An exit to Amazon, some amazing investments and just going big
Podcast transcription - 5th september 2018
Peter Cowley: Welcome again to another Invested Investor podcast. Today we have Simon Murdoch who was a partner in Episode1, has been an entrepreneur who I've known for several years. But let's hear about your story. So Simon, a bit about your education and background. And moving onto your entrepreneurial journeys.
Simon Murdoch: Okay. Yeah. So what I do today is I'm the managing partner of Episode1 Ventures. So I'm a VC, and this is actually the third time I've been VC. But I've started off as an entrepreneur. I've been an angel investor very actively, and now a VC. But doing some angel on the side. But my original background was a degree at Cambridge at Trinity College, which is in physics. I did very well at that. But then went to work at GEC-Marconi, which now doesn't exist, in Chelmsford after university. And I got interested in computing there, having done a physics degree. And then I went off to do a PhD at Brunel University in artificial intelligence.
Peter Cowley: Was it called artificial intelligence? In the day-
Simon Murdoch: Well, it was called cybernetics. And it was starting to be called artificial intelligence. It was 83 to 86 I did the PhD.
Peter Cowley: Okay. Yeah. Were Edinburgh was the strong-
Simon Murdoch: It was actually, yeah. There was a guy called Professor Allan Bundy.
Peter Cowley: Yeah.
Simon Murdoch: And I nearly went to Edinburgh, but thought it would be too cold. Brunel was kind of doing it in the South, so-
Peter Cowley: Yeah.
Simon Murdoch: ... I went to Brunel. And I had a great time there and realized that actually it was gonna be quite a while before artificial intelligence were real. And I did a lot of lists and prologue programming and that sorta stuff. And while I was doing the PhD, I become more commercial. I started doing some teaching. I was also doing some freelance work on the side. And I went to join a company that happened to be doing bespoke software work for, it was in those days the IBM PC. And they were a generalist software business.
Peter Cowley: What company was that?
Simon Murdoch: They were called Triptych Systems.
Peter Cowley: Okay.
Simon Murdoch: Based in Gerald's Cross, West of London. And I went there as a project manager to start with, but quickly learnt a lot about running a business. And I became a director within a year or so. And about three years later, the founder actually left and went to do something else and left me in charge of the company.
Peter Cowley: He owned the company?
Simon Murdoch: He owned ... No, at that time I think I took a majority stake. The company had had a lot of ups and downs. It was quite hard in those days selling bespoke software. It was a kind of ... I always kind of think of it as a kind of feast or famine situation where you either had too much work to do, or not enough. It was very difficult to match the work load-
Peter Cowley: If you were small. I worked for Logica out of university. And that was big enough where that didn't happen.
Simon Murdoch: Yeah. So it was tough. But the lucky thing for me was that I was in charge of this company. We did systems for book shops is one of the specialist areas we focused on. And therefore I saw what Amazon did in the U.S. And understood the supply chain in the U.K. very well about books-
Peter Cowley: So this is early 90s?
Simon Murdoch: 95.
Peter Cowley: Okay.
Simon Murdoch: 94 at the end of when I started-
Peter Cowley: Okay. Yeah.
Simon Murdoch: So I took control of the company in 1990. So I saw what Amazon was doing. I went to our customers and said, "Hey, you should be selling books on the internet." And nobody wanted to pay us to develop a website.
Peter Cowley: Yeah.
Simon Murdoch: So and I also tweaked that ... Actually on the internet, there wasn't to be room for many, many books shops, because of the accessibility for everybody on the internet. So I set up Book Pages, and that was in 1996. Set up Book Pages to compete with our customers at the software business I've been at.
Peter Cowley: Book pages, why? Because ... Pages on the internet?
Simon Murdoch: Yeah.
Peter Cowley: Yeah.
Simon Murdoch: All it was really.
Peter Cowley: Yes.
Simon Murdoch: Book pages on the internet.
Peter Cowley: Dot com? Did you get the dot com?
Simon Murdoch: It was Book Pages dot com.
Peter Cowley: Yeah.
Simon Murdoch: I mean, this is I think a very interesting part of my personal journey was because I had started this business. And we started it with £12,000 of personal money, actually of credit card overdraft. And then I spent ... It started to work. It was growing at about 20% per month in terms of selling books on the internet. We did a deal with the Daily Telegraph to sell books and all these sorts of things. But I found it very difficult to raise money. So as an entrepreneur, I spent over a year trying to raise some finance for the company.
Peter Cowley: This was for working capital to buy the books, was it?
Simon Murdoch: Yeah. And just to pay for the programmers, and the-
Peter Cowley: Okay, yeah.
Simon Murdoch: developers, computers and everything. Even then you couldn't start a business with 12K and expect it to trade through to profitability. And also there were no software tools to build websites. So we had to build our own software to
Peter Cowley: From HTML?
Simon Murdoch: Yeah. Exactly. To manage the database of a million books it was. So eventually I manged to get some angel finance right at the beginning of 1998. And Amazon had already started knocking on our door. They were quite interested in the fact that we built our own search engine. Again, there were no search engine tools for internet websites in those days. So we built our own, and they were quite impressed with what we've done with very little resources. And that's how I started realizing angel is a great thing to do. Within three months of raising £300,000 through angel investment, we've sold to Amazon for a very nice price in terms of Amazon shares.
Peter Cowley: Okay. And what were the multiple in the tens?
Simon Murdoch: Yeah. Their multiple ended up being a lot more than that, because Amazon also insisted that we had hold the shares for at least a year. So during that period, the share price went up about another five fold.
Peter Cowley: Right.
Simon Murdoch: Amazing.
Peter Cowley: 100x or more.. Yeah.
Simon Murdoch: Yeah.
Peter Cowley: Yeah.
Simon Murdoch: That sort of order.
Peter Cowley: So how big was the company that when you sold?
Simon Murdoch: When we sold it, it was 22 people I think. And about just over a million turnover selling books.
Peter Cowley: So he was buying you, the team wasn't he? To
Simon Murdoch: He was. Largely me and the developers. The team, yeah.
Peter Cowley: Yeah.
Simon Murdoch: Which was largely me and the developers that I had. The way Jeff Bezos described it was, he drew a graph on a piece of paper with two sort of exponential curves stacked on top of each other. And he said, "What I'm buying is the difference between you helping us have a faster start in the U.K. versus if we were already building a website to compete with you. And we're launching soon. But if you buy your business and your team, then I de-risk the launch, and I've got people that understand the supply chain and so on. And that's what I'm buying is that delta."
Peter Cowley: But the alternative was to squash you pretty much.
Simon Murdoch: Yes. And in fact, he said he was going to. It was very politely.
Peter Cowley: Nice guy?
