Tom Blomfield: Do the Best All Raise Pre-Demo Day & YC's Fundraising Advice to Startups | E 1152

1. 0:00 – 0:53

   Intro

   1. TBTom Blomfield0:00

      I don't think founders are necessarily the most likable people, honestly. If you just agree with everything that happens around you, you're never gonna create something different. So, this is a key skill of a founder, which is holding these two realities in your head simultaneously, cognitive dissonance or driving yourself crazy. One is the big vision of the 1% best outcome. "If this really, really works, what could this become?" And then you have to hold the, "What is my top priority today and this week and this month?" Which is very, very different from this billion people around the world, right? And you have to execute on that and get your team to focus on it. But you have to have both.

   2. HSHarry Stebbings0:33

      Ready to go? Tom, I am so excited for this, dude. We've known each other for many years, but thank you so much for joining me today.

   3. TBTom Blomfield0:52

      I'm delighted to be here.

2. 0:53 – 10:07

   Background

   1. TBTom Blomfield0:53

   2. HSHarry Stebbings0:53

      Now, I always think that people are shaped by early years and childhood. When you think back to the 10-year-old Tom, how would your parents and teachers have described you?

   3. TBTom Blomfield1:02

      Precocious, probably. Um, uh, I d- I d- I don't think I listened very well. I was, uh, I was fascinated by lots of different things. I got into computers very, very young. And I was honestly trying to start businesses from when I was about six or seven, I think. I stole a bunch of my mum's jewelry and tried to sell it on the street outside her house before she s- she saw me.

   4. HSHarry Stebbings1:25

      (laughs)

   5. TBTom Blomfield1:25

      Literally age seven, I think. It was a, it was a strange childhood.

   6. HSHarry Stebbings1:28

      So I always ask founders when I'm investing, "How did you first make money?" Because I always think that actually exceptionalism shows itself early in life like that.

   7. TBTom Blomfield1:37

      Yeah.

   8. HSHarry Stebbings1:37

      And no one comes out of Cambridge and just makes money at Bain for the first time.

   9. TBTom Blomfield1:41

      Yep.

   10. HSHarry Stebbings1:42

       Do you agree with that, or do you think that exceptionalism and entrepreneurialism can be later, and actually you'd miss the sway of the founders?

   11. TBTom Blomfield1:48

       I think it can be later. But often, certainly for myself, I started building websites as, what, 14, 15, and convinced my local estate agent to pay me three or four hundred quid for a, an, uh, a website. So that, I do fit that mold I guess, and I, in general, I do agree. But, you know, there are, it takes many different types to start companies. I think to be so prescript is probably, you'll probably miss people, but...

   12. HSHarry Stebbings2:11

       I always think, like, yeses and nos. Yeses can make careers and nos can be incredibly hard and painful to, to hear. When you think about the yes that you think made you most, what yes was that?

   13. TBTom Blomfield2:26

       Very easy answer. Um, getting onto Y Combinator in 2011. Getting the call. I thought we'd bombed the interview. The problem-

   14. HSHarry Stebbings2:34

       Why?

   15. TBTom Blomfield2:34

       Um, so I was working with Hiroki and Matt on, um, Group A at the time.

   16. HSHarry Stebbings2:39

       (laughs) .

   17. TBTom Blomfield2:40

       And we were all ex-management consultants. We sort of all wanted to be startup founders and really all wanted to be the CEO. And so, and we were working on, like, not a very good idea, which was a, a kind of student bills splitting app. And in the interview, every question that was asked, one of the founders would answer, then a second founder would, like, contradict them, and then the third founder would try and answer to try and, like, square the circle somehow. And it just went on for this horrible, like, 10 or 12 minutes of just, like, it was such a painful experience, and I was sure we'd bombed it. Um, but when we got the call afterwards, uh, it was like a dream come true. And honestly, those three or four months back in 2011 changed the entire course of my life. I mean, I, I wouldn't have started Monzo without it, for sure. And now I'm back at YC, it feels like...

