The millennial angel investor
Podcast transcription - 11th December
Alan Cowley: Hi, I'm your host Alan Cowley and welcome to another insightful Invested Investor podcast. This week I'm delighted to be joined by Reece Chowdhry. Reece is the founder and CEO of RLC Ventures, a multi award-winning venture capital firm. RLC are the only venture capital firm with the Venture Impact Pledge, which you'll be hearing more about in this podcast, along with what his motives are for investing in certain sectors and companies. Alongside his investing, Reece has been nominated for and won multiple awards and is a regular speaker at industry and academic events.
So Reece, a portfolio of investments totalling over 40 companies often starts with an entrepreneurial exit. But what's your background and how did you transition into investing?
Reece Chowdhry: Thanks for having me first of all. My background is probably slightly different to your typical angel or VC. I actually started my investment career very, very early on in my life, and for anyone who's done any angel investing or VC investing, they know it's a long, long journey. I always say to people start early as possible, and I started very, very early at the age of 13.
Alan Cowley: Wow.
Reece Chowdhry: And it was actually my father, who has a background in financial services and listed stocks actually, said to me on actually my 13th birthday, he said, "Would you like to put some money into a company that you like?" And I said, "Well yeah, I'll put my own savings, thank you very much, Dad."
Alan Cowley: Was this instead of a birthday present or something?
Reece Chowdhry: Well, I think his birthday present wasn't actually giving me any money, because he's very much like you, kind of do it yourself and build your own. It was like, "If you would like to put this trade on for you, I will facilitate that for you." And I said, "Okay, that's quite a nice little gift." I don't know what the commission is, but it wasn't that much. So I said, "Okay, Dad, I will put some money into Apple," and this is the time when Apple was a bit of an alternative thing. Steve Jobs had come back and he'd just launched the iPod and it was still for the people that really are into graphic design and music. This is still at this era, right?
So I said, "Dad, I want to put it in to Apple." Because I bought an iPod, I loved it, people thought, I remember taking it to school when people think, "Oh, that's never going to catch on, having music in your pocket like that." You know, people were still using CDs and MiniDisc, and so I did it and it was one of those things I really looked at the company. I thought, you know, a very product-centric guy, I've always been quite focused on product, and I invested it and I left it for a long time. A long time. I think probably something like 12 years. And you know, this was the catalyst for my interest in investing, particularly in technology. I went away, went to university at Durham, studied international business there and then went definitely down more the corporate route.
Went to the graduate scheme at EY, was in the technology consulting division at EY. Loved it. I was there for four years, chartered as a management accountant, and then after about four years I thought, you know, I've seen these big organisations like Lloyd's Banking Group and EDF Energy, and all these great companies that are FTSE 100, build different areas of technology. I was involved a lot in financial services and I thought, right, I'm going to take the leap now. I didn't actually know what I was going to do, that leap. I actually took a six month sabbatical, and EY are a very good employer like that. They said, "Take six months off and if you want to come back, you can come back," and actually 90% of people don't come back, and I didn't. I handed my resignation for one day and left the next day.
After that I thought, oh my God, what am I going to do? And so I used a little bit of the savings I had from my early investing career, which I had locked away, and I thought to myself, I want to do something as a founder. I want to really understand how to build a company, probably use my background with my relationships with EY and the business to business relationships I've built up, and kind of do something within financial services. And so what I did was, I was, right, okay, what's the best way to do this? I thought, I've always loved working with smart people, so my initial start to my investing journey on the angel investing career was actually investing in some very early stage idea companies. The reason I did this was not because I had this grand plan of what we're doing now, it's because I always thought to be a respected investor, you've got to understand where the founders are coming from.
It really feels like those initial angel checks were very small. They were like 10, 20 grand basically, and you've got your EIS and SEIS wrappers, but what they allowed me to do is I said, "I'm going to put this money aside as if I'm not going to go to do an MBA, I'm going to do this to learn how to operate a start-up, and if anything comes of it, that's great. But if it doesn't, I've just got a good learning experience."
