In this month’s VC Under The Spotlight interview series, we spoke with James Cameron, an investor at Accel. Known as one of the world’s largest VC firms, Accel have been investing for over 30 years, have more than 100 IPOs under their belt, and have invested in the likes of Dropbox, Slack, BlaBlaCar and Spotify.
Joining us at the Tea With A VC event, we spoke to James about Accel’s secret sauce in investing in some of the biggest tech success stories of our time, his personal focus at Accel, and advice for startup founders fundraising…
Tell us about yourself. Where are you from and how did you get this role?
I’m originally from Sydney. Like most people, I fell into the VC life in a completely roundabout way. At university, I studied computer science and law, so at the beginning of my career worked as a lawyer and then as a tech banker before I decided that I didn’t like either of those.
I then spent couple of years at Stanford Business School and while I was living in the Valley I started a company selling software to hedge funds and mutual funds. It’s then that I originally got to know the Accel Palo Alto team while I was pitching and fundraising for my startup.
When I then moved to London several years ago, I got to know the Accel team in London who were looking for someone to join their team to focus on enterprise and B2B investments. That’s when I moved from pitching to the investment side of things.
Tell us the founding story of Accel. How did it get started?
Accel has been around for a long time. We started in the Valley back in 1983 and we’ve been through multiple waves of venturing and the tech world. We started the London office – where I’m based – 15 years ago and from here we invest right across Europe, Israel and as far afield as Australia and New Zealand. We’ve now just closed a $500m fund for investments here, and it’s our 5th fund dedicated to the region. All up, we’ve raised $2.5bn for our European investments.
Accel took an intentionally global approach to venture capital reasonably early on. In our view, there is absolutely no reason why great companies can’t be started from anywhere there is a great technical talent.
With the rise of cloud computing and new direct-to-user distribution platforms, choosing where to base your startup is becoming a new kind of “platform” choice – and founders can use it to build competitive advantage and attract the right talent. Some of the best companies in fintech are coming out of London (e.g. FundingCircle), some of the best mobile gaming companies are in Helsinki (e.g. Supercell), some of the best dev tools software businesses can be based in Sydney (e.g. Atlassian), and the most innovative drone manufacturers are in Shenzhen (e.g. DJI).
With the right advice and capital behind them, the next Facebook can be started from anywhere. So Accel took the view that we needed to go to where our founders were, and that meant opening offices outside of Silicon Valley.
Does your fund focus on any specific industries and geographies?
We’re reasonably industry agnostic in so far as we can invest in anything to do with digital technology. Our current investments are roughly split 50/50 between B2B and B2C.
Personally, I focus primarily on early-stage B2B and enterprise software startups. I work with a lot of IT infrastructure and storage companies like Weaveworks, ClusterHQ and E8 Storage, companies in the developer tool space like Skipjaq, and those within the broader SaaS space like PeopleDoc.
From the London office we focus on Europe and Israel – and in particular the UK, Germany, France, Nordics and Israel.
Of course, we also spend a lot of time with our US counterparts on the West Coast and certainly look at emerging markets such as the Middle East and Africa.
How about a business model or type focuses?
We don’t focus on any particular business model or type. We try and stay as open minded as possible, because in this business as soon as you think you’ve got it all figured out, it means you’re going to drop the ball.
The sort of founders that we do love to work with though are the ones that have demonstrated that they can execute at speed.As a startup, your key KPI is always speed – how quickly can you get to product market fit then how quickly can you scale? We don’t focus on one type of model or another – but rather we love to back founders who are focused on executing quickly and can cut out all the bullshit.
On the enterprise side, we obviously love to see companies that have a high-velocity and high-volume sales model. But not every company in the enterprise space is like that – different models scale at different paces. In fact, many have to build large sales teams and sell top-down due to the nature of their product.
In many cases, enterprise companies at this end of this spectrum can be overlooked by investors who focus purely on low-friction, high-velocity sales models. But we’re reasonable agonistic in that respect too. What we love to see is the potential to build strong recurring revenues – but there can be a multitude of ways to get there.
What does a typical Accel’s investment look like?
We’re in a fortunate position in that we can be stage agonistic. We can invest anything between $1m and $70 million.
