Madeline Lawrence (Peak Capital) - Making women richer

Yes, Maddie is every bit as awesome as you’d think.

If you’re in any way connected to the startup world, I’d recommend you listen to this episode.
She shared her insight on a wide range of topics:

• Maddie’s thoughts on the current situation in the startup world:
• What has been Peak’s strategy going through the last years of high valuations
• What can founders of startups that raised at these high valuations do now?
• What are companies cutting out of their budgets now and what are they doubling down on?
• What does Peak focus on when investing?
• What does: Making rich men richer, mean to Maddie?

And SO much more! This is an episode filled to the brim with useful information.

Transcript

Maddie 0:00

And now the later stage investors or the capital markets are not gonna be able to pay what we need in order to have made that return to our investors. It feels sometimes a little bit like a pyramid scheme. You're always dependent on the next investor or the, you know, the capital markets in terms of the stock market to continuously write it up, write it up, write it up.

Spela 0:19

Hello, and welcome back to startups, people and equity. This is a space where we discussed topics well related to startups, people, and equity. We hope that you will enjoy listening to today's episode as much as we enjoyed recording it. Let's dive straight in.

Tamas 0:37

Welcome Maddie to the podcast. I'm gonna give you a short introduction and then we'll dive into, we have a lot of questions for today. So let's see how, how many we can get through. If you were worse in the startup scene and you still need an intro to Maddie, you might have spent the past couple of years under Iraq, but I'll give it a go anyways. Maddie is making rich man richer as per her famous or infamous. We can come back to that Twitter handle and she's 25 years old, half American, half Italian grew up in the states and Spain ended up in Amsterdam for univers. And, she did her toe into investing during the university studies and then landed a sweet job at peak straight after graduation. She's been there since. And she seems to be loving it cuz the tenure with startups, I'm not sure if it's the same with VCs, but you know, something between 12, 18 months is already like a veteran. So you would be like a double veteran by now. I'm also gonna give you, a personal impression. We've chatted through talking about investing into one of our projects and, you've been. Very kind. And you had a very refreshing tone in the VC game, which we truly appreciated. You were very direct and very easy to talk to. And you kind of went behind the usual framework of conversation, which, which was great. So. Welcome to the podcast. And thanks so much for giving us a bit of your time. Great to have

Maddie 2:01

you, Maddie. Yeah. Thank you for having me. How are you doing today? Yeah. What, what an intro. I'm good. I'm still never used to like, you know, when people sing happy birthday to you and you like, don't really know what to do and they're singing happy birthday. So you sort of like, stand there. You know, maybe like make a face. I still feel like that every time I have to be introduced

Tamas 2:19

do you wish I said something that I didn't in your, in the. No,

Maddie 2:22

it was, I think it was solid. I also really enjoyed, I think our conversations and, when we, when we spoke back in February, maybe one thing to add in terms of actually like my, what I did. So after university, I, I actually founded a fund, so a small fund mm. with a bunch of other, very young, very crazy people. And that's because I had a sort of crisis, in my degree, realizing I wanted to be a lawyer. Not really, then I worked full time at an accelerator that became a venture capital fund. And I remember like sitting in the middle of these meetings being like, what's going on here. and then at the end of it thinking I can do this. and that's actually where I got to know, I guess you can call it like, the scene and also where I got to know peak. Because my first investment there peak did the follow on. and it was a very interesting experience in sort of being in the founding seat of a fund, at least. So it's a bit of an inception there. but we worked out of a shipping container. We almost got sued by the financial authorities, you know, hired someone that never came to work, had all those great

Tamas 3:20

experiences. Hence you had the idea to become a lawyer to defend yourselves.

Maddie 3:25

yeah,

Tamas 3:26

exactly. I was gonna ask you, as one of the first questions, what's your relationship with your age? I very recently saw that you posted that you just turned 25, I believe. And it's, it's fairly young, but I never would've guessed before you posted it.

Maddie 3:41

That's a real, that's a really good question. really weird. I'd say, my mom always joked that I was sort of born 30, that I was born to very old parents who were also born to very old parents. Right. So I was sort of like, like all my cousins are like 50 and 60, so my parents' age and that's cuz of some weird generational differences. And even now like Yoon our managing partner, he loves to, whenever we're at an event, he's like, guess how old she. And everybody says like 30 or 35, which I mean, no, it is fine, but for the longest time I was 22 and now it's like 25. Like the gap is, is, is lowering, is whatever it's getting a bit narrower, but he always thought it was so funny that like everybody was at least 10 to 15 years off for the longest time. I think it was definitely a. A little bit of a, something I wouldn't put up front. And I think that that's just something about the job because you are in this, I mean, it is like a power relationship, right? and there is some element of, I have to review and analyze and ultimately evaluate what other people are working on. And sometimes, especially in Germany, you get people who have worked in a field for like 40 years. I'm like, you know, I'm younger than your children. And, and so there is, yeah, some people can react very weird to it, but I think I've now been more and more sort of open about how old I am. And I started working when I was 2021. Uh, I've been open about how old I am, cuz I have the rest of my life to be older. And so I should sort of enjoy, and find, find strength and, the age that I am now and also realize it's never about wanting to know more than someone else or knowing better because I don't and I won't, but I think it should be less of a mark of wisdom and experience and more, just a, a reality.

Spela 5:22

Very interesting. You mentioned the side on the investment side. I think with people being so much older, has it ever been an advantage? When connecting with the founders. Totally.

