Integrity in founders, not taking everything on faith and the dog life of a start-up

Podcast transcription - 22nd august 2018

Peter Cowley:                  So welcome again to another Invested Investor podcast. Today we have Ramona Liberoff, who actually, Jack and I have known for about six year now. So we met because she joined the advisory board of Araknis. So give me a bit about your background, or what led you to us meeting in 2012. A lot of things happened.

Ramona Liberoff:            So I've had many, many different career lives. The theme of my CV is apparent only to me and never to headhunters. But effectively, I've spent the last 25 years or so always the leading edge of whatever is about to happen in technology, business, and society. So probably the most relevant piece of this is I did an educational background that had nothing to do with business or with technology. However, when I was doing an abortive PhD at Yale in the early '90s, I met somebody in the computer science department who showed me the Mosaic browser, if you remember it.

Peter Cowley:                  Yeah, I do.

Ramona Liberoff:            And that famous Cambridge coffee pot and a few very early applications.

Peter Cowley:                  Oh, yes.

Ramona Liberoff:            And I thought "This stuff, this is what's going to change the world, and this is somehow what I want to work on." And that led to actually working in advertising and new media, as it was called at the time, doing some of the first websites for the BBC, for HSBC, for others, to working in consulting, on actually thinking about business models, competition, and sort of changes in market structures, in media and telecoms, and then eventually to working in startups, 10 years apart. At some point I took a detour and actually went and did another master's in organizational and social psychology.

Peter Cowley:                  That was here at LSE.

Ramona Liberoff:            It was here at LSE, exactly. Because I realized that so much of what goes wrong with startups and management teams and goes bad can be attributed to the dynamic with the people involved. So I wanted to understand it better, to be able to influence it. And that's actually helped a great deal when it comes to working with startups, to understand what's happening.

Ramona Liberoff:            And then over time I spent almost 10 years working in innovation insights with clients like PepsiCo, Vodafone, HSBC, for WPP, then for Nielsen, working on Unilever's global innovation increasingly in emerging markets. A couple of years running an accelerator as chief exec, an actually publicly funded accelerator, scaling businesses in East Africa and South Asia, and now at Energy as chief operations officer of the corporate, venture capital, and innovation group.

Peter Cowley:                  In Berlin.

Ramona Liberoff:            In Berlin, but actually with offices in Palo Alto, Tel Aviv, London, and Warsaw.

Peter Cowley:                  A really interesting mix there. So let's just unpack that slightly. So you came over to the UK. Did you work in the States before you came over here?

Ramona Liberoff:            Sort of. I mean, I had grown up partly in the UK as well. I very nearly went to a girls' public school, in which case my accent would be very different, I suspect. And I'd be much better at horses.

Peter Cowley:                  It's very mid-Atlantic, isn't it?

Ramona Liberoff:            It's rather. I have been dual national most of my life. So I consider the UK to be as close to a home as I have ever had. A good thing about not really having a nation is that you feel comfortable nearly everywhere, especially where there are people from everywhere doing all sorts of interesting things. Which both London and Berlin have in common.

Peter Cowley:                  So you started corporate life in the States, then moved over here, did you?

Ramona Liberoff:            Yes, very briefly. As I say, more than two decades spent based from London doing global jobs with global clients.

Peter Cowley:                  Okay. So let's talk about your first startup journey. What triggered that and what it was and what happened.

Ramona Liberoff:            Well, I worked briefly for British telecom in the mid-'90s, when they were going through this first wave of transition, actually thinking about content and trying to avoid the trap of being a dumb pipe. I'm sure everyone remembers those times.

Ramona Liberoff:            So the first startup was actually a spin out from the British Telecom Labs. There were a number of technologies that were looking for a market at the time. And this happened to be an early version of internet software for small and medium size enterprises. In principle, a need they all had, but actually in practice, an incredibly difficult thing to do. For a number of reasons.

Ramona Liberoff:            First of all, small medium size enterprises did not realize they needed an internet solution or even what that was. Secondly, they had no technology budget or technology department. And thirdly, the sheer effort of having to go and educate a market that didn't know it needed what you were selling at the price you were selling it at.

Ramona Liberoff:            Pretty much meant that even though we raised a first round of capital, we really struggled to get any paying clients and fell into a kind of valley of doom rather quickly.

Peter Cowley:                  Despite BT's marketing ability, potentially.

Ramona Liberoff:            It was not actually done in conjunction with BT. The founder left British Telecom with the permission to use the technology but very little support from the organization to actually commercialize it.

Peter Cowley:                  And what funding did you raise?

Ramona Liberoff:            We raised some angel funding. I seem to remember it was a low number of hundreds of thousands from a few connected angels. The other interesting lesson I had in this whole thing was the team had been brought together through an executive MBA program at LBS, which I was not a part. I was brought it as strategy and marketing director kind of afterwards when they realized it was a gap on the team.

Ramona Liberoff:            But something that is a student project that makes a lot of sense on paper even to potential investors, if it's not market tested, probably the biggest lesson I took from this was twofold. One, if it's not market tested, don't go anywhere near it. And secondly, don't take everything on faith. A number of the people involved in this were disingenuous. They kept other consulting arrangements, but several of us actually put money in and didn't take a salary, so when that came out, that obviously was one of the death nails to the team being willing to put the time and effort that it would have taken.

