All About Venture Capital: From Seedy Casinos to Seed Investing at Playfair | by Andrew Sheffield | Playfair Capital Blog | February 2022

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I’m really proud to have joined the Playfair Capital team in London as a venture capital analyst. Playfair invests in Europe’s most ambitious tech startups at the pre-seed/seed stage and I will assist with all aspects of the investment lifecycle. It’s extremely exciting to work with such a brilliant team and ambitious, cutting-edge founders.

Landing a role in VC is competitive. If there is no “standard” route, my route is certainly one of the least travelled. This short piece will describe my journey; how this applies to Venture; why I joined Playfair; and what I do on a daily basis.

I’ve been a poker fan since I started Zynga Poker when I was 13. Some of my early opponents were consistent winners and I became interested in how that was possible. It turns out that winning strategy lies at the intersection of mathematics and human psychology and has fascinated me ever since. I’m also pretty sure my teenage years were influenced by the glamorous aesthetic of movies like Casino Royale. My life culminated on my 18th birthday; waiting proudly at the casino entrance at midnight with my ID in hand ready to take my place at the table.

Not quite how I would dress but you get the gist

In college, I quickly realized that many economics subjects were actually relevant to my fascination with poker. Game theory, statistics, risk preferences and human biases were all useful for my exams and my weekly trips to the casino. I ended up writing a multipurpose thesis that analyzed the willingness of television contestants to take financial bets on Agree or disagree. It allowed me to study more deeply how my casino opponents made decisions. A part-time hobby quickly became a strategic and profitable side business.

After a few internships in Santander and State Street, I quickly understood what I was doing not want to do after graduation. Much to the dismay of my family and guardians, I challenged myself to financial self-sufficiency through poker. Countless books, YouTube videos and hours of analysis later and I was ready to take on the game full time.

Contrary to popular belief, professional poker is not the glitzy, James Bond-esque lifestyle of the movies. For starters, the most lucrative poker games are played after midnight. My typical hours were therefore reverse 9–5, making my social life non-existent. And while the game is inherently social, every player at every table is in direct competition. There really aren’t any friends/colleagues your incentives are aligned with, which at times was lonely.

That being said, it was a a lot of pleasure.

One of my most impressive chip stacks

I worked my own schedule, met various people I never would have met (including a memorable hand with a player from Old Crow, Yukon) and gained the financial freedom to live/work in Manchester , London, Barcelona and Vancouver. Sometimes I had to remind myself that this was made possible by playing a game.

However, every night I could gain/lose a few months’ rent and I could never rely on a stable income. (My VC brain is screaming for a recurring revenue model here).

Later, I discovered that there were many similarities between a career in poker and a career in VC. This is probably the subject of a future blog, but my main takeaways from this time can be found below:

  • Decisions > Results. The element of luck means that good poker decisions are not always rewarded with equally good results. You can perfectly play one hand/session/week and still lose. Success requires focusing only on the things I could control – my decision-making – and expecting results to come. This is particularly relevant in early stage venture capital where time horizons span many years and good decisions don’t always translate into immediate growth. At Playfair, we pride ourselves on being patient capital, focusing on getting the right inputs for every investment and expecting long-term success as a result.
  • Personal motivation. Poker is an individual game with a fairly extreme mental load. The periods of success left me with the impression of being untouchable. Sustained losses cast doubt on my abilities. Despite a fluctuating mental state, I found a way to continue playing 6 nights a week, studying and outperforming other professionals. I developed a severe caffeine addiction and since then I appreciate the work of the founder even more.
  • A desire to make the cake bigger. Since poker is a zero-sum game, any gain comes at the expense of others’ losses. I realized that my time and energy was spent on an issue with no clear impact on the rest of the world and I quickly became hungry for change. It’s great fun to now work closely with start-ups with global ambitions to impact the way we live and work.

The pandemic shut down casinos around the world and I joined the sales team at Neudata – a B2B SaaS startup – where I helped understand the sales playbook for a new product and market. I generated £400,000 in new revenue in my first year, then envisioned and implemented a shift in product offering from pay-per-game to recurring revenue.

It was an extremely exciting time for me. Startup experience is varied. Alongside the more traditional aspects of a sales role, I would help with marketing, account management, operations and even influencing the strategic direction of the business. The sales process included interviews with founders of ambitious tech companies and finding pain points. I found myself constantly inspired by their vision, their passion and their dynamism. It was through these conversations that I found my desire to work in VC.

Surprisingly enough, I have since learned that much of venture capital is sales so my start-up experience was formative both in my hiring and in my day-to-day work. Creating a killer VC elevator pitch is a quick way to build relationships with founders early in the investment process.

I spent some time wondering how I was going to land a job in VC – there are very few roles, especially as an analyst (best advice: Nicole DeTommaso’s Twitter does a great weekly roundup of live VC job postings). I was thrilled to find the Playfair role advertised on Linkedin and lucky enough to make it through the 8-step interview process. Playfair was exactly what I was looking for:

Support founders as soon as possible. Playfair builds on the legacy of Fede, who was a key member of the London angel ecosystem in the early 2010s. Therefore, angel investing is part of our DNA. We are often the first institutional investor in our portfolio. This is special for several reasons:

  • Early investors take on the most risk, but also get the most rewards. They are able to see ideas become reality and help guide start-ups through all the challenges to go from 0 to 1.
  • The lack of historical data means we need to reinforce founders’ belief and ability to execute a vision. This is perhaps the most exciting part.

Strong conviction and added value. The venture capital asset class has seen extraordinary returns for investors for many years. As a result, many venture capital funds employ a (very reasonable) strategy of making many bets in certain sectors. They offer capital with a “hands off” approach and rightly expect some of their businesses to become winners.

Playfair does the opposite. We make 6 to 8 investments a year in companies in which the whole team is convinced. We then encourage our founders to leverage the skills of our entire team to increase the odds that they are winners.

Since then, I’ve seen Joe cast perfect candidates in key early roles. Chris has robust sales processes in place that scale with each business. Henrik & Jeevan are reliably ripping and reworking models, or helping to drive the next funding round for our portfolio companies.

Of course, these actions are insignificant compared to the effort of the founders whom we support. However, in an industry where results follow the power law, we hope that even the slightest % improvement in the inputs of our portfolio can lead to outsized returns.

The analyst role at Playfair is divided into three parts:

  1. Outbound supply. That means finding start-ups that might be suitable for Playfair. Building technology tools, attending industry events and growing my network are all goals to ensure we have the widest possible market coverage.
  2. Incoming management. To ensure that all founders are able to introduce us, we have an open introduction form on our website. We typically get 80-100 submissions a week, so I spend a lot of time reviewing these decks and taking arguments where appropriate.

I am always impressed by the number of founders who take risks to create innovative companies. I also learned that, despite all-time highs for venture capital deployment, fundraising is very difficult for most founders.

3. Due diligence. This is when things start to heat up and we do extensive due diligence to create a 30-page investment note to discuss in our investment committee. As a generalist investor, research can range from assessing the concrete industry market one week to making referral calls with radiologists the next week. Everyone is on deck as we try to understand a company and its founder.

One of my new areas of interest is optimizing incentive structures in early sales teams. I will continue to read around this topic (book recommendations welcome) and aim to conduct a study to shed light on these opaque structures.

Most importantly, I will continue to read decks, connect with Founders and other VCs in my quest to find the best companies of the future. If you’re also interested in this, or you’re a founder looking to raise early-stage capital, I’d love to connect.

You can follow the Playfair team on LinkedIn, TwitterForbes and here on Medium.

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