Simon Murdoch: Yeah. Extremely charismatic. So I do know that he met up with our competition, the Internet Book Shop. He met up with them at the same time. And I think that what happened was that myself and the lead angel investor that worked with me Ricky Tartu who later became my business partner. He and I, it was a cultural fit with Amazon. They liked us, we liked them. And that was the main reason.
Peter Cowley: You can't beat the multiple of revenue, can you?
Simon Murdoch: It wasn't, no. And Internet Book Shop was bigger than us at the time.
Peter Cowley: So they just like you better?
Simon Murdoch: It really was a cultural fit. Yeah.
Peter Cowley: So you squashed Internet Book Shop presumably in the end?
Simon Murdoch: Well they got sold to WHSmiths later.
Peter Cowley: Okay.
Simon Murdoch: They did okay. So what Jeff Bezos was buying was a team that would de-risk their launch in the U.K. And it was a most amazing experience as an individual to be what they call, the country manager, effectively. The boss of the U.K. business when it launched. And I did that for just under two years. And he's a very charismatic person. Even then it was clear that he was incredibly ambitious. He named it Amazon so he could sell everything in the world. His vision was always to be the eCommerce business on the internet.
Peter Cowley: And it was just books at this point when you were-
Simon Murdoch: It started ... Yeah.
Peter Cowley: Yeah.
Simon Murdoch: Just books. I mean, while I was there we started to do music and video. But it was just books. And he's just extremely visionary. But he's unbelievable competitive as well. So if you read the book, The Everything Store, that comes out even more. But the bit that I didn't really enjoy at Amazon was that they don't really look after their people. So there was a huge churn of employees, and I think there still is quite a high churn. But in my day, I was burnt out after a year and a half.
Peter Cowley: Really?
Simon Murdoch: It was such pressure.
Peter Cowley: Did you have kids at that point where you-
Simon Murdoch: Yes. I had three kids.
Peter Cowley: Yeah. Okay.
Simon Murdoch: And in fact, then later went through a divorce, and all that sort of stuff. So, it was challenging but amazing to be at the sort of centre of eCommerce becoming famous and important in the U.K.
Peter Cowley: Did you leave, or did you have to leave?
Simon Murdoch: Yeah. No, I left. We got an opportunity. So, Ricky, the angel who'd invested me, he also helped me sell to Amazon, because he'd sold businesses before. And he I left to start what we'd called at that time, Chase Episode 1. We had a fund at the height of the internet boom, so we signed up in December 99. We signed up to work with Chase Capital Partners that later became J.P. Morgan Partners. Merged..
Peter Cowley: And they provided most of the capital?
Simon Murdoch: They provided ... Yeah. We had ... It was great. I mean, the fundraising took basically a month of negotiation. Because we'd had an introduction by Fred Wilson of Union Square Ventures.
Peter Cowley: Oh, right.
Simon Murdoch: And we got introduced to them. And the headline was a $100 million dollars to invest in internet ventures.
Peter Cowley: So, dot com boom or bust? It was the boom was it?
Simon Murdoch: It's December '99, so it was during the boom time.
Peter Cowley: Yeah.
Simon Murdoch: And it was really quick to get that deal done. But then, I don't know if you remember the timing, but around March/April 2000. And then October it was clear it had been a bubble, because the stock market and all the valuations sort of collapsed. And many people lost lots of money. We did well for them. We'd only invested in nine companies. The one you'll have heard of is Betfair.
Peter Cowley: Okay.
Simon Murdoch: And which eventually went public in 2010. So, we've made a lot of money with that one. We've also invested in what became ScanSafe, they also got sold to CISCO. Invested in First Tuesday and got our money back. And we invested in-
Peter Cowley: And they had a multiple of two or three, or something.
Simon Murdoch: They made three and a half X.
Peter Cowley: Over 10 years-
Simon Murdoch: Over 10 years.
Peter Cowley: Yes, okay. Well, that's pretty good for a VC.
Simon Murdoch: That's not bad for a VC.
Peter Cowley: Yeah. Particularly good timing.
Simon Murdoch: Yeah. Exactly, for that timing it was incredible. So we went off, and I then started angel investing just on my own, really.
Peter Cowley: In ... So 01?
Simon Murdoch: Yes, Sort of mid-01, really.
Simon Murdoch: So I'd been doing a bit anyway. In fact, my first angel investment was in 1999 with a company called Magicalia. Now which they'd get sold to a private equity company. A few years later we made a positive return on that. But 2001 onwards, I sort of acted as a sort of one-man VC really, I like to think of it.
Peter Cowley: Family office sort of thing?
Simon Murdoch: Yeah. It was probably ... It was really an angel investor.
Peter Cowley: Yeah.
Simon Murdoch: But we nowadays call it one-man VC when you're selling to limited partners trying to get into a fund.
Peter Cowley: Yeah.
Simon Murdoch: But the key thing for me at that phase of my life is that I really wanted to be actively helping the companies. With the experience of Amazon, everybody thought I knew what I was talking about. And quickly learned-
Peter Cowley: You were. To some extent. Among many others.
Simon Murdoch: I learnt a lot working with Chase, because they showed us what deals look like and learnt all the best terms for those sorts of things. I incorporated those into our standard angel terms. Things like a sort of hurdle preference, even my getting EIS.
Peter Cowley: Oh, right.
Simon Murdoch: Which I'm sure you know about.
Peter Cowley: Yeah.
Simon Murdoch: So we were doing that from a very early time. But I really loved helping the companies. So going on the board of businesses. So for example, I invested in Shazam in 2001. And I was on the board at the beginning. And in fact had a short period where the VCs that came in edged out one of the founders. And they asked me to be interim CEO for a few months while they hired a CEO.
Peter Cowley: So what was your role on the board, investment director? Or-
Simon Murdoch: Yeah. I was generally an angel director.
Peter Cowley: Yeah.
Simon Murdoch: So you know how these things work. You get a consortium group of angels together, and one of us would be on the board. Or sometimes two of us. And I often volunteered for that position, because I liked helping the companies. So another one was, I went on the board of NaturalMotion,
Peter Cowley: Oh, in Oxford, isn't it? Yes.
Simon Murdoch: Yeah. And..
Peter Cowley: That was a good exit.
Simon Murdoch: They eventually got sold to Zynga for $500 million dollars.
Peter Cowley: I wonder if Zynga got $500 million worth of value out of that.
Simon Murdoch: I don't know.
Peter Cowley: That's another story.
Simon Murdoch: I really, really enjoyed the angel investing, but you do get very busy. I mean, that's one of the challenges if you go on lots of boards.
Peter Cowley: Yeah.
Simon Murdoch: And you end up filling your time gong to board meetings. And while that's enjoyable, it does make it more difficult then to look for a new investment.
Peter Cowley: But you had another start-up as well, Friends Abroad?