Maddie 5:33

Also, I have to say on the founder side, there are a lot of founders who are a lot older, right? So a lot of people will easily start companies in their forties or fifties, particularly when they've worked so long in a field. And they're like, I've had enough. And I'm ready to change it. And that's particularly when, it's, it's really about getting to understand how they understand something, because I'll never know the field better than them when age comes to an advantage, definitely speaking to younger founders, or oftentimes when it comes to consumer propositions, because I sort of get what's hot. And the way that I'll look at something, I was looking at one company that was doing sort of live trading for Pokemon cards. Which is something that our partners are like, I don't really get this. And I'm like, oh no, I collected them. Like I had a full book of them and I still see that it's really hot, you know, like my, my younger brother and all of his friends still actually play Pokemon go. And so it, it's rather sort of having a pulse on what the new generation or the younger generations, are into.

Tamas 6:27

Yeah. I was listening to a podcast with Andreen Horowitz on the knowledge project. And, he was saying, he gets worried about his colleagues when they fill up with new technology. When they start saying, ah, I don't get this. You know, new wave of stuff, like why did we need a, a TikTok, like wasn't Facebook enough? Cause then their investment skills kind of perish together with that. I

Maddie 6:49

love that. I always joke cuz nobody can ever find the unmute button or the share my screen button on zoom. and we, I have a pretty young team, I would say they're all pretty like plugged in. But sometimes when we're in particularly Kohl's with founders, like tech founders, right. And then, you know, our, our partner's like, how do we share. Screen. I'm like such a tech investor, you know, and we have a good laugh. We have a good laugh internally, but it is it's. I mean, I have this weird thing, I would say, consistent internal conflict in, I want less tech in my life. And there are some things where I really feel, I don't want it to be touched by technology. Like I'm super interested in sex tech. Right. But then I'm also super skeptical on the technological sphere. Really taking over the. Sphere. And so things, for example, like TikTok, right. I downloaded it so many times and deleted it because it's so good. Like the algorithm just is just me. but then I keep deleting it cuz I'm like, I have better things to do. But then the other part of me says, This is sort of your job though, to understand what is the new technology, what are the new trends? What are people talking about? It's how do I, how do I work in the field of technology and stay in what's happening and what's hot and, and how it's evolving so rapidly while also making space for, you know, an analog self, that is not really touched at all, all angles by, by, by.

Tamas 8:10

I'm just gonna jump in with a quick question. have you had an investment recently? That was more on the analog side?

Maddie 8:17

probably not. I don't really know what that would entail. Software investment on the analog side. I'm curious what that looks like to you because I don't know how to envision it.

Tamas 8:28

I mean if we put the software lens on it, then it's very difficult to. To imagine that, so, no, maybe like a hardware without the software part, but peak doesn't invest in those but that's already interesting that Peak's focus is purely on the software side of things. Yeah.

Maddie 8:42

Software and marketplaces. so maybe marketplaces, there's a little bit more sort of relationship with analog things. Cause oftentimes, I mean, you can have digital marketplaces, which we do, or we have digital marketplaces, for example, creative fabricates, one of our portfolio companies and they're a marketplace for digital. But they've digital assets for the crafting community. But, so for example, if you wanna do like a knitting pattern and you wanna look for a kniting pattern, they would have sort of the digital knitting pattern that you could print out or crochet. So it's a digital asset that is sort of used in the real world, but they also have things like vector graphics and, and digital graphics, or we invested in a one company called United wardrobe that recently was acquired by vintage. And they were a peer to peer clothing platform. So in that sense, it is sort of a digital infrastructure, or marketplace as, as it's literally called, for the movement of physical books. But it's often just taking what would be, what would happen physically. So in a vintage store or at a secondhand market and. Making sort of the digital around it. So in everything I do, it is about bringing it into sort of the technological

Tamas 9:47

field. I think those was very, very good examples though. Yeah.

Spela 9:50

I think that's the closest you can get in software to analog.

Maddie 9:53

Yeah, I think so too. We might have some things that are like hardware that comes with software. So for example, smart scales would be a really great example of that. So it's a scale that you stand on. but then it has an app on your phone where you can then track things like your, your weight or your. BMI and things like that. And so you, you buy the actual hardware and the software is free in that case, most of them, but then there's a lot more sort of hardware enabled software wherein the hardware is sort of your, your lock in, but then the revenue is on the subscription to the software to keep the hardware working. Um, but we don't ultimately touch that. Mm-hmm

Spela 10:29

shall we dive into our first topic? Our big current macroeconomic situation? There's one big question. Very important for you to answer it correctly. Maddy what is going on in your opinion? Um, so much money has been raised, but it seems that less and less is getting deployed. What, what is your observation? What are, what are your thoughts? Hmm.

