UP464 Other People's Money: How to pitch to a VC

Other People's Money is our regular series on sports investment, with co-host Matt Rogan, co-founder of Two Circles.

Our guest today is Gabbie Swycher, Principal at Redrice Ventures, a venture capital firm that provides capital, advice and connections to early stage businesses including several in the sports sector, most notably they were an early backer of Castore. 

They describe themselves as ‘a high conviction, anti-hype investor, seeking companies with a sustainable differentiation. We initially invest at seed stage, with the ability to support founders through the entire entrepreneurial journey’.

So, if you have a great idea that needs funding, this is for you. 

Unofficial Partner is the leading podcast for the business of sport. A mix of entertaining and thought provoking conversations with a who's who of the global industry.
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Transcript

0:00

Hello, it's Richard Gillis here, and you are listening to Unofficial Partner, the Sports Business Podcast. Today, it's an episode of Other People's Money, which is a series on the sports investment market with our co-host Matt Rogan, formerly co-founder of Two Circles. Our guest is Gabby Switcher of Red Rice Ventures. Red Rice is a venture capital firm that provides capital advice and connections to early stage businesses, including several in the sports sector. Most notably, they were an early backer of castor the, uh, clothing and apparel brand. They describe themselves as a high conviction, anti hype investor seeking companies with a sustainable differentiation. So we talk about what do you need to get in the door if you've got a bright idea and need money to make it happen. if you're listening to this, you'll also like the Unofficial Partner Substack newsletter, which goes out to subscribers every Thursday. If you want to join them, sign up either via unofficialpartner. com or go to Substack and search for Unofficial Partner.

Richard: 1:08

Let's start with you, Gabby, because I think there's it's useful just to frame this bit of the conversation as on other people's money and this series has gone on. We've sort of looked at the investment. Question from lots of different angles, we've got a particular route in today, but I think the best way of sort of describing that is essentially you telling us what you do all day and how your you got to where you are now, and then we can sort of jump into more specific questions. So that is the basic first question is what's the job? What do you do?

Gabrielle Swycher: 1:37

so best way I find to describe it is imagine it's a bit like dragon's den. that's a little what I do all day. so I work with a fund called Red West Ventures and we do early stage investments into purpose driven consumer brands and tech across the UK. Thanks for having me. And early stage means a lot of different things to a lot of different people, but, but we typically invest into businesses that are generating anything from probably anything from kind of nothing, but by doing maybe 1 million up to about 10 million annual revenue. We've that now since 2017, 2018. brand investments. We've got a lot of sports, we've got the likes of Castor, which is premium sportswear, a lot of people listening might know, and some more recent

Richard: 2:22

he's bit Thomas been on the on the podcast. Yeah.

Gabrielle Swycher: 2:26

that's fun. Pure Sports, which is a leading performance supplement and hydration brand, got a very strong community. Hylo, which is the world's most sustainable running shoe, and then sports tech investments like Cooper, which is a personalised run training app, Gojo, which is B2B gamified wellness solution. And lots more outside of kind of sports and health space as well.

Richard: 2:51

So there's loads of questions, but there's a, is there anything that links them? I mean, you mentioned there, I can see sort of they are sport adjacent and they're moved. There's a sort of health and well being Venn diagram there as well. Is there you, is that the type of thing that you're looking at? It's sort of sport plus something else. Obviously Castor is a slightly different case.

Gabrielle Swycher: 3:13

so I think the way that we tend to describe it is, is this kind of the purpose driven element to things and purpose driven can mean a lot of different things. I'd say probably the three key aspects to that that we focus on is something that around the side of improving people's health and wellness people's happiness or kind of the harmony that we have between each other and with the planet.

Richard: 3:34

So before I head over to Matt, there's a there's a question here about when you're in the dragon dragon's den seat, and you're seeing I mean, I'm assuming quite a high volume of people coming in. There's a sort of question about what the hit rate is. How many did you say yes to as a proportion of all of them? then there's a secondary question about it. Are there any patents to the people who say yes to it?

Gabrielle Swycher: 3:56

Yeah, so in terms of hit rates, I mean, we see over the course of this fund, we've seen thousands of companies. There's a lot that come through our door, and we've made 17 investments. So you're guessing investment, You are doing something very, very right. It's, it's no easy task. And there's a kind of, I'm sure we can talk about it more, but there's different layers to what we think about. But first and foremost, investing in the early stage, we're really thinking about team. we think that this team is capable of, capable of growing a business to the size that that we kind of need for the fund returns? But also is that what they want to do? every fund will look at it differently, but for me that alignment with founders is so important because this relationship, relationships with founders last longer than most marriages do, or a lot of marriages do so it's really important that we're all coming together to join this, that same path, that same journey.

