Ep 164: Jone Vaituleviciute
Everything you need to know about VCs. When to raise, trade-offs of taking VC money, is there truth behind VC memes & how to tell if you are not performing
Jone Vaituleviciute is the managing partner and co-founder of Firstpick, an early-stage VC and accelerator program based in Lithuania and operating across the Baltics. In this episode we decided to focus more on VC as a business rather than looking at startups and founders from a VC perspective. If you are a founder, this is a great chance to learn how the VCs tick. Before starting Firstpick, Jone was a partner at StartupWiseGuys.
On this episode we talk about:
When and why startups should consider VC funding.
The importance of local presence and knowledge in early-stage investing.
Unique hurdles faced by startups in the Baltic region and how to overcome them.
When and why startups should consider accelerator programs.
Practical advice on managing funds and financial planning for early-stage companies.
Predictions and emerging trends in the VC landscape
Check out https://firstpick.vc/
We are on YouTube and Linkedin as well
Watch select full-length episodes on our YouTube channel > https://www.youtube.com/channel/UCP6ueaLnjS-CQfrMCm2EoTA
Connect with us on Linkedin > https://www.linkedin.com/company/pursuit-of-scrappiness/
Read the full episode transcript below
Uldis (00:02.005)
Hello, hello, hello, dear listeners. Welcome to another episode of the Pursuit of Scrappiness podcast. Whether you're building a business, running a team, or just starting out in your career, we are here to bring you scrappy and actionable insights to help you become more productive. My name is Uldis Teraudkalns. My co -host is Jan Zeps. Hi.
Janis (00:24.047)
Hey, and we're perfectly matching the color of our Samsung earbuds with our t -shirts today.
Uldis (00:31.157)
Yes, for the live audience. It's meant for the live audience. All right. Before we start, a quick reminder, follow us on Spotify, Apple podcasts. It helps exactly as much as you know. In exchange to that, you will find more than 160 episodes now covering all topics you need to become a scrappier and better version of yourself in life and in business. So go click the subscribe button and dive into endless
Janis (00:32.046)
The most.
Exactly.
Uldis (01:00.565)
of wisdom and be the first one to find out when we come out early Tuesday morning European time every week. So about today's topic. Whenever we speak to VCs we are often talking about their strategies, industries that excite them, what they look for in founders and overall we mostly look at them kind of from the founders perspective. But they're people too.
And they're businessmen, they're not just objects of founders meeting founders needs. So this profession is something that you can actually pursue similarly as a startup, maybe subject to some limitations. So today we wanted to talk more about VC as a business. And in order to do that, we have invited a great friend of the show and returning guest, Jone Vaituleviciute. Hi Jone.
Jone FIRSTPICK (01:58.708)
Hi everyone!
Uldis (02:01.525)
So for those few of you who don't know, Jone is the managing partner and dare I say co -founder of Firstpick, early stage VC and accelerator program out of Lithuania and operating across the Baltics and beyond. Maybe Jona will tell more. But yeah, and before starting Firstpick, she was a partner at Startup Wiseguys, so has the experience of both joining an established organization as well as starting her own.
So let's dive in to talk about VC business hard truths and maybe simple truth and how to make the most of actually doing an accelerated program in the second part of the conversation. So let's jump in. You want a question still from the, a question I lied. I'll start with that. A question from the founder's perspective, kind of. How early do you think it's a good idea to let a VC in your cap table?
Jone FIRSTPICK (02:42.548)
Absolutely.
Uldis (02:55.829)
And do you see some merit in sticking with angels until seed stage or later? So this is a test of your integrity.
Jone FIRSTPICK (03:08.564)
Yeah, exactly. I think I had this question last week. I was on podcast and it's not that I do podcast every week. It just happened. So and then myself and Irio from Change Ventures, we were both like, yeah, you have to be very thoughtful about like getting early stage investor. And then Gleb was like, come on, guys, you are early stage investors. You're just betting against yourself. But I think in all honesty, you have to really think whether...
Uldis (03:16.373)
Legend.
Jone FIRSTPICK (03:36.532)
your venture capital driven business and any investor should be very honest with you if you need venture capital to at least do a small test, right? So I would say there's always a way to do a test without raising capital and just building it for yourself or the market. But if you start pitching to investors, they will drive you so many different ways. So you have to be very thoughtful about it. So there's no time as too early, I would say.
But there is a good fit or no fit. And if you get in with venture capital early, then probably you will keep on raising, you know, every two years at least. And we know some companies in Lithuania as well, I think in Estonia, that for example, they have raised as well in Latvia, they have raised after they became profitable, like for example, NordVPN in Lithuania, and they became a unicorn. But these are some rare cases.
Janis (04:26.479)
Mm -hmm.
Do you think is there like, cause if you look at the portfolio of companies in Baltics, it seems like the ones that become known, it's almost like the default mode of operation. We're gonna kick off, we're gonna get some seed, but like raising funding from not only VCs, but overall like just aiming for that VC investment seems to be like the goal for, I don't know, most of the companies. But then there are these exceptions that are.
really exceptional. Are we different from the rest of the Europe or world in that sense or is everybody's more or less operating the same way? You know, we're going to get some seed, some angels in, but like we're, you know, going for that VC money.
Jone FIRSTPICK (05:14.1)
Yeah, I think it became a bit too popular to fundraise in the Baltics. I don't know what you think guys, but I feel like everyone's like, let's raise, we have raised, like this is the success metric of our business, but this is not true. And we have so many terrible fundraisers in the market that are not only like devaluing company, which might be, it might be still fine or overvaluing company, but where founders completely lose their focus on the business.
