Exclusive: Saul Klein talks on Seedcamp’s present, past and future

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Do You Have What It Takes To Give A Realtime Pitch?

Today Saul Klein, chairman and co-founder of Seedcamp, the pan-European programme for early stage startups, blogged a long post about Seedcamp’s structure and history. But over the last few weeks I’ve been meeting Saul to tease out, over long conversations, where Seedcamp is at and where it’s going. The debate is an important one, in part because Seedcamp, as the only Pan-european YCombinator-style organisation, now has a position that is largely unmatched at this level.

That is at once a great thing for Europe – afterall, there was nothing else like it before, and Europe really needed a pan-European Seed fund which could also educate young startups. It’s also a potential challenge both for Seedcamp to explain how it operates – afterall, despite its laudable openness to date, let’s not forget it’s a business – and for those that want to sit outside the burgeoning Seedcamp ecosystem. The below is a lightly edited transcript of our recorded conversations so is subject to the usual caveats, though I’ve tried to keep it as faithful to our actual words as possible.

Mike Butcher: How did Seedcamp start?

Saul Klein: The genesis of Seedcamp is I put a blog post up, I think probably in about February, 2007 saying, wouldn’t it be cool if we could have something in Europe that brought people together, helped invest in startups, whatever. The blog post is still there.

Mike Butcher: It’s interesting to get a history of it.

Saul Klein: This was just an idea. It was a blog post. The best way to make an idea happen is to put a date in the sand and then go out and tell people you’re going to do this. So, it was actually Future of Web Apps of that year where your good friend, Michael Arrington, introduced me to Reshma Sohoni, and said, “You’ve got to meet Reshma, she wants to meet you.” I had no idea why. I think initially she wanted to host an open coffee club. I got to talking to her about my idea for Seedcamp and I had registered the domain, I thought a bit about how we should do it, but I knew I needed someone to help me make this happen.

Then obviously, this wasn’t going to happen for free. But what we wanted to do was go out and have three Seedcamp weeks. So, the goal was, let’s go out raise enough money to make 15 investments of €50,000 each and to hold three Seedcamp weeks in London, 2007, 2008, 2009. That was it. And who we were going to raise this money from? We knew needed around €2 million to do this. We knew we wanted to have a very open tent. We’d seen the model that Paul Graham had used in the U.S. which was basically himself and a couple of colleagues. We thought the problem we’re solving in Europe isn’t just how do we help young startups get off the ground. Obviously that’s a problem. The other problem is we have no ecosystem in Europe. Like zip, zero.

So, we could do this on our own, or we could do this and try to include as many members of the ecosystem as possible. So, we went out to Index, Atlas, Balderton, Atomico and more, and started to talk about this concept and they said, “Yeah, great. We agree with you. It’s like Europe is totally fragmented, we need to support the ecosystem. This is an interesting new model. We don’t know if it will work, but, yeah, we’ll get behind it.” And slowly, but surely, key members of the European ecosystem, at least from an investment perspective said, “Yeah, we’ll put our names to this.” More than that, they said we’ll put pour money into this as well.

We very deliberately went on the road to start fund raising in June for that September event coming up, the goal being to raise €2 Million over the summer for a totally unproven idea where many of the major investors in Europe were going to participate at the same time. So, cooperate rather than compete, and we had no full-time CEO, because Reshma was being seconded to us by 3-i at the time. So, there was no team, no proven model, totally antithetical to the way that people think that people should behave.

Come that September we did the Seedcamp Week. We had something like 300 applications from 30-40 countries, and we had amazing participation, not just from the investors, but I think that first panel on the first Monday, which is probably still up on our website, was Nicholas Zennstrom, Brent Hoberman, Mark Sandbar, Charlie Muirhead, Richard Moross, and Danny from Index. We had not just great investors, but great advisors and mentors saying, “This is a great thing for the European ecosystem.”

Heather Harde, CEO of TechCurnch came over as well and we had great support from TechCrunch.

Mike Butcher: And we launch Tech Crunch UK then as well.

Saul Klein: Yeah, and from the FT. Because we felt like we wanted to offer not just the entrepreneurs, not just access to great advice and access to great capsule, but also access to exposure because all three of those things are sort of the early lifeblood of early companies.