Matt: 4:52

There you go. somebody who did it that whole journey with his wife And another man and Gareth who's still running two circles I guess our marriage outlasted our involvement with the business were probably very rare then in that regard Just about anyway, I think I'm in trouble today, but that's an entirely different subject so I guess It's probably important to say that RevRice doesn't only invest in sports ventures, right? So there are other, other walks of life, which also fill those three criteria you mentioned. So I think fashion and, and other areas you sort of invest in as well. When you see, uh, do you have an elevator? So when people come up to see you, do they come up in the elevator like they do in, in Dragon's Den or not? No elevator.

Gabrielle Swycher: 5:34

Not straight into the room, no.

Matt: 5:37

Okay. Okay, fine. What I was going to ask was so the metaphorical lift or the, I guess, uploading a presentation or something for you to look at notice in the, the sports ones that you receive or the sports, sports leisure lifestyle ones that you receive versus any other categories? So they Particularly emotive, particularly strong, particularly weak. You know, what is it about sport that makes you go, okay, well, that's somewhere we want to make eight to 10 investments. So wherever you're at now,

Gabrielle Swycher: 6:04

Yeah, it's a really good question, and I think There is actually something quite unique about the sports investments we see that probably results in us leaning in as much as we do. which is that sports is fundamentally community driven at its core is and always has been about community, friends, family, getting together to watch something that's going to make them excited or angry or some other very strong emotion and sports has really elicited that. And I think that that's something that we're really seeing coming through is that there's been a lot of focus on investing in communities, but in a lot of different categories and spaces, it can often be quite hard to monetize those communities. In sports, that's just not the case.

Matt: 6:46

and I'm guessing given the nature in which we keep communities together is changing a lot of your investments. You know, I don't know the Cooper team a little bit. DTC proposition. So digital is a large part of the things you invest in. Is it?

Gabrielle Swycher: 7:05

Yeah, absolutely. Absolutely. I think that there was a world five years ago, taking us back to the early days of COVID. Where we thought a lot of people thought that digital was going to be the future. It was going to be the only future. Digital is a huge part and most, if not all of our companies are digital first. Uh, but it was a. I think trying to really expand into that, what we call omnichannel approach. So they have a digital presence through their own channels, they have a digital presence through other people's channels, and then some sort of offline presence as well, so they can build that kind of real in person experience with people.

Matt: 7:41

So you're still getting, 10 paddle decks a week as well then?

Gabrielle Swycher: 7:45

Definitely, definitely a paddle, yeah.

Richard: 7:47

I was going to ask you where the hot bits are, you know, you must notice early trends, things that, you know, then paddle being, being a good example of that. is that true? Do you see a rush of either around a particular sport or an idea where things start to cluster? Because quite often when things It's just one of many that's that's sort of come to market. Is that something you notice?

Gabrielle Swycher: 8:12

Yeah, yeah, absolutely. We've definitely seen that in the case of paddle. I think there's been a scramble for investors to to know a sport that we haven't typically known in the past, although I'm pretty sure paddle is their favourite sport. It's like the new gilet for finance. everyone, everyone's doing it. but figuring out what does that. actually mean because Paddle can cross so many different sorts of business models. You've got Paddle Equipment, which is a consumer product. You've got Paddle Clubs, which is a capex heavy brick and mortar play. You've got sports rights with the, the Paddle Leagues and competitions. We've got sports tech with the likes of Playtomic. And so so many, uh, Paddle kind of encompasses them all, but actually you need to understand each one to understand which area you want to invest in. Yeah.

Richard: 8:59

Is it? There's a there's a little question on that, which is again. You can imagine on a podcast like this that sometimes the conversation moves to what a federation is, you know, an international federation or a governing body is and bullish argument is it could cover all of those areas. If you reimagined. A federation or a governing body. And quite often we had in the last podcast we put out, we were talking about cycling, you know, cycling federations. Could they ensure every cyclist in the country, you know, is that the vehicle through which, and it's a sort of D to C, a D to C argument. But as you describe paddle there, right. There are lots of different segments to just that. a minor sport, fast growing, but still a, you know, it's, yes, it's exciting, but relatively small in base, your assumption being they won't do everything. But there'll be still it will be picked off. There'll be specialists in particular areas, or there won't be a central body that will cover all of those areas. There's going to be privateers coming in with their own shops, but there's also going to be sort of the tech will be done by someone else. So it will still be. It's interesting paddle because it's just a nascent sport and people project onto it or imagine If you did read, you know, didn't do it in silos in the way that's always happened and you then did have a horizontal offer across all these areas, do you think that's even possible? Or do you think that's just a, over claim on the sort of DTC argument?