   18. HSHarry Stebbings3:24

       What specifically was it? It enabled you to see something of the world that you didn't know, t- well-

   19. TBTom Blomfield3:28

       We were play acting before then. We were three guys in London who'd come out of consulting, and we were play acting at being startup founders. You know, we'd hired a bunch of interns, we were just running around doing dumb stuff. We had no role models. We had no one who was smart or successful around us to model ourselves afterwards, u- uh, after. And, um, being in YC just put us amongst this group of, like, high ambition, high achieving technical founders who thought they could accomplish something. And then every week, a new founder would come in. You know, Max Levchin would come and tell us about the early days of Facebook, uh, the early days of PayPal. And then I remember, um, the next week, this sort of timid, s- short guy walked up and said, "Hi, I'm," you know, "I'm Mark." This was Zuckerberg to give a talk on the early days of Facebook. And it was kind of incredible being surrounded by those people. Whereas in London, we just didn't have those role models, and I think we would've, the company would've, like, slowly, slowly sort of died in London. We couldn't raise a single penny of investment in 2011. So YC really gave us that break, and, and raised the bar for us.

   20. HSHarry Stebbings4:35

       What was the most painful no?

   21. TBTom Blomfield4:37

       Probably 2020, March or April. We'd, um, we'd had an easy-ish time raising. We did around at a billion led by, uh, General Catalyst, then around a two billion valuation led by Y Combinator Continuity, and then, um, found it really hard to fundraise. And I had 96 nos in a row, um, for that fundraise to try and do a flat round. And we finally got it together, 100 million at a flat valuation, at two billion.

   22. HSHarry Stebbings5:09

       Tom, what do you tell yourself 95 times in? I- I fundraise now, and it, it really hurts me, actually.

   23. TBTom Blomfield5:15

       It was h- horrendous. And that's not even the worst no (laughs) . Um, it was really dispiriting, just saying the same thing over and over again about how I believed this bank was gonna be valuable, how we're gonna make money, how people are gonna deposit their salaries, and people just not believing me 95 or 96 times in a row. I mean, now I feel vindicated. It turned, all of the stuff I said turned out to be absolutely true. But, uh, at the end of 96 nos, we got these two Canadian pension funds to say yes, and they agreed to put in 100 million along with our existing investors at a flat valuation. I thought, "Pfft. The company's, like, can surv-" We were burning 100 million a year at the time. "So the company's gonna survive another year." And this was, like, March or April 2020. And the documents were all agreed and ready to sign on Monday morning, ready to sign and wire. And on Friday afternoon, London went into lockdown, and they phoned me up and said, "The investment committee back in Canada has said every investment's on hold. Like, we're not doing the investment, we're out. We're not investing." And that feeling of, like...... the world's going into lockdown. There's this crazy pandemic and no one knows what's going to happen. Um, we're running out of money, our revenue in the next week h- halved, went down by 50%, and I'm, like, staring down the barrel of this, um, this funding hole we have and spending the next few weeks trying to get any investor to invest at any valuation in, like, the first few weeks of COVID. That was the hardest by far.

   24. HSHarry Stebbings6:44

       What did you do?

   25. TBTom Blomfield6:45

       We got existing investors to invest at a significant down round, um, and, uh, we spent a long time trying to figure out what was fair. Because, you know, they had the... The company was in a precarious position, but we all believed it was valuable, and so it was sort of this game of brinksmanship almost, a sort of w- what is the fair valuation that, that rewards them for taking the risk, but, but sort of values the company appropriately? Um, and it was tough, three or four weeks. We got the round done. It was a sort of 40% down round, and I think about 1.3 billion, um, and we got 100 million in and, and the company survived. But, uh, that-

   26. HSHarry Stebbings7:29

       That, that no from the pension fund, that is a-

   27. TBTom Blomfield7:31

       Horrible. I remember the call so vividly, and the person that, you know, our champion on the inside was so upset about it. She'd worked with us so hard to get the deal done, and she was distraught, but there's this sort of nameless IC I'd never met.

   28. HSHarry Stebbings7:43

       I don't think that you can actually ever really have empathy for a founder unless you've fundraised. Like, that just brutal, "No, no, no, no," and every time, you've got to just embrace it and be, "Do you know what? Next one."

   29. TBTom Blomfield7:55

       (laughs)

   30. HSHarry Stebbings7:55

       "Next one is gonna be it."
3. 10:07 – 13:43

   Switch from Founder to Investor with YC

   1. HSHarry Stebbings10:07

      'cause obviously we mentioned that th- the challenge raising money in the early days for Monzo in London.

   2. TBTom Blomfield10:11

      Yeah.

   3. HSHarry Stebbings10:11

      And you've recently moved, obviously, to San Francisco. Why did you decide to make the move with the YC role, and just talk me through that process 'cause you coulda done anything?

