#117 - Interview with Marc Wesselink - Stop Building What Nobody Wants: The Startup Rollercoaster

00:00:00: Marc Vesselink is a serial entrepreneur and venture builder with more than three decades of experience in launching, scaling technology companies and founding over twelve companies.

00:00:12: As co-founder of VentureRock he's working to remove friction from startup investing in Europe and beyond by connecting founders backers and venture builders through a digital venture platform.

00:00:24: His mission is to advance technology, science and innovation.

00:00:47: Yeah, exciting career as an entrepreneur investor had successful exits.

00:01:00: If you look back into your career Mark what would you consider was your most successful venture?

00:01:09: Yes success has many faces and thank you by the way for having me.

00:01:15: Success have many phases and of course failures as well, so I was not only successful but i also had many failures.

00:01:22: My short my thirty second pitch is also always started.

00:01:25: twelve companies filled four times sold.

00:01:28: three to three companies were where we're sold but also at one IPO into bankruptcies.

00:01:35: that's a downside for out there ship but My biggest learning was I think in two thousand and six where.

00:01:47: I've created my first process of building a company from an idea to scale, And the learning was that guys who started with as a direct consumer business in food, and they ended up in a business-to-business to consumer... In energy.

00:02:15: So it was total different ballgame when they started what had become later.

00:02:22: And for me that is huge learning this company still existing growing That if you start with the business don't stare on the start but adopt an.

00:02:36: adapt what your customers are asking from you.

00:02:41: And that to me was the biggest learning, hence also not most successful but most successful learning for me.

00:02:52: So constantly be flexible listen to the feedback from customers and often The idea you had at the beginning has nothing to do with a product You're working on.

00:03:05: Yeah,

00:03:07: so I started twelve companies and failed four times.

00:03:11: And those four failures were all about building something first then trying to sell it?

00:03:17: Then come the conclusion that market was not ready or customer need wasn't there.

00:03:25: but problem is big enough... ...to be solved.

00:03:32: And then I started learning to do things differently.

00:03:37: That for me was epiphany at that moment,

00:03:40: yeah?

00:03:41: Maybe you can elaborate on it a little bit doing things differently.

00:03:46: A couple of examples maybe.

00:03:50: So...I started my first company just by starting and building something Then shake as many trees as possible To get the first customer which takes two to three, maybe four years.

00:04:06: And... ...to make it break even.

00:04:11: and back then I was a college student so I did not need a lot of money on an monthly basis.

00:04:18: but yeah that's really not sustainable way for building your business.

00:04:24: And i've learned along the way also by making mistakes That that's the best way to start is by listening first and building later.

00:04:36: And by listening, first listen to customers or anybody?

00:04:41: Listening to the customer, listening to users, listening through distribution right because It's nice that you have a customer, but sometimes the user is different than a customer.

00:04:53: The user isn't always paying for you especially in business-to-business But also distribution of how to get into that customer in a scalable and repeatable way.

00:05:06: You can determine this already from an early start And based on those findings, you can sort of pivot your way into a product market fit.

00:05:19: Mark I also want to talk about financing.

00:05:22: when would you recommend external financing?

00:05:25: When do you recommend organic growth bootstrapping for example?

00:05:32: If you look at the way we built for instance The company that i've used as an example that started in the beat direct-to-consumer food, and turned out to be a platform for green energy.

00:05:49: It's quite difficult to explain to early investors... ...that stepped into your story about Direct-To-Consumer Babyfood,... ..that you changed your business into Green Energy Platform?

00:06:05: And I've learned also the hardware that many companies are going down a drain because of getting capital too early in their still experimental phase.

00:06:19: So, to much

00:06:22: capital is too early?

00:06:23: If you look at the top five reasons why companies fail, especially in Europe is what we call premature scale.

00:06:32: The founders think they have a product market fit.

00:06:35: They get money and put a lot of money into acquisition of customers but also an increase of churn over those customers.

00:06:45: And then it's a little bit the same as filling up a bucket with big holes.