Peter Cowley:                  The final point of death was when more investment wasn't available

Ramona Liberoff:            Exactly. During the due diligence, actually, for the second round of investments, all these things came up about questionable commitment on some of the key members sort of foundations. But interestingly enough, a couple of them actually went to go on to work in venture capital. So for them it wasn't too much of a hardship.

Ramona Liberoff:            But it was a lesson that stuck with me which is don't take everything on faith. And certainly don't assume that there is a market unless you have proof there is one.

Peter Cowley:                  Right, because that's difficult for... I invested technology that is long way from market.

Ramona Liberoff:            Yes, but even then it's not impossible to chart a path to when it will be available. And then also know that you'll have to remain extremely thrifty until the market emerges. There's nothing wrong with being early as long as you haven't spent every penny in the bank before the market is there.

Peter Cowley:                  Exactly. So how long was that journey?

Ramona Liberoff:            That was roughly a year, year and a half.

Peter Cowley:                  So quite short then. Single round.

Ramona Liberoff:            Quite short, intense. But you know what these things are like. A year and a half in startup terms is kind of like a dog life. I aged significantly during that time.

Peter Cowley:                  So after that, did you go back into corporate life?

Ramona Liberoff:            I did, exactly. I started to realize something that's come back to me a few times, which is working for one startup is interesting but working to help arrange them is fascinating. And probably better suited to my magpie skills and short attention span than anything else.

Ramona Liberoff:            So I actually went to work for a short while for a conglomerate that was putting together a portfolio of new media interests and then sort of went on from there into this large global client work for Innovation & Insight. With a hypothesis that actually big companies had a lot to offer in the innovation space but hadn't necessarily taken advantage of their assets.

Ramona Liberoff:            For a long time, the cost and barriers to starting a startup, everything from cultural barriers against being an entrepreneur all the way through to barriers to information, the high cost of technology, really made it quite a tough thing to do. And I had had a hypothesis in kind of the early 2000's that companies like HSBC or Vodafone would be very well placed to really take advantage of new technologies and new business models.

Ramona Liberoff:            But what I discovered during that journey was actually that success can be one of the biggest hindrances to innovation because if someone's been very successful, an organization has built its success upon doing things a certain way, the pain and risk of change is too great to take. So that was actually a real "ah ha" to me, a reminder that startups will always have a role to play and I think today, ever more so.

Ramona Liberoff:            I would actually say the power has now swung decisively in the direction of the challenger, rather than the incumbent.

Peter Cowley:                  Yes, but they still take time and effort and money, exactly true. When you take the challenge of banks, that's minute compared to the global banks.

Ramona Liberoff:            Yes.

Peter Cowley:                  So let's go back again to startups. What happened to Movirtu?

Ramona Liberoff:            Yes Movirtu, indeed. So in 2010, I had just come to the end of working for a few very intense years for WPP and I wanted to try something completely different. And I happened to meet the founder of Movirtu, a brilliant technical genius who had been the head of one of the Indian company's labs. And he had a technical solution which enabled people in developing markets to share phones privately.

Ramona Liberoff:            It was a bit like Gmail for phones. You could log in and out without leaving a trace. The reason why that was important in material is that many people could not afford a phone but really wanted to use a mobile for banking, for communication, for small business. And this was particularly important to historically excluded set of people, agricultural people, small traders, and women, effectively.

Peter Cowley:                  In developing Africa?

Ramona Liberoff:            Not just Africa but also Asia. So the perspective market was probably about two billion people at the time. Not a small market, but definitely not where all the apps were being developed for the Silicon Valley dwellers.

Peter Cowley:                  So you have a single phone with a single SIM card and you can log in, but it won't change the phone number.

Ramona Liberoff:            It won't change anything. It won't use any of the credit on the phone, which is an important element to this. It won't disclose any of the data on the phone or your data to the user of the phone, so it's private, it's confidential, and it also allows you to do things like mobile banking. It's a virtual sim, was really the technology.

Peter Cowley:                  It sounds like it was a large need though.

Ramona Liberoff:            It was. The company had a number of patents. This also went not in the direction that we were hoping for but in a completely different way. Fast forwarding three years later, the company was actually sold to Blackberry by the investors after having defenestrated all of the existing team in a rather kind of cynical exploitation of the intellectual property assets and that lesson I learned was twofold was first of all, not every investor has the management team's interest at heart, and secondly, if you're trying to work in an emerging market, there's absolutely no point in trying to do it from several thousand miles away.

Ramona Liberoff:            We had a tech team in South Africa and one in Mumbai. We didn't have really anyone on the ground so I would spend months at a time during this sort of year and a bit in Tanzania, in Madagascar, on the phone to Pakistan because I couldn't actually go there safely to implement. There was really no substitute for being there. We should have had our commercial team closer to the markets.

Peter Cowley:                  And what was your role there?

Ramona Liberoff:            Head of strategy, marketing, and insight.

Peter Cowley:                  And were you a founder as well?

Ramona Liberoff:            No, I was not. I was a very early hire. Hire number four. I think my other lesson was, never ever go work for a married couple.

Peter Cowley:                  Yeah, I think I've heard that before.

Ramona Liberoff:            It's something I wouldn't readily do again.