Alan Cowley: But you say learning how to operate a start-up there. You obviously weren't running the company, or did you co-found them?
Reece Chowdhry: Yeah, so I wasn't running the company, but it was very much a day to day involvement in the company. You know, we had WhatsApp groups, every week we'd be meeting up discussing the key KPIs. I was doing introductions. I wasn't down there building the code, but I was very much part of that founding team, and some of those companies, I still am. There's one that's sitting in my office today.
You see all the highs and lows, you experience all the highs and lows, and I think that's really helped me on my journey as becoming an invested, because I can really empathise with companies running out of money, I've been there down in the woods, doing whole sales cycles with them, everything from code mocking up, I've been in every single scenario, founders leaving, everything. So I think I've seen a lot in my career now over the past I think four or five years now.
Alan Cowley: So where did you actually find these companies? You say that you had a few and you've got one in your office here. Where did you find them?
Reece Chowdhry: That's a very good question, and obviously having the corporate background I did, after I left, I just decided I'm just going to speak to everybody. It was one of those things that I was like, "Look, I'm thinking I'm going to start, you know, I want to be in the start-up scene," and so I reached out to advisors I knew from EY days, from my previous family friends. For the initial first couple of months, I was just speaking to everyone and I was kind of connecting the dots. I think looking back, it wasn't a bad thing, but I probably would advise have a bit more tactic to it, if anyone's...
Alan Cowley: Well, you were feeling the ground as you were going along, weren't you? That was your initial way of doing it, and everyone needs to take a plunge at some point if they're going to invest. So why not do it the way you did it?
Reece Chowdhry: Yeah, and I think over the last few years I've seen a dramatic increase of people wanting to get involved in start-up, becoming an angel investor. I looked at the landscape particularly and I thought, oh my God, there's no one investing like me. I'm a young person, most of these founders are young, and they're coming out of McKinsey or doing something similar to me. I'm sure they can relate to me at a personal level. I also don't look like, you know, obviously being from an Asian background, I don't look like every other angel investor. So this must be some advantage to me.
I actually thought to myself this, and it was true. I think that really did help in those early days, because in the competitive funding rounds, getting onto the cap table is hard if you haven't got the level of experience I have now versus then. So what was the angle that I pitched myself? I said, "Look, I'm not like all the other angel investors. I'm going to be with you for the ride. I'm going to get my hands dirty. I'm going to be here. I can do this." I think my enthusiasm got me onto the cap table in those incidences. So this is what I always advise. It's not all about the size of your check often, it's about how much the founders, you know, it's a personal relationship a lot of the time. These guys are going to be with you and you're going to be with them for longer than most people's marriages. So I think this is the mindset I had with it, and I think this still serves me quite well today I think.
Alan Cowley: You're talking about on a personal level there and how you identified that you were similar age, age range and everything like that. How did you identify that? Because that does come with experience, to understand that and understand that it's about the team and building a relationship with these founders. Where did you get that from?
Reece Chowdhry: I think it's definitely through my EY days. You know, you're thrown in the deep end in consulting, management consulting, in a place you don't know, often in a location which is far from glamorous, and you've suddenly got to have a very big impact, and the days rates, I won't disclose them on this, but it's astronomical. I can't even justify that to myself, never mind the client. So you have to find a way of being very up to speed in something you don't know, and also relate to the environment you're in very quickly and build a very good rapport with your client and demonstrate value. I think this was the skill that I really took away from those days and implemented into my angel investing career now obviously with our funds on the VC side. So yeah, that's what I would say on that.
Alan Cowley: That's good. Also you talked about being, obviously we're probably about the same age, aren't we? Early thirties?
Reece Chowdhry: Yeah. Just turned 30, yeah.
Alan Cowley: Just turned 30, and so you started four or five years ago, and you're saying that you're on a personal level and you're that sort of age. How did that compare then when you had the typical angels, these predominantly white haired men normally, whatever it is. How did you find that experience and did you find any hostility because of your age or anything like that?