Maddie 10:55

I wake up every day and I'm like, what is going on? I ask myself that often, I would say it's it's. I always feel weird talking about the current macroeconomic situation as a 25 year old investor, because of course I haven't invested through crises before. Whereas my fund that's been around for 15 years has. Through multiple crises. So I hear a lot from sort of the experience of the older partners in the fund and how this looks like, or doesn't look like, for example, 2008, we were four years old when 2008 happened, for example, but also, I stand on the fact that I do have a degree in economics and did, did also study macro economics. I would say what's going on as market correction the last two years, weren't normal. And the sort of term new normal I have in the four years, almost five years. Now that I've been adventure, I've heard the term new normal every year, because just the pace of difference and change, that we see is crazy. But the past two years since COVID has happened, if you really look at what has happened in the capital. In the amount of capital deployed and also the valuations and the speed of which that capital is deployed. It's it was unheard of, particularly when you sort of take a step back and you look at what does it look like at a five year span or even a 10 year span? There's actually some great supporting graphs. Maybe you can, you can link to them in the notes. I can send you them and it'll be sort of like, here's the sort of pace of capital deployed and it spike. And it crazy. I mean I don't even know the rate in 20 and 20 and 2021 race is an ultimate high and now it's, I mean, it's crashed from that high it's crashed, immensely, but if you were to sort of really draw the trend line through it in the five year, 10 year period where we are now, it's sort of where you would estimate based on sort of the years prior, we would be without those years of outlier. So I think what's happening is yeah ultimately market correction and what we saw in the past two years, isn't what should have happened. And I think that we will see VC start to deploy more, because there is still a lot of dry powder around, but what I think, what you need to understand about the venture capital business model is ultimately we are not judged based on one or two or three investments were judged based on sort of the, the returns of the full portfolio, which often is. Driven by one company that outperforms, you know, 10 or 50 X, all the others. But if you're making those investments over a period of, let's say four to five years, which is the usual venture venture structure. And you deployed most of your capital in the past two years, because you felt that you needed to because everybody was investing quick because you were able to rate these write ups and valuation very quickly. Then the PCs that did that are now sitting there thinking. You know, excuse my French, but oh shit. And we won't be getting essentially return on this investment because we paid too much for companies that aren't worth it. And now the later stage investors or the capital markets are not gonna be able to pay what we need in order to have made that return to our investors. It feels sometimes a little bit like a pyramid scheme. You're always dependent on the next investor or the, you know, the capital markets in terms of the stock market to continuously. Write it up, write it up, write it up. But when you also look at, getting a little bit radical here, but when you also look at just the model of, of macroeconomics global economics, it's also always based on growth, right? We measure the wellbeing of countries based on how much the company has expanded. So you always need this movement of, of expansion. And when it comes to the VC space, expansion happens. Oftentimes linearly because you have early stage, late stage, and then, then public markets. And when you know the public markets and the late stage investors are crashing and the early stage investors, there's no one to sort of take the Baton and run it further.

Tamas 14:30

I'm wondering how peak behaved through the last two years.

Maddie 14:33

Hm, that's a good question we like to say we're an Amsterdam based fund, not a Dutch fund because we have an office at Stockholm and in Berlin, and we wanna treat those all equally and we wanna expand and see really Europe as our home. But I do think there's value in going back to those Dutch roots when it comes to discussing our strategy. Oftentimes our strategy through, through the past two years, Which is a strategy that we've actually tried to change and we have at some level changed it, but, that touchness really means, you know, think about the jokes. People always make about Dutch people, you know, there's a brain of truth in all those stereotypes. a little bit more conservative, a little bit more frugal. There's that saying to go Dutch is to split a bill. And that's something that has been very much part of the strategy within the partners, not in frugal or conservatism, but rather things need to make. Always, which to be honest is not a crazy idea. Things should always make sense when you're, when you're moving millions of euros around, but really an attention to things like sustainable unit economics, like a path to monetization doesn't mean you have to be monetizing. We can invest in pre-revenue companies or companies that wanna do a freemium model. In order to build value and then figure out how to price that later on. But we would need to see sort of path and strategic thinking towards monetization. We would need to see burn. That makes sense contribution margins that are sustainable. Right? So it's all those things that I think particularly when you look at the American example, it's hard to see, but you just kind of feel they throw money at everything. And my fund and the people I work with, we've never been at that level of just balls to the walls investment so in the sense, I think we're, we're actually doing pretty. Okay.

Spela 16:07

That's very interesting to hear, because we definitely saw a lot of competition for some startups that now end up being worth less than what was invested into them. So that's a, I can imagine a very stressful situation for VCs. But also for the founders. So when it comes to the founders, I'm guessing they're turning to you for some advice on what to do right now. Maybe if they got a very high valuation and now they see that they need to raise soon, probably at a down round. Is there something that you're advising them if they were part of this high valuation era? Um, that's a good question.

Tamas 16:44

Yes, we've got good questions.

Maddie 16:45

I think, I think Tama, I think we also had a similar discussion. Uh you have good questions. I think we also had a similar discussion about what is the right amount to raise? I think, it's very difficult for a founder to really know what to raise, particularly when all you see are those tech crunch headlines. Right. And, and you see, okay, this person raised. X amount and the tens of millions or hundreds of millions what's different, from me or why can't I get that? And it's also a weird position as an investor to say, Hey, listen, don't raise that much money because when money is cheap, at some level, you wanna raise a lot of it, right? Because then you got a lot to play with, and you're not very heavily diluted as a founder. So it's this weird, I guess, catch 22 in. You don't wanna raise too much because you could end up in the situation that's happening now. But the flip side of the matter is, but you could also, raise money that could make or break your company, at the cheapest price. And what I'm seeing now is indeed there are a lot of founders coming to us, who we have actually previously rejected based on listen. I just don't think what you're, what you're raising is, is reasonable or some founders who have indeed raised a lot and are now raising down rounds and need new investors on board. I've gotten a few of those saying, Hey, I really like the conversation. We're actually raising this, which is, you know, less than. The total amount that they raised prior. The advice we would have, for founders who are now seeking to raise money or raising down rounds is, I mean, raise it right now. you need money in the bank and you need to be very cost efficient. So when you are raising that, think about what got you there in the first. So if it's raising a lot and spending a lot without sort of clear and measurable effects, be that revenue growth or, you know, market growth at some level, then you can't just raise more money at a lower evaluation and keep doing the thing that you're doing and, and sort of staying alive. So if you are gonna come back to us with a business plan, make sure it is with a different business plan. So cutting cost, focusing your priorities, showing really how far it can get you. I love the metaphor of the car, right? So you have a car and I mean, let's take a non nonelectric car. We investors we're the gasoline. In the car and what we really need to see is for how much gasoline, how sort of energy efficient, is your car, and how far are you gonna be able to get with that gasoline in the tank? And if there are leaks, or if you are, let's say a really old American, uh, Ford pickup, that's not gonna get you very far. And thus, you know, the dependency on more capital and more investors, and whatnot. Um, it doesn't look good, for anybody involved. So if you're gonna be raising less or you are going to be in a situation where you've. Raise too much and have to do a down round, then make sure you really take a step back and look at the full machine. Look at the full car, identify where the leaks are, identify where you can make yourself more efficient and be really open about that towards your current investors and your perspective investors and saying, we understand what happened before and how we're gonna move forwards from that differently. What's the shortest runway way you would be comfortable to have before a fundraising in the current, uh, macro economic situ. Raise money when you don't need money. Right. That's the way you should play it. Um, so don't wait for a three month runway. I would say six months in the bank, I would definitely start going out already. Don't always talk to investors. We're so annoying. We're always knocking at your door. We're always taking up time. We're always asking for information, right? So I'm not saying be perpetually fundraising, but be very smart about it and never wait for when you need money because you never wanna be in between a rock and a hard place and jeopardize your business and your employees and their wellbeing like that.