So, that was the concept and we pulled that off over the course of that summer, basically bootstrapped, from scratch. I think the domain names and Imperial College, where we held that, were on my credit cards to start, because no one actually put any money in when we held that first event.

But obviously, this was [going to be] a fund, so the proposition to the LP’s so to speak, the investors in the fund, was it’s going to be a three-year fund. We said to people, we’re only going to raise money once a year because we don’t want to spend our time raising money and if you want to spend that time helping companies and investing in companies and that’s no different from any fund, you’re not continually raising money. Index raises a fund, Atlas raises a fund, Accel raises a fund, and they don’t raise another one for another two years, or three years, whatever. They get on with investing the money.

The people who showed early faith in Seedcamp when it was literally a blog post and a PowerPoint presentation, and some of my time and a part-timer from 3-i, they were the originally investors. Mark Esiri, Sean Park, TAG, Alex Hoye, so there were individuals as well as funds. Anyone who wants to see the list of the Seedcamp investors, they’re on our website and they always have been.

So, that’s how you get to be an investor in Seedcamp, the fund, is you were one of the people we pitched to in that first year, or in the case of some people who actually came in in the second year. They’re people who said, “I love what you’re doing. I didn’t have the chance to invest last year; I want to invest in Seedcamp.”

So, we’ve never said to people who’ve been interested in investing, “No, you can’t invest,” but we’ve never actively, other than when we originally raised money, sought to raise funds for Seedcamp.

So, I don’t know if that helps to clarify that at all. And we will be raising a new Seedcamp fund in the next six to 12 months and anyone who wants to invest in that fund is more than welcome to invest in that fund.

I mean, obviously, just for administrative purposes we can only manage a certain number of investors. And I don’t think we would be unlike any other company or fund, that is to say we’re not Sainsbury’s, we can’t manage like 100,000 investors, but anyone who is an accredited investor who put effort into what we’re doing and wants to support the Seedcamp mission is welcome to be an investor.

And the proposition we made to investors was, this is a fund, we are aiming to give investors an economic return, we’re trying to do something good as well, but we are aiming to give people an economic return. This is not an NGO, this is something that if we are trying to teach startups how to be successful we need to have an economic motivation as well. I think that’s totally rational.

Mike Butcher: What would you say the criteria to getting in and what benefits do you get as a startup out of Seedcamp?

Saul Klein: What? As an entrepreneur?

Mike Butcher: Yeah .

Saul Klein: Well, we’ve got an application on our website and there are a bunch of questions in there that people need to answer that is probably not all that dissimilar from the Y Combinator application form. We sort of trying to ascertain what kind of people are they. How strong is the idea? How much potential does it have? Will they be able to use and take advantage of the Seedcamp network? But fundamentally, I think we are just looking for great entrepreneurs who are trying to make stuff that people want and will use, and pay for, and have bit of ambition. We’re not really interested particularly in someone who is trying to build the Polish clone of Twitter, or someone who is trying to build a business that is a lifestyle business. We’re looking to find the very best early stage entrepreneurs.

And that’s not an easy task and I think we’ve got a long, long way to go in Europe, but I think if we want to have a successful startup community in Europe in 10-15 years time, we’ve got to start somewhere. But our job… I mean we’re not even through Chapter One at the moment.

In terms of criteria, I think one of the things we deliberately tried to do is to seek out a very, very international base of entrepreneurs. So, we’ve really made a big effort to reach out into Eastern Europe. We had a mini-Seedcamp in Ukraine in the second year, we had a Seedcamp in Slovenia; we had a Seedcamp in Warsaw. We’ve had multiple Seedcamps in Berlin and we’ve very, very actively gone out into regions that most European investors don’t care about and don’t cover because we’ve felt always that there have been fantastic entrepreneurs there. And I think if you see some of the people coming through Seedcamp, I think that’s been proven out to be the case.

Mike Butcher: What would you say would be the main benefits?

Saul Klein: Basically, we did a survey, which I would be happy to share the data with you on of teams that have come to mini-Seedcamps this year. I think we’ve run six mini-Seedcamps this year, which means there would have been 120 teams that answered this survey and I actually think some crazy number, like 80 out of 120 actually answered the survey. So, it’s pretty good data.

