Goncalo de Vasconcelos: Founder of SyndicateRoom, investor-led equity crowdfunding. 

Podcast transcription - 7th march 2018

Peter Cowley:                  Welcome again to another Invested Investor podcast. This time, I've got Goncalo from SyndicateRoom ... the founder of SyndicateRoom ... I have known for five or six years. He's become a friend. We're going to talk through his journey and the various journeys he's experienced of the businesses that he's helped raise investment.

                                             So Goncalo de Vasconcelos, a bit about your background.

Goncalo de Vasconcelos:             Hello Peter. Great to be here with you.

                                             A little about my background. I'm Portuguese. I was born and raised in Lisbon where I studied an engineering degree. Then eventually moved to the UK about 14 years ago to study at Imperial College to do a Master's.

                                             Halfway through the degree, I had a job offer in London but actually I would study for a little bit longer. That little bit longer ... that one year ... ended up being 14 years and counting. It has dragged for all the right reasons.

                                             I started working in London after that. I've always been very entrepreneurial, so I also started my own business at the same time. It's a very small business, but that was what allowed me in 2010 to move up to Cambridge and to do an MBA at the Judge Business School in Cambridge.

                                             That's when I had the idea for SyndicateRoom, and when I actually met you as well. That's really my story until now.

Peter Cowley:                  Good. Okay. Let's talk about the idea how that fits into it. It was very early days for the point where electronic platforms were going to be used to raise cash. Talk about your idea ... how that developed while your MBA and then the launch of the business.

Goncalo de Vasconcelos:             The idea actually came from working with people like yourself when I was working during my MBA and I was with you at Business Angels and VC's. I started seeing crowd funding, in the sense of rewards crowdfunding, like Kickstarter. Equity crowd funding was just starting to appear. I could see the appetite by individuals to invest in the same businesses that Business Angels invest.

                                             What they had available online was not the same thing as ... it wasn't in really exciting companies, incredibly inspiring and of interest that I could see people like you investing in. I thought, hang on ... I could see those companies also struggling to procure large funding together from Business Angels. I could see people online interested in investing into those businesses. Why not put the two together? And that's really how SyndicateRoom was born. We created this investor-led model whereby there's always a lead investor, or lead investors, be it Business Angel or venture capitalist or Family Office.

                                             Then what we allow is online investors to invest alongside those lead investors. Our whole vision is that it shouldn't really matter how much you are investing, be it a thousand pounds or a million pounds. On a pound for pound invested, everybody should make always the same amount of money.

                                             Everybody is sharing the risk and the reward fairly. That's really how SyndicateRoom was born.

Peter Cowley:                  Yeah. So you formed the company when you were still an MBA, didn't you? Because a little bit of-

Goncalo de Vasconcelos:             Soon after, yes.

Peter Cowley:                  Soon after.  Family and friends' money, which I joined in at that point.

Goncalo de Vasconcelos:             Yes.

Peter Cowley:                  So this was just a very small investment in the low 10's of K at that point, wasn't it?

Goncalo de Vasconcelos:             It was, I think, our first round was about 15,000 pounds, which I somehow managed to stretch for quite a few months and do the technology, all the legal background work, with the help of people like Tim Bellis who is now our chairman. Back then, there was also I knew that no one had really built a similar platform in terms of technology. No one had really gone through the FCA to get authorization to this type of platform.

                                             Everything was so novel that there was not really the expertise available to just do it quickly and sort of an off-the-shelf sort of solution. So that was really the initial struggle ... how do we build this thing. The other struggle was how on earth are we going to find investors to help us with this vision and invest into this vision. Because it sounds a little bit absurd now, but actually only five years ago, no one really believed that anyone would ever invest online.

Peter Cowley:                  That's similar for any start-up that's trying to again to a disruptive market, or a disruptive market.

                                             You have a co-founder, Tom Britton, who also did the MBA with you.

Goncalo de Vasconcelos:             He did two years after me. He joined about a year and a half into the journey as I had sorted the legals and the base of the technology. When he finished his MBA, that's when we launched SyndicateRoom at the end of summer of 2013.

Peter Cowley:                  Okay. Before that, you had raised the two family and friends rounds. And another round? Or was that just about to happen?

