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Back for More: The Power of Good Relationships.

The most talented entrepreneurs have a choice as to where they take money from.
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For them and us, it’s about the long game. When we back them in their first business, we’re doing so in order to be chosen to back them in their second, third and fourth businesses. We want to be the first call when they have good (or bad) news. Knowing when to be there and when to get out of the way is crucial in building healthy, long-standing relationships.

The Personal View

There are a very small number of European entrepreneurs who have built successive, successful businesses from scratch. Alex Chesterman is one of them. So when he called one Tuesday in late November with news of his latest venture, we met on the Thursday, committed on Friday and closed the investment the following Thursday. That’s a ten day cycle, although it’s fair to say the decision itself took as many minutes. The business proposition, Cazoo, is intriguing, but we’re really taking a view on Alex as the founder.

At the point of investment, we’re taking an informed view, but one that’s based on working for six or eight weeks with the founder. It’s the following eight or ten years that cements the relationship. Any journey is one of ups as well as downs and it’s how we navigate them, together, that sets the course of the relationship.

The Backstory

There is a tree-like background to this, tracing back to our investment in LoveFilm, acquired by Amazon in 2011. Alex was a LoveFilm founder alongside others including William Reeve and Graham Bosher. We’ve remained closely connected to these entrepreneurs as they’ve come back to us repeatedly with the companies they went on to found, such as graze.comtails.comSecret Escapes and Zoopla. We invested in Zoopla a week or two after Lehmans collapsed in 2008. The rest of the market had frozen, but we took a view on Alex.

Over the years, the flow has been in two directions: we’ve introduced fledgling businesses like Uniplaces back to these entrepreneurs for angel rounds and mentoring. This is a dialogue that benefits everyone, including the European entrepreneurial ecosystem itself.

The Investment

Cazoo, Alex Chesterman’s new venture, has the single-minded aim to ‘Amazon’ the used car market. Carvana has been doing this in the US for some time. Its market cap after five years is over $7bn. Cazoo will be the first company to allow people in the UK to research, view, finance, purchase, trade and order a car online. Convenience and trust, in short supply in the traditional used car industry, is built in through door-to-door 48 hour delivery and a 7 day no-quibble refund policy.

Alex built LoveFilm having observed Netflix; he built Zoopla having observed Zillow; he’s building Cazoo having closely observed Carvana. This is a heavily complex logistical undertaking. It’s high risk, but maximising the risk has its place, when mitigated by trusted relationships and track records of entrepreneurs such as Alex.

Looking ahead

We are still a young fund. Ten years in we’re seeing the benefit of our long-standing relationships with Europe’s best entrepreneurs. With businesses like Swiftkey, Secret Escapes and tails.com, we have the makings of the next LoveFilm: ventures that spawn a group of founders who will go on to build a crop of enduring, sustainable businesses of breadth, depth and scale.

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