One of the questions we asked them is, why do you come to Seedcamp? The number 1 reason was, to get business advice. Number 2 reason was to build my network. Number 3 reason was to raise the profile of my business, and Number 4 reason was the access to capital. So, I think our entrepreneur proposition is really, really solid. That’s what a VC would love, right. They don’t want my cash, they want advice, they want network, they want validation, and lastly, they want cash as well.

So, I think that more and more we’re seeing people see that Seedcamp is more than money – it’s not about the €50,000. I mean there were great quotes that I had from people in, think the guys at Joobilee, the Hungarian travel company. Before they knew who the winner was they said to me, “You know what? If we don’t win the 50,000K, we have saved ourselves €50,000 from what we’ve learned. Not just this week, but throughout the Seedcamp process.” Teams say to us, “Just filling in the application form is a learning experience for us because it helps us to clarify what out business is about. It sets us a deadline we’ve got to hit.”

But the best people to give feedback on that is the teams, right? But we have done research from them.

Mike Butcher: Obviously some don’t like the Seedcamp model and have criticised it. Seedcamp takes a 5%-10% stake in a company. So, do you think there’s a sort of a weird incentive for an entrepreneur to bring an idea to Seedcamp, which is not their “A” game, so they don;t have to give away a lot of a great idea, but it kind of gets them into the “network”?

Saul Klein: Maybe. And quite frankly…

Mike Butcher: Not the “A” idea, but the “B” idea.

Saul Klein: Maybe. I mean I think if that’s was someone was doing, they would get flushed out fairly quickly. I think one of the most important assets any entrepreneur has is their reputation. Even though it’s a very fragmented community, it’s a very small community.

But I think, quite frankly, it doesn’t really matter to me whether, at the end of the day, Seedcamp becomes an investor in some of these companies, I mean, obviously if we are to create a sustainable model and people believe it’s worthwhile for us to have a sustainable model, then it’s in no one’s interest that people game the system.

But I can think of two examples, just off the top of my head, like Skimlinks came to mini-Seedcamp, London, didn’t win. You know what? They are now flying! Great! We consider them part of the Seedcamp family and we cheer them on. School of Everything, finalist in 2007: not a winner and has gone on to good things. TripWolf, a finalist in 2008; not a winner, gone on to great things. So, for me, if like every company that we touched through a mini-Seedcamp, or through a Seedcamp Week becomes a better company, we’re winning.

If the companies we invest in become better companies then we’re winning and we’re making money, which means we can sustain the model. But ultimately, if we are helping to create better entrepreneurs and better companies, we will retain support and enthusiasm from the ecosystem. If we dilute the quality, then we’ll produce an inferior product that no one wants to back and personally, I wouldn’t want to be involved with never mind the other people who turn up. I mean, remember, I’m doing this on my own time.

I’m the Chairman of Seedcamp. I’m a line item in the budget and we accrue a nominal salary, which I’ve never claimed.

Mike Butcher: But as regards Seedcamp, if a company say, wins TAG investment following the results of Seedcamp, is it worth explaining your interest in the sort of associations you have had with them?

Saul Klein: Yeah, so from that perspective: I’m an investor in Seedcamp through TAG.

Mike Butcher: You say you’re invested through TAG.

Saul Klein: Yeah, Index is an investor in Seedcamp, and I’m the Chairman and Founder of Seedcamp, so you couldn’t get more conflict if you liked, potentially. Every which way there’s potential conflict.

Mike Butcher: How do you resolve those, what have you… or at least how do you explain this to the market out there?

Saul Klein: I think most people understand the different roles that I play, most people who know me. And most people who have experience with working with me know that I’m always very, very clear about which hats I’m wearing at any particular time. But the reality is that anyone interested in a company in Seedcamp – never mind an investor in Seedcamp, anyone who reads TechCrunch – can email one of these companies and say – whether they’re an investor in Seedcamp or not, and say, “Hey, I saw you got through mini-Seedcamp, London, you look really interesting. Do you want to take a meeting?”

So, I think people get out of Seedcamp what they put into it. Not just money, but time. There are plenty of people, I think, who haven’t put money into Seedcamp who’ve put a lot of time into Seedcamp, who got a lot out of it. As advisors who’ve gone on to be advisors of, you know, Claude London, for example, who is an advisor to My Builder. He’s not an investor in Seedcamp. He saw what Ryan was doing very early on, liked it, became an advisor, is on the board of MyBuilder, and has done a fabulous job helping them.