Goncalo de Vasconcelos:             That was about to happen just before Tom joined.

Peter Cowley:                  Yes.

Goncalo de Vasconcelos:             That round, unfortunately, one of the lessons learned was it had the wrong investors involved in the rounds and that about 48 hours before the company was running out of cash, but we had the funding round sorted. So we're not worried. We were actually very excited about right, let's finally start building the business. It was a small round. I think it was about 150,000 pounds or a little bit more than that.

Peter Cowley:                  Maybe a bit more than that. Okay.

Goncalo de Vasconcelos:             Maybe 180 or something like that. 48 hours before we were going to run out of cash which was on a Friday, but we had the money already in escrow account. So as far as we were concerned, the round was sorted. Tom joined on Wednesday. On his first day on the job, soon after he joined, I got a phone call from investors changing the terms of the deal, and then eventually making the whole deal collapse. I didn't really want to work with that kind of investors.

Peter Cowley:                  Exactly. Okay. In return, I think we then brought in Jonathan Milner, who's very open about his investments in this business.

Goncalo de Vasconcelos:             Yes. Correct. So, as the funding round collapsed and we all sat around the table trying to rescue the round somehow, and therefore the company, and as I had just fired my co-founder on his first day on the job and proceeded to ask him to work for free instead because we didn't have any money to pay any salaries. Which he did accept.

                                             We had two days to rebuild a funding round that took about six to nine months to build.  A lot of the investors that we had were great and were really supportive, like yourself and others like yourself. They actually, a lot of them increased their stakes a little bit, but it wasn't enough to close the full funding round. So they said, "Look, we are increasing our stake, but you need to find the rest of the money,"  in 48 hours in August when everyone is away on holiday.

                                             And that's when I had a phone call with Jonathan and before I really knew him. He wasn't interested in investing in SyndicateRoom because it's too early and too outside of his type of investment.

                                             But he did invest. And then, the rest is history.

Peter Cowley:                  And he's still on the board, isn't he?

Goncalo de Vasconcelos:             He invested and said, "That's absolutely fine. I'll invest. But I will not be involved because I'm too busy." He was the CEO of Abcam, particularly 2 billion pound company at the time. He's no longer the CEO. And then eventually he joined the board of directors of SyndicateRoom.

Peter Cowley:                  So you'd raised a total of a couple of hundred thousand at this point. The tech was being done by somebody in Portugal, so the cost was kept lower there. How big was the team at this point? Just you, Tom, plus one or two others?

Goncalo de Vasconcelos:             No, no. At this point it was just Tom and I.

Peter Cowley:                  Okay.

Goncalo de Vasconcelos:             Then a friend joined us soon after that. I can't remember the exact month, but soon after that. And then we start to building the team up to four or five people.

Peter Cowley:                  And so, when was the first deal put on the platform then. How many months from the point of getting a decent amount of money and the first deal where you could actually generate some revenue for fee.

Goncalo de Vasconcelos:             The first deal that we closed was at the very end of 2013. Then, 2014 was really when things started happening.

                                             At the beginning as we had only startup, the entrepreneurs as I was and still am always very optimistic and I was looking at, "Great! This is the best idea ever." I'm going to switch it on and people just run toward my website and everything is going to be absolutely fine.

                                             Then a few months into it, Tom and I were looking at our website and our website starts. And we're looking at each other and thinking, "Oh, are we doing the right thing?" But the fact is, all of these things always take longer than you plan. I remember you telling me about it and I'm like, "I know they do but not this bad. This time will be really quick."

                                             It was not until 2014 that things really started kicking off. And then we started getting more deal-flow. Then you get the track records and it makes it easier. It's just like any new business. As you grow and you gain that track record, it becomes easier and easier to acquire new customers.

Peter Cowley:                  And so, with any platform ... because you're a platform ... you've got a cost of acquisition of the customer both sides. In many cases, platforms, as they grow, become imbalanced slightly. Did you get an imbalance in any form? Too much cash? Not enough cash? Etc.?

Goncalo de Vasconcelos:             Absolutely. All the time. It wasn't an imbalance of just one way. It was almost on a weekly basis. One week we'd have too much cash and a lot of the deals getting funded. I was not being able to provide enough deal flow for investors, which means that investors eventually start going elsewhere for deal flow.

