of um, insight?

Christian 37:10

The second one is probably a little bit but it's maybe my own one. This idea about you fundraise to recruit. the only reason why you would fundraise is to recruit people. But you don't recruit to fundraise, And I kind of liked that one because you need to obsess over the recruitment of people. And in theory, in theory, VCs didn't have money. They just had talent, really. obviously, and then they could give you some money for like platform tools and some kind of stuff. But in theory, they'll just give you people, right? But you forget about, again, it's about the people thing, about what do you need? Do you need a young SDI you want to develop into a sales leader? Or do you need a really experienced sales leader? And what's the salary? And how do you, how do you do that? I think it tells so much about this. strategy of the business and where you need to go and your conversations. And I think at times you can forget about it because The status in fundraisings and maybe this, the market's changed a little bit. So you've recruit because you want to hit a fundraising target. And I think it's, that shouldn't be the case. It should be like, who do I need on my team? And then really care for them rather than be obsessed about, and the last piece of advice I've said before, that's the controversial one, never take advice from people you wouldn't trade places with I use it often because it's a bit controversial and I know it goes against a lot of people who be like, take my advice. Like I will take it, but I'm not sure how well it would land.

Hector 38:20

Yeah. I like that piece of advice. I think advice taking is an interesting one because no matter how smart someone is or how much you relate to them. they don't have the context that you have and so I think listening to advice is really, really important because it helps you build your mental model by, I almost think the, the thing behind advice, which is more useful is the experience of the person giving the advice, because that's the truth behind the advice. you know, and that's what can change your mental model to allow you to get to a better decision for your situation. Listening to someone else's advice is like listening to the output from a algorithm trained on someone else's data. You know, it's such

Christian 39:03

a good way of putting it. And I, and I think I was thinking about it myself because a lot of people reach out and be like, do you want to be my mentor? And it's just no kick in it. And I was like, and I never had a good mentor myself. Really? It was kind of awkward. And I think about it's actually just obsessing about a problem. If you're obsessed about a problem, be like, and you're both obsessed about the problem, then you give advice, right? so yeah, you're completely right with your inputs. Like, are we obsessing about the same problem? And the best way to give advice, like which problem are you really obsessed about? And be like, I don't know anything about it, but it must be like, that's a cool problem. That feels good, right? But if you're like, okay, that's an interesting problem. Have you made a Facebook page? Like, you're like, Oh my God, I need your money. I'm fundraising. What a great advice. I'll write that down. Yeah.

Hector 39:41

I would like to, I haven't thought about that sort of advice taking very much, but there's probably a whole podcast episode in that because I think the, the outcome of that. Very brief discussion is you need to get advice from lots of people, and you need to ask why they are giving you that advice. Once you know that, then you can probably make quite an informed decision.

Christian 40:00

It's, yeah, I definitely think there's a podcast to be done advice taking, and I think there's a, that's needed in the British language, which is about you listening to advice and pretending that it's great advice in order to get an outcome, a certain outcome. That's what I call fundraising. You'll speak to a business angel. They would like to invest 50k and they give you stupid advice. You can't say that's shit advice. I've done that. You can't just be like, give them an illusion that they create value, right? In order to raise the money. So the whole advice is like, it's a whole economy of itself.

Hector 40:26

Yeah. But by the way, I mean, when, you know, I, I will very happily. Offer suggestions to founders on a first call that I have with them without with very little context on their business. And, you know, I'm totally not saying this is what you should do. It's just an idea from what little I've heard, and it's great when founders come back and say, Oh, yeah, no, nice idea. But you know, that's not gonna work because of X, Y and Z. And like, actually, that is. compelling for me as an investor because it shows that they are creative. They are thinking about the different options and they are willing to challenge and they're not going to roll over on things. And that's a signal for how they'll behave their team and making hard decisions and having hard conversations. So there's a lot behind. How people respond to advice and suggestions, I think

Christian 41:12

I really, yeah, I'm quite fascinated by it as well. And then you've got, I just did a, yeah, I had to encourage somebody right in the market right now. And it's like an A class student approach where it's just about everybody, but he ends up with this decision paralysis because he doesn't take a decision where I'm like urgency got damaged and be brave and urgent. Just take a decision, stick to it and be urgent, right? You can't, you won't get the perfect. You know, uh, which is, it's fascinating and there's a lot of different routes to success, right? And there's a survivorship bias and so forth. So I'm very actually lucky. I was just talking to my associates. They were like, I don't want to give, I don't, I'm not at a stage in my career where I can give advice yet. I don't feel like I can give it because I just managed to get out. And now my advice is more worth than before, but it's just a survivorship bias. Like a lot more to learn. Don't learn from me. Yeah,