Janis (05:17.967)
Hmm.
Jone FIRSTPICK (05:42.164)
So I'm like completely like betting against all the VC and myself here as well. But I really should say that this shouldn't be a focus. And when it's not focused, good companies, they raise money. There is a line of investors. But if you have to go on fundraise super actively and you're doing it for half a year, maybe you should rethink if it's actually venture capital funded, should be venture capital funded.
Uldis (06:07.701)
Let's continue this path down shooting yourself in the leg. So like what, what, what do you think is the, you know, the trade off really? What, what is the trade off when, obviously you get money, you get, connections, you get, potential ease of, of raising further. So what, what do you have to sacrifice? Yes. What do you sacrifice besides? What do you sacrifice besides dilution? So, when you, when you get into the, cahoot.
Jone FIRSTPICK (06:12.148)
Ha ha!
Janis (06:27.247)
You can add the venture backed on LinkedIn as well.
Uldis (06:37.607)
with the VC.
Jone FIRSTPICK (06:39.412)
Yeah, I think what majority of founders will notice that besides diluting, like giving away your equity, which should be quite precious, you are actually giving away a lot of your, I think like freedom in a sense, because you have to be reporting to investors, you have to do some board meetings, maybe not at early stage, but at seed stage, for example, right? So I think this is what founders notice only.
a year in and they're like, actually, maybe we don't need investors. But I say like, well, you needed the money, right? So it's also, it is a trade off, right? So I honestly don't really like when founders discounted so much and they say like, we don't need this. But at some point you didn't need it. So then you have to keep up with some reporting, giving up the board seat maybe. And then maybe having some stupid people.
or helping you run the company from investor side. And that may be the most, I think, damaging sometimes.
Uldis (07:44.629)
Yeah, I even know of some cases and I always wondered how did that happen? Even more than one.
We raised from VCs, we never touched that money. It's still in the bank account. Why did you raise in the first place? I mean, obviously there were some goals, I guess, at that point and maybe things turned out different than expected. But that's a... Have you encountered such? Has there ever been a target company not using the money you invested in them?
Jone FIRSTPICK (08:15.828)
But wait, that happened to you?
Uldis (08:18.197)
Not to me, but a friend.
Jone FIRSTPICK (08:19.796)
okay. Honestly, no, I know that someone raises and actually they are very thoughtful about the money and then already become profitable quite soon. So they really, really have to think why do you need that money? And I've heard like someone say, I think that was on tech chill panel that I participated is that you should celebrate every day you're not giving equity away.
So yeah, if you gave away the equity and the bank just, money just chills in your bank account, yeah, that's probably not something to be celebrated. But that doesn't happen.
Uldis (08:55.989)
yeah, maybe. Maybe it's a fake story. You can guess for yourselves if it's a real story or not.
Janis (08:58.126)
Well, you know, we...
Janis (09:03.471)
But you, well, I mean, when we first spoke to Jona, that was a different time, I think 2022 was it, or when everybody was raising and investing. Since then we have also talked in a bit more pragmatic times. But your look at the, how do you look at it now, VC money, company, when company needs it. Scaling, obvious answer, you know, you need to go after huge markets, huge industries, you just need the money.
What are other situations when you would say like, look guys, you have a good business, but you could really benefit from a good VC investment?
Jone FIRSTPICK (09:42.484)
Yeah, I think there are loads, but mainly if you crack how to sell or like you really see like this is working, then you just need more money to pump it up, right? So in this business, like really, as everyone says, like ideas are worthless, execution is everything. And there are so many people doing the same thing that we are all doing.
So you want to give them money for them to go faster. I think we see that really with quite a few of our seed, C -Rose companies where similar ones are being funded in tens of millions in West Europe. And this is, I think, the biggest challenge for us to make sure that our companies also get as much funding. Because really in many cases, it can be a lot about just having that money to hire executors.
Uldis (10:31.317)
And there we are having spoken again from the founder's perspective mostly sorry about that. Force of habit. So in the era of, you know, I've written down Uber connectivity and VC is actively investing across borders. How do you see that local presence as a difference maker? Is it still or is it not?
Maybe it can differ from stage as well. But the thing that I'm seeing and hearing often is that, and I think we even spoke to you off the record about it, that there is especially with some government funds coming in and the number of companies building and ready for VC investment, it's scarce. So how do you feel that competition and that especially from outside?
outside of the Baltics maybe.
Jone FIRSTPICK (11:31.54)
You mean with the other funds?
Uldis (11:33.909)
Yeah, yeah. I mean, or some power angels or whatever.
Jone FIRSTPICK (11:39.572)
Yeah, I think like honestly, I'm very bullish on the geography focus strategy for early stage. So I want to be clear, like I think if you're seed or later, you cannot be geography focused unless you sit in London or you sit in Paris where the ecosystems are massive. Obviously in the Baltics, we don't, we can't afford to have funds focused only on series A in the Baltics, right? Because then there are a couple of deals per year.
Janis (12:04.558)
Mm -hmm.
Jone FIRSTPICK (12:06.036)
And if you're a very good investor, you'll take them, but there are chances that you will not. In the early stage, I really don't believe someone sitting in Berlin can get the best founders in Latvia, in Tallinn, or like, I don't know, like in Lithuania as well. Like, I don't think that's possible. So you have to be around, you have to see what's happening, know where people are moving from company to company, meet them at the cafes or walking by in the street.