Spela 20:12

And we were just discussing that they have to come back or it's good that they come back to raise around with a different business plan, with a different cost efficiency approach. And we see many, many headlines. People, the first cost cutting thing you do is you, you let go of people. So that is the main headline right now. But have you seen other budgets getting cut?

Maddie 20:37

Oh, totally. absolutely. I mean, talent is of course, it's gonna be the one on the headlines because, I mean, it affects all of us. Right. And then it's, and it's not just saying we're gonna spend less on marketing. It is people losing their jobs and their ability to pay the bills and provide for their family. And the reason that talent get gets cut first is because it is the biggest spend. And also there's the most protection around that, right? So you're assigning permanent contracts and you have responsibilities and also liabilities to your employees. So it's just the biggest part of the P and L always. And also the most sensitive, and also legally heavy, a lot of companies are spending less on performance marketing also because those platforms are not returning what they used to. And that's a whole nother discussion about mono authorization of a bad space and whatnot, but things like, I mean, come on, I'm sure you were invited to some crazy, crazy, like even seed stage companies, you know, throwing giant parties, or just frivolous spending, going to conferences all the time. Very fancy. Office spaces. Right? So I think it's really overall, people are saying what's what's necessary. And what is often being retained is things like focus on sales, focus on customer support. So revenue retention and revenue upsell, it's always cheaper generally to upsell a customer than to acquire a new one. So focusing, on those core functions that are going to. Meet and make the bottom line. Whereas everything else, is oftentimes being cut. I mean, I know one company that's spent like 30 K on a couch in their office. It's not even that cute of a couch to be honest. Uh, and that's not something that we're gonna be seeing in the next period. Fair enough. It's pretty ugly couch. I mean, let's call a SPTA spade here. You know, I was like, that's a 30 K couch. Like my cat would eat that up, you know.

Tamas 22:14

Fair. I wanted to ask you a little bit about, there's always a lot of chat in a downturn on the. Market segments that survive better. There are some that even thrive. Do you have, any kind of analysis on this now that you're investing through it? Do you expect one sector to outperform others?

Maddie 22:33

It's very hard to say. And I would also say you can't necessarily time the market and I'm definitely quoting Warren buffet there and that's the only time I've ever quoted him. You can't time the market, but also, we are not investing necessarily in the market now, like particularly as a pre preceded seed investor, we're investing in a market in. Maybe three to five, or even 10 years time to really mature and grow into that venture evaluation. And that's not something I think all BCS necessarily know, or maybe it's something that I feel is kind of, one of the biggest misunderstandings also between my peers. Sometimes you think about how big is the market like. Right now. And I think a lot of investors will open up a call and say, what's the Tam or something like this, and it's irrelevant discussion. Um, but if you really look at the time to make value and you know, when companies have reached their peak value, it's actually beyond 10 years time. So necessarily you have to ask, you know, what can we achieve in the next few years? Because going back to that pyramid scheme I talked about earlier, We early stage investors also require later stage investors to jump on board. If you're not able to find yourself with your own revenue, which is unlikely. So we do need a runway that is not in in five years time before you start making any, any revenue or, or any growth signs, but we're not investing right now in the markets of right now necessarily, uh, as a precede. In terms of what has been hit most by the downturn and where you should focus, or if there's some sectors that perform better than others what's gonna receive funding right now, given the fact that we need that timeline in order to make a return and that dependency on later stage investors, there's a little bit less appetite for things that, for example, don't monetize. At the moment for consumer propositions, you know, generally it's very difficult, to find money there. There's also a great idiom. The question being, are you a vitamin or a pain killer? And what I loved recently actually was the founder of Saster said, let's be real here. We're all vitamins. The world doesn't really need another CRM system because CRM systems are oftentimes like the picture of a pain killer, right. Because they're so deeply ingrained in a company. I loved that. I'm gonna steal that from him and then, and say it often, but it is still, I think, a useful sort of framework to understand what is a need to have. And a nice to have understanding that need will never be need, like, you know, air and water, but those sort of need to have some things like payrolling or sort of like really, really, really, really core HR infrastructure. Um, I could also maybe look a little bit into things like business automation. So if you have to fire a lot of people, but keep your business running, how can you do so in a more efficient manner? So those really sort of inner sticky infrastructure sort of opportunities, I would say, perform the best.

