Waymark Tech, a Startupyard Batch 8 alum, is a London based AI regulation intelligence company, with clients among the top accounting and consultancy firms in the world. Waymark helps big enterprises to stay on top of regulatory changes, and bring alerts and guidance about regulation compliance to the right places in the organization, at the right time.
You can read more about Waymark’s story and its Founder and CEO Mark Holmes in our last in-depth interview. This week I connected with Mark for a one on one chat about his journey since StartupYard. Since he left us nearly a year ago, Mark has managed to raise a seed fund for his young company, and now has a team of 5 working on Waymark Tech, as well as a growing list of clients either actively using, or testing their technology.
We decided to focus our discussion on the challenges for a first time founder raising seed capital. From hiring the right team, to picking the right investors, we took a detailed look at the process, and what Mark learned from it. Here is a version of our conversation – edited for clarity and length.
Hi Mark! We’re gonna talk today about the process of going from a one-man-show startup, to being CEO of a small startup team that has raised seed investment, and gained a lot of traction with their product. Sound good?
Looking forward to it. Lots to tell. Lots of ground to cover since then. As you know, we’re now a team of 5, we have a bunch of customers in our pipeline, and the product is out in the world being used by companies today. We also had Credo ventures join with StartupYard and Seismic Foundry as our seed round investors in March.
That’s where I want to start. Can you tell us a bit about how that process worked for you? What’s it like to negotiate a deal like that for a first time founder?
Well, I did just about everything wrong at the beginning, but you learn as you go. You figure out what investors are looking for, what they need to see from you to feel comfortable. You have to figure out also what you’re looking for, and what kind of an investor you really want. It’s just a big learning process for everyone, and I think we got the result we really needed. That’s the important thing.
What did you get wrong?
There were thankfully no big mistakes in the process, but rather I found out that many of the things that investors look at are just very different from the things I thought would be most important.
I’m a product guy, and that’s where I come from. Going into the process of raising funds, I also had some customers who were ready to work with me. You think from your own perspective, this is enough to justify an investment. Of course it isn’t, because a VC investor like Credo are looking for more than this. They want to see the big picture in 5 years. They want to see it down the road, and how this thing you do can become really essential and irreplaceable for the customer.
The fact that you have this customer ready to buy is great, but the investor wants to know how you are going to make that a growth relationship, and how you’re going to repeat it everywhere you can.
To demonstrate you are doing something that people are not going to be able to get on without, that’s not the same as having a great product. It’s having a sticky product, that can’t just be replaced tomorrow. Especially for the early stage investors, they want to see that this will be at the heart of your industry in the future, which people will depend on. I did find this helped me to make some critical product decisions as well.
You made more scaling focused decisions?
Yeah, definitely. More importantly, I made more customer focused decisions, that were not necessarily about the product features. You have to get over this fear of rejection, which is very big for a product person. It’s maybe the worst thing I can imagine, to be told someone doesn’t like my product. You fear they’ll dismiss you, and you will lose your chance with them.
Now that I’m selling and not just building, I see that this doesn’t happen. Actually the opposite, because you aren’t selling the idea only, you’re selling the relationship you’re going to have with the client. They have something to react to and to give you feedback, which makes the product even better, and makes the relationship even better.
I found out when you show your product to a customer, even if it doesn’t completely work yet, that actually builds a lot of trust, because they can see what you’re doing is real, and it’s not so big a risk for them to start trying it. I felt this surge of confidence from getting all this feedback, positive or negative, because people are showing that it matters to them. You are doing something that matters.
Knowing that now, what would you tell yourself to do differently when approaching an investor?
Maybe this: that they are “technology” investors, but they are investing in you at the end of the day. The product can be the best, or just good enough. I want my product to be the best, but the investor needs your team to be the best, your traction to be the best, and your technology to be unbeatable. At the end of the day, the product is a small part of that mission. A critical, but ultimately small part of it.