Simon Murdoch: A little bit later. So, I'd always been interested in languages, and not very good at learning them. So, I created a social community really before Facebook launched. So, it was around some 2005 I set up Friends Abroad. I tried to get other people to run it. But eventually I decided I ought to go back and work sort of half my time while looking after my angel investments and in Friends Abroad. And it was a great learning experience as you call it. A kind of failure.
Peter Cowley: Yes.
Simon Murdoch: But what happened was, I put a lot of personal money into it. But it was really quite challenging. First of all, I hadn't realized how lucky I was when I set up Book Pages. I had fantastic technical people. In particular, there was a guy called Simon Cane who later became the CTO of LoveFilm and later the CTO of Zoopla. And I'd hired him straight out of university at the age of 21. And he was the guy that invented that search engine that helped us sell to Amazon.
Peter Cowley: Oh, wow.
Simon Murdoch: He was a genius, and I hadn't quite realized that. So with Friends Abroad, I didn't have such good technical people. It was actually a much harder project, because we were in 10 languages. So maintaining the content in 10 languages is difficult. And then the other key thing, the most important thing was, people don't like paying for language social community. It was very, very hard to monetize. I mean, we never really worked out how to persuade people to pay for the service.
Peter Cowley: Right.
Simon Murdoch: So in the end, we sold the userbase to a German competitor for a small fraction-
Peter Cowley: For a small fraction-
Simon Murdoch: Exactly.
Peter Cowley: So not a 100% failure. There still is some outcome.
Simon Murdoch: Yeah. It was some outcome.
Peter Cowley: Yeah.
Simon Murdoch: But you know, a home for it to go to, really.
Peter Cowley: Yes.
Simon Murdoch: But that was a really learning experience, because earlier in my career I'd been influenced a lot by sort of views on entrepreneurship and American attitudes that you just have to be persistent enough. If you just keep trying-
Peter Cowley: You'll get somewhere.
Simon Murdoch: ... you'll get there in the end. And you know, if you don't mind me swearing, it's bollocks. And actually the most important thing one has to do is to listen to the markets and understand, you know, what your customers are telling you, and what the activity of your customers is telling you, so you can keep moving your business, iterating your business until you find something that works. And sometimes you have to pivot completely.
Peter Cowley: Yeah.
Simon Murdoch: But even the best of businesses are multiple iterations over time until you get a business model that works.
Peter Cowley: So how many years were you doing Friends Abroad then?
Simon Murdoch: It was about two years full-time. It's either in 6 to 8.
Peter Cowley: Eight to now is 10 years. So you've done a lot in those 10 years.
Simon Murdoch: Yeah.
Peter Cowley: So let's just run through that. So from when you closed down Friends Abroad, you were already angel investing..
Simon Murdoch: Yes, so-
Peter Cowley: But you had another couple of ECs since.
Simon Murdoch: So the first one was the Chase Episode 1 I've already mentioned. Then I did some more angel investing. And I ended up investing in Zoopla.
Peter Cowley: In the first round?
Simon Murdoch: The very first round. Because I knew I had a Chesterman from LoveFilm. I'd invested in LoveFilm. I'd invested in Screen Select, which became Video Island which became LoveFilm. And Alex Chesterman the founder of Zoopla was the founder of that, of Screen Select. And he's a great entrepreneur and one of the best negotiators I've ever worked with and awesome, awesome individual. Very tough, but fair.
Peter Cowley: We want that from our entrepreneurs. They push hard. You know they'll push hard against the customers, suppliers, staff, and everything.
Simon Murdoch: He's the sort of guy that works until three in the morning and very, very impressive guy and deserves to be where he is. So we invested in Zoopla as an angel and we got to know Octopus a bit. So we just kind of invested in some things together. They introduced me to another one called Vision Direct, originally called GetLenses, which also did well. In the end sold to S-Law.
And having worked with Octopus a bit, they said come and help us manage our portfolio, we called it just portfolio development. So I worked half my time for octopus from 2010 until 2012. And again that was a good learning experience to see the inside of another VC, see how they think-
Peter Cowley: Was that the full portfolio? For all their various funds?
Simon Murdoch: Yeah. Yes, it was. At that time they had sort of mini private equity practice. Chris Holner who's now at Downing was running a group that did small private equity transactions called The Growth Team. And they kind of merged those businesses Alex MacPherson’s ventures. For instance, sort of ventures team. So that now they just concentrate on venture with the tightened VCT's.
Peter Cowley: Yeah.
Simon Murdoch: Octopus as a whole has got lots of other aspects to it. In terms of a bigger business. But it was great being inside another VC, working with a team of people looking at investments together but I thought that I particularly concentrated on helping the companies we'd already invested in, because that was partly what I enjoyed.
And it was really while I was there that I heard about, I'm still doing angel investments of my own but, I heard about the enterprise capital fund scheme.
Peter Cowley: Yes.
Simon Murdoch: That's run by British Business Bank. So I left Octopus in 2012 to set up Episode1 Ventures, which now is this VC that we've been running since then.
Peter Cowley: Which is, you're now on your second fund?
Simon Murdoch: Second fund. So the first fund we closed September '13, so it took about a year and a bit to raise the fund and persuaded British Business Bank to back us, get the Private investors to go in.
Peter Cowley: How big was the fund for you?
Simon Murdoch: 37 and a half million pounds.
Peter Cowley: Right.
Simon Murdoch: We've invested in 22 companies in that fund in November. 17 we've launched from 2 of 60 million pounds, and we're looking for another 25 or so.
Peter Cowley: With some ECF money-
Simon Murdoch: Again ECF, yeah.
Peter Cowley: We'll have something about ECF in the show notes.
Simon Murdoch: Yeah, and it's a great scheme. So, my journey therefore, I've been an entrepreneur, I've been an angel investor, I've had this experience with VC. But I'm in the best phase of my life, I think now, because I found it quite lonely being an angel-
Peter Cowley: Did you not belong to a group?
Simon Murdoch: I've been a member of Cambridge Angels, I've also been in the Surrey Investment Club. Because I live in Haslemere in Surrey.
Peter Cowley: Yeah.
Simon Murdoch: And of course, generally when you're investing as an angel, you're investing alongside other people. I've invested with some great other angels in the past. But you're all in different investments, and you know you're on a lot of boards. It's quite a lonely-
Peter Cowley: Funny if I totally disagree with that?
Simon Murdoch: Do you?
Peter Cowley: Because I learned everything from the Cambridge Angels, I'm sure of it at the moment. I find it very social, I've been skiing with them, two weeks ago.
Simon Murdoch: Well, okay. I don't only mean Cambridge-
Peter Cowley: No, exactly.
Simon Murdoch: Perhaps I just didn't-
Peter Cowley: London's too big, and you live outside in Surrey don't you?
Simon Murdoch: Yeah, I ... maybe the Surrey group just didn't gel with me in the same way.