Reece Chowdhry: No, I think they were very, very accommodating and actually I think the older angels that I dealt with were seeing someone like me as a bit of a protege to them. It's the same with me now. A lot of young people still look at me and say, "Look, you're a young guy. How can I be like you?" And, "There's not many people that are like you in our industry." And I say, "Look, the thing that you need to do is be transparent and you need to take advice from people that have been there before," and I've done that. I think even with RLC, what we've done with our advisory board for our start-ups is we've got people on there that have taken companies from three million to three billion market cap.
To have them on the end of a phone when you, and we just had this morning, there was a gentleman in our office who used to be the head of private equity deals for PWC for 30 years, and he's done thousands of deals and he was advising one of our founders saying, "Look, this is what's happening around this MNA process." And I thought, wow, to have that level of insight. I think just being around those kind of people is fantastic, and that's how you really learn. This was always like what, and I think if you're open to the learning part, this industry is changing all the time. I think the learning is the most important part of this, and people are very open when you want to learn and you're humble enough to say that and you don't know everything.
Even today, every day I'm surprised. Someone on my team, a founder, they teach me something every single day and my mind is open to that and I'll never stop learning. This is what has kept me going every day, and what I love about the job actually more than anything.
Alan Cowley: It's brilliant to see that passion, and obviously passion behind learning as well. You just talked about your team there, and let's just move on to RLC Ventures then. It's been going for about four or five years?
Reece Chowdhry: Yeah, so it's about three and a half, four years now.
Alan Cowley: And how many companies do you have on the portfolio?
Reece Chowdhry: We have around 40 companies in the portfolio and we've invested, we've done two funds now. So we have an SEIS, EIS fund. So typically we invest, we raise that every 18 months I would say, and then deploy it over the next 18 months or so. Usually over two tax years, which is slightly different to some of the other EIS funds and SEIS. We just wanted to feel like we want a longer period of time to invest our money, because we didn't want to be driven by a deadline of the 5th of April. I think this has worked well for us actually in a lot of ways.
But yeah, so our model is very similar to that, my angel investing mindset. We have a fund which we'll invest anything from 25k to 500, and we have a very active angel syndicate that invests alongside our fund into the underlying companies as well. The areas that we focus on particularly are four key verticals. Enterprise businesses, we've done I would say 50 or 60% of the portfolio in enterprise businesses. The other sector would be financial services technology. Given our backgrounds, our partners' backgrounds, our advisors' backgrounds, we are naturally gravitating to this field.
Alan Cowley: I actually saw something, I think it was on LinkedIn, there was about 50% of all investments at the moment in the UK are FinTech, aren't they? So isn't everyone gravitating there?
Reece Chowdhry: It is, and I think given the UK's history it's very understandable. It's a really good intersection of regulation, technology and finance, and London is beautifully placed in all of those ways, and the UK generally. I think that's why, and I think as a sector, there's so many verticals that have spun out. We
Reece Chowdhry: ... discussing before Insurtech and we have got a great company in our portfolio, RISK, who are a fantastic Insurtech company. And you got lending, and consumer, and there's so many different angles to it. It's very broad bash I think to say FinTech and if you have to dive in, I think they need to break it up. And so I've been saying for awhile need to break it up into different areas rather than just an overarching word.
Alan Cowley: Sorry I stopped you there, so the second one's FinTech.
Reece Chowdhry: And then the other one, the third one is gaming. So we love gaming business building, we have really cool gaming businesses at the moment. And I think VCs and angels, I think look at it as a bit of a, I don't know about that sector, but for me it really ticks the boxes in terms of what a good investment looks like.
And I'll just touch on that briefly for the audience I think a game developer or someone in the gaming industry has such... it's bigger than the cinema industry now. There's a company that we're investing in the moment it's completely bootstrapped. And it's been going for I think three years and they've had 5 million people play their game. And this was on no funding, no marketing spending because the scale of what you can achieve in that industry is phenomenal. And I think the industry VCs and angels are starting to catch on a little bit more. Andreessen Horowitz wrote a very good article recently about gaming and why they're backing more gaming companies. And my thesis is the same. Extremely scalable, extremely viral, huge market potential and the cost base can be very well controlled.
