Interview with Boris Mann
The 7 Questions Interview Series: Angels and Venture Capitalists
The 7 Question Interview Series is an investigative content series where I seek out key leaders in a specific industry and/or subject matter expertise area and ask them 7 key questions that “enquiring minds want to know”. There is a twist however to these questions. I provide the interviewee with a hypothesis for each question to help frame and set context for their answer. This specific series of interviews is ideal for startup founders.
The objective of this series is to establish direct connections with VCs and Angel Investors across the globe and ask them the same set of 7 questions regarding investing in technology startups. I’d also like to know what their appetite is for investing in Canadian startups and why they do or don’t.
Interview with Boris Mann, Managing Partner at Full Stack
When would it be appropriate for a startup to seek investment from you?
Full Stack is an early stage investor in B2B tech companies. We tend to invest in what we define as the Seed 1 round. A team has built some software and some customers are using it. You have to be able to show some product metrics and know a bit about your customers.
We are exploring the concept of venture creation, and actually co-founded one company and helped build the idea and the team around the founder (CommandWear). But we only consider that in very few circumstances – and generally ones where we know the founder well.
What’s more important: the idea, the team or both?
Both. The earlier you invest, the more the team matters. But the idea has to be a venture-fundable idea. I can tell pretty quickly if a team has a big vision that requires venture funding. There is a subtle difference between venture funding and “this business model only works if we have millions of customers”, which is one of the reasons we tend to stay away from B2C businesses.
Of course, there is nothing wrong with getting to break even and/or growing based on customer sales. As an angel investor, we have more tolerance to invest outside of gigantic ideas, but we still have to have some way to get a return – licensing, dividends, acquisition, etc.
What are you looking for in a startup team? What does a winning team look like?
We are looking for formidable founders who will be able to grow, are coachable / like working with us, and will be able to stick with the twists and turns of building a business.
One of the reasons that we look for the team to have shipped software and sold to customers, is that it proves that they can do these things. We’re happy to work with first time founders, but if they can’t demonstrate that they can do these things, and are willing to do the work that it takes, why should we invest in them?
Roughly speaking, B2B software startups are going to fall into a category of being a tech-driven organization or a sales-driven organization. Both need a minimum level of effectiveness of building & shipping a technology product, but one innovates directly through technology, and the other innovates through sales & marketing channels. (Sales & marketing is increasingly a tech supported function as well)
We won’t typically invest in a company that completely outsources its technology, and being able to convince a technical person (a “hacker”) to join the team early is another good sign. On the flip side, if the team doesn’t have experience in marketing and it doesn’t seem like the founders are willing to get better at sales, that’s a bad sign.
So having a “hustler” who can do sales, marketing, business development, investor relations, and so on – is also crucial. Increasingly, being able to have in-house skills around design – and design in the broader sense of user experience, product development, and so on – is important.
Single founders can have a hard time doing everything that is needed, but if we see that they’ve already managed to build a team, that mitigates it.
What are you looking for in an idea? What does a winning idea look like?
We’re looking for an idea that doesn’t have obviously non-scalable elements to it. That being said, “do things that don’t scale” is one of the ways that early stage startups can win early on, as long as they have a way for creating process and tooling that will let them scale later on.
I think there is lots more growth in B2D (business-to-developer) tools. As many businesses become software-enabled or software-supported, there are more and more developers. And they look for tools that make their life easier.
A winning idea looks like a team that is passionate about the space and the customers in the space. We usually get involved at an early stage that both customers and product morph quite a bit before it’s clear that it’s a winner.
Does a startup really have only one shot (at pitching)?
Not at all. We actually try and help the startup and work with them before investing. We hope we can be helpful in a number of different ways, and if writing a cheque ends up being part of that help, then so be it. The pitch is one of the most insidious things. For one, there are very few situations where the “theatrical pitch” of standing up in front of a projector and pitching your concept with some slides will result in an investment.
We like the investment deck better than the pitch. This is the standalone presentation deck that encapsulates a snapshot of the business and answers a lot of the typical questions about an early-stage business, as well as educating the potential investor about the space and customers that the startup is targeting.
This investment deck is standalone, and can be sent via email, as well as being used as the basis to have a discussion around an in person meeting aka “the pitch”.
You’ll want to be meeting with investors early (before you’re ready to take investment, even) and tell them about yourself and where you’re heading. Future updates can show the progress you’ve made. Neither of those interactions are necessarily a “pitch”.
When you’re in full on fundraising mode, you’ll be pitching all the time, asking for intros to other potential investors, and so on. Someone on the team needs to dedicate time for this process. As you do more and more investor meetings, you’ll get better. And don’t be afraid to ask investors for feedback. Are you too early? What criteria would they look for to consider an investment? Can they recommend someone who invests earlier or later to introduce you to?
What’s the best thing you can show an investor during a pitch? Traction. Customers. Growth.
Can you describe your due diligence and investment process? What’s important for a startup to know about it?
We want to meet the team, see their software and marketing efforts, and learn about their current customers and sales process. I often introduce them to a number of people that might be potential advisors, customers, partners, or investors, especially if they have experience in the space that the startup is targeting. Then we’ll want to look at an investment deck and a use of proceeds / budget document.
The 12 month use of proceeds budget will also outline why the startup is raising the amount that it is asking for, and actually encapsulates the assumptions and strategy that the team is making.
If your projections show that you are going to make 40 enterprise client sales in the next 12 months and your budget doesn’t show you hiring any sales people, clearly something is out of wack.
If that all seems like a fit, we’ll talk to the team about how they see us working together and if their next investment round is a fit for what they are aiming at.
Only if the investment is likely to go ahead do we dive into deeper due diligence around legal and financial aspects. The previous work is to really just make sure that we are on the same page of the approach for moving forward with this business.
In your view, is Canada a fertile ground for tech startups? If so why and in what ways is Canada unique and competitive in this regard? Are you investing in Canadian startups? If so, why? If not, how come?
Aside from natural resources, Canada’s greatest resource is its people. We have a great healthcare and education system which is producing many smart talented people.
Many of those people get job offers all over the world. As Canadians, it is our job to do more “secondary processing” at home. That means, driving towards more great digital companies here at home that are large enough and growing fast enough to be of interest for people to work at. Even better, to provide a place to get hired, to come back to, after someone has left Canada and had a career elsewhere and wants to come back.
Full Stack has been investing in Canadian startups. We still believe that early-stage tech investing in Canada suffers from not enough “first cheques”. This causes some of our best entrepreneurs to accept offers at US-based accelerators and venture capital firms, meaning they leave the Canadian ecosystem. These individuals might be gone for 10 or 20 years, especially if their businesses succeeds. The loss to the Canadian entrepreneurial ecosystem is massive.
Finally, we have large firms recognizing that Canada has great talent, and setting up shop in Canada. The recent report on Vancouver by Business Week was talking to Facebook, Amazon, Twitter, Microsoft, and Salesforce – all of whom have offices in Vancouver.
Does Canada have what it takes to compete and win against other areas of the world? I think when it comes to ecosystems, that’s the wrong way to think about it. What kinds of companies and what kinds of support will lead to great tech companies anchoring in Canada?
About Boris Mann
Boris Mann is founder and managing partner of Full Stack, a “napkin capital” angel investment firm that works with and funds early stage technology companies. Boris has been active in the Vancouver startup ecosystem for almost a decade. His first local startup was Bryght, the first commercial Drupal company. He then went on to co-found Bootup Labs, the first startup accelerator in Canada. Boris holds a BSc in Computer Science from the University of Victoria, where he went after a coin flip made him choose between university and becoming a professional chef.