Peter Cowley: Well they play golf, and that's about it I think, from what ... Because I was a member. At one point.
Simon Murdoch: Yeah. My point really is that as part of a VC, we got a team that are all looking at the same investments. We're all doing the same investments together, and you got this, you got a common purpose really.
Peter Cowley: Yeah.
Simon Murdoch: So I prefer being part of that team. And then also investing other people's money, as you can do bigger things. And being a VC means that the companies take you even more seriously than they-
Peter Cowley: But you have huge responsibility here.
Simon Murdoch: There is not just your own cheque books, not ... you're failing, you're losing money for other people, or you're making money, but-
Peter Cowley: Exactly.
Simon Murdoch: The point I'd like to get to is that one of the trajectories an angel can have is that with that experience they can become a VC. And British Business Bank is looking for other people that want to start funds. And so, some of your listeners might be interested in that.
Peter Cowley: During the one of the outputs from that-
Simon Murdoch: Yeah.
Peter Cowley: Was exactly that.
Simon Murdoch: Yeah.
Peter Cowley: To help skilled people, angels periarticular, to help run funds.
Simon Murdoch: So, you know, for some of your listeners, that will be a good tract for them to do. If I would say, one of the key things about being an angel is to think quite a lot about what your objectives are with it, and still love being an angel investor. And I still do some angel investments, and I'm still a member of the Cambridge Angels.
Peter Cowley: Let's talk about failures. What people have to understand, it is a very difficult journey. At least in terms of what the entrepreneurs say. And the angels have got to be patient in doing that. So we must be specific, but you have a sheet in front of you that has got quite a lot of zero's on it, is there any common theme, or are there any stories from that?
Simon Murdoch: Certainly. I've got 2, 4, 6, ... about 9 companies which have totally wiped out.
Peter Cowley: Which is actually only about a quarter, looking at the whole sheet.
Simon Murdoch: Yeah
Peter Cowley: Which is pretty good. So what sort of themes? Team dynamic?
Simon Murdoch: Yeah, the most frustrating one is when the people don't work. I can see two companies on here. There was one in particular I invested in where the ... and somehow, I knew this before investing so I should never have invested. And so great lesson that, for angels, is follow your instincts.
Peter Cowley: Yeah.
Simon Murdoch: There was a company that I invested in where they had hired a CEO, and there was a technical co- ... the technical founder, and after investing, it was clear that they hated each other. And the reason that there was a hired CEO in there was because the technical founder wasn't strong enough to run the business himself, but they were poisonous with each other and ended up-
Peter Cowley: And you didn't notice that ... how long was the DD? How long did you spend talking to them before-
Simon Murdoch: Well, I'd gone in actually with the Sussex Investment - John Bates and
Peter Cowley: Sussex Ventures?
Simon Murdoch: Yeah, Sussex Ventures.
Peter Cowley: Yeah.
Simon Murdoch: And so, my personal diligence on that one wasn’t…
Peter Cowley: Wasn't as much as it probably should have been, yes, okay. Anyway-
Simon Murdoch: You have to learn, you do learn, and every situation is a learning experience.
I had another one where, I made the same mistake. It was actually a friend of mine, I invested in this business, and he was a great, solid, good CTO. I helped him find an investor who then became the CEO. And then they fell out, and again the whole company was wiped out. So, people problems, as I'm sure you've experienced as well as-
Peter Cowley: Yeah, I would very rarely invest in a single founder. Would you agree with that statement?
Simon Murdoch: I can't quite think of whether I have or not. But generally, you're looking for teams, I think.
Peter Cowley: Yes, exactly.
Simon Murdoch: Two or three founders.
Peter Cowley: What about market failures, tech failures, anything like that?
Simon Murdoch: Yeah, one that's interesting is DataSift, which a lot of people might have heard about. Some really great entrepreneur called Nick Halstead, on paper it looked great after a while because they got Mark Suster of Upfront Ventures, led a big round. And it was on paper, very valuable. But eventually it sort of been sold for not much money.
Peter Cowley: And this was-
Simon Murdoch: And angels got nothing because they didn't pay out the preference.
Peter Cowley: Is this because they couldn't get into market? Or
Simon Murdoch: Yeah well that one was and interesting one where they were analysing the Twitter fire hose, and Twitter then bought a competitor called Gnip that was doing the same thing. And then turned off the fire hose.
Peter Cowley: Turned off the fire hose.
Simon Murdoch: Yeah.
Peter Cowley: Goodness me.
Simon Murdoch: DataSift then tried to work with FaceBook and do other analytics of social media, but it wasn't enough to get them a big enough business. Some even came out to Entrepreneur First, which was doing it with LinkedIn, which I don't know if you invested in, which again, LinkedIn turned off the connection there and they pivoted quite strongly.
Peter Cowley: A single point of failure, a single dependency like that can be dangerous.
Simon Murdoch: Yeah, in fact, one shouldn't really invest in that situation.
Peter Cowley: Probably not.
Simon Murdoch: It just- Thanks Peter! I wish I had you around all the time.
Peter Cowley: I'm talking to the microphone here, not you Simon.
Simon Murdoch: I'm sure you've made some mistakes-
Peter Cowley: Absolutely, I've got more failures than you I think.
Simon Murdoch: I know you like to talk about your failures?
Peter Cowley: Yes.
Simon Murdoch: Another one that I had ... where I think sometimes, if you really like the people ... because I kind of invested in a business in Wales call SubHub where, I really liked the founder, the entrepreneur, but they just, they were in a very competitive market trying to do the sort of thing that Wix does, W-I-X-
Peter Cowley: Oh yeah, yeah.
Simon Murdoch: You know, it's a website builder.
Peter Cowley: Yeah, yeah.
Simon Murdoch: And they just never really got the software working well enough to mean it was intuitive enough to I think get going. So-
Peter Cowley: That was probably a lifestyle business now isn't it? That's the sort of thing you feel-
Simon Murdoch: Yeah.
Peter Cowley: ... turns into a three or four man band, turning over 700, 600K, and you never get out.
Simon Murdoch: As Episode1, we've said that we invest in businesses where they've built their minimum viable product and really you're trying to avoid taking the technical risk.
Peter Cowley: Mm-hmm
Simon Murdoch: With the particular business
Peter Cowley: There's plenty yeah
Simon Murdoch: They haven't got through the technical risk. They haven't really built something that was intuitive enough.
Peter Cowley: Mm-hmm
Simon Murdoch: It was a bit earlier than we do as a VC.
Peter Cowley: Yeah, so okay. So, one thing we talked about earlier before recording was the difference between the US and the UK. Because you've obviously had quite a lot of experience there. You mentioned information flow. So, talk more about that and other differences.