And you could do B to B angles. You can do B to C, you can do B to B to C. And so these are the factors I really like in the gaming sector. And I think again, the UK is well positioned because if you look at the, historically we've had some big gaming studios come out of the UK. The likes of Rockstar games, et cetera. And I think it's like the financial services, the intersection of talent and technology and history. And so this is why I like it. And the last section I think we like is the classic artificial intelligence style businesses. So we've got companies in our portfolio such as Winning Minds who are a deep tech voice business, basically.
It's an interesting one. They spoke to me the other day, they came into the office. They said, what you guys doing? And it's a really interesting business, where essentially what they do is they analyse people's voice in different scenarios and tells an individual this person has been dominant and where are they actually applying it at the moment is in e-sports. E-sports teams. So e-sport teams will record their activities, they will send it off to Winning Minds. And Winning Minds will come back and say that person talked too much and that person was really assertive, that person didn't say anything. And they're almost becoming an API business where you send off something that you're doing and it comes back with some visuals around, this is what your team dynamic is. And this is really interesting business in our portfolio.
Alan Cowley: I can imagine public speakers as well, that'd be a beneficial tool wouldn't it?
Reece Chowdhry: Exactly.
Alan Cowley: People that need to public speak.
Reece Chowdhry: Yes. No one likes it. Right? And then we've got some... So I think a little lost a few companies that we've invested in, I can just touch on them so people can get a flavour of what we're investing in what stage we invest. There was one company called Green Deck, which is a B to B business that does online pricing for online retailers. So they've got clients like Showroomprive, Intu Group, who are the shopping centre. And they help clients with, if it's black Friday, how many of your competitors are discounting a white t-shirt? They solve those problems for online retailers, which are big problems. And we invested in them three or four months ago. And one of the thesis that we've really built out with our LC is we focused on companies that are based in the UK but then also have an emerging market presence.
So, this is one of the things we really focused in on because we found that one of the key elements to a successful start-up is talent and talent isn't necessarily defined within the barriers of the UK. It's very global now and the world is a very global place. So if you can start a company... We have them essentially based in the UK, their main operations. But then they will have often a sales function in Bulgaria or a tech base in India and Green Deck is one of these examples where they have a tech base. And just to give you some comparison on costs and productivity. The Green Deck team initially when we invested in this, it's higher now, was we're doing around 10000 monthly recurring revenue. And I said to them, "Oh guys, you must be burning through loads of money."
And he's like, "Yeah, we've got a team of 15 people in India." I said, "Okay." And he says, "We're profitable." And I said, "Wow, you got a team of 15 in India and you're profitable." He says, "We're in the city called Noida. It's not a main city. And we'd get every single person from the university, they're dying to work for us. And we're paying them a very good salary, we're the best salary in the whole of the region." But equivalent to a 20 grand a month for a machine learning engineer person, they're paying 500. So this is a huge... How can you compete if you're a... And so we've really teased out the thesis a lot more. We've got companies in Bulgaria, in Vietnam, in India, in Lithuania. And so it's not core to our thesis, but we love if they've got an angle in that space.
Alan Cowley: As in they've got an angle when you invest? Or they're willing to...
Reece Chowdhry: So when we invest, we like the fact that they have. And we like the fact that it's their own operations. It's not, they've outsourced some tech to a third party offshore. It's like they've got a base. And also from a global perspective going forward, they could sell into new markets as a platform from those basis. Because often they start off doing maybe more, I would say, technical work or back office work. But then they can develop potentially a sales function out the back of those regions as it were. And this is, I suppose, where we're different from a lot of the other EIS, CIS funds or other funds in the market that we specialise in this. Yeah, so...
Alan Cowley: How does that work in terms of the founders then? Is this founders that have come from emerging markets? Or they've just noticed that's the way to cut costs and find some decent talent?