Peter Cowley:                  Right.

Ramona Liberoff:            But I think it put a great strain on them as well as everyone who needed to work with them.

Peter Cowley:                  Okay. Do you know who the funding came from?

Ramona Liberoff:            That was another big lesson, in fact. We had three completely different investors in our early round. We'd raised a couple of million. And they each had a similar share. None of them wanted the same things, so you'd actually spend ten days preparing a board pack for three completely different sets of investors. A complete waste of time and a real drag on a small business that had enough complexity.

Peter Cowley:                  What was the difference? Was one a VC, a family office, an individual angel? Or one was a corporate or something?

Ramona Liberoff:            The difference was more in investment hypothesis. So two were to a greater or lesser degree impact investors who really were interested in the social impact that we were making. The inclusion effects of mobile, underserved populations, however they had different metrics to measure that social impact, so the measurement frameworks that we had to use was unbelievably complex. That was one issue.

Ramona Liberoff:            The others were mainstream VCs who had a good track record in effectively basically selling on IP which is indeed exactly what happened in this case. So the investors at some point got together, did a deal amongst themselves, and that's what enabled the team to be dismissed and the profit to be accrue to the investors rather than any of the people that actually created the business.

Peter Cowley:None to the founders at all.                Okay, yeah, there's a lot of lesson in there somewhere.

Ramona Liberoff:            Indeed there is.

Peter Cowley:                  How many rounds do they have? Just the one?

Ramona Liberoff:            One and a half.  It was a bit of a bridge round raised. I think the other thing was there was an immense pressure on user numbers and growth and from a technical point of view, the solution was infinitely scalable from a market point of view, it absolutely was not.

Peter Cowley:                  Right, because the cost of acquisition to a customer?

Ramona Liberoff:            Not only that. It was that we had to work with the telco. So our software had to be installed in the telco's hub. Which was a difficult process in and of itself. But the other thing was there was exceptionally little revenue to be earned on any one user and no operator wanted to be first, so we spent our time shuttling between five or six operators who were running very limited trials in very difficult markets. Trying to convince one of them to put a bit of marketing and other sort of sales push behind it.

Ramona Liberoff:            Eventually T-Go, who I actually give a lot of credit to for being super innovative, were willing to do so. They were kind of leading emerging market mobile player. Not very well known in developed markets but extremely successful in Latin America, in Africa.

Peter Cowley:                  So they were a great route to market for you.

Ramona Liberoff:            Great route to market. But the interesting thing there is the users found it exceptionally difficult to understand because they didn't even know what a SIM was.

Ramona Liberoff:            A virtual SIM proved even more difficult to explain. So we ended up calling it Action Magic SIM and that worked better.

Peter Cowley:                  Magic SIM?

Ramona Liberoff:            It did.

Peter Cowley:                  Well done. Okay.

Ramona Liberoff:            In Swahili.

Peter Cowley:                  And what happened? What has Blackberry done with it? Have you any idea?

Ramona Liberoff:            I haven't any idea. I suspect the patents are simply in a portfolio and being used for some elements of identity management. Ironically, identity management is such a hot issue in all of the new blockchain models, but I feel sometimes like I've gone back ten years and thinking about some of the early patents.

Ramona Liberoff:            So the founder really was a technical visionary but the circumstances that he found himself in and that all of us were in as a leadership team were insurmountably difficult.

Peter Cowley:                  And the final question is, were you aware if the founder made any money in the exit?

Ramona Liberoff:            I believe a bit, but I'm not privy to the details.

Peter Cowley:                  No, of course you won't have been. So this is now seven years ago and you've done a lot since then and one of the things I want us to mention is that we met because you knew David Buxton from the founder of Araknis.

Ramona Liberoff:            In 2010, actually, I invested for the first time.

Peter Cowley:                  Oh, did you? Okay. The first round. Okay, because my first contact with you by email was in 2012, when you joined our advisory board and you've been on that journey and helped tremendously not just as a shareholder, also as an advisor.

Ramona Liberoff:            Well, I have to say the second run of the startup was the time when I realized definitively it was a lot more fun to be an investor than it was to be an entrepreneur. And that's pretty much what I've stuck to ever since. Never say never, I might go back and try something again one day, but my two experiences lead me to thinking that actually maybe I was better served investing and advising.

Peter Cowley:                  You also invested in Repositive. Shall we talk about that? You're angel investing. Let's talk through that, how you found the investments, how they're getting on, how many failures you've had, perhaps.

Ramona Liberoff:            Sure. At a sort of high level, I was always happy to open source what I have done because I think it helps other people think about what they could do.

Peter Cowley:                  Excellent.

Ramona Liberoff:            Over the last ten years or so, I've taken about a third of my net assets and put them into startups. On paper, and this is a very important qualification, which doubtless you'll know, I'm up about 25-30% on the whole. But that obviously includes a whole degree of diversity.

Ramona Liberoff:            Several have gone under, a number are taking over, and a few are trending nicely, albeit a bit too slowly for my taste toward some sort of exit or liquidity event.

Peter Cowley:                  Yeah, I mean Araknis can be found on Companies House, the shares you bought originally probably about ten times Repositive. If you went in early, probably about 6 or 7 times that as well.

Ramona Liberoff:            Yep.