Simon Murdoch: I think the positive thing to say for this is that the UK is a great place to be an angel investor. The tax benefits of SEIS an EIS are fantastic. We don't seem yet to have the whole convertible notes and the thing that goes on in the US.
Peter Cowley: Coming..
Simon Murdoch: It's coming a bit.
Peter Cowley: In London somebody was talking about that.
Simon Murdoch: Yeah, the advance subscription agreements.
Peter Cowley: Yeah.
Simon Murdoch: But they have to have a long stop date, meaning you can't have EIS and-
Peter Cowley: Well you can CLN, convertible loan note, for the non-EIS, and then ASA
Simon Murdoch: Yeah, exactly.
Peter Cowley: Right.
Simon Murdoch: I don't really like convertible notes, they're not as good for the investors. I mean the entrepreneurs say they like them because they're quick.
Peter Cowley: You don't have to have that horrible conversation about priced rounds either do you?
Simon Murdoch: Exactly, but, you know, they're not great. So, what happens in the US which is unpleasant to angel investors, is that once VCs start getting involved ... I've seen this several times as an angel, then they put terms in where they class people as either major investors or not.
Peter Cowley: Mm-hmm
Simon Murdoch: And the major investors tend to be people who invested at least a million dollars, say. Which is obviously, hardly any of the angels. And if you're not a major investor, you don't get information rights, you don't get pre-emption rights, which means they could do a down round and wash you out.
Peter Cowley: Yeah, yeah.
Simon Murdoch: And you know, not having pre-emption rights, they often don't even tell you anything. Viagogo is an example of that, although it's based in Europe, founder is American, I invested in their very first round. I've never been told anything about the subsequent rounds that happened.
Peter Cowley: Right.
Simon Murdoch: I don't even know what investment it's had.
Peter Cowley: Really?
Simon Murdoch: It's hopeless, as an investor.
Peter Cowley: So, you could ring them up? Could you? Are they willing to talk?
Simon Murdoch: I have on occasion and to be fair to them, I have twice I think written to them saying, what are my shares worth, how much have you raised, and they have actually given me some information.
Peter Cowley: Right.
Simon Murdoch: But it's not their normal practice to tell the angels anything. Even the fact that they're raising another X million dollars.
Peter Cowley: And where are the legals at? They're a UK company?
Simon Murdoch: Yeah, it's US legals.
Peter Cowley: Okay.
Simon Murdoch: So, US legals don't generally provide as much protection to the early strange investors.
Peter Cowley: Right.
Simon Murdoch: So, I now, far far prefer to almost always I need UK legals.
Peter Cowley: I was in Istanbul a couple weeks ago and I met the guy who's really most famous angel I think in Russia, and they're starting to us UK legals in Russia.
Simon Murdoch: Oh really?
Peter Cowley: Yes.
Simon Murdoch: It's quite so simple isn't it. Another thing about US legals is that there's lots and lots of different documents and you lose track of which ones are about which.
Peter Cowley: Yes.
Simon Murdoch: I mean ours are so simple, with…
Peter Cowley: Agreement, investment agreement, and the articles.
Simon Murdoch: And the articles.
Peter Cowley: Yeah. You only need to go through those two things. And it's nice and simple.
Simon Murdoch: Yeah.
Peter Cowley: The structure of your portfolio, you've done 40 investments, I've done 60-odd, you've lost less than me. You must be doing something right. That I can see from here you've had a cash-on-cash positive outcome so far, though you have done it over longer. What do you think about structuring your portfolio angel investments?
Simon Murdoch: Let me explain how I think about it now, which is quite different than when I started.
So there's a number of threads to this, but the first thing is, to realize that as an angel investor it takes quite a long time to get your money back and make those big profits. As in-
Peter Cowley: As in, decades really.
Simon Murdoch: It can, so, I invested in Shazam in 2001, Apple and Shazam had just announced just before Christmas of '17, that Apple was buying them.
Peter Cowley: 16 years.
Simon Murdoch: Yeah, I mean I had had a partial exit which paid more than my money back, several years ago, and then this is all more upside, so that's good, but it's a long time. NaturalMotion was 2001 to 2014, you know you're talking about a long time for the home runs to really play out.
Peter Cowley: Yeah.
Simon Murdoch: On the flip side, the bad news comes quite quickly. So, if a company raises a round of finance, and then they can't get the next round of finance, it's usually within two years or so, it goes bust. Sometimes it's three or four years. So I like to say the lemons ripen early.
What that means, I think, is that you need to be planning to invest over the long term and thinking hard about how you should invest in each business.
Peter Cowley: Right.
Simon Murdoch: So that's one thread.
The second thread is that because it's a hits business more than most of us realize when we start ... So, what I mean is that if you take NaturalMotion, which is so far my best outcome, I made 77 times my money on the first round, and 45 times my money blended across-
Peter Cowley: Across. Phenomenal result.
Simon Murdoch: It is. And a lot of people don't realize the biggest benefit of EIS is you pay no capital gains tax. So when you get a nice seven figure sum, or more out a deal like that and pay no capital gains taxes, is very satisfying.
Peter Cowley: Until we get a change of government potentially.
Simon Murdoch: Well, potentially.
Peter Cowley: I'd like to say to any future governments, I re-use that money to invest in more companies. So…
Simon Murdoch: Exactly.
Peter Cowley: ... they should leave it with us.
Simon Murdoch: Exactly.
Peter Cowley: It's good for the economy.
Simon Murdoch: But, given that you can make 70 or more times your money sometimes, but then you have a number of companies, in my case about a quarter, where you loose all your money, then it's really important to do plenty of investments, plenty of different companies.
Peter Cowley: Yes.
Simon Murdoch: Now, previously I would have advised any angel to think about doing at least ten, but now, having done the maths on it, because we've been raising funds in the last few years, and I've done this math to try and persuade people to invest in out funds, you really need more than 20 investments.
Peter Cowley: Okay.
Simon Murdoch: And when you start to think about what proportion of them you make ten X or more, what proportion go bust, when you do the maths, the statistics of it, you should really have at least 20 companies.
Peter Cowley: In fact, SyndicateRoom have got Fund Twenty8-
Simon Murdoch: Yeah.
Peter Cowley: And I spoke to the person that came up with it, a 28 number and I can send you the spreadsheet. So, this is a number they think that you need in order to-
Simon Murdoch: Yeah.
Peter Cowley: We say in a VC fund that our target is 25 per fund.
Simon Murdoch: Yeah.
Peter Cowley: KPs per fund.
Simon Murdoch: You're better with more.
Peter Cowley: Yeah.
Simon Murdoch: So 25, 30 ...
Peter Cowley: There's an overhead involved in this.
Simon Murdoch: Of course.
Peter Cowley: As your spreadsheet gets longer and longer, you're signing documents every week or every other week,
Simon Murdoch: Exactly.