                                             Other times we'd have that deal flow and then investors would be away on a holiday or whatever and we don't have enough cash. And then we'd have companies on the phone saying, "When is any investment going to come through?"

                                             It was a constant battle. As we've grown, particularly now, it's balanced because you just have that required size on either side to keep it going without ... those imbalances will always exist, but they're just not that significant anymore. But at the beginning, it's hugely-

Peter Cowley:                  I think everybody thinks that, or zig-zags or whatever

Goncalo de Vasconcelos:             Yes. You keep on focusing. "Ah, we don't have enough investors." Focus on investors. Then, "Ah, we don't have enough companies." Focus on companies. Keep on that sort of thing between the two.

                                             That's just how you build a business. You just have to be prepared to go and firefight wherever it's needed the most.

Peter Cowley:                  Yeah. So before we go on to some of the people who've been through your platform, the successes and failures, can we just talk about your funding journey. At this point now, we've raised 180 or so K. There's another round probably needed quite soon because the team is probably five, six, seven, eight at this point, is it?

Goncalo de Vasconcelos:             Correct. So the beginning, when no one really believed that anyone would invest online, was the really tough part. And that took a really long time to raise the funding round. When finally we thought we had the first significant funding round, we had that episode of nearly collapsing and Jonathan coming in. When you thought you were over the worst part of it all, actually the far worst was yet to come.

                                             Eventually after that, it became easier and easier because then you proved the model. Then you can show that you have some traction, you have some revenues. Yes, they are small revenues, but they were ... but we needed ... I think the next funding round was about half a million pounds, I believe. But then you already have some metrics to show. You already have a team around you. The investors start to see, particularly the early investors, that you are delivering on what you said.

                                             And yes, not everything is going according to plan, because it never really does. You have to adapt. But the fact was that they could see that I was working really hard. We were all working very hard to achieve what we said we would be achieving, and we were achieving. And that made it easier.

                                             And then the funding round after that was 1.2 million pounds. From the 6-9 months of the first round of about 180 thousand pounds, the 1.2 million pounds, we raised it in less than 24 hours-

Peter Cowley:                  Wow!

Goncalo de Vasconcelos:             ... so that is a huge difference.

Peter Cowley:                  Of which a good proportion was from your own members. Your own investors.

Goncalo de Vasconcelos:             Correct. I had this quarrel with Jonathan that he wanted to invest the whole 1.2 million pounds of the round, and I had to beg him not to because I wanted to bring our own members as brand ambassadors.

                                             So he said, "Fine. I'll underwrite the whole thing.  And if you can't raise from other people, I'm interested." And that's really how we did it.

Peter Cowley:                  And then you raised the last round was-

Goncalo de Vasconcelos:             3.2 million.

Peter Cowley:                  3.2 million. Excellent.

Goncalo de Vasconcelos:             We oversubscribed. We wanted about 2.2 million and up through 3.2 or something like that. And again, it just became easier and easier. As you grow, it just becomes easier. Investors become more comfortable. You are delivering on your promises. I'm always very open with the investors on what's going well, what's not going so well. I report regularly, so that's one of the really sort of lessons that all entrepreneurs should learn as early as possible in their journey. It's just, report to shareholders. Even if it's just an informal email every month, they will really appreciate it.

Peter Cowley:                  I've got a great example of one that does that wrong here in Cambridge where we haven't had a report for over two years. The business is still trucking on. It's probably a lifestyle business. They're surviving clearly because two of the directors are feeling out loans at the moment. But the entrepreneur still hasn't reported.

Goncalo de Vasconcelos:             We've had examples of that. So we've seen companies that were not doing too badly, and then end up running out of cash because they raised the money. They didn't report for 18 months and then their first report was, "Quick, we need more cash." And guess what ... investors will just not have the trust in those entrepreneurs, and they will write off their initial investment. They would rather write off their initial investment than to put more money, and then for the entrepreneur to disappear for another year or two until they need more money.