Spela 25:09

And if we go a little bit more broader outside of this macroeconomic situation, When you are faced with an opportunity, how do you usually evaluate how good of an investment, uh, that is? How do you approach a person, a company? Mm-hmm

Maddie 25:27

I mean, it's actually interesting, right? Cause I think Toma has been in that seat for us. All investors say the team let's be really hear, they all say the team. I think I can stand on two feet when I say my team or the people that I work with really. Really focus on it. We have sometimes sort of quote, unquote investment committee. We don't have an investment committee, but we have sort of our final investment meetings, um, with all the partners on board. And sometimes we don't even talk about the product of the market and that's sometimes not. Necessarily good, because you can learn a lot about the people through how they speak about the product. Now they speak about how they see the market, but we really would focus on the, the individuals and how the individuals work together. So how would you describe, you know, your co-founder, if your co-founder fired you. Why would that be? Who's the good cop. Who's the, who's the bad cop, you know, I always joke. We wanna know what you age for breakfast. Sometimes I even ask it you know, I think, uh, there's a great movie. Uh, I forget which movie, cuz I'm really bad movie references, but there's one movie, all about sort of how someone likes their eggs. And it's the most important question to ask anybody that you're dating cuz how someone likes their eggs, says a lot about them. And I like to always sort of jokingly say that to myself. Like I wonder how they like their eggs. So I think a strong focus on. On interpersonal dynamics on also just the individuals in and of themselves. And that needs to be 100% and the instances where we have invested or where we have not invested, and that wasn't 100%, it might take a long time for it to show itself, but it almost always sort of proves true and, and reinforces the importance of that. Cause it could be all smooth sailing for the first few years, but. Maybe when, you know, you raise a series B at a down round, that's when those cracks start to really show and people start to show their cards. Um, or even when it comes to, for example, the moment of the exit that's oftentimes when the biggest founder arguments are, he wouldn't think so. Right. Because he sort of made it to the finish line, but right. When you have to start putting millions in a different people's pockets, um, it can turn bad, very. very quickly. So I think a 100% focus, on the individuals and how the individuals work.

Tamas 27:32

Um, as a whole, I don't wanna put on, the hit song from last summer, cuz you talked about your Twitter handle quite a lot, but uh, but it is a, you know, it is a mission statement or it's a branding piece probably. What do you mean by making rich man richer? How do you experience it on a daily basis? I mean,

Maddie 27:52

everything by making Richmond richer and I say it, and I say it really sort of critically, um. And I think it was one sort of article headline. And I really didn't like the way that it. Was presented. So sensationally in this sort of way of like, oh 7, 24 year old is just kind of like talking, talking shit. I mean, it as like a serious humorous, but like a very serious criticism of the industry. I mean, our job is we take money from, from in the us. It's a little bit different because they'll have pension funds in university endowments, but in Europe, the face of capital is a bit different. Like we take money from, from rich people, which are oftentimes either rich men or companies that are represented by rich men. And let's also be real hill rich, white men, often in suits and the people that control that capital. I mean, you know, BC and, and the investor sort of community, it's one of the most underrepresented in the world. I think there's only like 6% of partners of funds are, are women. And I don't even wanna go even more nuanced. Right. In terms of race in terms of sexual identity in terms of disability. But if you just look at, for example, The gender gap. It's the people that control the money are the men. the people that, that put where the money goes are the men. And then the people who receive the money are the men. And, uh, and it, it is literally you take money from the rich people. You give it to the slightly more rich people that hope to get richer into the probably least rich people who are probably maybe get the richest if they're successful. And then money goes back in everyone's pocket and it is. The raw example of the function of capitalism, right. Which is, putting capital in motion, such that it, it grows and ACU.

Tamas 29:26

What's your rough roadmap to change this?

Maddie 29:28

Yeah, that's a good one. Um, lot of good ones, lot of good ones. There's a lot of ways we can change it. And I wanna be an optimist at the industry. I'm a little bit more of a break things up and, and, you know, recreate an entirely new economic structure. which I don't know if, 10:00 AM on a Tuesday is the right time to get into that new vision of a financial and economic structure. But the first thing. We need to put money in women's hands or in minority hands. And that means we can talk about maybe the source of capital later in terms of the LPs. Cause that's very important, but right now, I mean, people see the world differently and being an investor, it's all about investing in what can maybe change the world or what can really solve a problem. And the problems that I have as a, as a. Are not understood by the men on my team. And that's not something that they would be able to see and make a good investment in because it's too far from their sphere of, of understanding or the way in which I would interact with. Let's say a minority or a female founder is also different. And, you know, let's say old guys and suits that work in Frankfurt, their whole life. So hire women to be investors. And if you can't hire them at a senior level, then make sure every single junior hire you have is a minority, or is someone who has been excluded from, you know, the capital markets and teach them the ropes of the industry. And honestly just start giving money to women who are building companies or to minority founders. We talk a lot about why there is the gap or where the pipeline is and it a talking is, is not doing anything. I think we need to straight up just start giving people the opportunity, and seeing what happens from that and way beyond that, we need to ultimately democratize the people who are able to participate in venture capital, giving money to those venture capitals. We probably also have to change the business model of venture capital itself. you know, we invest actively for five years and then we divest for five years. So the life cycle of a fund is 10 years often. And I don't know any big problems that can be solved in five years. and I know very few that can be solved in 10. If we wanna get serious about tackling things, like, for example, climate. Or name any other huge pressing burning problem in the world is not gonna be solved in five to 10 years. So there's this sort of disincentive, or I guess you could say venture capital is actually not able to invest in where I think money needs to go in innovation needs to happen because, we cannot conceive of a way or a timeframe wherein we can find that money to give it back to those rich men or those rich institutions. I don't know if this is something you've also thought about or, or how you think about this?

Spela 32:08

I think varies similarly, um, because it trickles down into the startup world. So we were both startup startup employees, and there's always this feeling of being chased. So you're always running towards something and it's not necessarily the company's goal, but it's someone else's goal so that something else grows. And this is where it gets very difficult for. founders to balance the two things, the company and the expectations. And one of the effects, if I may jump a little bit ahead, that we see is also right now. So we see the intense push from the perhaps VCs, or maybe something else as an investor to really grow your company, to grow aggressively, to spend a lot of money, to not be afraid of spending money. And then when something like this comes all of a sudden it's completely flipped. It's now you have to be cost efficient. Now, now it's your fault that you're losing money. So cut all the people you hired and deal with the consequences and still make me money. What is your relationship with that? How do you see this constant push for growth? And your relationship with founders when it comes to it?