And then the challenge is you can't be on 20 boards.
Peter Cowley: Oh, clearly not.
Simon Murdoch: So ideally if, as an angel, then you need to be working with other angels, and having other people you trust to be on the boards. Because, I'm sure we'll talk about it, but I think being in the board is one of the most satisfying things you can do as an angel, and most useful to the company. But it's also the best way to protect your investment.
Peter Cowley: Exactly.
Simon Murdoch: You can help the company, in lots of really useful ways. I always felt, as an angel, that my most important job was to help the CEO and the management team see the wood for the trees of working out what they need to do by when. And that's what we think a lot about as a VC as well. You know, what do we need to prove by the time we next need to start raising money to mean that we've got a good chance of raising that additional money.
Peter Cowley: Yeah so not to prick their bubble of enthusiasm, passion, complete non-realism, but at the same time, to inject some realism into their lives-
Simon Murdoch: And the ideal place for the angel to be is a trusted mentor as an NED, who kind of between the entrepreneurs and any incoming VCs or future investment.
Peter Cowley: But as you know this leads to a conflict, doesn't it, because you're representing money-
Simon Murdoch: Well-
Peter Cowley: You've got the entrepreneurs and you've got the company to take into account.
Simon Murdoch: I think as long as you're an honourable person-
Peter Cowley: Yes-
Simon Murdoch: Then you can do that in a fair way.
Peter Cowley: Yeah, different hats.
Simon Murdoch: Yeah exactly.
Peter Cowley: Yes.
Simon Murdoch: So, thread two is have multiple investments. 20 or more. And therefore, I think it's really important, as an angel, to think about structuring what you do, especially near the beginning when you start, and think "how much can I afford to be in this portfolio?" It needs to be money that I can afford to lose, or have tied up for ten, fifteen years. And obviously that might change if you've got sources of income which means you might only have 200K today, but you might be having another 50K to add to your portfolio. If you add whatever, but you need to really think through what are the resources you want to put into your angel investment. And if you divide that by 20, how much does that mean you should put in per company.
Peter Cowley: And also, per round. Of course
Simon Murdoch: Yes.
Peter Cowley: You can't put it all in at once.
Simon Murdoch: That's true. Lots of angels I've noticed tend to invest in the first round when the valuations are low and then not follow.
Peter Cowley: Yes, that's wrong. And very ...
Simon Murdoch: Well we could do a whole another ...we've got so much to talk about, Peter.
I do think it's important to think through, you know, diving it amongst multiple companies, and then take several years to find those companies. Don't rush it in.
Peter Cowley: So how many a year? Four or five a year?
Simon Murdoch: Yeah four or five a year is probably a good meter. Yeah, that sort of order. So you're perhaps doing it over five years.
Peter Cowley: Five years. Yeah.
Simon Murdoch: Sort of finding the companies. And it's a long-term game.
Peter Cowley: Yes. Okay, before we go on to the Invested Investor and what you can do on the board again, you obviously maybe slightly disagree about not just putting money in the first round. My view is that you should have three times you first money. So, the second time investment is because they'll get it wrong, so you have to rescue them and extend the runway. The third time it's actually just further with the journey.
So, if you're going in 10K, which is a relative small amount, then you got to have 30 available. If you're going in 50K, 150. Do you disagree with that?
Simon Murdoch: That's interesting. I think it depends on the stage you like to invest at.
Peter Cowley: I'm talk about very early, so-
Simon Murdoch: Yeah. So-
Peter Cowley: Pre-revenue probably-
Simon Murdoch: Exactly-
Peter Cowley: MPV possibly.
Simon Murdoch: Yeah, so, I've tended to have probably about double the money, so-
Peter Cowley: Okay.
Simon Murdoch: I would typically invest, say, 25000, and then reserve another 25000 for future needs.
Peter Cowley: And you go in very early
Simon Murdoch: Mostly I've gone into seed rounds.
Peter Cowley: Okay so don't disagree by much.
Simon Murdoch: Yeah.
Peter Cowley: So, okay. So let's talk about Invested Investor. So what you've done on the board, we've talked about it a bit before.
Simon Murdoch: Yeah.
Peter Cowley: When do you come off the board? You know, you're helping them, they like you, hopefully. And obviously you'll come off if there's an exit. You might get pushed off by somebody, by VC?
Simon Murdoch: Yeah, yeah, I've had a number of situations where I've been pushed off the board because other investors have come in and felt..
Peter Cowley: And pushed off positively, or has it been a difficult conversation?
Simon Murdoch: The one I was most disappointed about was that I'd been on the board of Zoopla right from the beginning. And then when Zoopla merged with Digital Property Group, part of DMGT, Daily Mail General Trust, wanted to put three members of the board on. I lost my board seat at that point. Which was disappoint to me because I wanted to see the journey right through to floation.
Peter Cowley: Oh, yeah.
Simon Murdoch: So I missed that part of the journey unfortunately. So, these things happen. If you're an angel investor, to put 25K in and then another 25K, you can't really expect to stay on there forever.
Peter Cowley: Yes.
Simon Murdoch: Unless in fact the entrepreneur really, really wants you for some reason-
Peter Cowley: Yup.
Simon Murdoch: And can somehow use us as leverage when setting the terms of the deal.
Peter Cowley: Yeah, and that's another reason why I prefer being a VC. I know that's not your journey.
Simon Murdoch: Yeah.
Peter Cowley: But when you're a VC, you do invest probably three times-
Simon Murdoch: Chunky amounts.
Peter Cowley: And you are very important.
Simon Murdoch: Well yeah so we talk in Cambridge about now about nominee structures now where you put a number of angels together. Giving you more than a magic 10%, if 10% is the amount for a board seat. So you might have 20%. So, they keep you on, later on. You can also trade internally in the nominee structure as well. But this will be subject to another podcast.
Peter Cowley: So, also, you Rolodex. So, you Rolodex in terms of future investors, customers, suppliers, that must be pretty good now.
Simon Murdoch: It's good, I think that the things that the entrepreneurs I've worked with when I've been an angel on the board have most valued is introductions to investors and having those taken seriously. And then helping them to negotiate the terms for the investors. Because I've tending to back people who haven't been entrepreneurs before, so a lot of it is new to them.
One of the pieces I really enjoy is spreadsheets and cap tables.
Peter Cowley: Each to their own.
Simon Murdoch: Yeah, you know it might seem a bit odd, but ... like I remember several times during the Zoopla journey there was opportunity for a bit of secondary that the management took some money out, I once took some money out, early on. And I just enjoyed doing the spreadsheets of who should get what allocation and all that sort of stuff.
Peter Cowley: Yeah.
Simon Murdoch: And that's helpful to some entrepreneurs.
Peter Cowley: Yes.