One thing I didn’t do, which I honestly should have before talking with investors, is to know more about their portfolios and their history. Focusing more on how the investor’s portfolio and the team they have is going to be a help in scaling and really in growing your business. Do they have the existing clients and companies in the industry you’re targeting, and can they open these doors for you that can’t be opened otherwise?
You always say at StartupYard that it isn’t just the money. That’s really, really true. The wrong money is not a blessing, if you aren’t also getting the right network and the right support to use it.
I didn’t read enough about investors before talking with them, because obviously it feels like they are the ones interviewing you. It’s not like that though; you have to interview them too, and figure out if the relationship really makes sense, apart from the financial consideration. That goes both ways too: how do they enhance your ability to scale, but also how do you enhance their portfolio? Are you going to be of value to the investor in the future? If you are, that is a good sign you will get the support you need, because they also need you.
It ended up that investors started to sort of pitch me on their ability to help the company grow, and this is when I started to pay more attention to an investor’s history, their other investments, and the decisions that the individuals you are working with have been a part of in the past.
As a result of this growing awareness, I did end up stepping away from the table with some investors who were interested in a cooperation. I saw that if you can’t see how you’re going to enhance each other, and have more of a marriage than a business relationship, then it might not be the right move. That’s particularly true in an early stage investment. These people are going to be around for a while. They will maybe have board seats. They will have opinions. You want them to compliment what you’re doing, not make your life harder unnecessarily.
I am ultimately happy with my choices, so I think I managed it ok.
What were some of the harder topics for you in the initial discussions with the VC investors you talked to? What did you need more preparation for?
There are obviously some things I wasn’t familiar with, that I had to study up on. Liquidation preferences, and preferred shares, shareholder rights, and other legal and technical things. These are really important to get your head around, so you know that the goals you are setting together make sense from everyone’s perspective. You want to have your expectations be aligned as much as possible.
I found I had to get used to this idea, that for a VC investor, they are really expecting most of their investments not to produce much in the long run. Just a few will pay back the fund, and maybe one will be that unicorn that will change everything. That being said, this is the kind of mindset they have when they are making decisions about who to talk to. Can you be the unicorn for us? Can you pay back our fund?
That is much less about your product than about your ability to scale, and to be sticky. I know that having a great shiny new product isn’t enough if it isn’t used by anybody, but I’m still a product guy. Still the focus on scaling and traction is really powerful from investors.
I also struggled with this, and we worked on this together a lot at StartupYard, which is that you have to have a story that someone can understand and relate to. These are really smart people, but generalists, and usually not as involved with your industry as you are. They are fast learners, but you have to give them something to work with, and that was something that was a challenge for me.
I’m doing regtech. Even just a year ago, this was not something being talked about much. Nobody knew what the stakes were for this industry. How important will this be, right? If you remember, at our DemoDay for my batch, we came up with this great story about a vineyard in the UK that made this wine, and then come to find out they can’t call it “wine,” because of some EU regulation they had no idea about. So they call it a “fruit-based alcoholic beverage,” which is just a crap thing for selling a good wine.
That was a story that early investors could really see very clearly. You can sense the frustration when you tell that story, and people get it immediately, that it’s this real problem, and it can effect them too. Once you can do that for people, you can get them to start seeing what you do as something that matters. This was a new discovery for me, just how powerful these little stories are in helping people to just “get it.”
You said the focus on the team was also a surprise for you. Why is that?
I knew they would want to know about my team, but it was something that went deeper than I thought. It’s not just having talent, which any company can find.
The investors are focused on your team because that is where the value is really being built in the company. With just a technology you have something that potentially anyone can do. There can be other ways to solve the problem. You are not likely to be so unique that nobody could ever replicate that technology.
I had grown the business through outsourcing, which is cheaper. Well, anyway it seems cheaper, particularly when I was trying to get a lot of things done very quickly. The investors look at this as a bigger risk in the long run, than slowing down a bit and building a great team that is going to continue to grow your product in-house and bring that organizational knowledge and experience that makes you viable in the long run.