Gabrielle Swycher: 10:30

I think that putting kind of my venture hat on, it becomes quite difficult because as an investor, you want to see a company doing one thing. I don't know if I'm allowed to swear on this really fucking well,

Richard: 10:46

Yeah,

Gabrielle Swycher: 10:49

wouldn't see a company doing something really, really well. And if a company is trying to figure out how to build a course, and how to get sponsorship, how to build an app and create a product, those are very, very different skill sets. So there's, there's certainly a world in which you get one company that does bit to that, but I think the chances of one company doing all of it is, is very low, not least because investors aren't all that smart. They are doing lots of different things. I speak to seaweed based bioplastic business and then a cat food business all in one day, and I need to try and understand equally, both equally well, but it means that my level of understanding of either is not going to be nearly as high as, inevitably the founders doing it. And so I'm looking for a simple story that I can get my head around quite quickly. Maybe I shouldn't be admitting to that, but, but it's, it's the truth.

Matt: 11:38

Does that mean in some senses, you know, if people ever ask me, well, would you ever look at my investment deck before I go out and pitch it? seems like at the moment it's absolute obsession with the sort of total addressable market. So, you know, total number of players playing sports in the world is, billion more people than actually live on the planet type nonsense up front. Where are you? Would you prefer to see a super tight proposition that says we're looking 1824 females, Western developed markets who consume sporting apparel like this. And we think on average they changed this part of that apparel once every three years. So our market is that so really go down and tight as opposed to big and woolly. Or do you want to see the size of the opportunity long term, which, which, which way do you go?

Gabrielle Swycher: 12:28

land somewhere in the middle. I'm not sure I've ever actually looked at a total addressable market page, although I appreciate that everyone says it's an important page to have on the deck, I'll admit. But

Matt: 12:38

you're not saying that. You're not saying that, right? So you're saying actually, it's not the biggest, the most important bit of the jigsaw puzzle, or it is?

Gabrielle Swycher: 12:47

I think when I'm investing at the stage that I am early on in the journey, The thing I care about most is knowing got a path over the next one, two years. If I think that you are amazing and it's solving a real problem, I can probably believe that the next three, five, ten years be figured out. People will, I come to the table having thoughts about it, but no one knows whether the world's going to be in three, five, ten years, so It's a little bit finger in the air. being said, there's some categories that I probably wouldn't touch because the market's too small. If you're playing in a category that you can't expand out of that, say, maps one million total category globally. it's never going to be big enough. But typically, I mean, take the wellness market, for example, which is 1. 5 trillion. There's a lot. If, if you anchor yourself in something meaningful, you can expand out. I mean, Castor is sportswear and they started with particular players in particular sports, but they anchor themselves in the high quality technical supports that they were providing and so there's a lot that you can grow into there.

Richard: 13:59

so the big story is a sort of hygiene that you need, there needs to be a sort of assumption that there's something going on in the, in the macro environment that actually is makes it worth your while. But actually. To Matt's point, the Tam, again, I, I, again, I've noticed that in the last sort of 18 months, but, you know, and I think, I think it came from Ben Thompson, actually, I think I blame Ben Stratechery, he was always on about Tam, he's incredibly influential in terms of his, you know, blogs and podcasts, and that became the sort of just thing, the thing that people said, I always wondered that it's, it's that sort of, it's the same question as the sort of enormous fan bases of various places, you know, you sort of think, okay, well, you need a big number, but no one really believes the number. I suppose you just have to see there's some energy in the big story. Like you say, wellness, I get, okay, that's feels longer term. It feels like there's a, the connection from the small story to the big story. It's quite interesting, isn't it?

Gabrielle Swycher: 15:01

yeah, absolutely. I mean, if you take something like Uber when it first started, well, the market for that was non existent. And so the market for cabs and yellow cabs in New York, et cetera, also probably wasn't that big, but actually Uber's market today is bigger than anything that existed in that space back when they started. So it's, it's definitely about that, that bigger potential vision down the line.

Matt: 15:24

If you think about the just to build on your example, you know, you said, well, you want to see a real quality story for the first two, three years, and then have faith in a management team you buy into that that you figure the rest out. mentioned earlier on that you, you sort of play between and do both the sort of seed and series A. So do you, do you find it? Quite common that you've got a management team two, three years in really going into their own Where you'll invest again? Did you find yourself sort of reinvesting and providing more capital to businesses you really like?

Gabrielle Swycher: 16:00

Yeah, we do. And so a bit of background to the structure of the fund we have a 60m fund our fund is set up as something that's called LPGP. What that means in basic terms is that we have investors that commit their money to us for 10 years. invest money into new companies over the first five years and then the second five years, we can continue to invest into the companies we've already invested into and start to what we'd call harvest the returns as those companies assets. And we have thereabouts 50% of fund, 50% of funds set aside for fund ones, which is that reinvestment into businesses as they continue to grow.

Matt: 16:36

Does that create a challenge if if you get to a point where you may be eight years in And a business got a great idea or a great next step But you're not likely to see the realize the returns from that to be able to harvest that within the two years remaining. Is that a point where you might be more likely to seek co investment or it might be the right time for the business to of find a different parent to time create a pressure for you?