So, I think our role is not just being investorcentric; it’s about making sure these companies can plug into the right people to help them grow their business. And that’s fundamentally what a good investor, or fund, should be doing. Not just saying, “Here’s a cheque,” but it’s like, “Here, meet so-and-so, they could really help you,” or “So-and-so could be a really great advisor for you.” There are a lot of bilateral benefits in that.

No one would be an advisor if they weren’t interested in one of a number of things: a) working with startups, b) meeting other interested and interesting advisors. So, a lot of mentors like Seedcamp not just because they get to meet great early stage companies, but because they get to meet other great mentors and expand their network. And a lot of people just think its fun. And if any of these guys get seriously involved with the companies, many of them become advisors, get options in the companies and have an economic interest in their success going forward as well.

It’s really hard to construct a model where everyone wins. All sides… like the mentors, the investors, the teams, and then their judges as well. It’s hard to do that at the best of times, but this is something we threw together in a few months and we’re kind of locked into the model that we started with.

Mike Butcher: So, what are the plans for the fund going forward?

Saul Klein: Yeah. When we do the next fund – and actually to be fair, we have adapted the model in really good and interesting ways, but I’m talking more about some of the structural issues you’re talking about. We’ve adapted the product in great ways, like mini-Seedcamps and doing more investments, like not just investing in the Seedcamp weeks and vetting out. So, we’ve made some tweaks to the product which I think have been great, but we haven’t made any structural tweaks to the way Seedcamp is operated and I think we’ve got the opportunity to do that for “Seedcamp II” and that’s why I’m very happy to have this discussion with you because this is all stuff Reshma and I are and have been thinking. Not just for the last few months, but for the last few years. But we’ll actually have a chance to implement some of this stuff in the next fund.

Mike Butcher: You also made a tweak from the first year , which was a very hard and fast 10% stake?

Saul Klein: Yeah, last year we went to 5% to 10%. But we haven’t tweaked to a substantial degree, the main thing we haven’t tweaked is where we source funding from. And obviously, the more diverse our funding base is, the more interesting Seedcamp gets on multiple levels.

Mike Butcher: Give me an example.

Saul Klein: For example, when we first raised funds for Seedcamp, other than North Zone, I don’t think we had very many sort of institutional investors who were outside of… who weren’t based in London. I mean, obviously you had Atlas, Index, Atomico, who, you know, take a Pan-European perspective. But when you’ve got a mini-Seedcamp in Paris, all the best French VC’s are there. Innovacom, Banexi. When you go to the mini-Seedcamp in Berlin, Early Bird is there, Wellington is there, Neuhaus is there.

So, all of the sort of regional investors that we didn’t know and hadn’t taken the proposition out to the first time around have not been able to be a part of “Seedcamp I”, and there are a lot more active angels and seed funds in the market. When we raised Seedcamp I, there was only TAG. Now there’s PROfounders, Stefan Glaenzer is getting very active, there is Lukasz Gadowski of Team Europe – there are four or five seed funds around.

And the other thing, which I mentioned to you is that you’ve seen the rise in the last two years for very good reasons of government backed funds – I mean NESTA was an investor in Fund I, but we didn’t know about the French equivalent of NESTA in Fund I, the German equivalent of NESTA in Fund 1, the Nordic equivalent of NESTA in Fund I. You know, all the people who are saying we want to, and we have money to encourage and invest in really early stage entrepreneurs. So, I think the diversity of funding that is available to Seedcamp now compared to where we started is vast.

And obviously, there are entrepreneurs like Phil Wilkinson [Crowdstorm] and others who might have felt like they didn’t have the opportunity to invest last time and maybe would like to invest this time. So, as I said, we’ve got an open door to people who are interested in investing within certain limits of our capacity to talk to people and manage a sort of diverse investor base.

Mike Butcher: OK, on another issue, what’s the incentive for a mentor to contribute to Seedcamp if they are not an investor or benefiting financially, because there’s n now several hundred isn’t there?

Saul Klein: About 500 plus mentors.

Mike Butcher: OK, so what is the incentive to you as a mentor to get involved because you’re not invested in the fund?

Saul Klein: Like I said, I think I enumerated some of the benefits before. I think benefit number 1 is that there are a lot of people who aren’t investors, or don’t have the ability to be investors, but are incredibly useful advisors on specific issues like product, marketing, business development, legal, who want to be advisors rather than investors. These are people who convert their intellectual capital into to options as opposed to checks.