                                             We've also had companies that have reported to shareholders, monthly or quarterly. Monthly sometimes a little too much. But certainly quarterly, that is, I consider a perfect sort of frequency. Because investors know what's happening ... they know not everything is going well but they also know the company's evolving ... when it comes to the funding round, there are no surprises. They are told there will be a funding round in six months' time, and then in three months' time. And when it gets to the point, everyone is suspecting it. There are no surprises. They are incredibly supportive of the business, even when not everything is going as well as planned.

Peter Cowley:                  That's a really important lesson for entrepreneurs, but also for people who want to be more invested investors, because they must ensure this communication. I write into shareholder agreements, if I'm doing the term sheet, quarterly reporting yearly face to face in lieu of an AGM. Still difficult to get entrepreneurs to do that, but that's the idea.

Goncalo de Vasconcelos:             At SyndicateRoom, we actually have realized the importance of this, and we demand quarterly reporting by entrepreneurs, and we do chase them for it. Of course, if they refuse, we'll need to follow it up eventually on a legal basis. By the time they're refusing, and we have to go on a legal basis, something is going very, very wrong with the company already.

Peter Cowley:                  Yes. You kept true to purpose in terms of what the original pitch and what I invested in, the others invested in, all those years ago. You've added some bold funds, haven't you? There's a fund sitting there, etc., etc. ... maybe what your vision was for these size, the market wasn't quite there. Or maybe the vision always was to put on a number of ... can you just talk through that process, making those decision?

Goncalo de Vasconcelos:             A few months ago, we turned four years old from being live. I presented the first-ever pitch I did to investors. Exactly the same slides. It was remarkable how much of SyndicateRoom four years older was already in those slides.

                                             So the vision that we worked from the beginning is still exactly the same. There's this fair transparent access to the investments that the professionals are investing in. It's always been the same and it's going to remain the same.

                                             The bolt-ons most of them planned ... I mean, hindsight is a beautiful thing and it was mostly by coincidence, I believe ... there's no way I would have had the foresight to have guessed all of that. The fact was the bolt-ons that are really working very well were all first of the first presentation.

                                             So for example, Fund Twenty8. The name wasn't there but the fund was. And remarkably, the amount that we ended up raising last year. first ever pitch. And then the ones that didn't work as well was our expansion into capital markets. It was never part of the first pitch. It was an idea that we came up with and we started getting excited about it and we executed. And we executed really well but it's a very different world from private companies. It's not a world that we're particularly well-suited to. At least, not at the moment.

                                             So, it is working. But it's not working nowhere near as well as we thought it would. We basically reduced the amount of interest within that space.

Peter Cowley:                  Without giving any secrets away, what's the future look like? You know, in terms of the business.

Goncalo de Vasconcelos:             Yeah of course. One of the things that's really important for SyndicateRoom is to gain the trust from investors. I always said from the beginning, and actually we're not the first to hear that, is that for me to work with the passion I have for SyndicateRoom and to make it work, it has to be by doing the right thing.

                                             Something that I'm really proud of and there's no cutting corners or taking shortcuts. That's one of my regular advice to entrepreneurs is build something that you're really proud of. You can look back and say, "Right. I, together with the team, did this." If it's something that you look back and you think, "Oh, actually I'm a bit embarrassed about that and I wasn't very honest or something like that," just don't do it.

Peter Cowley:                  Yeah, so if you're really proud of it and you fail, at least you-

Goncalo de Vasconcelos:             Yes!

Peter Cowley:                  ... your pride is still there. This failure-

Goncalo de Vasconcelos:             You'll learn and yet you pick up again, and you try it again.

                                             And also, I believe that investors ... those investors that backed you ... if you reported to them on a regular basis, if you build something you're very proud of ... it just happened not to work out because maybe market conditions weren't good enough. Maybe there was a downturn. Whatever may have happened. But then when you try it again, investors will trust you because they know that you've put really hard effort to make it work. And maybe the first one doesn't work but maybe the second will. Or the third one.

Peter Cowley:                  Yes exactly. So they've still got people now. So both the staff and the board. So staff, you're about 30 people now, of which some are in Portugal, some here, and some in London ... here in Cambridge. Okay, that's built up well. I would suspect that the culture's really strong, that the cohesion of the group's good. Any tips about hiring or firing, for that matter?