00:06:51: So, misallocation of capital at the beginning early stage.

00:06:58: Mark when you look back into your experience and did your exit and sold your companies can tell us a little bit about that experiment?

00:07:07: What was the process in selling or let's say first-exit for example?

00:07:14: In my first exit I was sold to co-founders so it is quite speedy a process, but despite the fact of course that they're never ending discussion about evaluation for company.

00:07:28: The one who's selling it always wants to get more than what he is paying and another company was sold too big customer.

00:07:45: So that was also really an insight.

00:07:48: And another company eventually listed on the stock exchange, and it was a more lengthy process.

00:07:56: but ever since then I've been part of an investor or board many companies being sold.

00:08:07: It's always very difficult and lengthy processes because of due diligence, no insights in companies and lack of proof.

00:08:17: what happened.

00:08:18: Prove it is happening and prove will happen in the future And that's why I also started a venture by creating more transparent process of progress.

00:08:33: What is progress?

00:08:35: Yeah, absolutely.

00:08:36: We can definitely talk later a little bit about venture rock what you're doing at the moment.

00:08:40: I would be also interested You as an investor.

00:08:44: What do you look out for before?

00:08:46: You invest?

00:08:48: or maybe are there any red flags for you

00:08:52: now?

00:08:52: they're one of them.

00:08:56: The critical Points of starting in business is what we call the founder problem fit that the founder really needs to have a connection with problem he or she is solving and also, the market that's going to be addressed.

00:09:15: Without that Founder Problem Fit there you see big churn of founders slash companies that are failing.

00:09:27: Let me elaborate if a founder who really felt the problem on a daily basis, like stone in his shoe.

00:09:36: He or she is willing to eat grass of their neighbors and solve that problem.

00:09:43: And one thing you always know when starting business there will be rollercoaster There'll be multiple bush fires, mayhem, ups & downs but the founder that really feels the problem he wants to solve and has a connection with it.

00:10:05: He or she will keep going?

00:10:07: So for example, a dentist invents new technology in order to make his profession more efficient.

00:10:16: is he more credible than an investment banker who has an idea of solving some kind of solution on the medtech field?

00:10:28: So credible is I think the wrong word, but the dentist will go on in ups and downs.

00:10:39: And investor a banker who's less connected with problem if things get rough he or she more likely to stop.

00:10:50: Okay makes sense Mark.

00:10:52: Is there any other reasons why startup fail?

00:10:56: You mentioned the problem founder connection,

00:11:02: how did you call it?

00:11:04: The Founder

00:11:05: Problem fits.

00:11:07: That's one.

00:11:07: but we did quite a large survey amongst more than hundreds post-mortem startups and We asked the founders only one question And that is what went wrong.

00:11:22: they were only allowed to give three answers And to my big surprise, more than fifty percent of the founders admitted that they built something... ...the market was not willing to buy.

00:11:36: More then fifty percent!

00:11:39: The second reason is team.

00:11:43: Indeed the founder problem fit but also the fact that people who are really good in starting a business.. ..are NOT necessarily the same people which are good at scaling their businesses.

00:11:56: And you see that a lot happening in Europe, that scaling of businesses is totally different ballgame.

00:12:03: They are not able to scale the company and they stay founder-centric for a scaling company really difficult.

00:12:13: The third reason why most companies fail were access to capital In a continually way.

00:12:21: at eighty percent of time was wasted on fundraising And the person who's doing business development was the same person, he is doing the fundraising.

00:12:32: So eighty percent of his valuable time were spent on non-business related and that's also a big delay for businesses to go fast.

00:12:47: So misallocation of time as well?

00:12:50: That's where you venture rock facilitates also founders and investors not to waste any time in making the perfect match there.

00:13:01: We'll talk a little bit about that

00:13:04: later.

00:13:04: I want you quickly catch on what you said The challenges of scaling, also scaling globally.

00:13:13: now You know Switzerland very well?

00:13:16: Europe very well.

