Francesco Perticarari

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Tell us about the journey you are on

Francisco Perticarari and I am the Managing Partner of Silicon Roundabout Ventures

and how I got into this new world of the VC, this VC I'm literally starting right now is almost by chance.

I am a software engineer.

I've been a software engineer for and computer scientist for over ten years now.

And through this journey of moving to the UK because

I'm originally from Italy and trying to find my way into software engineering, I got together with other people building what is now become the largest tech meetup in the UK.

And as far as Meetup is concerned, Europe and it almost happened again by chance.

It was people like me, engineers, founders and there wasn't really much of a tech scene at the time when it meet.

It was an opportunity to get work, you know, to meet opportunities, to develop my career and, and and help everybody along the journey develop their careers and meet.

And from this pizzas and beers in bars, you know, in pubs actually around the the roundabout that has become Silicon Roundabout, the Old Street roundabout in London, then the thing kind of got bigger and bigger.

And it got to a point in between 2018 and 2019 when we were like, OK, so we've helped two unicorns come together.

I know the team presented their initial idea and rebranding, and we followed them along.

And startups go more and more advanced as in more and more based on actual computer science or physical science.

And I remember along those years is when this started to surface in the media that deep tech word and people talking about deep tech, but then most of the people actually being either from banking or low backgrounds.

And, you know, we were just there with this meetup and all being engineers thinking, well, maybe there is a chance of actually helping engineers by being engineers to engineers or scientists to scientist and helping them with initial capital.

The last year started to make some engineering investments and then this year again, still with my own capital, my co-founders capital, we have made four investments out of the fund and hopefully fingers crossed in Q1 next year will be joined by some institutional investors in the fund, one who is already hard committed.

And so the idea is to again foster more deep tech. Let's call, even though I kind of hate the word advanced technology innovation, but coming early, you know, not waiting for companies to have hundreds of thousands of customers or a proven model, but actually in the pre-seed, early seed stage by actually looking at the technology.

What makes Silicon Roundabout special?

I'm not sure, I mean, I think for us, the fact is that I, you know, I did it without even knowing I was doing it. Like I said, you know, at the time I was for most of this decade, I was focused on actually being an engineer.

And it was only like a sudden realization in the last period that I was hold on a second. And it's like any of these actually build something in this communities alive. I can reach out to, you know, the city of a company that has become a unicorn and, you know, I can reach out to.

And he was the guy that used to come to the pub in the early days. It was like, You know, this is this is something so Y Combinator, I think eventually it was a business and it's the venture capitalist business.

It's got a different approach from, say, a later stage VC. But you know, it started out that way, and it was that way. The meetup never was. And even now, you know, we're launching our first, in a way, commercial aspect to it.

I mean, in the past, we've been through the community, we've been taking sponsorships, done events, helped other organizations like London Fintech Week do hackathons. But that was almost like a side gig that I would do out of passion, right?

So as I was again, coding and building stuff. So I think because of that, I wouldn't say necessarily stronger, but definitely definitely different because I've seen, for example, this year I've invested in a company that I've that I've known the founder through the community for a couple of years.

And, you know, through this time, you know, with the community helped grow , shared dinner with them and we've communicated over this time. And when she finally moved from having an idea to be in a position to actually build the company, she was there.

So and that is kind of advocating what I think, which is this community doesn't build a cohort and expect results from that cohort. This community is there for people to join and most likely, the ones that join today and participate in meetups today that so they are doing that might be building a successful company in maybe two years down the line.

And so it's kind of this very almost patient approach. Is that besides, we don't take any equity or fees for people to join, and the reason of launching a VC on top is precisely because of that. Of keeping the two things independent, not having to basically start to charge fees or taking equity for people to participate in a street program.

Because what I see in practice is that there isn't a timeline. Some people come and never build the company they're wanting to build. Eventually, some people come and build it in six months and people come and now really have a company and they actually like in the running.