Goncalo de Vasconcelos:             Yes loads. So Tom and I, neither of us had any experience in hiring or firing, for that matter, when we started. The first person we ever interviewed was Fran. She ended up being our first hire. I still remember vividly that interview where Tom and I, we asked Fran, "Explain it in your own words what the SyndicateRoom do." And she explained to us in such a way that Tom and I looked at each other and we both thought exactly the same thing, which was, "I wish I had taken notes to put it on our website," because it was a phenomenal explanation. We were so impressed, we hired Fran who is still with us and practically a co-founder because she came in so early, as many others that we have. And that was really what defined SyndicateRoom. And we were, in many ways, lucky because we hired the right people without knowing much about how to hire people. It was just a personality fit. That is not to mean that we are all the same. We're actually very different.

Peter Cowley:                  There's a chemistry. You don't have to be a clone to have a chemical bond.

Goncalo de Vasconcelos:             The fact of that is what I call the first wave of recruitment in SyndicateRoom was crucial in defining the culture of the company for what I call the second wave of recruitment as we started scaling up.

                                             All of those people are still around. They are people that I trust entirely. They trust me entirely. We work really well as a team. We doubt that ... it would have been absolutely impossible to get SyndicateRoom to work what it is today.

Peter Cowley:                  But you've also had to let people go and people have left, I'm sure.

Goncalo de Vasconcelos:             Yes. So some people have left. It's a high performance culture. That's not to mean that it's long hours. It's just working really smartly and having fun. That's crucial, because we all spend so much time in the office. Most of our awake hours are in the office. You have to enjoy it. You have to really love what you're doing and the people you're working with.

                                             If you're not, you're better off going elsewhere, to be honest. And that's really important for us, that we have communal tables for people to sit around with their laptops like a café and they can work all together. Even if they're working on different things. That's really important. People have left and they were mostly people that didn't really fit into that culture. There was a firing era. In hindsight, yes, but at the moment you were hiring, could you have noticed that?

                                             Sometimes you have this sneaky suspicion and you should have just acted on it.

Peter Cowley:                  Hire slowly, fire fast.

Goncalo de Vasconcelos:             Exactly. And that's one of the things we need to learn a lot more is to fire fast. Both Tom and I are-

Peter Cowley:                  Too nice.

Goncalo de Vasconcelos:             ... we're just to nice, yeah. Sometimes, we are. Sometimes, we are. Which works great for some things, but then some others maybe we shouldn't.

Peter Cowley:                  It's all part of the learning, isn't it? Yeah.

                                             Can we talk about the board. So, just talk through who they are and what value they've brought.

Goncalo de Vasconcelos:             We are incredibly lucky with the board of directors that we have. I wish that all the companies, all the start-ups, could be just as lucky.

                                             Tom and I as active directors, as the co-founders.

                                             Then the first non-executive director to join was David Gill, who was the managing director of St. John's Innovation Centre. He worked for HSBC in the past. He has been involved with venture capitalism, investment. He has been a part of St. John's Innovation Centre.  He has a wealth of experience in that space. He kindly accepted my invitation to join as a non-executive director, and his wealth of experience and knowledge and understanding of people is crucial.

                                             The other person that joined was Tim Bellis. He's the best lecturer I had for the entire MBA course. He used to be the senior partner of Herbert Smith, the very large law firm in M and A and corporate transactions. He understands, not only just the legals, but also the mentality between those deals. He's now our chairman. He has been absolutely instrumental. I asked him, actually, several times to become an non-executive director which he passed on that offer because he was very busy. Being a lawyer, he's risk-averse, naturally.

Peter Cowley:                  But he'd retired out of law, hadn't he, and become an academic.

Goncalo de Vasconcelos:             Right. Yes. Correct. He was a lecturer at the Judge Business School, and he had recently retired. He is my chairman at SyndicateRoom. He's getting more and more involved with SyndicateRoom, which is great to see. He's very good at listening and asking all the right questions to make me think and challenging in a really respectful, in a way that I absolutely love. He makes me thing, we openly discuss things. That just really helps.