Gabrielle Swycher: 17:05

There are certainly considerations around time and, I mean, being where we are in the fund, we are now, that's an active decision we make in terms of the stage at which we invest in businesses so that we can aligned as is possible. But a typical journey might look like we invest, call it, one million initially, it could be more than that, we kind of have a typical ticket size as well to into a round alongside other people. then in the next round, either we'll do another one to two million into it alongside existing investors, or perhaps at that stage, we'll go out and you'll get new investors in and they'll come in and they'll do a five million ticket, but we'll invest, to make sure that we maintain the ownership that we have in the company, or maybe bring that up slightly if there's room in the round. And so we'll continue to co invest at our side, but, but the, the funding journey, the fundraising journey, it's really like passing the baton. My main job is to get the company to the next funding round. And after that, we'll continue to support it any way we can, it's the next investor's role to, to help them on that next stage of the journey.

Matt: 18:12

So with a business as large as something like castor, do you still feel yourself sort of? Cheering on from the sides or do you still stay in touch or what does that look like?

Gabrielle Swycher: 18:22

Yeah, so absolutely. So when we invested, we took a board seat. Robert, who's one of the partners here, uh, brilliant, brilliant guy, very good at brand. He was former CEO of Saatchi Saatchi and, and has his own ad agency before that. He sat on the board and advised them very closely on, on a variety of matters as they brought in a huge amount of investment at this round. The benefit of being the first investor into the company is we have that close relationship builds up over a period of time. it can

Matt: 18:50

I,

Gabrielle Swycher: 18:52

there to continue to support, but the investors coming in at this round will have, uh, more of a view on, on what the next two years of the company should look like. So that's the end of my

Richard: 19:04

What do you think about the, the sport as asset class question?

Gabrielle Swycher: 19:08

If

Richard: 19:09

the more you,

Gabrielle Swycher: 19:10

questions,

Richard: 19:10

you know, I get it

Gabrielle Swycher: 19:11

to contact

Richard: 19:13

people say it's become a, you know, it's a, it's a shorthand

Gabrielle Swycher: 19:15

all

Richard: 19:16

its own asset class or whatever. But then I wonder what the point of doing that is sometimes. So from an investor, it's either a good company with good fundamentals and you're excited about it or you're not. And actually the context is. Again, to the big story, I get it that it's in sport and sport is a growth marketplace discussed. But what do you, how do you approach that? Because again, I'm sort of just when I hear that, I think I just don't quite know why you would do that. Why, the point of that is other than just, you know, the sheer bullishness, people are just pumping sport as a, as a thing, which again, you know, you hear it. Franchise sales level. But at the level of that you're operating, I'm just wondering how that impacts on your decisions. Are you actually? Are you? Are you bracketing them is a sports property? Is it just a marketing term to get interesting companies in front of you?

Gabrielle Swycher: 20:16

Yeah, I think I probably agree with you, Richard. I'm, I'm personally not sure what sports as an asset class means. Sports, sports is a sector. events, asset class is venture. And I think to the point that we spoke about earlier, there's so many different business models within sports. That. I mean, when I think about asset class, you're talking about asset that demonstrates similar characteristics to other assets in that, in that same bucket, sport doesn't do that. You, if you're looking at sports rights, you could call as an asset class or, tech is an asset class or consumer goods is an asset class, sports itself isn't, but it is a sector and it's a very easy way to communicate and as you say market people the focus that you have.

Richard: 21:03

Is that true? I'm wondering if that's true at other levels and, you know, in terms of the thinking about the agency marketplace and whether that's, you know, the sport label.

Matt: 21:13

the agency space for sport, I don't, I don't think really exists in particular because if you look at of the biggest agencies that have grown and evolved, you know, Endstate is that crossover between music and entertainment and sport and everything else. You know, you look at the Endeavors, you look at the Octagons, you know, actually it's just about entertainment, marketing, whatever you, whatever. of that jigsaw we play in. I do think potentially could make a case that says sports teams.

Gabrielle Swycher: 21:45

Silence.

Matt: 22:00

see a sports team asset class, but frankly, I'm glad that we don't. You know, people like in roles like Gabby's aren't looking at sports businesses as a, as a discrete category. Cause we've got to be better than that. Yeah. We have to have the same fundamental dynamics, quality of management things as every fashion brand, she sees every organic seaweed business she sees, you know, we need to have the same quality underpinning ourselves. If we're going to get more share of, of investment funds going forward, which ultimately I guess to that point, I'm sort of interested, if I'm honest, if I look back at my critically at myself, I don't think I'm a natural entrepreneur at all, despite having set two circles up and I, I'm not convinced that I'd have had the, Gareth may well have done, I'm not convinced I'd have had the zeal, the energy,

Gabrielle Swycher: 22:51

I

Matt: 23:14

my skill set. I was interested in Gabby in terms of it, the, the people you see. I'm coming to pitch to you. Do you ever think you're going to be superb until the point of being a 10 million business? But then maybe you'll run out of road in terms of your own skill set. What do you believe? A great entrepreneur that comes in to see you can be developed the right support to go the whole way. You know, like Tom has a castle.