And some people take two years. So the idea is that the community is there to help everyone. And then if any of these actually fall into the specifics of what we're interested in, then the funding, which is, you know, considering physical science early stage, then we're happy to support them financially.

Otherwise the community is there to support you no matter what, at least in terms of connections, right?

What is your investment thesis?

So at least I'm not saying it's better, stronger or weaker. I think it's just different. Yes, this strategy is kind of specific because in a way, I want to stay focused.

And you know, what I normally say to people is that I, you know, crazy enough I I have the belief, you know, that I might be better off distinguishing somebody that has built a good, actually innovative machine learning algorithm versus someone that hasn’t.

But I probably wouldn't have any clue if I had seen I don't know TikTok or Snapchat coming to me at pre-seed and versus somebody that had a similar idea because I don't know. Like, I don't necessarily maybe I would have been able to make the call. So actually being focused on what I know and making the decision about whether I believe that they have some real innovation and they are in the right trend looking at, you know, microtrends across the industry, no way makes me feel more comfortable.

And so even though for crazy as it may sound, you know, we're actually in the far out edge of frontier tech. In a way, it's easier because I can actually get my hands dirty, look at the tech, speak to the team and then realize, OK, at the very least, there is innovation.

At the very least it's on a market trend. Then you never know, right? The market might turn. There might be other issues, whatever. You cannot predict that, but at least I can de-risk my choice based on that versus just I don't know.

I think it's a good business that has some good traction. I'm just going to give you some checks. On the other side, in terms of portfolio, it's our first funds, it's a small fund we are, but we still are trying to target 25 investments overall between now and the next three years.

It's going to be slightly slower over between now and mid-next year, just because we are in the process of launching it. And then probably like peak end of next year, maybe the year after and then finish that same year.

Also, because we have a lot of deals that are kind of warehoused in the community that ideally want to bring in as soon as as soon as we can close the next close of LPs and keep doing that basically have set up ready before.

So let's assume, you know, we get to 25, you know, but obviously that's a plus minus, you know, they deal in my numbers. The ones I've been modeling on. I'm pretty geek on models is is that if you invest in any less than 15, like at Pre-seed, seed, early seed.

The risk is so high that yes, you may get lucky, but it start to become gambling more than investing, on the other hand.

And you know, I'm also familiar with all the research done by the likes of 500 Startups, you know, and the larger portfolios to say, Well, you know, you actually even 25-30 is gambling because you should invest in 500, and that has a point. But then, on the other hand, you can never outperform. And that is not just true of venture. That's true of hedge funds. That's true of anything, you know, even immaturely you invest in stocks.

And of course, you know, it's not something you need to worry about. So I do have it's just because it's safe. But on the other hand, if they back a few companies, I'm not going to have 500 of them.

Now, the mechanics of what's going to succeed or not take into consideration a lot of thinking. one which is ugly to say because you would never want to say that because it sounds like you're taking away from the founders, but it's also thinking about how investable the company is for the investors that come later and especially for a small starting out fund. And I think actually you and I actually spoke about in the past, but basically, you know, it's, you know, for a small is it fund that cannot just afford to follow an until Series B and then lead round and there's Series D like some, I don't know, say U.S. investors, family office type can do.

We do need to take into account whether we think that after our initial check, an initial round start up can be palatable for the follow on investor so that eventually can then continue to grow because otherwise, you know, it's just delaying the inevitable.

This is very it's not even really a science. It's hard to fathom. Honestly, I keep my connections and I try to understand, you know, how far I also understand the milestones. You know, if I give Company X this much money and I'm joined by so many other investors and I put them in touch with so many others.

And let's say the round comes together. What are they going to achieve by the time they come back for money, when potentially I'm not going to be in the position to give them any, and I just need to refer them to my network with my network be able to to invest at that point once they've achieved those milestones.

And so, you know, this kind of balance in all of this between having a concentrated enough portfolio that can drive results above the median, obviously taking some risks in return, but having a big enough where it's not just pure luck because you have, you know, across three years taken in a series of investments and equally understanding that you do all of your due diligence.