                                             Then finally, Jonathan Milner, who invested in the round that we talked about earlier. He didn't want to get involved because he was too busy and it's way out of his comfort zone, in terms of sector that he invests in. Then we started delivering and he started getting more involved, or more interested.  I started having coffee with him every two months, and then every month, and then every two weeks. Since then, he has become very much like Tim Bellis ... a mentor of mine, and a friend of mine, as well. Just like yourself and Tim Bellis. He obviously brings the experience of scaling up a business. He started Abcam, he founded Abcam, and it's I think about 800, 900 people. 2 billion pound. The way that Jonathan adds value, he's really very experienced and we've been able to go to him, as I just did last night with an email. He replied straightaway. "Look, I'm having this problem. Have you come across that before? What do you think? I'm thinking about doing this."

                                             The value of having that board is phenomenal.

Peter Cowley:                  Yes. Yes. You've been very lucky to build that up. But not just school of luck. The skill of motivating people to give their time up to be proper investing investors.

Goncalo de Vasconcelos:             Yes. I think there's a matter of ... it's obviously very valuable to me. As a person, I'm learning a huge amount every day and at every board meeting.

                                             There's also the fact that I think they enjoy doing it, because they can really see that I'm listening and I'm taking good notes of their advice. I'm following it or I'm discussing it. I'm very open about when we have issues be it from me or from the company or whichever and go through them. So I think that it's a very enjoyable board because there are no egos involved. No one is there to ask questions just to show how clever they are.

Peter Cowley:                  Yeah.

Goncalo de Vasconcelos:             I think that could be very disruptive in a board. You don't want people to be concerned about showing how clever they are. Everyone around the table is clever. We all know that. No one has to show it. We all really focus on building a great business.

Peter Cowley:                  What's also interesting ... You've actually got one entrepreneur, one banker, one lawyer. They're not all ... they understand entrepreneurs, they haven't all been entrepreneurial, two of them.

Goncalo de Vasconcelos:             Yes. Correct. That's a perfect mix for our needs.

Peter Cowley:                  Good. Let's talk about some of the journey. I don't know whether it's in the public domain, but a large number of businesses have had funding through the platform. Talk about one or two successes. Please, one or two failures.

Goncalo de Vasconcelos:             Of course. We have funded over 120 companies by now. We've had just under 10 failures. So percentage-wise in four years, it's actually very good. But it's really important that people in this time, the investors in this time ... there will be more failures. So failures are, as you know because- you have your own failures..

Peter Cowley:                  I have my own failures.

Goncalo de Vasconcelos:             ... you have your own failures. And you're also very open about it.

Peter Cowley:                  Yeah.

Goncalo de Vasconcelos:             And there will be more failures. No doubt about it. The crucial part is how do those failures take place.

                                             The really bad ones that really burn investors is when entrepreneurs either just give up or there was something really obvious that the investors missed. Or they just disappear, try to build a business, don't report, and then come back for more money.

Peter Cowley:                  Hmm.

Goncalo de Vasconcelos:             We've had what I would say, a perfect example of a failure, if there's such a thing.  I think they manage it ... we actually have two really good ones.

                                             One was the Niume, where they were growing. They were doing really well. But then their main competitor, a much larger competitor in the US ... as they were raising and getting in their process of raising a much larger round, their competitor in the US failed to raise a significant sum because they were struggling to make the numbers add up in terms of business model, revenue model. That's undermined their larger round. And then the whole thing starts getting trickier and trickier because other investors get spooked by it. They basically were running out of cash. The thing was that they constantly and consistently reported back to shareholders before they were getting into troubles. And then, while the trouble was happening, and they were very, very open and very honest about it. The lead investor for that Was Simon Thopre, very well-

Peter Cowley:                  Who we’ve interviewed

Goncalo de Vasconcelos:             ... and that was a great way of handling it and I had absolutely no hassle from investors. People understood it just happens. I know the risks. I know that when I invest in these things, some of them will fail. No one likes to see a failure or to lose money. But as far as failures and losing money go, that's a way that no one really was upset about it. Everyone is sad about it, but no one is upset.

                                             That example of failure was Soshi Games which was actually, as it happened, our first failure. And what the entrepreneur did, and in my opinion very good was, he recorded a video saying, "Look. We tried to do this. This went well. This didn't go so well. Our cost to customer acquisition was way higher than we ever thought it would be."