00:13:18: Where do see the challenge is if you have product or build company have a well-functioning startup, they have customers.

00:13:28: Next phase now you want to scale globally.

00:13:31: what do you see there?

00:13:32: the challenges?

00:13:35: They don't do proper market research on which markets needs to be addressed.

00:13:43: second after their first addressable market and second distribution too those markets based on a few inbound requests, or their website and mail.

00:14:01: They think like let's go to the other country.

00:14:05: then they put lots of efforts into it And suddenly its way more complicated than they thought Way more expensive for customers especially if you compare also The customer acquisition costs towards the lifetime value of that customer.

00:14:22: And economics doesn't get up anymore, they spend a lot time on acquiring those but business economics does not work and then you got a stall-up instead for scale-up right?

00:14:35: That is happening alot!

00:14:40: And they also underestimate the jurisdictions, the different legal jurisdictions in Europe or Asia.

00:14:47: But also in

00:14:47: U.S.,

00:14:48: they also under estimate the different jurisdictions of the US.

00:14:51: because don't forget that the US has all sorts of different jurisdictions and everybody thinks there is one United States of America but it isn't.

00:15:02: They love to sue as well right?

00:15:07: Yeah, that's of course the common law principle.

00:15:10: where everything is they need to be written in a contract and therefore Common Law Contracts find five times more extensive but also More expensive to create.

00:15:25: And you see also lot of European based companies stalling because of that.

00:15:32: Because if all regulation legal but also a lack of research.

00:15:37: If you want to branch out into new country or new market, do your research properly if it's worth penetrating the market?

00:15:47: Exactly and most of them are underestimated costs And they think that can manage their countries from the rich.

00:15:56: But we need to go where our markets is.

00:15:58: So when going through the US You will have to be in the US

00:16:03: And

00:16:05: by the founders, because in the first five years you are running a founder-led company.

00:16:13: So the founder also need to be on next market and you see lots of scalabs failing by hiring an external consultant who is doing US or Asia but the founder themselves.

00:16:26: they needed understand that market.

00:16:30: so the founder needs to present

00:16:33: there six or twelve months, but you also have the founder.

00:16:39: that's also in the founder of that sales group.

00:16:45: The founder led adaption because you need to change a lot in settings when you are overseas.

00:16:52: Mark I also wanted to talk about Europe as a technology hub.

00:16:57: how do we see Europe?

00:16:59: tech space, growth space.

00:17:03: Maybe you can elaborate a little bit on that?

00:17:07: If you look at also the data but not only the data and money we are really good in getting research to first market But then we're less good into global scale And I'm a big advocate on creating an organized operating model that helps research from university, also known as technology transfer offices.

00:17:47: To a founder-led company to international scale and also organize the right capital around it successful projects or stop because there are many zombie companies running around from grant one to grant two, to grant three.

00:18:08: Especially also from European Union and local grants from local regional development organizations And it will never be a viable business.

00:18:20: so please stop putting money in.

00:18:23: So many zombie company's are financed by government grants in Europe And they're basically just like fake companies that don't have real customers, or just don't work in an efficient way.

00:18:39: They made the mistake of... The biggest mistake of the founders and building a solution is search for problem.

00:18:51: Yeah, you should go reverse right?

00:18:54: It should be the other way around.

00:18:55: That's the best way.

00:18:58: but many technology-led companies they build a fantastic solution and yeah They can solve all problems in the world.

00:19:06: But

00:19:10: that's kind of not so good.

00:19:13: I would like to talk about VentureRock your latest really exciting project Where you bring investors and match them with founders, maybe... You can talk about that a little bit.

00:19:30: So since I'm active in the startup space for around two thousand ten or more than fifteen years ...I've discovered there are three main issues not only in startups financing and innovation in general, but also in the European context.

00:19:54: That's not from bottom to top... The bottom is a sort of mutual understanding.

00:20:02: what is progress?

00:20:03: What is the progress for company?

00:20:05: And no bullshit hockey sticks or whatever!