Maddie 33:24

It's difficult. It sort of goes back into, as I mentioned, it goes back even to the feeling that I have a lot of, I think I have a lot of cognitive dissonance in my life. For example, I'm a tech investor, but I don't want. To be on my phone, for more than an hour, a day, right. Or I'm a tech investor and I had to digitize everything, but there's some spaces that I'm super skeptical about, you know, the impact of digitization or, or how that shapes our values or our, interpersonal relationships and everything. And it's goes similarly towards being an investor and knowing that my job and my business model requires. That growth. Whereas I, at a personal level and also at a sociopolitical level, believe that the idea that growth is the, the golden lining, or the gross time metric. And everything depends on that. And it does, you know, it is a house of cards and if you don't have that growth, it will all fall. I'm super skeptical about that. and I don't wanna see that realize, and I also don't wanna necessarily perpetuate that. However, it is a founder's decision, right. To raise venture capital. And to start a company that is on a venture capital growth phase, a VC growth phase, which is a term that I use often, right? Is this a quote unquote VC case? And I oftentimes will be very open even before, you know, we've made the investment and we have to sort of say, Hey, listen, we need to think about growth here. I'll also be open in saying like, is this a path you wanna go down? Have you considered other types of investors because there are other sources of capital and there are other are other business models that don't require quote, unquote, a deal with a devil. And I wanna be, if you ever use that quote, please note that I mean that in a way that is once again, sort of. Critical, maybe a little bit sensationalist, but it is, it is sort of a critical commentary on what it is to raise from VCs. If you raise from a venture capitalist, you are accepting essentially a time with which you will sell your company. When you raise from VCs, you, you essentially promise within a five or 10 year period. And of course, some funds are doing a little bit more multistage or even investing in the IPO markets, but that's such a small portion when you raise from a VC, you're stepping up to, we think we can be a billion Euro company. And you step up to the idea that you'll have to sell your company either for, an acquisition or maybe an IPO, ideally. And in order to reach that valuation or to reach that moment of liquidity, where you can make those Richmond richer in the end, they need to have a certain revenue size, a certain timeframe, and that all means a certain growth playbook, which requires aggressive growth.

Spela 36:00

I think what you just said is so important and it, I hope it doesn't get lost, but you are entering an agreement. You entered an arena. We all know the rules and VC is also a job. It's not something you came up with and now you're living out your wildest dreams. it's a job. And also for a founder, it's a job. So we, we are in agreement and I think that's probably the healthiest way of looking. Distance with the devil, if we wanna

Maddie 36:27

go that way. Yeah. And it it's an agreement that people will sort of sugarcoat, right? Mm-hmm, they'll sort of say it's a, it's a, it's a marriage, which is also, I think, a very, very, important metaphor because in some ways you do have to look at these people and speak to these people on other side of the table for, for years to come often. But, it is an arrangement and it's hard sometimes to understand what that arrangement means, because people will try to sugar coat it and say, we're sort of partners, or we're like a late co-founder or we're, you know, we're like husband and wife or wife and wife or husband and husband or whatever. And the reality of the matter is, I mean, you're tied to each other, based on a contract And the ultimate owners of that contract are of course the founder and the investor, but behind the investor is the LP. So the decision fact, we make, we have a boss that we have sort of promised what we're, what we're returning to, and that's the pressure that we're facing. And as much as we can say, you know, I'm on your board and we're being speaking eye to eye, and I don't wanna erase the importance and the realness. That is the human relationship between the founder and the investor that that can be. And where I think the strongest partnerships lie, but it's not just often the person you're looking in the eyes of, unless maybe they're an angel investor. If you're raising from a VC, there's someone bigger standing behind them in the us that might be pension funds that might be university endowments. That might be, really rich people and Europe it's often times corporations, family offices, founders, etcetera,

Tamas 37:51

through the last couple of minutes, I found myself kind of thinking about. What as their VCs could do that is a short term campaign against your interests, but would kind of secure a mid to long-term benefit. And one of these things that came to my mind was moving away from celebrating. Amounts raised. We see this in, whenever I have some spare time, we consult the team in water polo, with data analytics and, we struggled really to move away, in the player's minds from identifying their self worth in the pool with how many goals they. Because there's so much more to a player's performance. And I feel here amount raised is a similar metric, this like one thing that gets into sifted and everywhere else, but it really deteriorates your quality as well. So do you think that there could be something to be done to move away from this and really to emphasize that there are other routes than the VC route?

Maddie 38:49

This is sort of like two separate questions. The first question was rather how can we reframe. Elements of success in the venture space around from just for example, I'm out raised because that is such a misleading metric and oftentimes not really what matters. And then the other question was, could we promote, or could VCs be more perhaps explicit or all of us be more understanding that there are other sources of capital and that venture capital entails, certain expectations and requirements on the business model and founder. I