Peter Cowley:                  Cost to customer acquisition.

Goncalo de Vasconcelos:             Yes. Cost to customer acquisition. "And therefore, the business model isn't working, so we're going to call it a day." They stopped trading. And he recorded a video to the investors explaining what had happened.

                                             I actually got emails following that email saying, "Let me know when that person is raising money again, because I want to invest." They could see that honesty in that person. And when that is the case, again, no one was upset. Everyone was sad, but ... the failure, particularly for the entrepreneur to put in so many hours trying to make it work.  But no one is upset about it.

Peter Cowley:                  Yeah. Let's also talk about some successes. You've had some successes, haven't you?

Goncalo de Vasconcelos:             Yes, we've had Oval Medical Technologies was an exit that we had. We Barbara Leadas the entrepreneur. So that was a success. It was actually quicker than expected exit. And again, Barbara was keeping the investors up to date on what was happening. Of course, bearing in mind that a lot of these deals are very confidential while they are taking place. There's only a certain period of time that it can release some information.

                                             But we've had many others that went on to raise larger rounds. We've actually had some companies that have been incredibly successful on full-on rounds from SyndicateRoom investors. So they raised a certain amount. And then what they got ... so, for example, Recycling Technologies ... and then what they got was because they're very good at reporting back to shareholders. When they go for a new funding round, shareholders know that these are coming months and months and months in advance. They know how much they've evolved since the last funding round. They are very willing to support the company. What that means is that even new investors will look for signals. And a great signal is how many of the existing shareholders are following their money.

Peter Cowley:                  Exactly. Particularly the bigger ones. Particularly the lead. And then new people are writing larger checks.

Goncalo de Vasconcelos:             It's also important to understand that that is just a matter of a few questions. Then it's very clear that some of the large investors may have a disproportionately large signaling problem because they might be ... I know some investors that invest very large sums very early on and then they don't follow on.

Peter Cowley:                  Hmm.

Goncalo de Vasconcelos:             And that's just their investment strategy. So the signaling is not negative, it's just their strategy. But that can be explained.

Peter Cowley:                  That's a very interesting point because I say that you should keep at least three times what you initially put in aside for any one investment. So, a third up front, a third because the business plan initially won't work, and the third for growth capital potentially. Not everybody does that, and there are reasons why you don't need to do that. Being principal, you should not use all your firepower in the first time you invest.

Goncalo de Vasconcelos:             It depends on your strategy. You should not. But if the value of the share is going up, yes, you might be getting value. But say you invested ten pounds per share. And then the next round is at 15 pounds per share. If you don't follow on, yes, you might get diluted percentage-wise of the company. But the value of your shares has just gone up. So the value of your investment has just gone up.

                                             If you don't follow on, it's not really a huge problem in terms of dilution. The real problem begins when there's a down round-

Peter Cowley:                  Yes.

Goncalo de Vasconcelos:             ... and if the share price goes down to say, five pounds, and you don't have dry powder to follow-

Peter Cowley:                  Or you feel you shouldn't. I mean this is different.

Goncalo de Vasconcelos:             For example, we have a deal called CamNutra or Cambridge Nutraceuticals-

Peter Cowley:                  Which I'm an investor in.

Goncalo de Vasconcelos:             ... oh, are you?

Peter Cowley:                  Yeah.

Goncalo de Vasconcelos:             So you're an investor in it. So they had a very successful funding round at SyndicateRoom

Peter Cowley:                  Mm-hmm (affirmative).

Goncalo de Vasconcelos:             Then, they had to change a few things in their business model and they had a down round. They were very successful in that down round because they were very open with investors, including SyndicateRoom investors and probably others

Peter Cowley:                  Me.

Goncalo de Vasconcelos:             And they had a down round. So, as an investor, it was an amazing opportunity to grab more of the company when they were just sorting themselves out. And now they are having another round of significant up round. Again, they did really, really well.

Peter Cowley:                  I've just put in four times my pre-emption this-

Goncalo de Vasconcelos:             Four times pre-emptiong and that's just how these things work. Yes, many people follow their money and have a third or even a quarter of what they are planning to put in a company on their first round. So they might have just had a different strategy.