Peter Cowley:                  Okay, so failures. Why do you think the companies that you've lost as an investor have failed?

Ramona Liberoff:            It's a bit like that old cliché that every unhappy family is unhappy in its own way. But there are definitely some themes that I've taken out from looking at the portfolio as a whole.

Ramona Liberoff:            The first I'd say is timing. A number of businesses were too early for the market and didn't manage their cash in line with that. They were overly optimistic. They failed to raise funds, they went under. A couple were bad luck. One was actually a trade sale where the legals were improperly set up so even though it was technically an exit, none of the shareholders could realize a gain.

Peter Cowley:                  So there was no cash transaction?

Ramona Liberoff:            There was no legally binding cash transaction and the acquirer went under shortly after they had acquired it so it was a mess. That was unforeseen and hopefully anomalous. But quasi exit. I don't know quite how you manage that.

Ramona Liberoff:            Then if I look also at the ones I feel are failing to achieve their potential, which in a way are more interesting to me than the failures. It's all down to management. It's all down to leadership. It's all down to the ability of a founder to recognize his or her limitations and needs and actually be generous enough to incorporate others.

Ramona Liberoff:            The flip side of that is simply a vision that isn't big enough. So you need in a founder this paradoxical combination that the best founders have. Of being extremely humble and being extremely visionary at the same time. I think David has it at Araknis. I think Fiona has it at Repositive. I think that's something that they share.

Ramona Liberoff:            The other thing I've observed about the successes looking on the bright side for a moment, is they're all exceptionally good at shareholder communication. No one taught them to do it but for some reason they understand instinctively the importance of keeping that community informed, engaged, and ready to help. And I think it serves them exceptionally well. Not just when things are going well but also when they might need a bit of help, some introductions. They build trust through that openness and transparency.

Peter Cowley:                  Good, yes, exactly. So have you had any successes? Any exits yet?

Ramona Liberoff:            I have had probably more up rounds than exits. And I think one of the other things is because of the businesses that I invest in, it's not surprising. I have tended, after a little bit of experimenting at the beginning, I don't look at consumer businesses. I look at business to business businesses that are really in a sort of market disruption area, that use technology or layers of technology more commonly and that also have a greater vision or purpose.

Ramona Liberoff:            They really want to make an impact in the world and as such, the propositions are often more complex. They grow more slowly but more sustainably and they make a difference and I think that making a difference piece for me, personally as an investor, is extremely important because it keeps me interested in the business as it grows.

Peter Cowley:                  And that will vary, because Araknis hasn't really got social impact, has it? As we both know.

Ramona Liberoff:            I believe it does. I believe it does. I would disagree with that. I think the business was started from a market failure in making information transparent that also prevents the flow of capital to emerging markets, so I don't define it as is it what a charity would do. I look at it as a greater purpose of improvement.

Ramona Liberoff:            And that can be environmental, social, financial, fiduciary, business, informational, whatever it is.

Ramona Liberoff:            So for example, there's a business called Apolitical that I've just been looking at and they are basically a social network for policy makers to share information about what works or what doesn't work as importantly or more so. They don't call themselves a social impact business but they absolutely will have a positive benefit in the world if they succeed.

Peter Cowley:                  And would that be true of all your 14 investments?

Ramona Liberoff:            It would be true of the ones I care about and was willing to reinvest and go the distance with. It's something that I discovered about myself as an investor, that this was a powerful motivator for me.

Peter Cowley:                  Right. And when was your first investment? 2010 or was it before that?

Ramona Liberoff:            No, I'd actually made a couple of investments before that, small ones. I think I'd probably spent two or three years tinkering and doing small amounts until I figured out. I call it my sort of unconventional MBA. I've probably spent 40 or 50 grand just playing around to figure out what kind of investor I was. And if we come to tips later on, I think it's really important for everyone to put themselves through that period of education for themselves.

Peter Cowley:                  Yeah, I've certainly done the same. My criteria are probably the main maybe six or seven years to settle down.

Ramona Liberoff:            Indeed. You need to know yourself before you can actually figure out how you can have the best impact as an investor and as an advisor, because you're investing in something early. Then you'd better be prepared to be an advisor as well.

Peter Cowley:                  Good. Let's move on to the next part of your life which is SPRING Accelerator and innogy. Clearly it gets you in contact with entrepreneurs and interesting ideas and everything, but with an executive role. Does that work for you? It obviously does but why does that work for you?

Ramona Liberoff:            Again, I'm always fascinated by the interfaces of different domains and to me, the place where large companies and small companies come together can either be a PR story, a disaster, or a great success. And I actually believe there's scope to make it much more fruitful for both parties to get more out of it.

Ramona Liberoff:            So in the case of SPRING Accelerator, the large organizations were really development funders who have given an extraordinary amount of money toward entrepreneur programs that have not really delivered.

Ramona Liberoff:            Spring Accelerator was a kind of lab to say what if we put a small amount of money but a very large injection of technical expertise in terms of innovation, business models, and general business skills into high growth businesses and challenge them to serve their user needs better and make a better impact. What would happen then?

Ramona Liberoff:            And I'm pleased to say that I spend two years, basically turned around the program, restructured it, hired a new team, devolved a lot of control to the countries. By the time I left, three quarters of the companies were actually on track to becoming much better businesses and attracting fresh capital, which is incredibly important.