Gabrielle Swycher: 23:40

it can go either way. I don't know the exact stats, but The number of companies that when the IPO was still managed by the same person as, as the person who It's really low. to exactly that point that, the skill set required when a company is just being born to when it's at 10 million of revenue to when it's doing 100. That's totally different skill sets. And I think that there's a lot of strength in recognizing what. your best role is in a business at any given point in time.

Richard: 24:15

It's interesting that does, does anyone keep that stat? That's quite a good, that's a good point, isn't it? Founder to IPO.

Gabrielle Swycher: 24:22

somewhere, I'll have to dig it up and yeah, it is a good one, isn't it? But you do see, you interestingly see it when sometimes when people go out and come back in, I mean in the case of Jim Sharp, we've seen that a little bit where the founder steps away and then, and then he came back in subsequently and I, I think the same for, Bumble in the USA possibly.

Matt: 24:41

it's funny because when you start a business, you've sort of got no option. I was super lucky because I had Claire as a and Gareth as the force of life and a brilliant now CFO, CEO he is but even with three of us, we found we kind of all had to be generalists slightly, you know, we had to know how to. Kind of coalesce a team. We had to know how to manage a balance sheet. We had to know how to pitch. We had to know the backend of how the product actually works. And, I wonder if to stay with the business for the longterm, you also have to have a hidden deep specialism. So you have to, you know, you have to be a leader as a core or you have to be the CTO as a core who can get a great CEO alongside you. If, if the technology is your piece, I wonder if it's really possible to stay as a. There's a generalist entrepreneur who turns into a generalist CEO running a multi billion pound business. I'm not, I'm not sure.

Gabrielle Swycher: 25:33

Well, Matt, do you think that at different stages of the business, Did, did those roles, were they locked in from the start where he was CEO seat or did they kind of chop and change at different stages of the business?

Matt: 25:46

It's a really good question. So, so I think on day one, we were quite clear that my energy was to run the business. Gareth's energy was to deliver superb work for clients and Claire's energy was, to protect both of our mortgages and run the, run the finances. And I don't think that necessarily changed. However, what sat in both our roles inevitably evolved. So, despite the fact I was running the business, not the client work, I was still spending three days a week running client work early on because you do, you know, without revenue, you haven't got a business. And we definitely made a concrete decision. I would say probably turning over six, seven million. When we made a concrete decision, I wasn't going to deliver any client work. Because the business was of a size that, running a very full balanced scorecard that needed care and attention. And I guess that was the point where we're starting to have external conversations about people investing in us. And that needed, as you well know, a lot of time and attention as well. and then once we were in a WPP environment, when I handed over the running of the business from a CEO perspective to Gareth, Claire's role turned into more investor facing sort of, uh, and mine was definitely external stakeholder management became a lot more concrete, which actually was in hindsight, that and the. The leading the teams of people were probably the bits I enjoyed most wasn't necessarily I was best at but I enjoyed most and so although theoretically our job profiles written down in a piece of paper didn't change much actually there were, Gareth would probably say at this point, you know, his role changed every four or five months and I was probably no, not dissimilar in that. It's

Richard: 27:26

It's quite interesting question. If you broaden it into the just, I mean, you will get Gabby far more than I do, but just bombarded with just in your on TikTok feeds on YouTube. And, you know, there's a sort of sort of Greg Eisenberg figures who are saying, well, here's a, here's 100 startup ideas. And I've gone into Reddit and I've know, done loads of data analysis and here are some great idea. Bang, bang, bang, bang, bang. And this is, this is a million pound. This is a billion pound idea. Someone just take it, you know, and that sort of assumption is quite particularly around the tech question. We've got the, there's a real sort of finance bro tech bro type culture, which is doesn't actually matter what the, you know, it's it's the opposite of specialism. It's like, okay, just pick something and just go for it. I just wonder, which is quite, you know, can be entertaining, but it's sort of a wonder about its sustainability and when it actually gets serious and you get in front of investors, whether you can actually, whether that's a red flag. You know, there's someone who's presenting. I've done 20 different things already. And now I've got, you know, this is my new idea and it's completely random. Is that something that you think? Okay. Well, good luck with that. But we, it's not for us.