And I even noticed that for myself coming from Lithuania, getting to get to know Estonia or Latvia that closely, it takes immense effort. Even being from the Baltics, when someone thinks, it's the same, you know, Baltics is a small region. I think the smaller the region, the harder it is to really be super acquainted to everyone. So I'm feeling it with my own kind of effort. And I believe then our strategy actually was very attractive to other ABCs.
Janis (12:57.07)
Mm -hmm.
Jone FIRSTPICK (13:03.892)
So everyone was quite interested to have someone as a partner and like investors from Fondo Funds, they want to invest because they know we'll cover the Baltics and we will not go out like hunting best early stage in Berlin where I think it's impossible for us.
Uldis (13:23.285)
That makes sense. That makes sense. The question is how much...
Also locally, I guess there's not that many names in the VC, let's say, with the VC hats, but do you think it requires something extra to get those best deals? Or is it guaranteed that more or less...
top three, five best deals of the year will go to first pick, change ventures, whatever. And it's just by the presence or there's something extra that you need.
Jone FIRSTPICK (14:07.956)
Yeah, I wish if I could just sit and that happens, that would be nice. No, obviously, I think first, of course you have to have a good reputation as a fund and as a person. I think that's how deals are coming to you. So it's really a lot about people's business, but still a lot of energy has to be put in. So you cannot close yourself in an office, sit and like do a lot of work at the office.
and not to be seen. So you have to put an effort, go and meet people, speak with them, ask what they're investing. So I'm pretty sure, you know, and I know we have not participated in some of the good deals of the year and some other funds also have not participated in some that we participated. So it's definitely not given, absolutely not. But you can establish certain presence that gives you higher chances than others.
Uldis (15:02.837)
by going to prominent podcasts, for example, and becoming a thought leader, right?
Jone FIRSTPICK (15:08.18)
Absolutely.
Janis (15:09.838)
And how does your day look like as an investor? When you look at the market, you have pitches coming in, you have companies that are on your radar. Is there a worry that there just aren't enough good companies or vice versa? The worry is that there are too many and you have to fight for deals. The 2024 snapshot, what's your worry in that sense?
Jone FIRSTPICK (15:38.932)
Actually, I've lost the war. I realized, so my goal was we have to get access to every best deal that's happening in the Baltics. I think we have it 100 % in Lithuania, a little bit less in Latvia, a little bit less in Estonia. So there is still some work to be done. But if we get access,
Janis (15:49.87)
Mm -hmm.
Jone FIRSTPICK (16:00.372)
then we should participate and don't ask stupid questions trying to challenge deep tech founder or trying to challenge a very difficult FinTech. We know some things, but our mandate like that we have created ourselves is find those best founders and understand that they will do their thing. And maybe we'll pivot three times. That's also important because we're coming in so early. So my worry was that we will not have enough pipeline because we...
We were digging in the deals too much and seeing too many risks. And then we realized, okay, like guys, we are at early stage. What are we trying to answer here? There are a lot of risks, but we should participate because the founders are great. They are second time founders and we just love it. So when we realized that, it became much easier. So that's the answer about the word.
Uldis (16:52.373)
It's very easy to be smart and poke holes in somebody's ideas and plans, right?
Jone FIRSTPICK (16:59.06)
Absolutely, I mean, but you don't even have to be smart to do that.
Uldis (17:03.189)
No, I mean smart in quotation marks. Yeah.
Janis (17:03.342)
Ehh...
Yeah, that's like these quotes where like internet is this thing that will go away, you know, somebody in 1995 said and whatever like, yeah. But you mentioned second time founders. I would assume more and more of them, right, coming up, like is it really becoming a trend?
Uldis (17:14.613)
Hahaha.
Jone FIRSTPICK (17:28.18)
Absolutely, I see them a lot in Lithuania for sure. And second time founder might be also an operator who was for example, in one of the bigger companies from early days till now. So for many years, not like any employee obviously, there has been a boom. And I'm very happy about it because obviously like some vested options are coming out and people are not afraid of going out and creating it.
Janis (17:42.574)
Mm -hmm.
Jone FIRSTPICK (17:54.164)
They are very well connected. They don't want to waste their time on something they don't believe can work. So yeah, absolutely we have more of them, but I think there is still more to come. I'm very bullish about it.
Uldis (18:09.653)
So speaking of winners, they say that one winner should make the required returns for the whole fun, right? In your experience, how long does it take for a winner to emerge and what to do with the rest?
Jone FIRSTPICK (18:29.876)
That's a good question. And honestly, I don't think there are some people in our market that have been long enough to say it, but I haven't been long enough in the market to actually say, okay, you know, it takes 10 years and we saw three winners and we wrote everything off. No, we started back in 2018 and with a concept and like building up the fund and investing in 2019. So now we've seen some winners emerge. Then those winners go down a little bit.
and the whole portfolio is still performing, majority of it. So meaning that the life cycle is so long that it's impossible for me to tell now, like, have I made the right decision or not? And I think majority of fund managers will say that, you know, if something is performing well, you should keep it. And you would see from the Baltic funds, eight years in, a lot of portfolios still not sold, right?
So it means that the life cycle is that long and usually the winners emerge probably six years in or even later. So we are about to see something like that. But like technically, obviously if we hit year eight and we can extend it for a couple of years, but if we don't sell or return the money, we just write everything off and whoever returned the money, that's our return, right? But until then, you keep even the...
the worst performing companies because you never know what can happen to them. And we have seen that out in our own, like, in our own.