00:20:09: But what is real progress from seed or pre-seed from idea till

00:20:13: scale?!

00:20:17: There are a lot of literatures being written about it, and I've sort-of copied them in the right order.

00:20:25: So i have created the Seventy Two proof points where you can see how far a company is in their development but also what proof that they have delivered on getting there.

00:20:41: The second layer is support.

00:20:46: A CFO is not needed in the first two, three years of your company.

00:20:51: But you need to have an administration order.

00:20:58: A chief legal officer isn't needed at that stage.

00:21:04: but if they sign and build their own contracts then there's a huge issue in a later state.

00:21:10: So how can we create a scalable support system?

00:21:14: But most importantly objective support systems And I've seen many companies fail due to listening the Rome advice.

00:21:25: Therefore, we have built an operating system that helps founders going through those seventy-two proof points in an objective way.

00:21:38: and of course what is more objective than a AI agent?

00:21:41: It's very objective.

00:21:45: And the AI agents are helping the founders through those seventy-two steps, and of course for legal you have different than for finance.

00:21:55: then you have difference for marketing and talk to agents.

00:21:59: that is how we build a second layer.

00:22:01: So it's not just about finding an investor.

00:22:04: It is supporting the startup or scale-up in all different departments such as legal, finance marketing whatever they need to grow and be healthy.

00:22:20: Because if you look at the core challenge of a European ecosystem its ninety percent failure rate for startups and predominantly caused by three reasons.

00:22:36: They build something nobody wants, they take too much time to find money.

00:22:43: And thirdly the team is out of balance when it grows.

00:22:49: Those are all three dominant reason why companies fail.

00:22:55: If you try to organize that to start bottom down, and the bottom is really proof for evidence that you have gone through a series of steps.

00:23:08: Then there's support system... ...and then access to capital in Europe is very dispersed.

00:23:20: You have local regional funds, you have national funds and of course European funds.

00:23:26: You also have local angels who are not cross-border active at all in Europe.

00:23:36: so there's many different players in the funding ecosystem.

00:23:40: hence when building a company your time on raising funds is lost.

00:23:47: That what we're trying to organise.

00:23:49: And then the jurisdiction as well plays a role.

00:23:53: I mean, we're in Switzerland now which is completely different to European regulation but maybe funding from EU would be good for certain companies and Maybe funding from Switzerland will be better for other companies.

00:24:11: We also have the European Investment Bank is an anchor in almost all the venture funds in Europe.

00:24:23: And they also demand a certain regional focus, which you can of course imagine that Spanish fund.

00:24:31: it's not investing in Dutch start-up but doesn't help right?

00:24:36: Because if your market... If your start is in the Netherlands and your market turns out to be in Spain.

00:24:47: And the Spanish investor wants to invest, you need to move your company... ...to Spain?

00:24:53: Absolutely!

00:24:57: So then suddenly

00:24:58: your Dutch investors said like yeah and then your Dutch investor said what are you moving to Spain?

00:25:04: where's my money?

00:25:06: I've put seed-money in it.

00:25:08: What are doing?

00:25:09: most of the companies will will go bust because of this.

00:25:17: Mark, I also wanted to ask you a question.

00:25:20: if you look back into your exciting career with all these ups and downs roller coaster rides what would say is there anything that you have done differently?

00:25:33: You wouldn't be where are right now without the ups-and-downs but maybe it's something.

00:25:41: What would that be?

00:25:44: I think more international from day one.

00:25:50: In my second phase of entrepreneurship, My first company was really a very localized company and doing business internationally The chance for success is way higher if you also look at different markets out your own country.

00:26:07: That's number one.

00:26:09: Number two I would have found a more experienced advisor that did not do it from the theory, but from practical.

00:26:28: That's number two.

00:26:29: and three... ...I'd always do with someone else.

00:26:34: Not by yourself or somebody else?

00:26:38: Okay!

00:26:39: That is some good advice as well.

00:26:42: Also a question I love to ask the podcast guest is if you would buy an auto biography, which one?