Tamas 39:23

think that's correct. Yeah. Which one would you wanna dive into? I think

Maddie 39:26

the first one, because the second one, I mean, just, just Google it no, I'm also, I'm also gonna be writing a little bit more on that, but I would say on the first end, it's similar to a lot of just the macroeconomic theory we're hearing now. Right? So we now measure countries size and success based on total GDP and total GDP growth, and maybe you get a little bit more nuanced in GDP per cap. For example, or you would get even more nuanced by saying something like green GDP, right? That's a new metric in order to sort of bring a level of sustainability in the discussion on country performance or macroeconomic performance. And there's been a lot of research done. And then how can we go deeper and understand like the true sort of quote unquote. Or performance of a country. It's weird to say performance of a country. That's my VC talk, going into my global macro economics talk, but things like, what is the average, basket of good size? How is wealth distributed? What is people's age, longevity, lifespan, what is the, whatever, how safe is it for, for women? What is the equal rights between. People of different, orientations at a city level, you could even measure that in terms of how accessible is it for people with disabilities. And I think that we need to. Use a little bit of that same thinking for the company space. So if you look, you know, what is more to a country than just a GDP or it's GDP per capita and it's GDP growth, it's what is, what else is there that we can celebrate or what is more telling towards a company and, and a company success than just their full on revenue or they're full on amount raised or their year on year growth. and already things like revenue and year on year growth are not necessarily shared in those big tech crunch or sifted article. And that would be, I think just the first wave. So beyond just, this is the amount raised I would wanna know. Okay. But on what basis is that raised? So what, what is their revenue for example, or if that's too, sensitive to share, then what are the actual contributing factors that were considered in justifying the evaluation, but then when it comes to reporting on company performance, I would wanna know things like, their employee wellness, their employee, turnover. Maybe their customer NPS score, even though I think NPS can be a little bit bullshit, sometimes things like net revenue retention or churn, right? So just everything that we would wanna understand at the, on the founded level and also a good investor level, the metrics that matter, we should start also being open in reporting those, Which is, I understand there's some risk, competition risk to be said, but I mean, raising a hundred million tells me nothing but saying that all your employees stay for more than four years and that all your customers, are retained and actually expand their contracts with you 140%, every year that gives me some idea, okay, this is a great place to work. They're able to hire and retain great talent. And they're also able to acquire customers and build something that they really love. And that to me would maybe justify a hundred million valuation if those other pieces also came, came into line. So really just saying, maybe what's the first question you asked, not who did you raise from or what did you raise, but rather what's your relo intention and those very, very small changes I think can snowball into, into bigger ones and more nuanced conversations and presentations of company perform. What do you guys think?

Spela 42:41

I think that's a very fair point, I am looking at it mostly from the startup perspective because it resonates very heavily because I was head of CX at a startup. So NPS being bullshit and so on, I can relate to that. We just saw a shift and it's not the new revenue that came in, but how much of it were you able to retain? So now the biggest metric became N. And I think in that case extrapolating it to a country, I think a very good sense check would be how many young people leave as the, that the brain, um, leaving, you know, we call it is a big problem. Brain, brain drain. Exactly how many people end up staying or returning. I think that would be a massive step forward in country. Uh, measurements.

Tamas 43:27

Another metric you could consider here is, and that kind of brings us onto one of the recurring topics of the podcast is kind of the equivalent of a Ginny index. So the distribution of, of what's the lowest and highest salary and maybe the lowest and highest equity, grant and. Then maybe I can ask you a little bit about equity. What is your relationship with equity? How do you advise founders and equity? Tell us a bit more here. What is

Maddie 43:53

my relationship with equity? And then give me some Um, no, I mean, I, I really appreciated speaking with, with youas, um, about sort of conversations on compensation, right? Because for me. I also actually forgot to mention this. When you asked earlier about what are the changes we can make now, in order to maybe shift away from this sort of Richmond richer structure, and it's often, you know, pay your employees well, and Europe is definitely way behind the us in. In that sense, but I think it's also just cuz the us is more competitive at the talent level, but, if you go to Silicon valley, a lot of tech companies like the secretary or the janitors should also participate in the for example, and I'm 100% for that. And I would love to see a really radical distribution of equity in the employees, hands at all levels. And also a lot of transparency in that process. And ability to, education and ability to also exercise those because it's, it is difficult. I don't think people understand the implications and the amount of people who are able to actually benefit from them. I'm sure you, you two know more than I do, is very low. Or the ones that benefit from them also incur consequences that they weren't familiar with. but I think that, you know, a good investor, reflecting on, on my role here, a good investor should always dictate. Dictate is a horrible word. A good investor should always push for a very large ESOP. And also when we are investing, I mean, we like to see things like organization. And, who will, you know, who will receive part of the ESOP, but it should be

Tamas 45:20

everyone. I don't wanna corner you into, anything here, but, can you put a number on that? I know it depends on the hiring roadmap and all, but, would you say that an average optimal seed round ESOP pool is X percent? Mm-hmm

Maddie 45:33

20%.

Spela 45:34

Okay, amazing. let's stop it right here. Let's

Maddie 45:37

stop it. That's it. What do you, what do you feel it is? Or what do you see that it

Spela 45:42

is? Ooh, do we wanna get into that? so, for reference, I lead an equity module where I help companies and startups set up these, employee schemes for, clients. and also I've seen probably hundreds of cap tables with their employee pool distributions when I was still at ledge. It is surprisingly low. It is so low that I do not know how they distribute equity in a way that is in any way meaningful to their employees. So, you know, starting at 3%, I have never seen it go above 20%. Um, it's whoa, it's even hard to, to talk about it, but when you say 20% at seed to me, I resonate with that because those are the people, that are gonna. Make up the entire company. I

Tamas 46:32

think that was probably one of our first motivations for the podcast as well is to encourage people, to ask for more equity, to be, to be perfectly blunt. I also think that that if that sets in motion, that would correct. Founder motivations a little bit, because now if you really wanna be effective at climbing the social ladder, like you need to become a founder mm-hmm or on the other side, you need to get into a position that you get Carrie, from a VC. and if we reframed that a little bit and the distribution was a bit more. Socialist, then then, then you wouldn't have to do that. And you could be employee number 50 and still benefit greatly from an exit mm-hmm