Uldis (20:03.893)
Have you had some winners flop properly or go down in flames? Some first three years a winner and then turns out that's actually, I don't know, was just for a short time, a market opportunity that is missed or something like that.
Jone FIRSTPICK (20:10.836)
No.
Jone FIRSTPICK (20:17.044)
Bye soon.
Jone FIRSTPICK (20:22.612)
I mean, very honestly, I could say that some winners that were in my head, obviously on paper, there was nothing yet, nothing in cash for sure. But in your head, you're like, this is going to be so good. Like, you know, you keep on quoting those companies that you're an investor in these companies. And I think it's wrong because it has really changed. So now I'm like, stop quoting any names. And I'm saying like, this is the portfolio. They're all good. People keep on asking us like, so what's the best in first pick portfolio? And I'm like,
Come on, we're just like one year in investing. And if I would select my winner, that would be so bad.
Janis (20:59.63)
By the way, look.
Uldis (20:59.957)
So let's assume that they're all equal to you.
No, no, no, sorry, vice versa. They're all equal to you, but let's assume they're not and you have some kind of grading, which you don't. But if you did, would you treat the winners somehow differently than the ones on top of your of your portfolio performance? What what what do you think should you because it's tempting to kind of pay more attention to them, but maybe then it's, you know, you should be kind of moving out of their way. So so what's your approach there?
Jone FIRSTPICK (21:35.028)
Actually, I think as a human being, we want to work more with those companies that are doing good. It's just interesting. They have good investors. You want to sit maybe as observer on the board, but usually they need your help less than those that are actually performing bad. But very honestly, if it's really bad performer, then you just agree that, okay, you know, I can help you to do this and do that. But they are bad performers for a reason for us because they don't follow up. They don't send something.
So then it's a trade off, you know, if you want something, we need to make sure that, you know, you use our help wisely as well. But we don't treat them differently for sure on purpose. It's just that companies that are doing better, they have more exposure everywhere. They have more boards, et cetera, et cetera. So sometimes they just take more.
Janis (22:29.488)
Is there a way for a company to understand when, I mean, if you're doing good, I guess you will know if you are in that portfolio dropping down and you're part of the rest, is there a way for a founder to sort of pick up on the signals? Will we see try to help more or vice versa? Will we see ignore the company more? I know you said it's, you know, you treat them the same, but like what indications a founder could sense that, ooh, I need to maybe step up a bit.
Uldis (22:59.509)
Maybe they don't get a t -shirt.
Janis (23:01.775)
Yeah, invitation to a Christmas party.
Jone FIRSTPICK (23:01.78)
Yeah, so if founders should review if they have received this t -shirt, if not. I think honestly, if you keep on sending some reports and putting an ask in the report and there is no one coming back about it or like replying something to your email, probably investor lost some interest and they're not.
Janis (23:09.807)
Hahaha.
Jone FIRSTPICK (23:30.836)
not reading it enough or something. That could be an indication. But I think like we have to make sure that, you know, founders, if founders don't understand themselves that they're doing poorly and they're seeking for validation from VCs, I think this is not right. Sometimes it's just, you have to understand that, you know, investors have portfolios of 20 companies and more, and they just don't have maybe equally time for everyone.
but you are the solo one who's running the business. So first of all, it's your indication. And then if you want something for investor, you can go straight and say like, you know, what's happening? Like, why aren't you reading? Like, have you written this off? Like, well, how do you want to change it or something? So yeah, I would say there should not be kind of assumptions if we are still interesting for investors or not. You should be interesting for the market.
Janis (24:22.128)
It's a good point. I think it's more likely that the founder who's obsessed with the company and doesn't hear back from a VC in three minutes starts thinking, my God, they've written us off. But it's probably another reason like it always is in life. Yeah, good point.
Uldis (24:41.237)
Is there a point in your heart or in your mind when you give up on an investment besides filing for bankruptcy? Is there?
Have you encountered that? Because of course you want to back the winners, etc. But I mean, and you have limited time if you see somebody, I mean, it's clearly not going to make it. You thought it's a VC case, turns out it's a family business and there's nothing you can build from it. Have you had such experience and do you have some tells or some signals when that's about to happen?
Jone FIRSTPICK (25:22.548)
Yeah, definitely in my heart or in my head, I have given up on some, but then there have been completely like different situations. Some where they raise us Phoenix from the ashes and change something. And I'm like, my God, you know, I knew it. I knew it. They're good. When we were investing, we knew it. They're good. But then there are definitely. Right. Yeah, it's like.
Uldis (25:41.205)
Yes, yes, yes, I was right.
Janis (25:41.582)
Yeah.
Jone FIRSTPICK (25:46.58)
And then obviously there are those situations where, yeah, you see it's more, it's actually more of a regular business. It's not VC backed. And you know, like we are best at helping maybe to help to raise another round, prepare for like do intros with investors. And then if we see that it's just, yeah, a basic business, we will not make any return of it. We'll let it run. But we speak with founders quite openly and we had those situations recently. And we understand that, yeah, you know, as much as we can help you with some.
maybe relevant kind of commercial intros, that will be fine, but otherwise will not keep on pushing you to fundraise, to report, et cetera. But it's just funny how the mind and heart works. It's really, I would say you cannot ever like really write it off before you just close the fund, like technically.
Uldis (26:36.693)
That is true, that is true. Speaking of closing the fun, let's talk some numbers because it's always some kind of, you know...
I don't know, 20 % return annually or some kind of 3x or whatever, but it's very different I think for different stages and for the early stage game where you're playing. So what is the expectation on average? What is expected of you to return on, I don't know, 10 million or whatever, 20 million that you get to invest? What you must bring back?