Hector 41:57

no, for sure. I've been running with this idea in my own life For the last six months, which is where if I can't come to a decision on Sunday, if I'm really struggling to come to a decision on, you know, which route to take having spent a lot of time thinking about it, it's a flip of a coin situation. It means that I'm optimizing between making such a tiny optimization that it probably just doesn't matter.

Christian 42:18

that's a really good approach.

Hector 42:19

Um, so anyway, good discussion to finish on. But with we also want to hear your dinner party guests. So if you can invite three people dead or alive to a dinner party, who would you invite? Yeah, I'm not sure if this is going

Christian 42:32

to rub some feathers as well, but the first one I'll probably take is uh, Henry Kissinger. So I, I assume the question was loaded with people who live now. I think that's a key part of it. So they have to be alive and have to speak English and Henry Kissinger. Yeah, he's, he's got a lot of controversy, He was in World War II, right? Like, I think veterans, people who were in World War II, just listening to basically an entire modern world, like there's a guy out there who has pretty much been involved in every disaster and good thing that happened in the modern world. Cuba, Vietnam, like what's going on in the Middle East? Like, and he was in the World War II. And his parents, and he was a refugee uh, from German, Jewish refugee in Germany, and he's still living. Like for me, it's just bridging the old and new world and having like a gazillion whiskeys with him. That would be really fascinating. And just be like, so why did you decide that with the Middle East or with Cuba? Uh, That would be, yeah, that'd be really cool. And then the other guy I would probably choose, and he's probably like a little bit of a dark horse. He's a guy called Abby Lerp. Uh, Which I'm going to introduce to you. I'm reading this book now called Interstellar. What was the name? A V L U P. A V L U P. So A V I and then L O E B. And I'm reading this book now called Interstellar, he was a Harvard astrology. I think pretty sure he was leading the astrologist department for Harvard actually. And he came out, I think it was in the 17 or maybe it was last year and suggested that advanced aliens have been visiting our solar system. And he had proof. And for me, that was just like, are you kidding me? Like a guy with that background who's leading the Harvard astrology department claims that advanced in the Vista solar system multiple times. So just. Henry Kissinger with his sort of defense policies and that kind of stuff and the guy who claims that there's foreign aliens, like, I think that would be a good match together. Uh, Yeah,

Hector 44:18

absolutely. Yeah. I mean, I'm the first to admit there's a lot that we don't know and that science hasn't yet discovered, so I'm not going to write him off yet. Yeah,

Christian 44:26

no, I think they'll be really cool. And then the third guy, he's like, uh, maybe he's not, he's got, he hasn't got the same cloud, but, maybe it's a good shout out. So if you ever listened to this, then I'm a fan of your podcast, but a guy called David McWilliams who's Irish economist and podcast host, He's just got like a nice way, like he's more, I listen to both the rest of politics and the David McWilliams shows, but I just like David McWilliams. He's just like much more street smart and comes with good anecdotes and he hasn't got this right to rule approach that the guys in rest of politics has. So it's just like a straight guy coming in and I think he would be able to facilitate it well. So he would be able to sort of speak to Henry Kissinger in every loop and I could sort of sit back with some red wine and, and just watch the show go on.

Hector 45:06

Yeah, I think that's, that's a great approach. You want someone who's going to get the best out of all of the people. Yeah. Dinner. So

Christian 45:12

maybe next time it's going to be you. I wouldn't wish that on

Hector 45:19

anyone. Um, look, um, Christian, absolute pleasure to chat. And, um, we've covered so much that loads of practical insight, from founding to exit. And a pretty atypical journey. So, loads of good stuff there for our listeners to think about. Thank you very much for coming on the show.

Christian 45:36

See you soon.

James Pringle 45:38

That's it for this week Thanks very much for listening To stay up to date with the latest episodes, please follow or subscribe on your favorite podcast platform We also have a newsletter called reading unicorns which is another great way to get every episode direct to your inbox Please tell your friends about it and engage with us on social media we'll see you on the next episode.