Peter Cowley:                  Who were the corporates that put money into that program?

Ramona Liberoff:            The corporates in this case inverted commas were really the development finance institutions, so DFID, USA ID, Nike Foundation, and AusAid. And as I say, they have spent a lot of money trying to spur on entrepreneurship through training programs and various other things. So this was a deliberate experiment, which I believe is successful to show that if you give businesses what they need, which is some capital, some technical support, and some greater visibility, they'll thrive.

Ramona Liberoff:            Which is indeed what has happened, assuming you select the right businesses in the first place, which is something we've put a lot of effort into redesigning. And actually, my angel investing experience really helped in designing that selection process.

Peter Cowley:                  And was this accelerator actually based in the UK or in developing countries?

Ramona Liberoff:            It was operating across nine countries in East Africa and South Asia, including some very challenged countries. Countries where there are actually businesses and a startup scene, but in some cases like Ethiopia or Myanmar, a very early, early nascent entrepreneurially ecosystems. Vibrant, but nascent.

Peter Cowley:                  So this was a big job for you. You were CEO of an organization that had multiple sites throughout multiple components.

Ramona Liberoff:            Actually, it wasn't such a big job for me. I'll say. I've run teams of 250 and worked across forty countries before so in terms of the complexity, this wasn't actually all that complex. The greater complexity was among the stakeholders and also the use of public funds with something I had never dealt with before and will possibly never do again.

Ramona Liberoff:            But I found it absolutely facilitating and I really took the trust that was placed in us very, very seriously.

Peter Cowley:                  Right, okay. And you moved on from that to innogy?

Ramona Liberoff:            Development programs tend to have a finite timetable. I came in at year one and a half and left with sort of eight months to run because I was very comfortable that the team could more than handle it.

Peter Cowley:                  Eight months to run to the next cycle of capital coming in – oh, it was the end?

Ramona Liberoff:            Public funds only fund for periods of times. That's actually one of the challenges in the development sector is that just when you've sort of figured out what you're doing, the program comes to an end.

Peter Cowley:                  Unless it can be sustained somehow.

Ramona Liberoff:            They're not generally sustained. Often you find the same teams going and doing similar work on different projects but each project is effectively self-funded. Each project is effectively standalone. It's done for good reasons but not necessarily with good results. It's done so there's no guarantee to any commercial organization of an ongoing revenue stream.

Ramona Liberoff:            The UK is unusual in that. In Germany, there's a vertically integrated development funding operation that allows for greater continuity. But in the UK, it's very much sort term, short sprints.

Peter Cowley:                  So it's compressed building, effectually.

Ramona Liberoff:            Indeed.

Peter Cowley:                  Yeah, okay. And then hopefully they've grown so they can be stable and continue. Okay. So did you move from SPRING Accelerator to innogy?

Ramona Liberoff:            I did, I did. It was around the turbulent time of Brexit and Trump and my husband and I had started to think about what we wanted our next decade or so to look like. And the truth was that we're both committed Europeanizes, we like to think that we're not remoaners, but we really do care about Europe.

Ramona Liberoff:            And so we bought a flat in Berlin and I started to get to know the scene in Berlin better and it actually reminded me a bit of the scene in London about ten years ago, so very exciting cosmopolitan arena where capital and ideas were just starting to flow in.

Ramona Liberoff:            So the job at innogy came along simply through the network. Someone knew I was looking, that I'd be happy to be based in Berlin, and went from there.

Peter Cowley:                  And your role there is not CEO but COO, is it?

Ramona Liberoff:            It is indeed, yes. The CEO and CFO position are taken by long time innogy insiders and the head of people and town and culture and my role, we are people who are new to the organization. It's a sixty person organization, based as I say across the innovation hotspots, Silicon Valley, Israel, Berlin, London, and Warsaw and our mandate is to invest corporate capital. It's also a small corporate investment venture capital team, is to invest and seed and serious and beyond, on things that are going to be the future of the energy industry.

Ramona Liberoff:            So not today's energy industry, not grid optimization, not retail automation, but a world where all energy is effectively free and a lot of the trading and supply of it is autonomous by buildings, by cities themselves, rather than people.

Ramona Liberoff:            So it's imagining a very, very different energy world, because to me, the energy industry, what's fascinating about it, it's one of the last remaining industries to be digitally disrupted. But it's happening very, very quickly.

Peter Cowley:                  Energy is free, you'd have to explain that.

Ramona Liberoff:            So if we look at renewables, there's a terrifying chart for anyone who invests in that renewable energy that shows the price of a kilowatt hour of solar trending to zero very quickly.

Peter Cowley:                  But there's a capital cost, isn't there? A social cost?

Ramona Liberoff:            That is the problem that the large energy companies have. Because their cost of supply and provision is not decreasing but the cost of the point of use is nearly zero and the only markets that are possibly left open to them, and energy businesses have traditionally been national or regional rather than global in their outlook, are markets where that's already effectively the case.

Ramona Liberoff:            So it costs a lot to make no money.

Peter Cowley:                  There shouldn't be no money because there's still...

Ramona Liberoff:            Very little money.

Peter Cowley:                  Really?

