VCs are Sheep, How to Raise Money and Who to Hire

Penta’s Interview with Nigel Verdon - Part 2

Luka Ivicevic
July 27, 2017

In the second part of our interview with Nigel Verdon, CEO and co-founder of Railsbank, we discuss raising money from VCs, and how Nigel got Currencycloud and Railsbank off the ground.

Read the full interview below:

Luka: Hi Nigel, thanks a lot for sitting down with us again. I’ll get right to it.

How many investors rejected you for Currencycloud? How did you guys even get up and running?

Nigel: My co-founding team and I all put in about 50,000 GBP each to get Currencycloud up and running.

Sean Park had also just founded Anthemis and was making investments. Sean and I knew each other from Dresdner Kleinwort where we have previously worked together. My CFO was also very close to a London Stock Exchange listed investment company who put the other part of the money in.

It was quite easy to raise money because of our previous relationships. And this was prior to any “FinTech scene,” or even before the word “FinTech” existed.

Luka: What about Railsbank?

Nigel: On the Railsbank side, funding took longer than expected because we’re building a new sector and the unit economics are not properly understood by investors. Everyone also wants to learn and get educated (especially investors and VCs) which can be a real pain.

Another problem is that there are too many associates and “venture partners,” and not enough partners at VCs that are getting directly involved themselves.

Luka: What were investors looking for when you were raising your first round with Currencycloud versus Railsbank?

Nigel: For Currencycloud, investors were looking for an innovative financial services startup that had a team that knew the industry and with a bit of a track record. When Atlas came along (the first proper institutional VC—with Fred Destin), they were picking up on the fact that there was massive change going on in financial services, driven by technology and open regulation. People were leaving the banks and wanting to make a change in the world. People were thinking “this industry is broken, let’s go out there and fix it” This was primarily driven by the events of 2007/2008 and the credit crunch.

That’s why Atlas were investing in that theme and we were lucky to have them as a lead investor. That became the beginning of “FinTech”. The investment was made in 2011. And then the word “FinTech” burst to life as a media thing, particularly in the first half of 2012.

For Railsbank, it was a similar process.

Investors saw this disruption in financial services and everyone was fascinated with what we were doing. Probably because they had decks from other open banking companies and wanted to be educated on the market. But, the guys who have backed us from an Angel and institutional side did so because of the team and the track record. And they also believed that transaction banking globally was broken and somebody needed to go out there and fix it.

Now that we’re proving that we’ve got traction, we hope closing our next round will be a hell of a lot easier, because initially VCs thought that building a partner bank network was going to be difficult. VCs were looking for somebody who really knows this area and who can walk into banks and close a deal. They were looking also for execution and vision on something that was a real world problem.

And that’s what we have.

Luka: Nigel, I know you personally and I know that you’re always so calm. But how do you always stay calm in such a crazy environment?

Nigel:  I’m not always calm [laughing]. But you can’t force things to happen. Sometimes you have to just let things take their natural course and they will happen. If you try to force things too much, you’ll get awfully frustrated and then the team gets impacted.

So you gotta’ keep it calm. Let things happened.

Luka: How do you decide how to hire people? I remember you mentioned that you and your team take potential hires to a pub for a few drinks?

Nigel: [Laughing] We take potential teammates to the pub to see how they are in a social environment. Sometimes we’ve seen some people turn into completely different people when they’ve had a few drinks. It also gives everybody a chance in the existing team to say “no.” And if they say “no” then we don't hire them.

It’s important to understand the dynamics of the team.

You’ve got to watch out who enters the team, especially very early stage, because one bad egg can destroy it.

Luka: What makes you angry and, or happy, about having a startup/being in a startup environment?

Nigel: What really makes me angry is the false sincerity of some investors. There are many of them which think they’re talented, but in reality, they are just sheep:

“everyone is going into investing and VC so I’ll also go into that as well. And I’ll make it sound as if I’m super intelligent.”

Many investors are pure sheep. But the good guys, are good, and humble, and talented.

However, what makes me happy is getting a good team together and hitting numbers. Which is important. Good numbers and a team is very important.

**

Nigel Verdon is CEO and Co-founder of Railsbank. You can also follow Nigel @nigelverdon

In our next Startup of the Week interview, we sat down with Philippe Gelis, CEO and Co-founder of Kantox. Follow us on twitter to stay updated with our next interviews! @getpenta

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