So, for people who want to do that, and there are thousands of people who want to and can do that, we’re a great pool for you to meet awesome companies. So, Seedcamp is doing those people a service, obviously doing the companies a service and it’s doing Seedcamp a service, so as I said, try to construct models where everyone can win. So, that’s one reason.

A second reason is that a lot of the mentors actually like meeting one another. I don’t know if you’ve ever sat in on a Seedcamp mentoring session. It’s not very often someone from Google gets to sit across the table from an investor, or an angel, or someone who works at a design agency and hear their views on a subject. So, it’s the same thing where people ask “Why are Chatham House conversations interesting?” Because people actually give an unfettered opinion and you learn a lot. You learn from it and you meet some really interesting people.

So, 1) you meet interesting startups, 2) you meet interesting other people, 3) a lot of people just enjoy it. It’s fun. And they like giving, it’s not a lot – it’s like two hours, four hours of their year. We don’t ask people to come to every day, we don’t even ask them to come to the whole day, to help startups. I mean, you know, one of the earliest exec guys at Skype, still there, ran product early at Skype Now, he’s come for the last few years. Every year he says to me, “Oh my God, I just love doing this because like for one day a year, I get out of being in a big company, worrying about my day-to-day stuff, I hear these young guys would are really passionate about what they’re doing and I can actually help.” They enjoy it.

And we’re not forcing anyone to do it and one of the challenges we have now with advisors is that a lot of the feedback we get from the teams is like, “Whoa, too many advisors. Too much advice.” It’s like, “Give us fewer advisors, not more advisors.” We’re in the fortunate position where the teams need to really think about who the advisors are who can add the most value and have the right motivations. As opposed to like, “Oh my God, are we going to have enough advisors for the Seedcamp?”

Mike Butcher: Do you think that the ‘what do you get out of it’ is a kind of a question that perhaps some in Europe would ask, but someone in the US wouldn’t necessarily ask? People in the US probably wouldn’t say, “Why are you doing this? You’re not getting anything out of it?” We’ve heard time and time again about the culture of sharing in the Valley. Do you think we’ve actually an infection point where’s there’s a culture clash going on if Europe where people are going, “Oh my God, people are sharing ideas in Europe!”

Saul Klein: Maybe, but the only time I’ve ever seen any evidence of this was after Phil was asked to leave the room [Referring to an incident this year when there was a misunderstanding about whether mentors could attend during investor day]. That’s the only time I’ve heard this. I’m sure we’ve got over a thousand advisors in our network, I’m sure there are 10% or 15% who haven’t always had as good an experience at Seedcamp as we would have liked them to have. But we want to keep improving that.

Mike Butcher: It’s kind of rushed sometimes.

Saul Klein: Yeah, it’s like… we’re not even Tech Crunch 50, we don’t have massive budgets, we’re not an events company.

Saul Klein: We’re trying to be “seat of your pants,” “boot strapped,” were not trying to be “roll out the red carpet,” type of – and I think people like that about Seedcamp. It’s informal, it’s a bit raw, it’s got some rough edges. So, obviously, there are going to be some people who aren’t happy, but I think on balance people really see the benefits and not just like all airy fairy, it’s about sharing, but it’s about rational benefits. Like, I get to meet startups; I could advise and have an equity stake in as an advisor. I get to meet other really smart people in the industry in a setting that I would never normally meet them in. And I get to like spend three or four hours away from my day job with people who are trying to change the world. And that’s like an adrenaline shot.

Mike Butcher: So, to the issue of: Are Seedcamp companies required to take the investment??

Saul Klein: If the companies have come through to the final Seedcamp week, part of the discussion that we have with them when we’re taking the list down from 40 to 20 is to make sure that they understand the terms of a Seedcamp investment. Obviously it would be a colossal waste if everyone’s time during Seedcamp week where there are investors and advisors, etc., give a lot of their time and energy to work with these companies, and they get a lot of publicity – if at the end of that process the teams just turned around and said, “Thanks very much. We’re going to move on.”

So we actually, this year, had a session which Chris Grew from Orrick did with all of the 40 finalists to properly brief them and help them to understand what the Seedcamp terms were and, yes, if they do come along to the Seedcamp week, if Seedcamp decides to make an investment then they will have to accept an investment of €50,000 for between five and ten percent.