Ramona Liberoff:            Very little money. Yeah.

Peter Cowley:                  The cost of the competition, though, because...

Ramona Liberoff:            No, it's partly competition, it's partly monetization. It's partly technology because with the big push in Germany and Japan have lead the push, particularly in solar energy, so with a combination of high volume buying, Chinese manufacturing improvements and so on, the technology become cheaper and cheaper.

Ramona Liberoff:            But then also, the efficiency has become better and better, so with hydro and with wind, it's slightly different, but the truth of the matter on renewables, broadly speaking, is it costs much more to deliver than you can possibly hope to earn back, which is why you see the energy industry consolidating at such a rapid rate.

Ramona Liberoff:            Again, I'm reminded of the media revolution in the late 90's and early 2000's. You suddenly see a window opening for completely different digital first disruptors coming in and seizing aspects of this market without any legacy either regulatory pressure or competitive pressure or employee base.

Ramona Liberoff:            The core energy business is obviously looking for ways to digitally improve or automate its existing business, so things like grid management, maintenance, it doesn't require as many people because also talents are short. Things like installation of smart meters, they're doing all of that already.

Ramona Liberoff:            This is assuming a world where everything has a smart meter already. Where all energy is renewable and possibly free. What then?

Ramona Liberoff:            So these are models looking at things like peer-to-peer energy trading and we are investing in businesses that have these ideas and business models.

Peter Cowley:                  Right, excellent, okay. And so the money's coming from the BO, RWE, et cetera or whoever the bigger energy...

Ramona Liberoff:            It's coming from innogy itself. But obviously there's the desire and there's some frameworks in place to attract other sources of capital.

Peter Cowley:                  Alright, and how many startups have you got around the world at the moment?

Ramona Liberoff:            We have about 55 in the portfolio at the minute and we're adding on average about one a week. So we see a lot of deals.

Peter Cowley:                  So you're putting it into any accelerators so you can buy some shares early stage, adding some smartness to it. The acceleration program and helping them raise finance later on. Not all would raise finance there, I'm sure.

Ramona Liberoff:            Many of them will, but actually the interesting thing there is nontraditional sources of finance. So there's an example of a company called We Power, who raised 30 million Euros in an ICO to build infrastructure, to build renewable infrastructure in Lithuania, Estonia, and central and eastern Europe because they found that the public finance markets were broken for the reasons I've explained to you.

Ramona Liberoff:            It's becoming a really unattractive investment case to build renewable energy infrastructure, but it still has to be done. So they actually just went straight to an ICO.

Peter Cowley:                  So they sold crypto, they sold a coin of some form.

Ramona Liberoff:            They created a token.

Peter Cowley:                  Yeah, some euros. I still haven't gotten my head around how cryptocurrency comes in, euros are needed to build infrastructure on the ground. You can't yet spend bitcoins to knock forests down.

Ramona Liberoff:            No, I was actually on a blockchain investment panel last week, so my learning curve has been extremely steep, but what I've come to realize is a lot of these new financing models never look at real currency. What they do is they aggregate all the resources that are needed, people's time, people's energy, a community. And because they're digital first, a lot of the work required is devolvement of an open source protocol of one kind or another and then they basically call upon that and reward that in something that will eventually convert potentially to fiat currency or become a valuable currency in its own right.

Peter Cowley:                  But it needs to be able to convert to fiat currency for the staff to pay the rent though, doesn't it?

Ramona Liberoff:            I mean, it doesn't always. So the interesting thing is a lot of the people who made it big in the first crypto wave are actually multimillionaires themselves so you find them being the investors in these kinds of models, in these second order models. It's all happened very quickly.

Peter Cowley:                  So let's talk about women and angel investing and entrepreneurs. We both know Sarah Turner well. We've both invested in Fiona, a Danish lady from Repositive. What's your views?

Ramona Liberoff:            First of all, I think there's a real struggle right now on both sides of the market. If you like both for entrepreneurs and for investors and I think both have to be solved if we're going to make the most of the entrepreneurial and growth capacity in the market.

Ramona Liberoff:            It's actually a market failure. If we think about the stats in the UK alone, women control nearly half of the wealth. But actually do a tiny, tiny portion of those funds find their way into any kind of early stage investing. The main reason for that is that Angel investing is still very much a social activity, a community activity, and people tend to invest with people they know and things they know, but there's often not a forum for women to meet with other investors.

Ramona Liberoff:            So things like the Cambridge Angels are a perfect example. It's a fantastic group, that now has a few women in it and much credit to opening it up and trying to sort of find other capital, but we need many, many more of these small networks before we can really start capping...

Peter Cowley:                  Mixed networks.

Ramona Liberoff:            I believe it's important to have mixed networks. I mean, humanity is roughly 50/50. So the idea that you still have many, many networks that are 99% male does seem a bit odd.

Peter Cowley:                  Absolutely.

Ramona Liberoff:            The other side of it is there's actually far more female entrepreneurs but they tend to be treated as if their businesses are somehow smaller lifestyle businesses. I know a number of very, very talented technical entrepreneurs who fail to raise any venture capital because the moment they turned up, they were asked questions about their children, their husband, and whether they'd like to have dinner that evening.

Peter Cowley:                  I hope it's not that bad.

Ramona Liberoff:            I'm afraid it is.