Reece Chowdhry: So I'll give you some examples from the portfolio. So we have a company in our portfolio called Betting Metrics. And essentially, what they do is if anyone knows the website eToro on the financial services. They essentially allow people in the gaming industry, gambling industry, to go on, compare the odds, place a bet on the site, analyse your performance on the site and also compare all the tipsters that are giving you tips on what horse race to back or football match to bet on. And you could follow them. So this is like an end to end platform that founder Martin has created and he's a great founder. He was from Bulgaria originally and he came to university in London and then he raised some funding from us, idea stage funding. We did the second round as well. And then he went back to Bulgaria and he lives in Bulgaria. But then he commutes every month to come and see us.
And this has worked exceptionally well and so sometimes... There's another company we're investing in now, I can't say the name of it, but the individual has been brought up in the UK, everything in the UK. But then created a satellite office in Eastern Europe. And so it works those two ways, usually and both ways are equally good. I think it's just a question of making sure you commit to coming back here or being here if you're not basing yourself here. So the Green Deck team, they're actually based in India, but they have four co-founders and one of them is always in the UK at all stages. So this works very well. If you have-
Alan Cowley: Connection to you guys as investors?
Reece Chowdhry: Yes, correct.
Alan Cowley: What about the disadvantage of this then for you and for the companies?
Reece Chowdhry: The disadvantages is that we have a very strong relationship with our founders. We surveyed all our founders and we have 100% founder approval writing. So i.e, they would recommend us to any other person that would want money. And I think the thing is we have a more of a Skype relationship or a zoom or whatever it may be, than the face to face. And a lot of investors like that face to face contact time and there's a lot of people in Cambridge who are like, "I'm not going to invest outside of Cambridge," for that pure reason. And I think there is a disadvantage. You can't look somebody in the eye and say, this is what I think and this is how it should be.
And yeah, I think that's one thing. I think there can be a slower pace of growth potentially because of just the communication speed, that lean start-up methodology that a lot of start-ups use. But I think in the long run, my experience is that start-ups need time. And no matter where you're based or how much money there is, you're going to have to change the thing that you started off doing. And the best companies on portfolio, and I think a lot of vendors will say that, are probably not the ones you thought are going to be the best. And that's because, and in our portfolio particularly, they've had the runway to do that on very small checks actually. And what people can achieve with very little money is really incredible actually. And this is why I think the portfolio have done well, because they've been to take 24 months in development and pivot two times and not having to raise more than 300K to do that. And then tell me what you can do that in London, it's like nothing unless you probably seven months if you're lucky, you know? So...
Alan Cowley: But do you think that's on the back of being in these emerging markets then?
Reece Chowdhry: Absolutely, I think-
Alan Cowley: A mixture of bootstrapping and understanding that and the emerging market?
Reece Chowdhry: Correct. And this is, this is where we've honed it on and tried to focus our energy. Saying that they don't always have to be completely... If we find businesses that we really can love work to. And a good example is a company in Bristol called Scribe List, which has been an investment we led this year. And they are a fantastic company and allow you to send that handwritten note at scale to everyone and everyone and the you test, it's printed on a normal A$ printer, but you'd never know it's not a handwritten note.
And you think about, we're going through an election at the moment, think about some of the political parties and that is a very useful tool for a lot of people. Sending out Christmas cards et cetera. They do exceptionally well, but they're based in Bristol. They don't have that emerging markets thing. But it was an enterprise fit, it was the right stage. Team was excellent, very scalable, all those great things that every investor will probably come and say. And so when there's an opportunity like that, we will jump at it. So that's...
Alan Cowley: I think I actually saw them at SETsquared event fairly recently, probably one that you were at.
Reece Chowdhry: That's right. Yeah.
Alan Cowley: And we actually had time to bond, so it's quite a few weeks ago. So let's just carry on with ROC, because I know there's something that makes you guys a little bit different from other firms, other than the emerging market. So can you just talk about that and how... Well no, let's just hear what it is first. Then I'll ask other questions.
Reece Chowdhry: Yeah, I think the one thing that we've always tried to do is have something different around the ethos and the culture. And I think that was very much epitomised by our venture pledge. So I think there's various mechanisms in the industry where a percentage of our carry or exit profits are distributed in different ways. Some distribute it to other founders that they've invested in. So, you might have a big exit from another founder that will give you some Kerry and then that might be distributed to other founders you invested in it, who might not have been so lucky. So it's like a collective equity scheme.