That’s clear on the website, it’s clear before people apply, it’s something that Reshma spends time educating people on as they come through the process. As I said, this year we actually added a workshop with Chris and the guys at Oracle to help people sort of understand the legal process as well.

Mike Butcher: What’s the difference between the presentations done on a Monday and the one’s done on a Thursday?

Saul Klein: On Monday it’s really a very sort of brief two, three minute pitch where the company more or less just sort of explains who they are and what they do. We don’t encourage people to go into the business model; it’s more just them introducing themselves to the people that they’re going to see and meet during the week. The pitch that they give on Thursday is a longer pitch. I think it’s a 15 minute pitch. We typically encourage people to spend seven minutes presenting and leave the rest of the time for questions and that is a pitch that is given in front of either Seedcamp investors or mentors who have been active and around during the course of the week and have actually spent time with the teams and who have got a perspective on the teams that they can give feedback to the teams on or feedback to the investors.

But it’s a longer presentation; it’s more detailed, it’s not in front of any of the other teams on Thursday so you can pitch without wondering or worrying what your peers think of you. You get much more of a time to engage with the audience because you actually have 50 percent of the time for Q&A. So hopefully you get some really good feedback in that session as well.

Monday is really just sort of “HI. Here we are. This is what we do.”

Mike Butcher: Do you plan to open source Seedcamp’s funding documents to help other startups around Europe?

Saul Klein: That’s the plan. We’ve actually been working on that with the guys at Orrick and it’s hopefully something we’ll do later on in the year. So it’s definitely something we’re planning to do; although, Y Combinator and Wilson Sonsini have done a great job sort of putting that stuff out there. So if we were to do something, which we are planning to, it’ll be more of a reflection, I think, not just what Wilson Sonsini and what Orrick thinks but also we’ll obviously get input from a number of Europe’s very active seed investors.

So it’s hopefully we want it to be useful and to do something that’s not just purely duplicative. We want to come out with a document or a set of documents that is actually relevant and accepted by the wide European seed community.

Mike Butcher: Could you clarify further how role role at Seedcamp fits with your role at Index Ventures?

Saul Klein: So basically I spend 60 percent plus of my time at Index, being a partner at Index, making venture investments for Index. I spend 40 percent of my time doing TAG, doing active seed investments with my dad and, thanks to TechCrunch and TechCrunch readers, TAG was the investor of the year in Europe last year at The Europas Awards where we beat out my other half, Index and Atlas and others.

I think with TAG we’ve done, since 2000…we’ve made around 75 seed investments, which probably I think along with Ron Conway and Josh Kopelman probably makes TAG one of the most active seed investors on the planet.

Seedcamp really was a separate initiative from both. TAG is an investor in Seedcamp. Index is an investor in Seedcamp, but there were 30 investors in Seedcamp and no one has more than single digit share in Seedcamp. So it was designed to be an open initiative; as wide-open as possible albeit, as I explained in my post, we only had two months to raise the capital. So we could only go to a limited group.

I’m the chairman of the Seedcamp board but Reshma runs Seedcamp on a day-to-day basis and has done throughout. I was probably most involved in the first year, helping her really sort of get the show on the road and now I probably meet with her once a week. I’m an active chairman but it’s really her baby and that’s the way I continue to be involved in Seedcamp. Obviously as the co-founder, the vision and the strategy and the direction is something that I still care a lot about; I like to spend time with the companies and go to as many, many Seedcamps as possible, but my day job’s Index and TAG.

Mike Butcher: What happens if your company wants to be involved in Seedcamp but doesn’t actively want to raise money?

Saul Klein: Boxed Ice is a great example. Here’s a company that’s bootstrapped, the founder is still finishing up his final year of his law degree at the University of Birmingham. This is his third start-up and he’s not actively looking to raise money, but he wanted to have Seedcamp as an investor because he recognises the value of having an active advisor who has great connections and can give someone, like him, who’s a young entrepreneur, some good business advice.

So he’s not looking to raise Angel or VC capital but he’s looking to have someone on board who can help out and he very much models his business on 37signals or Fog Creek software. 37signals are famous for bootstrapping, not taking any outside capital. But they do actually have one outside investor who presumably they took onboard not for his money but because he could give them great advice. It happens to be Jeff Bezos. I’m not claiming that Seedcamp is the equivalent of Jeff Bezos, but even the companies who are more stringent about bootstrapping often want someone else on board just to help guide and advise and open their network and their rolodex.