Simon Murdoch: I think there's lot of situations when you're an investor where you can help tilt the table a little bit to improve the odds. And being smart at cap tables is what everywhere I've made a difference. Marginal difference in lots of different businesses. For my benefit and the entrepreneur’s benefit. And the other things are understanding how to manage the cash flow forecast. I tend to get involved as well with the spreadsheets of you know, how long does our money last, should we be hiring people this quickly or should we slow down. What can we do to change the pricing? Trying to help the entrepreneurs as a mentor with various aspects of their financial model. Is the other piece I quite enjoy doing?
Peter Cowley: And of course, you've been on a lot of these journeys anyways. So trying to prevent them making mistakes.
Simon Murdoch: Exactly.
Peter Cowley: Assuming they'll listen of course.
Simon Murdoch: Actually, that's a really important point and a good thing to look out for, for any type of investor. Is that I like to, and we say this at Episode1, as well, generally, we like to invest in entrepreneurs that want our help but don't need it.
So the sort of people we're looking for is what we call coachable, where they will give advice, or I'll give advice as an angel investor on the board or, whether or not I'm on the board. And every time you want time to listen, and a certain proportion of the time you want them to take your advice. But you want them to be strong enough to often say to you, "actually I think you're wrong, I want to do it this way." You want people who have got the strength of their own convictions, but will listen.
Peter Cowley: That's a great way of expressing that.
Simon Murdoch: Yeah.
Peter Cowley: Yeah, so. The passion, the drive, the vision, everything. And then push it aside when they think it's right. They may be wrong, of course.
Simon Murdoch: Yeah they might be. But it's their business.
Peter Cowley: Yeah.
Simon Murdoch: And I think we've got to accept that.
Peter Cowley: Yes.
Simon Murdoch: As angel investors, we're not running the business.
Peter Cowley: I mean there was a panel in Istanbul a couple of weeks ago where were talking about how do CEOs of big companies become angels. And they don't do it very well. And in fact we had a podcast the other day where somebody said that was the first thing he had to learn, was the fact that he wasn't CEO. He mustn't control the entrepreneurs, because they'll hate that.
Simon Murdoch: Yeah.
Peter Cowley: And, I'd say it's wrong as well.
Simon Murdoch: Yeah, that's right because the entrepreneur's there every day.
Peter Cowley: Yes.
Simon Murdoch: You're in there once a month, or whatever it might be.
Peter Cowley: So what do you wish you'd known when you started all this? There must be thousands, but let's just come up with one or two things that you've specifically learned over the years.
Simon Murdoch: One of the things that has been very healthy ... I tend to invest in software driven businesses, I have all my career. Although that's a very wide box of industries. Marketplaces, and some pure B2C and lots of deep tech. And the thing that's always salutary aspect, is that things that you think should sell, often don't.
And I really like the concepts that have come about in recent years with Lean Start Up in particular concepts with customer development. So as early as possible in a company's life, they've got to go out and test their proposition on customers. Often before even building anything.
And the whole concept of customer development and going out and doing test marketing or test sales of your product, but in a way that you don't say, "if I build this will you buy it?" Putting the question in the potential customers mouth. You've got to ask clever questions that understand their context, workout whether or not what their alternatives are today, whether what you're thinking of building is something that they might buy and if so how would they think about the return on investment, of buying your product.
Peter Cowley: Exactly.
Simon Murdoch: So all those aspects of customer development I knew nothing about that when I started Book Pages or Friends Abroad. Very, very useful things for entrepreneurs. But as an investor as well, I have several times invested in companies where I thought, "oh that's bound to sell," and then it just doesn't. And what I've experienced trying to help those entrepreneurs, is it's really hard to diagnosis why something doesn't sell.
Peter Cowley: Mm-hmm
Simon Murdoch: The price, you don't want to drip the price and then find it wasn't priced right after all.
Peter Cowley: Yeah, exactly.
Simon Murdoch: But sometimes it's sales execution, and sometimes it's much more competition than you thought, and sometimes it's just that you're selling into an industry where people make decisions incredibly slowly. You have to wait for the next annual budget cycle.
There's just so many things that can mean that stuff doesn't sell. That's frustrating.
Peter Cowley: So, let's just, sort of wind up gradually. The tips for angels. So what tips have you got for angels.
Simon Murdoch: I mean, everybody says this, but the most important overall thing, is you're looking for amazing people, a team as we said before, ideally it's two or three people at the top of a business, who are doing something, ideally it's disruptive, but something that's in a big market. I tend to like to think about markets in a sort of bottom up way, of thinking about the unique economics of what's this company trying to do, how many customers are there out there, how much would it sell for. And when you multiply all that out, can you build business that is, ideally in the long long run going to be 100 million in revenue.
Lots of angels tend to go for things that are smaller.
Peter Cowley: I do, actually this is something I'll disagree with you. I think you can have a really great exit for a company that's only turning over 5 million. If you get in early enough and it's on the right growth path.
Simon Murdoch: You can do. I mean if it's on the right growth path, so in the end it could end up being 50 million turn over business, then I can be. But the sorts of things that will end up, if they work, they'll be a lifestyle business that might have two, three, five in their revenue. Even in the long run.
Peter Cowley: Yeah.
Simon Murdoch: And they're good businesses for the entrepreneurs to own, but you can't get out of them as an investor.
So I think its really important to look for things that can scale to be something big in the end. So it's great people, great market, and then the deal.
I mean, I've had to turn down plenty of things where I think it's too expensive.
Peter Cowley: Right. It's interesting. We're siting in London here at High Holborn, not very far from City, and not very far form Shoreditch. Let's expand on that a bit.
Simon Murdoch: Well, yeah. And actually I might be wrong. I'm going to admit this, because when we first invested in BetFair, we actually invested in Flutter, which then merged with BetFair a year later. The price was crazy. It was crazy high. And then we ended up-
Peter Cowley: In the five to ten million range?
Simon Murdoch: No, you'd be amazed. It's the height of the internet boom, the company had already had 25 million dollars of investment-
Peter Cowley: Oh okay.
Simon Murdoch: ... and we invested at valuation of about 100 million dollars.
Peter Cowley: So it's the first time you went-
Simon Murdoch: First time we went in, we put seven million dollars in. And then when it merged with Betfair, because it had all the cash, they ended up with the biggest stake-
Peter Cowley: Yes.
Simon Murdoch: And they crushed the preference. But they gave us the biggest stake than we would otherwise have had.
Peter Cowley: Yeah.
Simon Murdoch: And we ended up doing really well out of it.
Peter Cowley: Right.
Simon Murdoch: But valuation at that point was crazy. And yet that was our home-run in the Chase Episode1 portfolio.
And then, I've been in other situations ... before we had a fund, this is a bit unfortunate. We were talking to Will Shu at Deliveroo, and his valuation when we first started talking to him was three million-
Peter Cowley: Yes.