00:26:50: Would you buy and why?

00:26:57: like from a famous person.

00:27:03: Yeah i'm not really uh big fan of being a fan but yeah it also connects with what I've already said before.

00:27:18: What Steve Jobs always did is have the customer and a customer experience, everything what you do.

00:27:30: And that in essence made Apple... ...and he was a master in it!

00:27:38: He shown this at the start but of course later he fired and re-hired again.

00:27:47: And your customer is always in the center of everything you do.

00:27:53: That was his motto and that's also what I believe it still is.

00:27:58: So always listen to the customer.

00:28:00: Always take their feedback from customers and implement

00:28:04: it in product.

00:28:06: listening is a little bit of wrong word Because yeah, there's a big famous quote from Henry Ford.

00:28:13: If I would have listened to my customers they would have asked for faster horses because many people don't know about The innovation of a car right?

00:28:22: And data like I want to go but look at what they are doing and then test, and iterate.

00:28:35: And that was of course mastered by Steve Jobs but also by Apple... ...and if you look it from a corporate perspective right?

00:28:44: If we now look at how fast innovation is going big corporates can't handle the speed!

00:28:50: They try to do innovation within And Jobs already did.

00:28:57: the biggest innovation was their iPhone.

00:29:00: It was a special department outside, it's very small team who had short development cycles to have continuously iteration and that is something big companies can learn still from them

00:29:20: Because the bigger you grow as a company, do you think it's harder to listen also?

00:29:26: To the customer?

00:29:28: or do corporations also doing good job in that department.

00:29:33: No I've been unfortunately part of a few corporate accelerated programs and You see they use market data from third parties like A.C.

00:29:44: Nielsen and have never ever talked to the customer themselves other than showing at first version of their product.

00:29:55: But if you show something, they're not listening.

00:30:00: so... The art of asking right questions is really important And by showing something that's not the way.

00:30:11: So get feedback from customers honest feedback And listen to the customer, what customers are doing.

00:30:20: But again business is sort of problem-focused and not a solution.

00:30:25: everybody's like look this is where I built.

00:30:28: oh yeah nice but that's how you start your conversation.

00:30:32: The conversation is about how do you listen out to audio?

00:30:35: How does it listen for podcasts?

00:30:40: What is irritating or annoying?

00:30:43: what can be improved, and how much is it worth for you to solve that problem?

00:30:50: It's a different conversation than showing apples.

00:30:55: So solving the problem getting into the problem... ...and finding then the solution.

00:31:00: once you analyze your problems And

00:31:03: of course based on the first version show with two people which we've been talking about Then start iterating based on the feedback loop.

00:31:17: Mark, if you were to pick a superpower next to your superpowers that already have which one would you pick?

00:31:28: Flying I think sitting in an airplane is very annoying.

00:31:35: so If i could get a few feathers or wings it will be really helpful for me.

00:31:45: So flying, because in different perspectives right?

00:31:51: Because flying gives you also a good overview helicopter view on where you stand from distance.

00:32:01: And flying I think is if would be able to fly one of the greatest thing that can do with and always mesmerized by birds like they land on water and they fly.

00:32:17: They can do whatever, what ever they want to do for years of

00:32:22: use.

00:32:22: Do you have a mission statement?

00:32:25: A credo or something like a motto that you live by?

00:32:37: The number one is I always get used from the founder perspective but also health.

00:32:42: wise perspectives never give up.

00:32:47: That's the number one.

00:32:49: Number two, show me the evidence and we will invest.

00:32:57: Evidence is key to anything.

00:33:02: God-feeling can help but data, evidence first.

00:33:10: Thirdly, accountability because there are many people saying that they do a lot but don't deliver anything.

00:33:22: So accountability is third.

00:33:25: Marc Vesselding, thank you so much for this podcast interview.

00:33:29: it was a pleasure.

00:33:30: I wish you success and nothing less with VentureRock!

00:33:34: And hope to talk soon.

00:33:37: Thank You for having me.