PROfounders Capital Managing Partner Sean Seton-Rogers on the Secrets of the VC Market

Written by Tom Fairey

8 March, 2022

What VCs Really Want: Metrics, KPIs, and Data Analysis

Sean Seton-Rogers knows a thing or two about venture capital.

The Rice University and University of Pennsylvania Wharton School graduate has an incredible CV:

  • Senior associate consultant at Bain & Company
  • Associate at Commonwealth Capital Ventures
  • Investment professional at Benchmark Capital
  • Board member for onefinestay, GetYourGuide, Festicket, wundertax, NDGIT, Waldo Contacts, Bloobirds, ENLYZE, and Surrogate

Seton-Rogers, who grew up in the U.S., founded PROfounders Capital in the summer of 2009 when he noticed that there was a huge market gap for startups seeking more than $2 million but less than $3 million — turns out, that’s the gap left out between traditional VCs and angel investors.

London-based PROfounders Capital aims to make between 5 and 7 investments a year in businesses that are using tech to solve problems seen by customers and businesses. Those businesses can be located in any country that is qualified to compete in the Eurovision Song Contest — for real. This position puts him in close contact with both founders and investors across the musically inclined parts of the continent.

Thanks to Recent Tech Advancements, Founders Need to Raise Less Money

With PROfounders, Seton-Rogers is handling companies in their earliest stages of company formation and that are in the stage where their concept can be proven — or disproven. For founders, however, the cost of setting up a company has fallen dramatically in the past decade thanks to advancements such as Amazon Web Services and Facebook targeted ads.

Despite that, and a surge in similar investors, PROfounders is still dedicated to writing smaller checks.

“We think it’s the most exciting time in a company’s entrepreneurial journey,” Seton Rogers told me during an interview for my podcast, Back Yourself. “It’s going from a small team of 2 to 5 people to really properly start to scale the marketing department, scale the tech team, and get a sense for whether or not this business can become something big.”

Now, that something big, he notes, can come from almost anywhere.

“The information gap between different ecosystems has really flattened,” he said, “so the aspiration level has also risen.”

The Risks in Taking VC Money: Founders Lose Part of What They Built

PROfounders looks for companies with potential for massive growth, but the excitement and potential VC sees at the early stage may not translate to what later-stage investors see. In other words, just because the idea is there does not mean it is attractive to venture capital. Yes, this is a tough game.

To that end, though, for founders, there can be risks in taking VC money. To appreciate that, you need to understand how VC really works.

As Seton-Rogers says, a VC getting just 1X its money in 2 or 3 years is not a good use of capital. This next quote may be a shock to some:

“We would actually rather push a company to the edge, push them to be very aggressive, knowing there is a higher chance of failure, than be satisfied with 1X our money in 2 to 3 years. What that means from a founder’s perspective is, you have all your eggs in one basket, and we have 20 different baskets. Individually, what might be best for you as a founder might not be best for a venture capital fund.”

Further, founders own 100% of their company pre-investment, and that figure dwindles post-investment. On top of that, you get a new board member who has veto rights and a direct say in how your business operates going forward. Do you want that? Will it help you reach your idea of success? Maybe, maybe not.

That does not discount, however, the benefits to VC money: the ability to invest ahead of growth, revenue, and profits. That money can be invested in new markets, new tech, and beating the competition.

The Brutal Truth About VC: They Don’t Know Everything

VC has the money so it knows what is best, right? Not necessarily, Seton-Rogers admits.

“VCs aren’t as smart as everyone might think they are,” he said. “And there are jerks in the industry as well. Clearly, there are people that misbehave.”

But they do like numbers, and early-stage companies hoping for a leg up in the industry should focus on that.

“Call it what you want — a metrics guru, a KPIs guru, a data analyst — someone that is measuring every single component of the business and is responsible for every number in the business,” he said. Many companies are flying blind about their metrics, and if changes are made, founders need to know immediately what those impacts are.

The Takeaway:

The world of VC is incredibly exciting — and incredibly tough. For companies that take VC money, the payoffs can be not just huge, but life-changing. Before you take a pence, though, make sure you understand clearly what the downsides are and what you are giving up.

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