Simon Murdoch: ... and then he raised money from index, I think it was at seven and a half million or something.
Peter Cowley: Yes.
Simon Murdoch: And we just never got to it, we didn't have the funds. So we missed that one.
Peter Cowley: But you can't regret the ones you missed, can you.
Simon Murdoch: That's true. There's a great thing, there's a VC in the States that's got the anti-portfolio. Bessemer Ventures.
Peter Cowley: Okay.
Simon Murdoch: It's well worth looking at that page. Bessemer Ventures anti-portfolio.
Peter Cowley: Anti? Okay.
Simon Murdoch: Yeah. And, they say the same thing. They've got on their anti-portfolio, companies like Google.
Peter Cowley: Ah, okay.
Simon Murdoch: That they saw, but missed. I think it's healthy to be aware of the things that you missed. And-
Peter Cowley: I missed SwiftKey.
Simon Murdoch: Yeah.
Peter Cowley: I was on the e-mail train with SwiftKey when it was at, probably about three million valuation. It sold for 250 million dollars. It had some capital between of course. But even so.
I missed another one recently, where the founders were in my own living room and it sold recently after five and a half years for 37x. And I didn't invest. You know. We all gonna do that. If you regret those, you'll never invest.
Simon Murdoch: Exactly. That's true.
Peter Cowley: Or you invest in everything.
Simon Murdoch: Yeah, of course.
Peter Cowley: The valuations here in London, are higher than Cambridge. I think everyone knows that. You still will turn stuff down?
Simon Murdoch: Yes, I mean, as I say we do have healthy debates about it here. And in fact another a counter example is that one of our most exciting companies at Episode1 is Cloud NC which helps-
Peter Cowley: Yeah, no I looked at that quite closely, which came out to Entrepreneur First.
And their valuation is quite high- That was the highest valuation.
Simon Murdoch: Yeah we all looked at that and thought- what are they doing here Simon?
Peter Cowley: Exactly. It was something like 5.7 million-
Simon Murdoch: Yes, straight out of a-
Peter Cowley: Straight out of entrepreneur first-
Simon Murdoch: Out of a thirteen-week or whatever it is, program.
Peter Cowley: Now we're actually going to do very well out of that, because it's really difficult software and they've managed to crack it.
Simon Murdoch: Well yeah, so the founder is one of the entrepreneurs that everybody just believes in. So he was able to command a high valuation then and he's going to, going forward.
Peter Cowley: So let's just talk about tips for entrepreneurs. You have many entrepreneurs who have come into this room, or your rooms, must be hundreds or thousands who have pitched to you.
What stands out, what could you tell the entrepreneurs that listen to us?
Simon Murdoch: Yeah, there's just so many things. In fact one of the things that I would say is fun about being an investor is that always learning. I mean, I've been doing it now since '99, so nearly 19 years.
Peter Cowley: Yeah.
Simon Murdoch: And I'm still leaning every day, which I really enjoy.
Peter Cowley: Yes.
Simon Murdoch: So every situation is different. Every situation is a learning experience.
But for the entrepreneurs ... I mean you only live once. And you're going to put all your eggs in one basket for five, ten, fifteen years. Just do something big. Do something that can be that 50 or 100 million turn over business. I mean that's not always true, sometimes people would be better off building a, one, two, five million turnover business and owning 100% of it. That's fine if that's what they want to do, you can go an do that. But if they want to build something that changes the world, that's very disruptive, that makes lots of money for themselves and their investors, they should look for something big to do.
A very large proportion of the deals that come in to us we turn down because they just don't feel big enough.
Peter Cowley: Right. Okay, but that's with your VC hat on, or is that also with your angel hat on?
Simon Murdoch: Yeah really, I think so. I mean, I ... okay, maybe as an angel you can invest in something that's going to end up being 20 million turn over.
Peter Cowley: Right.
Simon Murdoch: Other tips for entrepreneurs, really, that it's very very competitive world out there. And generally when you think you've found something clever then somebody else is doing the same thing.
Peter Cowley: Right.
Simon Murdoch: So, it's really great for entrepreneurs to raise plenty of money, to be able to afford to hire really good people, to then go fast at whatever it is that they're trying to do, because somebody else is probably building the same thing in a garage somewhere else. And running fast and executing well is really, really important.
Peter Cowley: But then of course to raise lots of money you need a decent valuation. Otherwise you dilute them too far. So you've got to be able to sell, as you mentioned, Cloud NC.
Simon Murdoch: Yeah, if I tell you that I've got five kids in fact, and my oldest daughter is about 26. I'm very hopeful that one day she'll be an entrepreneur and I've said to her since she left university the most important thing to do is to learn to sell.
Peter Cowley: Right.
Simon Murdoch: So, go and start off your career working at selling, and then you can do whatever you want to do and when you want.
Peter Cowley: And she's done that? She's listened to her dad? Amazing.
Simon Murdoch: She has. It is incredible. Only on that one thing.
Peter Cowley: Yeah. Final question. It's always the same question. There's only five or six years between us, so let's change the question slightly. What are you going to do on your 70th birthday? Are you going to be doing something similar, are you going to walk away from this and sail into the south in your yacht?
Simon Murdoch: Yeah, that's a good question. My wife points out to me that she's known me for about 15 years, but I always say that I'm going to stop working in five years time.
Peter Cowley: She said that really?
Simon Murdoch: Yeah. And she's getting fed up with me saying it.
Peter Cowley: And she might win at some point.
Simon Murdoch: Eventually she probably will win. But, I mentioned recently that I just really love learning, every situation is different, so I can't see myself ever stopping being an investor. I think as long as I've got the mental faculty and the money to do it, I'll carry on investing.
Peter Cowley: But if you're 70, and these take 15 years-
Simon Murdoch: Yeah.
Peter Cowley: Our life ... we're about the same age. I think our life expectancy is about 83, statistically. That means you're not going to necessarily see the fruits of your-
Simon Murdoch: That's true. My idea would be to be only doing it one or two days a week.
Peter Cowley: Yes, okay.
Simon Murdoch: Rather than..
Peter Cowley: Golf course?
Simon Murdoch: No. Don't have the attention ... I quite like to write books.
Peter Cowley: Oh right, right.
Simon Murdoch: Maybe I should write a book like you're writing.
Peter Cowley: Okay, yes you should. Excellent Simon, really interesting, really enjoyable, we learned lots.
Simon Murdoch: Thank you.
Peter Cowley: Thank you very much.
Simon Murdoch: Thank you for having me.
Peter Cowley: Thanks for listening to another Invested Investor podcast. You can subscribe to all future podcasts via our website, Invested Investor dot com. 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, LinkedIn and Facebook, to get the most up to date, interesting, and insightful content from the Invested Investor.