Gabrielle Swycher: 28:37

Yeah, I would say it can be, it can be a bit of a red flag. I think that the red flag for me there, the kind of underlying motivation is, are they always looking for the next shiny new thing? Is it, is it kind of quite macabre? The concern there is that if the going gets tough, which running a startup, a fast growing business, it's always going to. Are they just going to want to get out and do something new that feels more comfortable, more easy, more exciting? That being said, there are absolutely founders we come across that go, you know, well, we wanted to run a startup. surveyed the market. We saw a white space here. I think at the earlier stage of investment, that story is probably okay. what you'll typically see is, and, and it would be interesting, I need to go back and listen to the podcast with Tom, but the story that a founder shares five, ten years into their journey is going to be very different from the version that they shared at the because they will have retroactively put in a narrative of Of, I mean, like, for example, we have a cat food business in our portfolio, and they are incredibly passionate about cats, they genuinely are, but the version of the story they share today is much more crafted, inevitably. it's, it's truly about the health of cats being the core of everything they do, and that is true, but that narrative both to investors and to consumers becomes really important as you go through that journey because in consumer, that's the thing that encourages loyalty. Robert always talks about brand as being loyalty beyond reason. So when something is maybe not the best product or not the cheapest product, but you're still buying it, it's because of the, the emotion it draws out. And that tends to, these days especially, given social media, be driven by the founder's story. Okay.

Matt: 30:48

we have, we always had an official external narrative for why we called the two circles business, two circles, and then the internal, why we write, why we actually came up with it in a restaurant in Baker street, you know, they're very different stories. The unofficial one being. Gareth wanted to, to call the business Circles, which I thought sounded like a crap sitcom in the days. And and it was cause it, he was an 800 meter runner and used to tell girls at parties he ran around in circles for a living, said, well, I'm

Richard: 31:21

did that go for him?

Matt: 31:22

not just, so he's doing absolutely fine. And, and so now, you know, we kind of came up with a rationale for what the business was looking to do in terms of the community it was trying to serve and why it was therefore called Two Circles, which just worked for us on an emotive level, but we still sort of giggle occasionally about the fact that actually we were originally registered as Circles Enterprises Limited.

Richard: 31:49

Used to be, there was Google circles, isn't there?

Matt: 31:51

So, Gabby, when so let's say people get beyond the first deck and, you know, you have a look at the initial teaser document, you're interested in conversation, once that starts, you know, if, obviously, as you say, you know, there's a, there's a very well run lucky few who managed to get through to investment, but once the conversation is up and running, you know, if there are two or three things or reasons why the deal would fall over. You know, why would things fall over? Because everyone puts time, attention and energy into it. But what's the darker side of this? If something doesn't work, why would that be?

Gabrielle Swycher: 32:27

So I think probably the first thing to say is that if a deal of doesn't happen, to founders, don't take it personally. Because what, what founders don't see is everything that goes on behind the scenes at a fund. And at least 50 percent of the time when a deal doesn't happen, it's because it doesn't quite align with the, the preferences of the team, where they are in the fund, etc, etc. And so. It could be the best business in the world and I might wish desperately that I could invest in it, but if it just doesn't fit the fund where we are today, it's not going to happen. So, so sometimes it just falls over because it's not the right fit and that's nothing to speak, that's kind of nothing of the company. I think the other times that it falls over is probably like fine balance between founders being salesy but honest. It's really important to sell your business, your achievements. being honest about things up front is equally important because if we find out down the line there's kind of some, some, some little secrets that have been hidden along the journey that are quite important to know. Those pieces of information alone might be, not be enough to turn us off, but it tells us something about the pay for the founders. As I say, this partnership, the partnerships are really to make sure that we're going into a relationship that that is as open as it can be. And then beyond that, probably another key thing that another key driver is unit economics. So typically you'll have a conversation, that conversation will be really based around what the product is, what the market is, who the founders are, and then you'll dig into the detail. For investors these days, we want to see opportunities that are what we could just de risk as possible. So although you're not the business that you're going to be in two years. What, what kind of structures have you put in place and what have you proven through marketing today to show that the path that you're going down is, is, likely that it can be achieved. And then also that there's kind of a path to profitability as well. Silence.

Richard: 34:50

I've always wondered what the beyond the obvious, you know, a famous face is useful in terms of promotion. It cuts through, uh, in a way, but we're seeing obviously a generation of athletes now seeing themselves as sort of entrepreneur investor. Types. Now, just talk me through what, why is that important? Is it useful? Is it something that you think as the money, you know, increasingly goes to the athlete whether it's the IPL or premier league footballers or NBA footballers, they're becoming slightly different. Entities, how does that, what do you, how do you view that question? Cause obviously you've got someone like Andy Murray is, is again, I get a lot of press releases, Rory McIlroy's name attached or Lewis Hamilton's name attached or, you know, so there's, there's a sort of there. And I've always wondered what actually the reality of it is.