We felt that actually the way we would like to have done that is we all ask our founders every time we invest what cause is close to their own heart? So this might be cancer research or mental health or trying to solve child poverty in Asia, whatever it may be. And everyone we've ever asked has something that's close to them. They've obviously experienced Alzheimer's, whatever it may be. And we say to them, if we become successful, if you become successful and we exit your investment, we will give a percentage of our carry back to founders charity, basically. And so as far as I know, we are the only VC in the world that is... Carry is the ultimate for VC, right? So just put your marker and say, look, we're going to give something back if we make this, is a very bold statement in industry in a lot of ways. And it's probably the thing that most people ask me about when I'm out and about and talking to people or they say, "Oh, that's a really good initiative that really resonates me."
And what has that allowed us to do? Again, it simply tells a founder how we are as a firm. Without us even saying we'll be there for you. And all the rest of it. Every VC says that, right? But coming down to it, what does that mean? But it shows in the values of how we care about the world, how we care about you. Because we're giving you that choice and it's helped us win deals, many
Reece Chowdhry: ... clients actually. So I think it's been a very positive initiative for us. And we would like to do some more in other similar kind of schemes. But I think at the moment, this kind of serves the purpose in terms of what we're trying to achieve with the firm.
Alan Cowley: Does it work as a motivational tool in any way or is it just kind of the added bonus of working with us?
Reece Chowdhry: Yeah, I think founders that we invest in are intrinsically motivated and I think yeah, it's an added bonus. And I think, again, it's just around the kind of culture that we portray, which is the one that I think is internally internalised but then very hard to articulate like, "We're the greatest." and like, "We do this and do that and do this and all our founders love us." Yeah, everyone does that. And everyone says that. And everyone could write a good article about how much we support founders. But I think it just goes back to values as a company and our value as a company is we need to make sure that we give back if we're successful.
We also, as a company, put the onus on the entrepreneurs to make decisions and that is articulated perfectly in that. We're not choosing the charity, they are. And something they're passionate about and we will support you in that journey. It says a lot about us more than anything. So I think this is why it's been a very successful scheme and we're potentially exiting something at the moment, which is in our first fund and hopefully we can write a nice check to, I think it's the British Asian Trust, who the founder chose. So yeah.
Alan Cowley: It is a brilliant initiative, it is. We'll just take a quick break.
Reece Chowdhry: Sure.
Alan Cowley: Is there anything else you want to talk about? We've done really well. We've followed what I wanted to talk about.
Reece Chowdhry: Maybe, I don't know, you could have some war stories. I don't know.
Alan Cowley: Yeah, yeah.
Reece Chowdhry: Yeah?
Alan Cowley: Yeah, let's talk about failures then, your war stories. Okay. And then we'll do that and then just go onto kind of what ... then sort of look about into the future a bit. Does that sound good?
Reece Chowdhry: Yeah, that sounds great. Let me just have a sip. That was good. That was okay, right?
Alan Cowley: No, no, it was fantastic. It was great. I've just said that's a brilliant initiative. So let's just go onto ... We've heard quite a lot of successes of your portfolio and some of the really positive things that you do in the emerging markets and with your carry to charity, but let's talk about some war stories. What have you learned from the failures and the downs and the war stories over the last four to five years?
Reece Chowdhry: And there has been plenty of those stories. And actually, one thing I would just touch on briefly before we dive into that, is that what when we invest in every company, one of the first things we do is we set up a direct WhatsApp channel to each founder. So we're there for them whenever they need it. And it's like a direct line, a hotline. And I think that's where the world works now. So why wouldn't we do business like that and why email and whatever? I understand one of these use Slack and stuff, but I think this works really well for us and so we get a good insight into people's thinking on a daily, weekly basis. And to touch on your question, the war stories have been, they've been painful, but I think that's part of the game.