Jone FIRSTPICK (27:13.876)
Yeah, so very simplified. We invest 20 million. We say the return should be at 3x or more. So we should return 60 million. And then the math goes, yeah, eight years, a little bit less from now on, and then two years extension, but hopefully you don't want to be extending that, because otherwise if you cannot return it, yeah. But so, and...
Uldis (27:24.693)
Mm -hmm.
in 10 years or so.
Janis (27:37.006)
Hmm.
Uldis (27:37.524)
You don't want to be, obviously.
Jone FIRSTPICK (27:42.548)
The interesting part is like, I don't know, guess maybe. So there is like top 5 % of the funds that have done free X on their funds. Guess which year they are from.
Uldis (27:58.581)
Hmm, okay. Like 15? 14? Yeah. Yeah, yeah.
Jone FIRSTPICK (28:00.852)
Just do it.
Jone FIRSTPICK (28:05.396)
You are close. 2013.
But that's the top 5 % that that's the Cambridge Associates date. I was actually like it's amazing amazing report I couldn't believe what I saw is it's actually very demotivating but It's really just the small part of funds that have done that this kind of expected return and they were from 2014 and the top quartile like is top 25 % They are from 2010 vintage. So it's really old funds meaning a lot of extensions happen
Uldis (28:39.605)
But still, but that doesn't, then it doesn't mean expected return, that it means your own expectations and hopes and dreams and plans. But what's the reality? Like what is the average return in that study maybe that you saw?
Jone FIRSTPICK (28:58.836)
Actually, I would need to look, but I think it's on, it really depends on the vintage. So I think what, like the benchmark in the venture capital industry is that I'm telling like investors, I'm raising 20 million fund, I promise you a 23x return in eight years. So this is more or less how the pitch goes. And then if you're like, you know, quite savvy.
Uldis (29:20.533)
But then it's the same as start -ups saying I'm gonna be a unicorn. Everybody who is pitching to you, right?
Jone FIRSTPICK (29:24.692)
Absolutely. Absolutely. I mean, probably. Actually, Uldis, I think you're quite right. It's not easy to make this DPI. And so many emerging managers, but also established funds, they don't make it. So if you're an emerging manager, for you not to make free X on promise, like what you promised, it's a bit more harsh than for those established ones, because for established ones, like, I don't know, the big like Sequoia, Axels, whatever, you can say, okay, the vintage was bad.
And more and more everyone understands that it's a lot about the year when the fund started based on economic cycles and many other things where you can expect a good DPI. So for example, everyone is assuming that DPI...
Janis (29:53.998)
Mm -hmm.
Uldis (30:07.829)
Can we please define the API? Sorry for interrupting, but we're just casually using these terms that maybe not everybody understands.
Jone FIRSTPICK (30:15.86)
Yeah, thanks for that. DPI is deployment per investment. So it's how much cash you actually brought back to investors for what they have invested. The other very popular term is TVPI. So total value per investment, which is a paper number. So there is a big kind of talk in the VC industry now that yeah, TVPI is irrelevant because it's on paper, it's inflated, and DPI is actually what you have returned.
Uldis (30:33.461)
Mm -hmm.
Jone FIRSTPICK (30:44.948)
So this is more important. So DPI is deployment per investment. So deploying free times of what you have invested, very few funds have done that.
Uldis (30:56.245)
and then what happens if you don't with your next fund.
Jone FIRSTPICK (31:00.368)
You go look for work somewhere.
Uldis (31:05.685)
But is it like that? I'm just wondering, can you consistently not hit that mark? Because as a founder, you don't build a unicorn company. Well, you start the next one and people are even happier that you have this experience and you're a repeat founder and maybe now this time you will make it. Doesn't work like that for VCs?
Jone FIRSTPICK (31:07.508)
It is like that.
Jone FIRSTPICK (31:26.024)
Yeah. Yeah, but I think it's different a bit for founders. It's not that, I've tried something, I failed very early, I learned almost nothing. So also those that fail like long in the journey, they're very different from those that just started and like closed it, right? So the same I would say for funds is that if you showed consistently, like you have worked based on your strategy and you have shown that you have actually making good bets, but the market was just wrong, right? So you had like very good bets.
but somehow, you know, a macro went down, et cetera. You might have just been unlucky. So I think investors, so those limited partners that are investing in our funds, they also evaluate that. They look back and they say, okay, I see you said you will focus on the Baltics. You said you will have, I don't know, 20 % from Estonia, you know, 30 % from Latvia, 50 % from Lithuania, and you more or less hit that. So strategy works. The question is then do you believe the market, et cetera?
But so I'm exaggerating, obviously, it's not that, you know, one failed fund and you go out, you might raise another one and another one. And in the Baltics, we still are yet to see, you know, those funds that have returned free eggs. And we have, we see multiple funds, but investors look at your strategy and they say like, okay, I see that you're doing well. The companies are still growing. You need more time for the return. But it's harsh.
Janis (32:46.255)
Yeah, I guess that's why these... But that's why these vintages are, I guess, like you mentioned, a very important point to compare. I would assume probably in, you know, UK, US, you have so many funds and then, you know, LPs can also kind of really compare, you know, who did better based on the vintage. How's it in Baltics? Is that on consideration or is it just too small and, you know, whatever, five funds or so? Yeah.
Uldis (33:08.885)
Not much to compare I guess you can either invest in the funds that there are or start a fund yourself or buy Bitcoin
Janis (33:15.726)
or buy bitcoin.