And at the end, you also try to understand whether this investment will progress the company far enough that somebody else will be able to help them grow at the next stage.

Do you think smart contracts are the future of venture capital?

As an engineer, my only experience building smart contracts has been on the Ethereum blockchain, which was a few years back. It was before this new Ethereum 2.0 we know that is, I mean, hasn't come out yet, but it seems like it's coming.

But, you know, I have built some, at least in there. And in terms of whether I think it can replace the VC I mean, not anytime soon. Eventually, I mean, can you have a space? Possibly. I mean, it's like, look at the end of the day, it's like, I've got some cryptos back in was like 2013 when I think bitcoin was like 100 grabs, 30 pound sterling a coin. Then I lost my private keys there, and then I go back into it through the Ethereum route. Like I said, I was developed. I was told to develop some stuff and I was like, Oh, no, actually, this is grown.

And then I checked out how much bitcoin had gone through, and I was like, Oh my God, why did they lose this? So that was 2017. So I did some work in there. And then I also began, but some cryptos myself, just because again, like, I'm the person that is open minded, right, it definitely has potential.

Would it replace everything? I don't know. And it also depends like on the timelines we're talking about. I think. The whole ecosystem in terms of investment is very complex So in terms of managing to replace the whole thing. It's a bit like, for instance, saying can't we replace the due diligence with machine learning because it's private market and a lot of information is coming to us by PDFs and then asking questions to founders. And yes, there is some parts where you know, and again right now, like my fund is early stage, but as an engineer, it's something that I want to bring forward later on.

Once we are figured, you know, potentially look at ways to use data in a more automated fashion when it comes to scraping web stuff. But when it comes to very early stage pre-seed, seed companies, there is a lot of noise and a lot of non digestible information is not as the same as, say, a publicly listed company is that you can just get standardized reports.

And based on that, you can at least try to do algorithmic trading. So it's not like that. And I think for the smart contracts to take over the whole system, I think maybe incrementally can start to take a position, for instance, you know, take a small type of investments, perhaps maybe is more like growth stage. Those things are things that should be more aligned and maybe there is more data. So potentially be able to have a more diversified portfolio again, taking more of an indexed approach.

Like you said, there potentially can be something in that fashion. Why not? It's all about finding the right formula and then proving that it works. And then eventually people will follow on. Right now, as three or four years ago, there seems to be another wave of COVID positive momentum behind the technology.

So again, you know, going back to your question, I think it won't replace the VC any time soon, like short time, because right now it's like humans still have that edge on machines. Can you take a part of the game?

Yes. I haven't seen an application that I would have. So like, Wow, that works already. But if I do see it, I'm not necessarily going to dismiss it. I think, you know, it's definitely up for grabs into doing something more automated the same way that there's going to be more and more ways that data will be used in other parts of the of the process that right now are not mainstream yet. But over time, we'll just get better, I guess, and take their own slice.

What comes first? Money or Talent?

It I've I've seen both. You know, I've seen cases where the right circumstances are even talking about just here in the UK, but then I guess it's all over the world. I mean, by reading a line of probably seeing things that I don't know personally, but I can also see that being singular. So I've seen both. I've seen cases where money has come and kind of a potential story has become successful and it's very hard to tell whether had in the right environment.

And I'm thinking like some COVID enhanced start ups that got, you know, rather than being disadvantaged, got advantaged by this panic of the world is just going to go online. We all need to invest into what's going to empower it.

You know, and we've seen it in the public market. I mean, Zoom's valuation, just like going off the charts in terms of multiples or anything that has ever been before, just because like gold and I'm not saying the Zoom doesn't have quality, I'm just saying there definitely was hypes in in certain circumstances, but this didn't happen just there. I've seen other cases where for whatever reasons, and it could be even like personal connections of the founder, somebody can just get enough traction of funding that allows the person to get to talent. And then it's kind of a spiral from there.