Peter Cowley:                  Okay.

Ramona Liberoff:            I'm afraid it is. I have enough direct examples that I think it's far more common than we imagine. So they have simply gone and found alternative financing methods and are doing quite well. But they're not featured in the stories or in the public, which reinforces the opinion that somehow women run lifestyle businesses or girl ghetto businesses.

Ramona Liberoff:            I really resent when someone approaches me and asks me if I want to invest in a business around lipstick and shoes, because it shows they clearly haven't done their research about my interests.

Peter Cowley:                  Exactly. Are your interests in the public domain, though? Have you got on the website or how could somebody tell what your interests are?

Ramona Liberoff:            It's fairly obvious. I have spoken on the record a number of times about my interests and my... It's just laziness. It's often people assuming that because I happen to be a woman, I will only be interested in things that women buy.

Peter Cowley:                  That must be really depressing when somebody comes up and does that. You must be pretty angry as well.

Ramona Liberoff:            I just say to them they should do their research.

Peter Cowley:                  Okay. So now we do quotas are we? How are we going to do is education or networking or?

Ramona Liberoff:            I think a lot of it starts simply with assumption making and stereotypes and it's not an easy thing to overcome a stereotype apart from all the women like me who are seen as an exception should work to make ourselves seem very normal, because I don't believe we are exceptional. With close to 40% of senior professionals being women, there should be no reason that more women aren't putting more of the money on this asset class, which is quite exciting and rewarding and no more volatile than any of the others.

Ramona Liberoff:            So rather than putting money into property, I just want to encourage every woman that I meet to try it and start going on the journey and find other people to invest with.

Peter Cowley:                  Which is the education. There's a report came out in the last two weeks on that that Jenny Tooth was involved with. Have you seen the report?

Ramona Liberoff:            I have.

Peter Cowley:                  And a lot of it's got to do with risk appetite.

Ramona Liberoff:            I don't actually agree with it, I'll be perfectly honest. Because I think that is again something that women are told that they don't have the same risk appetite as men. It doesn't square up with my experience or my own character. I think if women are in a group, just as if men are in a group, they will feel less a sense of risk, because they will not be investing individually. They'll feel reassured by the confidence, the experience, and the different angles of approach, of diligence, of their peers.

Ramona Liberoff:            So I think a lot of that risk appetite business would be taken away if there were more groups within which women could invest and in fact, at Angel Academy, we've pioneered something called Investor Academy, which is about getting a group of people who want to invest in female founders together and running them through a proxy exercise of what it's like to actually make that investment and when they come out of that half a day, they're far more likely to go and make an investment because they've effectively lived the experience of it.

Ramona Liberoff:            It takes away their sense of anxiety and incompetence and makes them think "Actually, I could do this."

Peter Cowley:                  Yeah, and there's rising tides which is a global movement, a movement I’ve been to in New York and generally works if it's not just purely women, doesn't it? It works so there's a mixture.

Ramona Liberoff:            Absolutely.

Peter Cowley:                  Not 50/50, probably but 70/30 or 80/20.

Ramona Liberoff:            There's a great piece of research on the 1970s by Rosabeth Moss Kanter who's an academic at Harvard Business School. She wrote a book, which is her master thesis, called The Men and Women of the Corporation. It was very simple. Any minority until it gets to 30%, is seen as anomalous, extraneous, and somehow the exception.

Ramona Liberoff:            But at 30% it begins to normalize, which is the logic behind 30% Club, the frown quota in Germany and so on.

Peter Cowley:                  Right, okay.

Ramona Liberoff:            I think in the short term, one may need forcing factors to simply prove that there's nothing exceptional and nothing unusual about being someone in 50% of the population doing this work.

Peter Cowley:                  And of course if it’s 30% and the numbers apparently are 15% of women Angels in the UK, which neither of us really believe, do we?

Ramona Liberoff:            Neither of us really believe that.

Peter Cowley:                  So it's a long way. If it's less than 15% from a tipping point at 30, isn't it?

Ramona Liberoff:            It's probably 10%. And the difference between 10% and 30% isn't just a numerical one, it's also a great shift in the population's thinking about it. Too often when people say investor, the immediate impression that comes to mind is rather more like you than me.

Peter Cowley:                  Unfortunately, I was about to say. Middle aged and...

Ramona Liberoff:            I'm middle aged too, that's fine. But I'd actually like for someone to think a middle aged woman is an angel investor with not a bad track record at that.

Peter Cowley:                  You certainly have, yeah. Okay, let's move on to a few tips for entrepreneurs, investors. What would you like to share here?

Ramona Liberoff:            There was actually something very interesting I saw by Bill Gross, which is a wonderful TED talk I recommend, because he tried to deconstruct the elements of the successful investments that he's made in his own ideal lab portfolio. As the name would suggest, he believed at the time that the idea was really the thing and closely tied to that, the entrepreneur or the founder.

Ramona Liberoff:            Quite to his surprise, he found almost the opposite. He found that the combination of the team and the timing were really the thing that made a success or not. And all I would give people is a top tip from that is to really think about the future proof nature of the business and think about the longevity and relationship of the team, in addition to being greeting communicators and being this combination of visionary and humble founders, I also find that a lot of the best startup teams go the distance together.