Jone FIRSTPICK (33:17.716)
Yeah, well, I mean, come on, like that's my biggest headache. Like how do you sell a VC as a financial product when you can actually have multiples faster somewhere else, right? So I think really majority of investors in the Baltics, I would say they are very mission driven. They are, a lot of them are founders. They want to support you because they know you or they want to support the ecosystem. And that's very nice. But then we have also been fundraising from funds and LPs.
outside of the Baltics who do not have sentiment for the region and they are very much like math driven, Excel driven. They really measure how much of their portfolio should be established managers and emerging managers. And that's a bit of a different sell, right? So yeah, I think for the local investors for sure, it's a lot about being part of it, seeing the pipeline.
Probably, I would say, is much less about the return, but I wouldn't say that they don't expect it.
Uldis (34:21.141)
Yeah, it's a good comparison. I think in this kind of, for example, US market, you could go like this, you know, money ball strategy, you know, hire a PhD in physics and just devise an algorithm and just deploy and see how that works. Maybe that's even better than, you know, looking the founder in the eyes. But obviously with the numbers that we are having, it's a different game.
Jone FIRSTPICK (34:32.852)
Okay.
Janis (34:43.214)
But I would say, like, I mean, it seems like from somebody, like Baltics, for example, some winners will emerge, right? As long as you have a fund that's clear to back those winners or is one of the favorites to back those winners. I mean, that sounds maybe even like a more safe bet than just trying to pick your luck among 30 funds in UK or Germany who also maybe will have some winners, but who knows? So in that sense, like if...
I guess what I'm trying to say, in Baltics if you're one of those big funds, you probably seem to be in a good position, but there's probably some, you can't have unlimited amount of funds that you'll be able to successfully raise, I guess.
Jone FIRSTPICK (35:26.836)
Absolutely. And I think that's what actually what happened. I think we are in very good position to have access to Baltic markets, be here, have the fund now like fully closed. So we have the money. I think really there aren't too many funds as you both noticed, right? There are just few very active funds. And then...
I see like I'm exposed to a lot of funds in Western Europe from UK and like other markets and it's a bloodbath like really they all have same strategies they are all of the similar size it's so different like difficult to differentiate I have a lot of talks with investors like how do you select among all the deep tech funds in Europe of 150 million like how do you select so I think it's good to differentiate
Janis (36:10.926)
Look for the one who is founder focused on their website.
Jone FIRSTPICK (36:14.324)
yeah, we are not any investor. We are founder. Yeah.
Uldis (36:23.765)
Yeah, so after what correct me if I'm wrong you've been in this business for roughly seven years now according to your resume So do you do you do you think it's a good business to be in and so far or you need seven more to be able to tell?
Jone FIRSTPICK (36:38.42)
my God, will this ask this question that I kind of worst point in time for me. I'm thinking it's, it's really good business to be in, but you really want to, to, to start seeing the winners, right? You want to start seeing that you have selected the right beds, that you were right about something and just the feedback loop is so long by now. I still have no clue. So I'm like, I just know that I have super good network.
Janis (37:04.174)
Hmm.
Jone FIRSTPICK (37:09.012)
I cannot find good founders, I attract good people. That's very nice. But at the end, is that financially a good bet or something? That I still don't know, right? And I think majority of fund managers are in a similar situation. You have to wait for a long, long time to see that. So am I in a good business? I would say it's amazing because you just get to spend so much time with founders.
with other investors, it's really exciting. It's so challenging. You always have to keep up with a lot of stuff. So you always have this FOMO, which might not be good for your like health, mental health, but that's fine. But then at the end of the day, I think, yeah, you still need a few more years to say that if you were good or not. And then what do you do with that information? Then it's another question.
Janis (37:47.79)
Hmm.
Uldis (38:00.405)
and everybody wants to be your friend.
Jone FIRSTPICK (38:03.476)
Yeah, I was like kind of friend but only if they get what they want.
Janis (38:08.302)
Yeah.
Uldis (38:09.845)
That comes with money, I guess, in many places.
We have been talking quite a lot about this. We did want to touch a bit about the accelerators with which you have also very big experience and maybe just the basics. Do you think that accelerator is for everybody? All founders could and should go to them? What should the main considerations be when actually founders considering the accelerator?
accelerator, to get out of it.
Jone FIRSTPICK (38:47.572)
Yeah, so definitely I've been doing this accelerator since we started with the funds as our kind of support for founders. Let's put it this way. So we were more visible, like we were very much focused on acceleration in the very beginning. But then we saw that actually for some founders can be even detrimental in a sense, because you give a lot of information that they don't need at that point in time. And I became a big believer that if you have like a thousand
12 problems and then you come up with something, but wait, in the future you'll need to know about GDPR, the founder will not listen to it, right? You will not remember. So you have to be very careful about what you give to founders and founders should be very careful of what they take. So it's not easy to sell accelerator to any founder. So my experience now is that almost everyone will say, I don't need it. And we've changed the concept quite a lot that we actually give very tailored help.
and maybe everyone says that, I don't know, but we really say like, you know, we have B2C coaches, we have B2B coaches, but very specific ones, not like thousands of mentors, and then some other topic experts, and obviously we have the network. And then we sit down with each startup and we say like, what do you want? And then we kind of roll them in into this acceleration. But I think it definitely founders need to think.
if they are ready for that, if they have, for example, something what they can sell, because if you don't have anything to sell yet, you're building a product, you're testing it, then you need something earlier than accelerator or just do some validation. But accelerators are for those that have already something to sell and you need to accelerate the sale.