I'll give you a few. First one is around a founder leaving. One year into company, company's doing very well. One day the founder just packs up, leaves, we can't get hold of him, his co-founder can't get hold of him, disappears of the face of the earth for months and months and months and months. And then eventually resurfaced, but we were like, "The business could be different." Obviously, it was sit down and have an adult conversation. It all worked out in the end, and I think that individual just obviously needed that time. But it would be nice to be like, "I'm checking in." And they were obviously a core part of the team, so it's quite a big way to step away and leave your co-founder.
Alan Cowley: Can I just touch on that? And you don't need to disclose what it is and who it is or anything like that, but was that to do with kind of founders fatigue and the kind of mental health of running the company? Obviously, there might've been something other personal, but did that add to it?
Reece Chowdhry: I think, with a start-up, everyone has these grand ambitions of where you're going to be at what stage. And I think in that scenario, I think there's an element of personality clash, there's an element of, "We're not where we want to be," and there's an element of, "We've been trying this for a long time and it's not working out." And I think there's a combination of all of that. And I think, actually looking back in hindsight now, it was a good decision from all parties because basically the company has moved forward very quickly under very strong leadership with one clear direction, and actually half the time could have been fighting that battle that didn't need to be fought. And so often the times when you feel like there's just nothing that can go your way, is actually you'll just look back at that and think, "My God, what happened?"
And there's another company. I think this is my favourite war story, I think. When we invest in any company, like any angel or VC, one of the first things we do is say to the company, "How can we help you?" And where we particularly have helped founders and we've been very successful, is helping them with the next funding round or closing off the existing funding round, recruitment of potential hires, bringing it to advisory board together, doing platform in terms of getting their name out there, PR - we seem to be pretty good at that - and just general show demos, et cetera. But one of the things was coming up to the end of last tax year actually.
And so some of our compatriots, who we have very good relationships with and trust us very much in the kind of the tax efficient space, but sometimes say, "Look, we want to get some money out the door and so if there's anything in your portfolio that needs a bit of EIS or SCIS, we're happy to provide it because I know you've done all the due diligence and I know you've worked with the founders, so we kind of like trust you as an investment partner." And so that situation arose in one of our portfolio, and actually the company was actually doing all right, but it was not far away from probably running out money.
And so we said to the founders, "Look, we need to go raise some money. It's a good opportunity to do it. I'll set you up with a meeting. I don't know where it's going to go, but basically let's try. And it's a good time of year so you might get a very ..." So I set them up a meeting with a VC I know very well. They had one meeting with them, spoke to me for a long time, looked at all the stuff, checked the DD that we had done. So it wasn't a big decision. Loved the team. Basically went on the back of my recommendation, got a term sheet and set to close in two weeks.
One of the founders said, "That's fine, everything's fine. We need the money, it will help us grow." The other founder says, "No, I don't want to take the cash." And then I was sitting there saying, "Well, I think it's best for the business to take the cash, otherwise it becomes a growing concern," and so we've got to this weird stalemate where, essentially, one of the founders said, "No, I think we'll get a better offer." The other founder really wanted to take it and it actually meant that basically the company was just completely restructured because they were both in at completely opposite mindsets on where to take the money.
But actually, what that did was accelerate a lot of thinking around them working together in the long-term. And that actually just came to fruition through this exercise of putting something in place. And obviously, it came to a head. And again, it was the right decision. The company actually restructured into a different kind of vehicle. So it meant that basically they went their separate ways into two different companies. And actually, that was a great thing because actually in a year's time, they would have probably spent them the VC's money and would've probably gone their different ways because they didn't have the same kind of vision.
So this was actually a really good exercise, but it was at the time, very painful because you're like, "Guys, come on, we've just got you something, which is good. And one of your founders agrees." Every single shareholder agreed except for the other founder. But the thing is, you could say, "Well, just take the money," in that sense. But if you're left with someone on the cap table who fundamentally disagrees with what you are doing as the rest of the 75%, let's say, then this is no way to start a business and take people's money on, you have to be aligned. So this wasn't the right thing to do.