That said, our sweet spot certainly is series A. That’s where we tend to focus and where we can often create the most value for our founders. However, we certainly do invest at seed, or series B and beyond.
We do 10-15 investments a year, and we aim to invest around $15 million over the lifespan of the company – this gives us the opportunity to really spend a lot of time with our portfolio companies.
We don’t really have a minimum traction threshold. I think in order to make sure we’re investing in great companies we try to be as flexible as possible. That’s why we do invest in companies that are pre-revenue (and in some cases pre-product).
Apart from investing capital, how else do you support founders?
We try to be the first investors that our founders turn to for help. We support our companies in areas such as marketing, sales, hiring etc, and we have a great network of partners and EIRs across the globe to help with this.
Almost all of the companies we invest in – and certainly all of those in the B2B and enterprise space – are looking to become global category champions, and so a lot of the support we provide involves supporting their international expansion strategy.
This often involves in tapping into our international networks and growing their international presence – both in terms of customer base and team.
Looking at Accel’s portfolio, it’s pretty clear Accel has picked winners. What’s Accel’s secret-sauce when looking at a potential investment?
Obviously, we love to find great teams. But you need to unpack that a little bit.
For me, this means teams that have a great sense for finding a product-market fit and who can execute at speed. We like backing founders who move quickly and are focussed on testing their assumptions, getting to product-market fit and then shifting their energy to scaling.
It’s also very important for us that the founders are going after a big market. It’s one thing to have product-market fit, but another thing to have it in a market where you have the opportunity to build a very large business. The way the economics of our industry work, we have to believe there is a very large opportunity to go after.
What are the current ‘hot-trends’ or industries are you excited about right now?
There are a bunch of things I’m excited about at the moment. We’re seeing a ton of great innovation in the cybersecurity space coming from the US, Israel, and increasingly in the UK. It’s an area that has fantastic macro tailwinds at the moment and we’ve been lucky enough to have had some very successful recent investments in the space like Aorato, Crowdstrike, and Illumio.
We’re also really excited about the emerging landscape around developer tools and the API economy. It is creating some fantastic new business models and has lead to some of our most recent investments in companies like Algolia and CartoDB.
And, of course, as a team, we’re very focused on B2B and B2C marketplaces. We’ve been involved in some fantastic growth stories in this space, like BlaBlaCar and Deliveroo, so we’re always on the look out for more of those.
There has been a lot of talk about the impact of Brexit on UK’s tech scene, what are your thoughts on the topic? Has Accel’s investment strategy changed as a result?
It hasn’t. We’re very much open for business. Accel invests right across Europe and anywhere where great companies are coming from.
For the UK, there is a risk for Brexit to potentially disrupt the flow of talent from the rest of Europe – and that will certainly have a disproportionately negative impact on UK startups. Ultimately though I think London is a place that will attract talent from all corners of the globe. In any case, and we’re hopeful that a solution that enables startups to maintain a good flow of great talent from Europe is found.
What advice would you give to a founder fundraising for the first time? Can you give us three tips?
The fundraising process is a long game. It pays to get to know investors reasonably early – even before you’re at a stage where you’re fundraising. The trick is to get to know them in a low-pressure situation – which means not asking for that meeting only when you think you’re ready to raise.
Secondly, when it comes to the point when you’re looking to raise money, it’s important to think about the process as a storytelling exercise. You need to think about a narrative that grips investors from the very beginning. it’s almost like theatre in many ways, and it’s important to think about the storytelling aspect of your pitch.
And lastly, get a warm introduction, or at least try to network your way to an investor through an event. Whatever you do, don’t send cold emails, or worse, send cold emails to the general email on the VC firm’s website!
We’re sure you get pitched to all the time, what are the most common mistakes founders make when fundraising?
Not having that warm introduction is certainly a common mistake.
I also see a lot of founders who try to convince you there are no weak areas in their businesses, or that there is no competition in the market. I think this is a huge mistake. I love founders who are honest about the challenges they are facing. It gives me confidence that we can work together and it also makes them more credible when they are talking about the positive aspects of their businesses.
How should a startup approach you? And how should they not?
A warm intro is particularly effective, but even if not, we spend a lot of time at events and we do office hours at accelerators, incubators etc, so just come up and strike a conversation. We love talking about new ideas and new companies – so don’t be shy and come say hi.