Peter Cowley:                  Yes. Okay. So, before we move on to tips for entrepreneurs and angels, what would you have liked to have heard from me five years ago when we first met? What could I have told you which would have helped with your journey?

Goncalo de Vasconcelos:             You could have told me, "Don't worry. Don't sell everything. It will be all right. Eventually, you will be able to raise money."  But you'd have known that.  Had you told me that, I'd say, "Peter, what do you know? You can't predict the future."

                                             But that would have helped a huge amount. It's tricky because being an entrepreneur, you just come across so many different challenges, and you learn so many different things, be it dealing with investors, and putting funding rounds together, dealing with people, recruiting, customers, cash-flow. It's actually very tricky to have one specific-

Peter Cowley:                  Okay, I know that was very unfair on me, wasn't it?

Goncalo de Vasconcelos:             Yeah, if I were to give any tips ... it's great to dream about success. You have to work really hard to actually make it happen. Don't just dream about it. Get on with things and make it happen. Be prepared. The journey's far tougher than anyone will ever tell you.

Peter Cowley:                  Yep.

Goncalo de Vasconcelos:             It is also far more rewarding than anyone will ever be able to explain it to you. It's amazing. You have to have this stamina to put through all the good and the bad, particularly the bad moments. That's what it is to be an entrepreneur. The peaks and troughs are just out of the scale, sometimes in the same day or even the same morning.  You feel on top of the world and the company's going to go to be a billion pound company. Then you get an email or you see somebody else-

Peter Cowley:                  Or somebody leaves that you don't want to leave.

Goncalo de Vasconcelos:             ... leaves and then you think, oh my god, why is this happening to me? But the crucial thing that I think I've done since starting SyndicateRoom is to listen and to learn. I was incredibly lucky to be surrounded by people like yourself and the board and all this. The amount of information that I can learn as I ... I just had to learn everything.

Peter Cowley:                  Mm.

Goncalo de Vasconcelos:             And if people like yourself have been there, done that and you have any tips, then it would be silly of me not to listen. Entrepreneurs cannot act like teenagers that know everything that is out there in the world. We just don't. We just have to learn as we go along. So, why not listen to those people that already know?

                                             Then you can act. You may really disagree, but to listen and to learn is really, really important.

Peter Cowley:                  What about tips for angels then? Passive angels and active angels and, what I'm hoping, are passive becoming active angels.

Goncalo de Vasconcelos:             So, for active angels ... again, going back to my experience with our own board ... is that don't tell people what to do, just to show how clever you are. Obviously, you've done well in your life so you're clearly clever. You don't need to show it to anyone. Listen and ask all the right questions and enjoy. Enjoy working with those entrepreneurs. If you're not enjoying it, it's pointless to do it.

                                             For passive investors that, hopefully, will become active, is start trying to help entrepreneurs, sending a friendly email saying, "Hey look, I have contacts in this industry you might be interested. Do you and I meet up for a coffee?" Don't get offended if they are too busy and they have either a more active angel investors already. But then if they are available, do meet them and help them because that's really appreciated by entrepreneurs.

                                             And also in this time that nothing ever goes according to plan. Things go well. Other things go not so well. Usually they're paralleling the same company. I just used the example of us having to fund going really well, but the capital market's not going so well. And the company just lives on and we just focus more resources on the funds and the platform and not so many in the capital markets. Be prepared for things not going quite according to plan.

Peter Cowley:                  That's just given me an example of that point. I was listening to Mitch Kapor, whose name you might know, who set up a company called Lotus with Lotus 1-2-3, the spreadsheet, which is before Excel. He put together a plan to have revenues of $1 million in the first year, not very much, and his revenues were $53 million. That's something that was going to go to plan in a different way.

Goncalo de Vasconcelos:             Slight different experience from entrepreneurs, yes.

Peter Cowley:                  Exactly. So Goncalo de Vasconcelos, that's been very interesting. I've learned again something and I've spent a lot of time with you in the last six years. I'm sure our audience will also learn from that, so thank you very much.

Goncalo de Vasconcelos:             Thank you very much for having me on your show.