Alan Cowley: Is that advice to founders, if you do have multiple founders, to continuously talk to each other about where you want to go and take this business? And don't leave it a year or 18 months. Actually have this chat regularly?
Reece Chowdhry: Absolutely. I would highly recommend that. Everyone sets off with this grand strategy and plan and then it just gets caught up with doing payroll or ... You need to take time, take time as founders. I always tell my founders, "Go out the office, take time with your team out the office, do things, go for team lunches. This is where you tease out culture. This is where you tease out your strategy. Don't be afraid to take that step out." The great companies on our portfolio are very, very good at this. They do the soft skills very well. They know what they stand for, other people know what they stand for.
And they do things like these offsite days, build their culture, build their brand and the things that you don't think are important at the beginning, but if you don't lay those foundations about something as small as, how do you onboard somebody? I can tell so much about a company when I ask them that. "We have this pack and this is what it says and this tells about our values and this is where we do our Christmas party and this is where the systems are and these are the passwords for their systems and we use whatever ..." This shows me incredibly about a company and how they're built. That's Jim Collins' book, Built to Last.
Alan Cowley: Built to Last, yeah.
Reece Chowdhry: And so yeah, this is what I would say.
Alan Cowley: Okay. All right. So let's just finish on the future. So you've invested in now with RLC for about four to five years. So what does the future hold for both RLC and yourself? And what do you think actually, and very briefly, is there any other markets that you're looking at to maybe venture into in the future?
Reece Chowdhry: Yeah, I think at the moment ... Markets change all the time. So the one thing that I'm very, very passionate about and I've spoken many times, banged the drum about this, is as a market, I don't know if it's a market, but as a kind of space, I'm very interested in voice. Anything in the voice space, I find very deeply fascinating. If you think about just the market as a whole, one in five people currently have a smart speaker in a US home. I mean, that's an incredible statistic, right? And it's only going to get more prevalent and it's going to outpace tablet sales in the next few years. And so I think that's a market to watch out for, particularly in so many different angles in terms of the way we do business and the way we kind of play, the kind of way we live our daily lives.
And I think this is something that we're paying a lot of attention to and we've already got a couple of interests in the space already. So we'll see how those play out. As personally, for myself, my main focus is to build RLC up. So the scaling our funds, scaling our portfolio, helping our founders and turning RLC into a brand in its own way. And I think we know we're on that journey to do that in a lot of ways. And I think, personally, I think I want to carry on investing. This is like every great investor that I've ever read in times gone by, say that you need to have a very good, diverse portfolio. And I think, personally, I love investing in different things and I don't just invest in the UK.
I invest in AngelList in the States and that's really helped my investing career in the UK because I've seen how other people do it at a different kind of market and different kinds of scale. And so this is what I would lead people on, that if they want to get in the industry, you don't have to write big checks, you can just be passionate and you can find ways to learn. And I think, one day, I'm going to write a book and I swear by this. And it's going to be something on the lines that like, "Don't waste a hundred grand on an MBA. Put 10k into 10 angel deals and you would learn an infinite amount more about the world and the business and people and there's no life lessons for that." So wait for this space.
Alan Cowley: We'll look out for it. Don't call it the Invested Investor. One last thing before I just wrap up, you talked about Apple in the first story. You made the investment over 12 years. Did you get a positive return on that?
Reece Chowdhry: Yes, yeah. A very, very positive return.
Alan Cowley: Oh really? Raring to listen. Reece, it's been refreshing and it shows how much value you've taken from the industry already over the last four to five years and how much you going to give over the next 20, 30, 40, 50 years. And you obviously enjoy it as well-
Reece Chowdhry: Love it.
Alan Cowley: ... so that's absolutely brilliant. So thank you very much.
Reece Chowdhry: Thank you.
Alan Cowley: Cheers.
Reece Chowdhry: Thanks a lot.
Peter Cowley: Thanks for listening to another Invested Investor podcast. You can subscribe to all future podcasts via our website Investedinvestor.com or via a number of online podcast platforms. And be sure to follow us on Twitter, LinkedIn, and Facebook to get the most up to date, interesting and insightful content.