Uldis (40:33.845)
OK, but.
So I guess it also goes along, especially in this region that I think it has the overall education level of founders of doing a technology business has increased tremendously. Either they have seen it themselves or they have been around the industry. They have read books, they have listened to very smart podcasts and they are just more well equipped and they don't need the basic things that maybe
an accelerator used to do or incubator that you would teach, you know, this is accounting and this is a lawyer, meet lawyer, you need a contract with your employees, you know.
Jone FIRSTPICK (41:20.884)
Exactly. But this is what actually used to happen in accelerators. And I think you can find so many resources online now. We have all the library as well, and founders go there and read whenever they want. And I think this is the best way to do it. We try to see how much of that they use. And I'm surprised actually that founders log in quite often to use the materials and all the videos that we have prepared. But then...
it's really just about executing and sales because you have very limited runway. It's very difficult to take yourself from pre -seat to seed stage or even I would say from accelerator to pre -seat stage because expectations are very different. So you have to maximize your effort on getting the traction or validating the go -to market. So something very specific, but not like making sure that you're all kind of, I don't know.
Fire alarm systems are in place in the office because you can get a fine.
Janis (42:19.694)
Hmm.
Uldis (42:20.725)
So, so to summarize, if I, if I understood correctly, so the first thing, do you need an accelerator or not is whether you have a business to accelerate already, or is it just a development phase or product development? So that's one. Second is, does the accelerator offer you flexibility and an on -demand help, or just shoves down knowledge down your throat that maybe you don't want or don't need. So, so that is, that is another consideration.
And finally, the accelerator should be basically focused on sales, whatever kind of sales you're doing. That's the, that's the enabler. And if, if it doesn't do that, then it doesn't serve you well. Right.
Jone FIRSTPICK (43:02.868)
Yeah, absolutely. Very well nailed. You can do it pitchfork here.
Uldis (43:06.325)
Okay. Good.
Janis (43:06.576)
Perfect, you can create a... You can do a LinkedIn post out of this all this.
Uldis (43:14.325)
For sure, for sure. And you know, applications for the Scrappy Accelerator are open. They close on May 31st and applicants are welcome to join. Okay, that's a joke. Yeah, if it has to be said, if it has to be said, but yeah, obviously this whole thing has been a scheme. We just suck people's knowledge to create something competing with them and win. So it's a long game. It's a long con. So be sure.
Jone FIRSTPICK (43:23.988)
Hahaha!
Where do I sign up?
Uldis (43:44.279)
to continue listening to hear it.
Jone FIRSTPICK (43:46.708)
Yeah, next month we'll see a scrappy NBC fund with the promise of free X DPI with 80 years or maybe six because it will be faster than others did it, right?
Janis (43:58.575)
and 5x, you know, we have to beat... We'll just do some kind of...
Uldis (44:04.469)
and it's gonna be AI making the pics.
Jone FIRSTPICK (44:07.604)
I think that's already like old news, but okay, do it.
Uldis (44:12.725)
Sorry. So for those listeners who have... let's reward the listeners who are still with us. Can you tell us what is the stupidest thing you have seen founders do after you wrote them the check?
Jone FIRSTPICK (44:31.412)
yeah. I mean, I wouldn't really say like something very spicy or anything like that. But really, the stupidest thing is that some founders can make a mistake of like 25 percent in their budget and they run out of money so quickly. So just like, oops, we lost something. Like we didn't see that. We didn't see that expense.
or we actually thought the client signed up and we counted them in for our monthly revenue, but apparently they weren't. And I'm like, but are you looking at the bank account at least? So yeah, but no one bought a yacht. No one bought like anything. So we write, no, like we write checks too small for that. Thanks God. But for sure it's...
Uldis (45:13.941)
Strippers? No.
Jone FIRSTPICK (45:24.692)
It's a lot about once you get the money is yeah, make sure you have someone who helps you to manage it or like you are good at managing it and just looking at the bank account and understanding that it doesn't match with your report or something. So because then it can really create a friction.
Janis (45:38.127)
Janis (45:42.095)
Anything
Uldis (45:42.229)
Well, actually we can turn it into a serious question because at the stage where you're playing, there's no money for a CFO. None of the founders is, for example, with a finance background or a business education even. What do you recommend? How do they make sure that they understand P &L and money? I mean, everybody understands money on a bank account, but do they? So what should they do?
Jone FIRSTPICK (46:10.64)
Yeah, but that's the point. I think it's just like basically sometimes like very practically I would do revenue audit, like audit not in a sense of like inviting someone just by yourself, look through the contracts of what you have signed up, have they paid, are you actually getting that money in or not? So understanding the revenue side and then on the expense side, I think it's much easier, right? Also account for the taxes, you'll have to pay something that's not visible upfront. So some...
you still have to have an accounting firm. As a company, you have to have it. So at least make sure it's like someone who's smart enough to point some things out, right? You don't have to be a proficient in P &L, I don't think so.
Janis (46:53.488)
being in the industry, I guess it's also hard to maybe talk about your portfolio, but any kind of rumors you've heard from whatever Europe or Scandinavia about stupid usage of money. I don't know.
Jone FIRSTPICK (47:07.284)
my God, then I'm pretty sure it's just the buying of all the fancy stuff. I am trying to remember some things, but I think it was even on the news. I think it's just like some founders are so looking forward for that lavish lifestyle and yeah, they just spend it all, like spend millions at the beginning once they get it for like, I don't know, celebration parties and whatnot. And then they have to cope with...
much smaller runway, but I'm very happy it's not happening here.