It's definitely harder if you don't have your network, if you don't have friends that can write you even like 10,000 checks, you know, like I'm talking about being able to put together a 100 K just on friends with nothing, right?

If you don't have that, then it has definitely to be talent because you don't have the funds. And in that case, then then it is talent. So I would say that it mostly is talent because not everybody would have the luck or the circumstances or the network when you don't have connections.

But in the other sort of scenario. I've also seen it happen. I've also seen it, and I think we've all seen it failing spectacularly. And where in the UK there was a recent example of a bank that tries to mimic what the fintechs are doing.

Spend millions on a project but just blatantly failed when they launched. We've all seen sort of, you know, startups being created kept secret, raising billions of fundings and then eventually not having the product. I mean, like, you know, it's this is an easy target, writes a cheap.

Should they shot to say Theranos, but they're not the only one. You know, maybe they're one of the most spectacular for the whole process that ensued from there, but they're definitely not the only one. And so when it comes to money first, I think what happened is that if money came and there was some talent there or the market was strong enough that eventually that talent will come. Then it was a win. Win money met something that just wasn't there alone. It couldn't move the needle.

On the other hand, unfortunately I've also seen talent not meeting the right money at the right time because of again connections. You know, like what the ecosystem wants to invest in what they think is the time or not timing, etc. And unfortunately, that's a problem because you may die.

You might argue that once the startup gets a certain level of traction, the horizon, all investors can broaden substantially. But you know, that's also the game. You know, you try, you fail, you build connections. And maybe the next time around you've got some more network to try again.

And that time you know what these investors want. And if you haven't given up, then you might find it easier. So I've also seen that. So I guess it's a it's a case of talent kind of should be there.

I think the market needs to be there even more as in like the demand that eventually can open up doors and then money. I've seen it create more. I've seen it accelerate the pace much faster or I've seen how the talent create.

But also I've seen the talent being able to eventually win money over and then create this power

Can Europe compete with the USA and China?

Europe just needs to pick up some courage to dream and go bigger, because I think a lot of. And you mentioned, for example, luxury brains, I mean, right now luxury brands in Italy are almost like on sales because the first generation of the actual people dying out or retiring and children, offspring's not wanting to continue on with this mentality of it's a family business.

American brands come along and just buy out in their portfolio.

And now we've seen acquisitions out in the venture space because of just the Americans having this capacity to look ten years down the line.

And so I think in Europe, things are changing, but they will take it will take probably the ten years you separately, another decade for people to start to dream beyond, you know, to actually start to like, go even bigger than than what's been done so far and not accepting just a tiny little exit and just like sell it on American because Americans, at least on their side, they have this ambition.

China is a story on its own because it's living in its own bubble of self-sustaining market where they invest and grow internally.

But but they're also rich now. You know, there are some corporates from China that are, you know, they are here in Europe. And, you know, despite the political issues, they do talk to players and they do play under the radar and also in the U.S. despite Trump, there are still things happening.

So I mean on the private side, you know, it's not completely isolated. But yeah, going back to Europe, I think you're right that the fashion runs and all of the tradition is great. But until people start to actually stop thinking about this funny little thing and look more as a potential corporation right there will still be lacking because, you know, Americans are able to look ten years down the line and say, Hey, listen, dear, you know, Corporation A going to give you this much that and as much cash to go and buy out your Italian rival and now become much bigger corporations.

But it's US based and we've seen it over and over. And now we're starting to see an even in the VC world, you know, where Americans just drove cheaper money to go and buy, not because of today, but because of what is going to be ten years down the line. While in Europe, which frustratingly has the capital to do that, doesn't do it. You know, we still don't see that. Hey, you know what? I'm going to give you half a billion or even 5 billion to manage to go and buy out other things, you know, like to grow bigger than Europe.

I think that's a cultural issue.

How mature is the early stage investment market in Europe today?

I mean, I see two trends here, and I think, you know, I speak for London because it's kind of the more mature market, but I think to a, you know, slightly reduced extent, it's applicable across Europe, obviously Berlin and Paris, probably.