Gabrielle Swycher: 35:39

Yeah, and I think that question is really right of, well, what value are they actually bringing? That's at the core. I mean, so often you see celebrities that they will help with reach, with audience. And that's certainly one really, really important piece of the puzzle. But the next question is, well, how does that reach audience convert to engagement, to monetization? And understanding that journey is really important. I think particularly in a world where So many celebrities, so many athletes have a lot of different optionality, which is fantastic, and it's so great to see the sports world evolving in that way, but, when there is so much optionality being spread too thin, or having kind of relationships with different brands that might impact, be it positively or negatively, there's a lot of different people. Thank you. pieces of that puzzle to kind of break down and understand what the actual influence of any given celebrity be because it'll be very different. I mean, it's It's the same reason that lot of the time today when we talk about ambassadors and influencers, there's a focus on micro and nano influencers, because actually building those relationships with, with really, really well known celebrities, is something that's been done in the past, but it's very expensive for the kind of the return that you get from that investment. And so we've seen a shift to focusing on influences with, with smoother audiences, but audiences that are more highly engaged. Um.

Richard: 37:22

Thinly. It's such a transactional sort of brand. I don't trust his judgment. You know, I think, I assume it's a deal that's been presented. And going back to Paddle, you know, he's streaming Paddle on his YouTube, which is because he's got an investment in Paddle. It's not,

Gabrielle Swycher: 37:38

talking Puzzle. Stormzy also has a Puzzle investment. I think it's into Puzzle Social Club if I'm getting that right. but Stormzy adores playing Puzzle, so at the very least there's kind of a more authentic relationship there.

Matt: 37:54

I don't know if you saw the Brit Awards this week. He was wearing sunglasses because he had a paddle injury. So he had a bruise and I wasn't sure whether he actually did have a paddle injury or that was one of the smartest bits of marketing for his paddle franchise. Have any influence in marketing ever where you claim to have an injury in order to drive the affiliation between you and, and the sport. The I guess there's one area that I was always interested in, in when my wife was, was sort of investing in sort of. Early stage slash sort of, I guess, similar space. So C to series a, it was always why she was getting calls after the deal. So, you know, we'd typically be driving somewhere and Clara get a call, just ask with a bit of requests for a management team for a bit of advice. And that relationship between, you know, being able for an investor to get more than just the money seems super important in particular earlier on. So, so you get a call. after the deal, you know, what, what do people tend to need help with?

Gabrielle Swycher: 39:04

But it can really be anything to be honest. I think that sometimes it's just picking up the phone because they need to talk through things. We some teams in our portfolio that have co founders and as I'm sure you know Matt, having co founders can sometimes be a godsend because there are people going through the exact same thing as you at exactly the same But some of our portfolio founders are self founders. so having, having kind of someone that you can soundboard with can be very helpful. but then the other perhaps key areas that, that we speak to companies about are financials, so budgeting for the year and how that evolves as kind of the year comes through and things happen. Hiring is, is of mind for all teams at all times. And brand is, is another area that we get very involved in.

Matt: 39:54

do you find yourself that it's definitely the makeup of a finance team at this stage of growth seems to be something I get asked a lot, tend to ask, then ask Claire, but so it seems really interesting. almost you, you sort of need more finance capability in a business at this stage than its actual revenue number. If it's going to go quickly and its actual revenue number might dictate. There's just sort of having access to the right skills to future proof you for five years, even if that's a bit of a struggle in the P and L today.

Gabrielle Swycher: 40:23

Yeah, I mean, I definitely think that we see a lot of companies because of the speed of growth that they've got that they've kind of to five million revenue without really having budgeted thought about finances all that much at all and so then sometimes when we invest it's a bit of playing catch up to get them to

Matt: 40:41

I'm sure. Yeah.

Gabrielle Swycher: 40:42

usually important to us is helping the companies with with getting those governance structures in place so that they're as you say ready to scale for that next stage of their journey.

Matt: 40:51

Pre ball patch my case.

Richard: 40:54

a, okay, so there's a question. I can't remember if you answered the question about what the hit rate is. So in terms of how many succeed in terms of the investments, what's the, what, what ratios do you work to? Is that something you share or is it something you keep, keep yourself in terms of the number of, because VC, again, this is my framing put me right. If I'm wrong, but you're at the high risk end. Of the value chain compared to someone like private equity, which is coming in and they shouldn't have any misses because they're bringing in sort of operational expertise, et cetera. That's the story as I understand it. So how do you balance that risk? What is it? What does it look like in terms of the sort of hits and misses?

Gabrielle Swycher: 41:35

In terms of companies we invest in and

Richard: 41:38

Yeah.