I think even in the case of Boxed Ice, which is a company that didn’t come to Seedcamp to access capital, they came because David wants a partner in building his business.

I mean, to that point, three out of the eight companies, that we funded in 2009, are profitable already. And not just ramen profitable, really profitable.

Mike Butcher: Is that a real phrase that goes around?

Saul Klein: Yeah, Paul Graham wrote it in a great essay. I actually linked to it in my blog post about ramen profitability and the notion is that you’re not paying payroll and you’re not paying rent, you’re basically you’re working at home, so what it’s what you would pay to feed yourself, ramen noodles and your broadband. So it’s companies that can break even on a couple of thousand dollars a month.

Mike Butcher: So, going back to how Seedcamp will operate with Fund II…?

Saul Klein: Yeah, you think of Seedcamp as a fund. So all of these guys are limited partners in the first Seedcamp fund as well as TAG, Alex Hoye, Sean Park, Oliver Beste, Oracle, Brown Rudnick, it’s all on our website. So basically the people who were initial investors are the people we had an opportunity to talk to or people who expressed interest. We actually… although this is not normal for a fund… we told our original investors that we would be open to having new investors in 2008 albeit at a premium to be fair to the people who came in 2007 and we had a couple of people come in 2008, including Doughty Hanson. That’s it. Obviously, anyone can invest in any Seedcamp company and many people outside of that group have invested in Seedcamp companies.

You’re more likely to earn the rights to invest in a company if you spend time with them because entrepreneurs like to have investors who understand who they are and have invested some time and energy in them. So to the extent that Seedcamp investors have a privileged position it’s because they’re very much in the inner circle of coming to Seedcamp events, going to mini-Seedcamps, obviously being part of the investment committee of Seedcamp that makes Seedcamp investment decisions, but any accredited investor who can invest in any other company can invest in Seedcamp companies.

Mike Butcher: But if Seedcamp takes Five to ten percent of a company, there’s enough equity left for another investor, say a follow-uo investor?

Saul Klein: Sure. If the investor adds value. It depends on the goals of the company. In the case of Boxed Ice, Boxed ice is bootstrapping, it’s profitable, decided that it doesn’t want to raise that much capital at the moment. In the case of BaseKit or MyBuilder, all of those guys decided what they want — remember €50,000 doesn’t go a long way for most companies.

Mike Butcher: That’s the thing, €50,000 can only really last about three months can’t it?

Saul Klein: Well it depends. It depends on how well the startup is heading towards revenue. I think in the case of HyperNumbers, I think €50,000 has lasted two years for those guys. So it depends on how you play it. Your equity runway is as long as you make it. Some people never need to raise money. I was reading recently that in the Inc. 500 [Inc. is a small business magazine in the US and the Inc. 500 is the top 500 small businesses in the US] well over 60 percent have never taken any outside financing. The myth that start-up are about raising money is absolutely bullshit. It’s like, you raise money because you need capital to grow and if you haven’t proven to yourself that you have a product for which there is a market then obviously you’re going to have to take on board more capital than it’s necessarily. But I think there is plenty of equity available for both founders and outside investors in the Seedcamp scenario.

We’re not taking 20 to 40 percent for €50,000. I think most entrepreneurs feel that’s a great deal and if they don’t then Seedcamp’s the wrong program for them.

But I think my experience of having made 75 plus seed investments, having been an entrepreneur myself on both this side of the pond and on the other side of the pond is that what people should focus on is the outcome: how big can the outcome be and what value do my fellow travellers bring along the way. And I think being generous with your co-founders and your earliest investors in effect makes them like co-founders because they are going to work really hard for you. The more equity, the more skin they have in the game, the more motivated they are going to be to support you. Their network is going to be invaluable to you in terms of your initial deals, your initial hires, etc. So it’s a trade-off every entrepreneur needs to make but I think every great company from Apple to Cisco to Google to Oracle has already taken outside capital, to a greater or a lesser extent.

But I do feel strongly that taking money is not an end in itself. It’s something that people should only do when they need it and when they know what they’re going to do with it and making sure that they’ve chosen the right partner.

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