And Sweden, let's say, following sort of closely behind and then the rest, you know, at various degrees behind. I think there has been definitely a higher increase in attention to startups. That's great because the system is maturing. And I think what we've seen is also capital coming from overseas, for example.

I mean, it's now not common knowledge that the likes of Sequoia's have set up an office here in London or in Europe. And and so that's so great. I do think that there has been some money coming back from, say, equity founders that have successfully exited in our reinvesting.

But I also think that the system is still fragmented when it comes to the very early stage because some of the initial early stage funds have now moved up in size or they have become very generalistic but they still effectively can only invest in so many companies per funds, whereas the innovation landscape is becoming bigger and bigger in the sense that today, you know, yes, you've still got general tech.

And I think for that there is still a lot of funding available across all stages.

But then when it comes to say, you know, right now, I'm looking at a company that is doing battery technologies and they're not even going to have revenue for at least three years.

And so, you know, somebody that can take a gamble on the pure technology, depending on which sector, there is still a little bit of a gap again.

Also because some of the specialists that did successfully start earlier have now moved up in size, and so minimum cheques starts to be around the 1 million or so

What is the role of universities in gestating startups?

Cambridge and Oxford definitely have, you know, a long history of innovation, but I think in general and you know, perhaps Cambridge, Oxford, where a little bit further ahead than everyone else.

But in general, in Europe there has been a kind of a tech transfer type of build technology and solid corporate that was kind of even preceding the whole startup movement, even before startups or a thing in Europe.

And so that continued and it kind of naturally develop more and more towards the startups. Universities started to realize that it wasn't about taking 25% of the IP and sell it to buy for, you know, a couple of million.

But actually, it was a matter of taking a tiny slice of a company and making it more startup and having venture capitalists and angels help it grow and let it become actually a creator of value over time. Not just something that you know, it was just a matter of an IP quick and dirty sale. However, as that happened and some investors that were close to the scene kind of gravitated naturally towards it.

There's also been the opposite what you said, you know, people that have this is not necessarily anything to do with that particular, you know, PHD spin off a university, but just say an engineer from Bristol that just was passionate about energy or somebody that was studying biology at Imperial, but was crazy about data science and couldn't understand why we couldn't do something about the backend data.

That's the bank and the open banking that is now available in Europe has allowed. And so, you know, why not do something for it and so like doing side projects and eventually becoming a startup? So personally speaking, I'm actually more excited about the latter.

Not that I wouldn't do the first, you know? And obviously we do speak to universities and we're happy to support people. But I think it's great that it's starting to become a thing where people could just meet up and build something which is actually technologically advanced without necessarily being, you know, like the traditional PHD that stays in academia and it comes out. And of course, that is still there and history is developing. one thing that I would like to say is that even though the system has matured, I have noticed that is not equal across all universities.

And so Cambridge and Oxford has moved along quite a long way since the early days. But a lot of our universities are only now starting to get to grips with the whole of startups at. And that's not just your case across Europe.

I mean, again, I'm Italian, and I left the country over ten years ago, but I still have close ties there. And I think that's a problem because I think it's kind of hindering the process. I mean, I've had actually a personal experience with people that had to drop out of universities and have to almost kind of like get almost to the point of lawyers just because they couldn't find they couldn't find an agreement on shares. And I think there are still loads of universities and within universities faculties. I mean, some some universities are actually made up of different parts.

There are still thinking about the Oh you work for me or you were a student here. I gave you the lab and I need to take the IP or I need to take 50% or 25% of your company where that's definitely not the right attitude, because it's not about who owns what it's about. Do you prefer to own 25% of zero or five or two or 3% of billion dollar company? So are you happy to help create this company? And I think this is a mentality that still needs to sink in into certain places, other places I've started to to see it this way. So I think hopefully over time, more and more people will learn that it's much better to help engineers and entrepreneurialism try most likely fail and if they don't fail, actually help create value over time.

And it's those that that do make it that can give value back to to the institutions.