Uldis (47:42.261)
You do a 100k party for a million Rays now.
Jone FIRSTPICK (47:46.804)
Yeah, yeah, something like that. Well, you pay 100 for lawyers, you pay 100 for a party, and you have 800 left. But then you report your fundraisers in dollars, so it looks more, right?
Janis (48:00.464)
And I'm.
Uldis (48:00.949)
You keep bringing up topics that we need to expand. Lawyers, I mean it's a long topic, but do you really enforce a lot of lawyer work on founders and is it really necessary? Like in the current day and age, can't we just have some pretty simple templates and not spend 100k on the lawyers for that round? What's your take there?
Jone FIRSTPICK (48:29.044)
Yeah, I think,
Uldis (48:29.301)
It's your money, kind of at the end of the day.
Jone FIRSTPICK (48:32.468)
Yeah, I hope listeners will not turn when we speak about lawyers, but like very briefly, we don't enforce lawyers on founders in our stage. So we have templates that we have prepared and we say, you know, for us, it's clear. Let us know if you have questions. But the templates are not three pages and I don't believe in them. Term sheet is yes, like two pages. But then like agreement is longer. And I don't believe in those very short agreements because when...
Janis (48:57.296)
Hmm.
Jone FIRSTPICK (49:00.692)
you are neutral, not good, not bad, that's fine. But if something happens very good or very bad, then under those very vague sentences, there will always be something that most likely will go against the founder. So I would really not be against longer agreements. But I think, and also founders have to make sure they read it themselves. Like I've once received, we sent an agreement to a founder and we highlighted in yellow the parts where they had to put in their details.
And the founder came back saying like, my God, thanks for making it so easy for us for highlighting where I should read. Otherwise, you know, it would be too tough. I'm like, dude, like, it's like, where you're doing the details, you have to like read all of it. So definitely founders need to understand that themselves. But then, yeah, some help is always good. Just make sure that it's a very small part of the budget. We usually cap it at 2000 euros for, I don't know, 200.
200 ,000, you're around or something like that.
Uldis (50:04.149)
Still 1%. So this is for you founders. If you're saying that you're going to build a billion dollar company and you cannot read a contract, that is not good advertising for your vision. Even if you're not a lawyer, you have to be able to read a contract.
Janis (50:05.392)
Jone FIRSTPICK (50:16.948)
yeah.
Janis (50:20.048)
This is what I'm always.
This is what I'm always thinking when I hear that, I don't know, it's hard in Baltics to establish a company or something. It's like, if you really are aiming to build something significant, is that one day and whatever? Yeah, is that really something, a bottleneck that we need to solve? But anyway, one last thing I cannot miss asking about VC memes and they are the full LinkedIn of those for last few years, right?
How much truth are there? And again, maybe it's hard to speak about your immediate circle, but like, you know, people in Europe, Scandinavia, maybe. Are there really those VCs just playing golf and posting, or is it a bit exaggerated? What's your take on that?
Uldis (50:53.653)
Love them.
Jone FIRSTPICK (51:11.86)
Honestly, I don't think memes are for no reason. There are so many funds and I think some fund managers, they go in it for wrong reasons. So for example, having very big funds, like very big payout and that's not happening in the Baltics, right? So I think we have to be quite clear that I think in the Baltics, the funds are of sizes that you cannot have too big of a management fee and you're really working for that carried interest for that profit at the end of the fund lifetime. But obviously like,
Janis (51:31.216)
Hmm.
Jone FIRSTPICK (51:41.3)
going to conferences and networking there, it's not like maybe the biggest heavy lifting that we have seen, market do. I think that this is really, really important to take into account that, yeah, like some funds will be like that, but you shouldn't be, I don't know, like for founders, maybe it shouldn't matter that much. And they should be really maybe looking more into.
Uldis (51:50.385)
you
Jone FIRSTPICK (52:10.26)
what I'm getting from that money as investment. If they say like we'll be giving support, then it's quite different.
Uldis (52:21.077)
Alrighty.
I think it's a good way to finish. It feels like we will, with each answer there's gonna come another question and this is never gonna end so we will put you not out of your misery but out of your bliss, dear listeners. So thank you very much, Jone, for joining the show. I think I realized that you now hold the record. I think you are now the first person to have four appearances on the show. So congratulations.
Jone FIRSTPICK (52:26.58)
yeah.
Jone FIRSTPICK (52:54.308)
Wow, it's fourth? Okay, I thought it's third, but maybe.
Uldis (52:58.741)
Me too, but then I realized that you were solo guest very early on, then it was some end of the year show, and then you guys with Marius from First Pick, we did an episode back in 2022. So yeah, you hold the record now. Congratulations. Your award is in the mail.
Jone FIRSTPICK (53:21.876)
Thank you.
Thank you. Thank you. That's good. I hope it's my ticket to invest in your companies or something, in your Scrapabc Fund, whatever you called it.
Uldis (53:35.797)
Yeah, for sure, for sure. And to the listeners, we wish you to be as committed and loyal to the show as Jona is and even more. So subscribe, listen, share with your friends and your colleagues and make sure you don't miss the next episode that's coming out every Tuesday. Thank you very much. Have a good day. Bye bye.
Jone FIRSTPICK (53:58.708)
Thank you.
Please note that the transcript text is AI-generated. We apologize for any potential errors or inaccuracies. Thank you for your understanding.