There are other things like security concerns, IP concerns. However, I think it’s mainly that the investors do recognize that the team is going to be critical in building the company’s value, and reduces your risks.
It makes sense, for sure. If you are one founder, and it’s all in your head, that’s a big risk for someone to invest in. To gain trust, you have to also trust people, and bring people in, so I took that very seriously, and thought hard about how I was going to grow my team, and what kind of team we were going to be.
What is important to you about your team members? How did you pick them?
I got this I think from an old boss of mine in the finance industry, a long time ago. He said you can hire the best person for the task, but that isn’t always the best person for the job. There is talent, and there is fit, and you have to balance them.
Being with StartupYard was a good experience in this regard as well. In the program you’re with other companies that are struggling sometimes to find the right fit for themselves. Founders or employees come and go, and I saw some examples of what I wanted, and some of what I did not want. That gave me something a little more concrete, and made it easier to make these decisions.
When I was growing my team, to be frank I did not always choose the people with the most experience or the most skills in their area. I looked at their fit in the team, and their long-term vision for themselves, and tried to pick the best people for the job. I let some people pass with very impressive skills, which I think in the long run is the right thing to do. I couldn’t imagine how to work with them every day. We need that sense of belonging in the team, to be our best.
Also, I want to build a team that lasts beyond me individually. I am the “get it started” guy. I’m a builder and an idea guy, and I want to make something that I can pass to the next person to really grow it and nurture it. When we reach a size and a state where I feel I can hand this over to a great team that can take it to the next phase, I will probably step back and think about my next step personally. Since this is my nature, I am planning for that to happen eventually.
Ok, so more personally, is this something you can see yourself doing again in the future? Are you going to start another startup, if and when that time comes?
Look, never say never. Ok? I didn’t think I would even found one company, but there was just this moment that all of us know who found companies, that I knew I had to do it. It was just something I couldn’t let go. So here I am, and that’s the journey.
And by the way, I now see why some people do it over and over. I didn’t know this before, but the more I work with our customers and the more I solve their problems, I just keep finding even more mind boggling problems that I could fix, so my ideas are still growing. Your confidence grows, and your ideas just come faster, so maybe one day I will have to do it again. I don’t know.
I have spent 15 years in financial services and I do have other interests, so I want to explore them too. It might be a business, but it could be angel investing instead. I think the entrepreneur spirit is something that comes from having your eyes really open to what is possible, and what is not being done, that could, and should.
So to cap this off, can you give me maybe a bullet point list of the things you wish you knew a few years ago, that you know now? What would you tell young Mark of 2 years ago?
So many things. Ok, I’ll try and give you a simple list:
- Know what kind of founder you are, and let yourself be that to some extent. Don’t try to be somebody else completely. I am a product guy, but this doesn’t mean I can’t focus on scaling and selling. I am selling now maybe 70% of the time. Still I spend time on the product, where I get inspired to keep going. Don’t lose that.
- Remember that investors want to commercialize, scale, and grow. If you aren’t ready or you don’t want to go at their pace, you can choose not to. If you do, understand what it means for you.
- You have to sell. You have to sell! You have to overcome this fear of rejection, and sell what you have, as soon as you can. That is so valuable to the creative process, and it will make your product better.
- See clients as an advisor, and not a buyer. The old saying is “ask for advice, and you get money. Ask for money, and you get advice.” That’s it. If you are looking at your customers as the best source of insight, you are going to be rewarded in so many ways. Keep that focus where it should be, on listening and responding to clients.
- Think about how your company is going to become essential, and how it is going to become impossible to replace. Whatever this is that makes you stick, you focus on that and you don’t lose focus. You don’t want to be one of many alternatives. You want to be the one that the customer has to have. That’s how you raise investment, and that’s how you get deep into solving customer problems.