Gabrielle Swycher: 41:38

or failure down the line, yeah, I mean, it's interesting. I was having this conversation actually with another investor earlier. in the tech space, you tend to see, it's kind of the power law that a fund will invest into 20 or 30 companies and they hope that. 1, 2, 3 will do exceedingly well. You'll probably get a couple that do well and a lot that fall away completely. Within consumer, there's varying opinions on what that looks like and typically that's because putting kind of consumer tech aside for a moment. What you'll find is that the kind of the hits are. Slightly lower return than the hits in tax, you might get a 200, 300, 400 million exit, or even up to, I mean, in the case of Castor, they're kind of still growing and they got got values as a unicorn last year, but you might not get your million, 100 billion exit that you get in tax. And so because those returns are lower, you're looking for more successes. overall across the portfolio than the tech fund might be. So I've heard some consumer funds that will say that they need everyone, almost every one of their companies to succeed in, in one size, shape or form. Other funds will still kind of take that, that power law. So it does vary a little bit. I think the challenge of Venture is that learning cycle is quite long because a lot of funds are 10 years. So it takes you a decade to know what's gone well, what hasn't, and kind of replicate and adjust it for the next fund.

Richard: 43:14

I was going to say that actually the definition of a miss is quite interesting, isn't it, in terms of, well, what does that actually mean? Again, I've got a whole load of cliches in my head about, you know, it's, you've, I can imagine a hit that it goes and you get the, you know, the, the returns that you're after, but misses probably turn up in different shapes and forms, don't they?

Gabrielle Swycher: 43:34

Yeah, yeah, definitely. I mean, when we make an investment into a business, we're targeting either a five to ten times plus return, or returning a third of the fund. So we already look at success through two different lenses, but if a company gets a four times return, we, we certainly wouldn't view that as a miss. It's just maybe they're not going to be in that kind of top class of success that we see in some of those.

Matt: 44:00

And so just to play that out, I'm conscious of your inbox, right? So that one of the things that could happen is after this podcast is you get absolutely inundated. So just to manage people's expectations for everyone you do invest in. If we're at that point of the funnel, we've talked a bit about what happens after that, but in terms of before that, any idea, you know, how many, how many pitch decks would you have read for that one investment? How many of those would have turned into sort of concrete conversations?

Gabrielle Swycher: 44:32

invest into about 1 percent to 2 percent of companies that we have a first Yeah,

Matt: 44:44

call. I'm sure there's a bigger number as well as that.

Gabrielle Swycher: 44:47

absolutely. There's definitely a bigger number pie in that one too.

Matt: 44:51

Well, they just manage people's expectations when they're remarkably offended that you don't call them back an hour after their, deck is uploaded, right?

Gabrielle Swycher: 44:59

we do try and respond to every, every founder because yeah, I think that's important. And even if they're not around for us, we'll try and guide them in the right direction.

Richard: 45:07

And also a lot of them will be crowded out by the podcast businesses that are being pitched and taking all the money, aren't they? just like,

Gabrielle Swycher: 45:13

looking for investment, Richard?

Richard: 45:16

I'm not particularly, no, uh, you know, I'm sure other people are. Well, listen, fascinating. Thank you so much, Gabby, for your time. Really enjoyed that. And it's really, cause it's a bit of, as you said at the beginning, it's a, it's a part of the world, which is very romanticized, isn't it? A lot, you know, that there is that Dragon's Den element to it. And that's right. It's interesting. Dragon's eggs. It has sort of framed, I just think in the UK here, Dragon's Den and The Apprentice are two big hit business shows in inverted commas and actually the sort of reality and the way in which they've sort of portrayed the world and framed people's ideas about, entrepreneurship. Is really is I think very strong and I'm always aware that I think actually I'm not sure how good a, you know, good a guide they are. What do you think? Are they, is Dragon's Den a good guide or do you, do you, do you think, I'm not sure they've quite captured the reality of it.

Gabrielle Swycher: 46:16

Yeah, to be honest, I think that Jonathan's done probably is a good guide. The kind of. Worst kept secret, perhaps, is that most people go on Dragon's Den because it's, I don't know if I'm allowed to say this, free marketing.

Richard: 46:30

Yeah, yeah,

Gabrielle Swycher: 46:31

great free marketing, but a lot of the companies that come through Dragon's Den we either have spoken to or do not speak to. They are very good, high performing, well, from the non consumer companies. So Dragon's Den is pretty, is a pretty good reflection of what that journey has been.

Richard: 46:49

that's interesting.

Matt: 46:50

to me like one of those shows where wish I could watch a repeat and there was sort of two minutes at the end as to how every business actually did. a bit like when you look at those house building catastrophe sort of shows and then they go and, uh, and you know, you, every so often you've got a couple that stayed together and they got a lovely house and every so often they've had to flog it and run out of money. And always wanted to see what happens next.

Richard: 47:16

I also think, I think the due diligence process is quite ferocious, isn't it? That, that was, that sort of, I, I've got a friend who went through the process and actually, and you know, somewhat, you know, they gave him money, but they didn't in the end. So it was quite that, that post show due diligence, I think is quite a ferocious process,

Gabrielle Swycher: 47:38

yeah,

Richard: 47:38

is my assumption. Thanks so much for your time, Gabby. Cheers.

Gabrielle Swycher: 47:42

Thanks for

Matt: 47:43

ever so much. Really appreciate it.