Ramona Liberoff:            They have a very strong trust based relationship. They are not necessarily the same as each other, but they're able to stay as a roughly stable team and add what capacity they need on an equal footing.

Peter Cowley:                  How long do you think they need to have known each other beforehand? Because if you take entrepreneur first, the teams that come out of that accelerator have only known each other for thirteen, sixteen weeks.

Ramona Liberoff:            They don't need to know each other for long. What they need to uncover quite quickly is whether they share the same values, because to me, one of the biggest things that splits up a founding team is when there is a difference in integrity or a difference in values between the members of that team. That's an absolute disaster.

Ramona Liberoff:            And I have a couple companies, regrettably, that I have invested in where the founder's integrity is one of the main limiting factors.

Peter Cowley:                  Yeah, that's not a great thing. I have three founders I've had to negotiate out of businesses and it's not been integrity. It's been the values.

Ramona Liberoff:            I think it's closely connected. One of my risk hedges, by investing in businesses with a bigger purpose is there tends to be a correlation between that intent and some deeply held values. And integrity.

Ramona Liberoff:            So in a way, some might say, "Oh, that's nice. You're doing some good for the world." No, I'm doing something good for my portfolio because there is actually a clear correlation between high integrity and deeply held values.

Ramona Liberoff:            If a founder is merely trying to in rich him or herself, it won't come to it.

Peter Cowley:                  Yes, I think we can usually detect that, can't we? When you start doing due diligence? I hope so.

Ramona Liberoff:            Indeed. Actually, another top tip I would have is try not to meet the founding team until you've learned something about business, because for de biasing purposes, many founders are exceptionally charismatic individuals. And human being are fallible. We are emotional. We do respond socially rather than intellectually. So unless we equip ourselves with a point of view, which obviously can be a challenge when we meet the founder, but unless we have a point of view...

Ramona Liberoff:            That was one of the things that we did in SPRING. We took away the personal pitch until the very end of the process, whereas before it had started with it. And our predictions of success actually went way up.

Peter Cowley:                  Yeah, we've had that from another interviewee, where he said that once you've seen the pitch and fall in love with them, walk away straight away. If you've got too emotionally connected, because they've done such a great job of pitching at you.

Ramona Liberoff:            In a perfect case, the charisma goes alongside the integrity but not always.

Peter Cowley:                  And of course as we know, the ones who actually come well are great at selling equity. We don't want them just to be able to sell equity. We want them to be able to execute and sell a business.

Ramona Liberoff:            Yes, exactly that. And I think of one other top tip, which is simply think about what you can bring to the investment that you make beyond capital. Think very carefully about the amount of energy or time that you have, about how willing you are to open your networks, because I think as much as the entrepreneurs can sell themselves to investors, I think also a lot of investors oversell themselves to entrepreneurs.

Peter Cowley:                  Yes, that's right. They haven't necessarily got the time. I have a list of questions I put on the slide for entrepreneurs to ask angel investors before they take their money just to see if there's some proof that their smartness will be there.

Ramona Liberoff:            Indeed. I also, by the way, always tell entrepreneurs to remember that investors are not doing this out of the goodness of their heart or because they have plenty of spare cash. They do expect a credible plan to receive their money someday hopefully enhanced.

Peter Cowley:                  Yes, I think that's true, isn't it? Unless it's a social investment.

Ramona Liberoff:            Even if it is a social investment, Peter, and actually there's recent research that shows the returns from so called social investments are no poorer. They may take a little bit longer because the propositions and markets are more complex but they should never be lower. A social investment is not a handicapped investment. It is an advantaged investment.

Ramona Liberoff:            And if I didn't already have my gender crusade on, I would get on the crusade that social investment is not a charity or for philanthropy. It shouldn't be. Otherwise it shouldn't be called an investment.

Peter Cowley:                  Right, it should be a charity. You’re actually buying some outcome.

Ramona Liberoff:            Indeed.

Peter Cowley:                  Good. This has been really interesting. And we do want to ask you another question which, if you've listened to any of those past few, you'll know what I'm going to say, which is you're well more than a decade younger than me. When you get to my age, which I'm happy to say is 62, what do you think you will be doing?

Ramona Liberoff:            I do love that question. The crystal ball never works on oneself, of course, but I'll give you a hypothesis. I may be just crazy enough to have one more startup in me and in this case, it'd be something I'd like to start myself and it would probably be a startup that actually looks at supporting entrepreneurs, so some kind of clean tech incubator or accelerator, potentially looking at developing markets.

Ramona Liberoff:            Could be doing that or could be enabling someone else to do that. That's one thing and I very much hope that in a decade or so from now, I'll still be living in Berlin legally and be able to enjoy the city and watch how it's grown.

Peter Cowley:                  It's a great place, isn't it, Berlin? Excellent. Well, thank you very much Ramona. It's been a really great journey through your life and we've learned a lot. Thank you very much.

Ramona Liberoff:            Thank you, Peter.

Peter Cowley:                  Thanks for listening to another Investor Invested podcast. You can subscribe to all future podcasts via our website, or via a number of podcast platforms online. Signed pre-orders for our Invested Investor book are now available on our website and be sure to follow us on twitter, linked in the Facebook to get the most up to date interesting and insightful content from the Invested Investor.