Maddie 47:12

mm-hmm I mean, listen, my brother is a Marxist philosopher so you can imagine, our dinner time conversations. Right? My older brother is a Marxist philosopher. My younger brother is a. Latin drummer. so it's a, you know, it's like the, the Marxist, the venture capitalist, the drummer walk into a bar, right? That's sort of the, the joke I like to think about, but these sort of conversations are, are something I have on the, on the daily with people who are unfamiliar with venture. And I think also my perspective on compensation equity is much more radical as a result of, of also my background. Right? Studying more, more in the realm of political science and, and philosophy in a very socialist nation. Um, You know, the sort of family that I was brought up with and. And the conversations that I have, people are very shocked and they think it's very radical. But for me, I just think it's a matter of principle and, what I hate the most or what I find the most sort of alarming is oftentimes in conversations with I don't like to use the word hate, but what I find very alarming and very problematic is sometimes I speak to founders about their ESOP or about, you know, their compensation of their employees. Let's focus on equity. And there's some instances, few where like the CTO would have no, no equity and a lot of CTOs that I, that I, that I see in teams, let's be real here. They're often they're often men. And so a lot of the CTOs that I see in, I would say Germany, Northern Europe, a lot of'em come from more like Eastern Europe or, or Russian, or maybe even sort of in the, in the Asian continent. And I'll be like, where is there? Tie in with ESOP and then they'll say something like, oh, he, he doesn't actually really care or, you know, he doesn't, doesn't really matter to him. and I'm like, what? Like, that's, I mean, that's probably a matter of education, you know, or you're maybe raised thinking you should optimize on, on salary. oftentimes with, or for example, with female employees, right. They don't know how to ask or they're not familiar with it or they didn't study finance, like every guy I know. And so it's, it's not a matter of, they didn't ask for it. It's a matter of fair principles. and the same thing can go down to salary discussions, right? You maybe, you know, if you don't ask for a raise, you're not gonna get one, but I do believe that we shouldn't be putting the onus on, on the individual employees to, to fight for fair worth and fair compensation. at all, that should be, a shared, um, ambition and

Tamas 49:23

reality. I think there is no better point than that to move onto the rapid fires.

Spela 49:27

Okay. So these are always the same. These are rapid fire questions and, here goes the first one. If you could pick, would you work for an early stage growth stage or late stage startup

Maddie 49:39

early day one?

Tamas 49:40

I'm not even gonna ask why, because it just ties in with your profile so well that I think we all understand next one. remote hybrid or on

Maddie 49:49

site hybrid. I love people, but I also love beaches.

Spela 49:54

So your hybrid means you would not do two days in office three days outside, but more like three months. In Thailand.

Maddie 50:03

Yeah, I believe a little bit more in, in chunks of time, rather than a few days or a few days. because that's still inflexible. and time well spent is well spent, you know, fully together or fully apart and trying to do like a 2, 1, 2, 1 it's just for me, I don't think it's

Spela 50:19

effective. If you could pick your next team building team offsite, however you call it, what would you

Maddie 50:24

do? We are actually going to, cross country ski in Norway. That was just announced. That's not a beach. yeah, that's not a beach, not a beach. Uh, but we have a Nordic team. And we haven't been up there. It's difficult because we have some portfolio founders and the team really wanted to go to Mexico. And the CEO is like, no, we're a team of 200 people. We're not flying to Mexico. Like, think about the, the environmental footprint there. So I would definitely wanna minimize, air travel. also at a personal level, I would say. I would say I would take my team to a farm for a while, like at least two weeks and experience everything from like being in the fields and picking and harvesting to actually cooking and cleaning and the, the full process of it. And maybe that's awesome. My Marxist fruits coming out.

Tamas 51:08

amazing. Yeah. Great. We would really love to come actually. All right. Last one. Next big thing in startups is. What

Maddie 51:20

the next big thing in startups is? I would say women

Tamas 51:25

mm-hmm I, I thought you were gonna say Marxist deck

Maddie 51:28

no

Tamas 51:29

which way? No, no, no. I mean, it's similar, right?

Maddie 51:32

Yeah. I mean, we can totally go into a one through rabbit hole right now. I would say women, I would say building by women. Uh, and I would say for women, and I also wanna say there's a lot more, right. In terms of, you know, women of color, women of rotations, women of disabilities. Like I, I never like to just keep it at the, the, at the high level, in terms of talking about diversity, but I would say, I would say women's issues, women in power, women with money, women building, really, really excited for.

Tamas 51:58

I really love to hear that. And maybe next time we have you on. I really love to ask for advice on how us men can behave in that, in that setup. When I learned that I'm gonna have a son, I got super stressed because I had like all these great plans of how I'm gonna educate like a very powerful lady. and then I was like, wow, it's a son. I will now have to teach him like a lot of humility and how to support, what is his role in this changing, environment. and I think that's that conversation we could have sometime.

Maddie 52:25

Mm. Yeah, I think it just boils down actually really quickly to, to mutual respect and inclusion. So, you know, give everybody a seat at the table and everybody time to, to. And I don't ever like the idea that you need to make yourself necessarily smaller though. I do believe there is some element of that going on, but it's not that men shouldn't speak. Right. We need. Then as part of the discussion, you know, I asked my, my colleagues, yesterday I was like, what do we think about, you know, real versus wait in the Supreme court, cuz I'm half American. And a lot of them are like, I don't know if I could speak on this issue. I was like, what do you mean you can't speak on this issue? You know, you have a son of a mother you have a wife, you have a daughter. these are, these are humans issues. and uh, you're ultimately just giving other, other humans a.

Tamas 53:13

Beautiful. Beautiful. Thank you so much for your time, Maddy. It really has been a pleasure.

Maddie 53:17

Cool. Thank you very much for, for the time. And, really curious also to listen a little bit more on what you've done and, and digging also more on both of your perspectives on compensation, because I would say I'm waving the flag a little bit alone sometimes, so good to know there's other people there.

Spela 53:32

Oh, yeah. Heavily opinionated on this side. So yeah,

Maddie 53:36

I love, I love heavy opinions. Cool. Then now looking forward to it, have a good one. Thanks Maddie.

Tamas 53:42

Thanks. Take care. Bye.