   4. TBTom Blomfield10:20

      So, I left Monzo. I took a year or two to recover. Honestly, my brain was really, um, like melted. Um, and then I started angel investing in 2021, and I, I managed to sell some shares in GoCardless, my first company. And I put aside a pot of money, um, that I wanted to put back into the tech ecosystem, specifically the UK tech ecosystem, so I made... Um, I was, uh, planning to invest it over three or four years, and I think I put, in nine months, I made nine, uh, 76 investments in nine months, uh, 56 of which were in the UK. And, uh, my brain just works that way. I just kind of find something fascinating, and I will just do it to an extreme. And so I took angel investing-

   5. HSHarry Stebbings10:59

      Did you write the same size cheque with every investment?

   6. TBTom Blomfield11:01

      More, I n- I got that message, and no, but almost every one, yeah. The, uh, there were two or three outliers that I put bigger cheques into that I am, two of which I'm really happy about and one of which I was pretty sad about.

   7. HSHarry Stebbings11:13

      What are your biggest lessons from doing, what, 76 cheques in nine months? Like, when you review that today, what are you, like, did well, did badly, would do differently?

   8. TBTom Blomfield11:22

      Two big mistakes. Oh, no, I wouldn't call them... One was a mistake. Uh, the biggest mistake was, uh, over-indexing on the idea and not enough on the quality of the founder.

   9. HSHarry Stebbings11:30

      Mm-hmm.

   10. TBTom Blomfield11:30

       So, as a, as a CEO coming into that, I pictured myself running each business, and I thought, "Wow, I could do this and this and this," and that's really dangerous.

   11. HSHarry Stebbings11:40

       So dangerous.

   12. TBTom Blomfield11:40

       (laughs)

   13. HSHarry Stebbings11:40

       That happens with so many operators, they're like, "I could sh- do sales at this one." They go, "Oh, you're not-"

   14. TBTom Blomfield11:44

       Yeah, and it's not me doing any of it. It's the founder. Um, and so there are a few ide- where I, like, really loved the idea, and the founder just wasn't high enough quality, frankly. And that's something I've just had, I've learned over and over again at YC, just picking the highest quality founders trumps everything else. Even if you think the idea's totally stupid.

   15. HSHarry Stebbings12:02

       Yeah.

   16. TBTom Blomfield12:02

       Work with the best founders you can, and everything else is easy to, easier to fix down the line.

   17. HSHarry Stebbings12:06

       Do you outcome scenario plan?

   18. TBTom Blomfield12:07

       Absolutely not.

   19. HSHarry Stebbings12:08

       So, you won't go, "How do I think this looks if all of things go right? Is this a billion-dollar business? Is this not?"

   20. TBTom Blomfield12:14

       I, also, like, is there a world in which if this goes really, really well, if this, like, the-I thought about this a lot at the start of Monzo, there's like a sort of spectrum of outcomes.

   21. HSHarry Stebbings12:24

       Yeah.

   22. TBTom Blomfield12:25

       If you look at the top 1% of that spectrum, does, is there a world in which this could be a multi-billion dollar company? Absolutely.

   23. HSHarry Stebbings12:32

       Yeah.

   24. TBTom Blomfield12:32

       Um, and I, I don't know exactly how it happens, I don't, I'm not smart enough to plan it out, but if there's absolutely no world in which that could happen-

   25. HSHarry Stebbings12:42

       Okay, so we have that angel investing and it's incredibly proli- prolific, Tom.

   26. TBTom Blomfield12:45

       (laughs)

   27. HSHarry Stebbings12:45

       I mean, you worked hard. That was not some time off.

   28. TBTom Blomfield12:48

       Yeah.

   29. HSHarry Stebbings12:48

       76 in nine months, that's a lot of company meetings.

   30. TBTom Blomfield12:50

       Yeah, it was, um-
4. 13:43 – 17:14

   European Work Ethic Critique

   1. TBTom Blomfield13:43

   2. HSHarry Stebbings13:43

      Okay, so you have this unique perspective, built, you know, two incredible businesses in London, European through and through, living in the Valley now, seeing the incredible exposure that you have with YC. The most common critique, European work ethic is lackluster. The founders don't work as hard and they don't want it as much.

   3. TBTom Blomfield14:02

      I think that's true. I've seen some data, who knows if it's true or not, on Twitter, about the actual time worked by people in various countries, and the US is somewhere in the middle of Europe. May- maybe they talk it up a lot. I really don't think it's a work ethic question at all. I think there are other big differences. I think the big difference is, um, one of, like, positivity, optimism, and ambition. So when I was starting Monzo, um, people... I was 28 years old, I'd never worked in a bank. People in the UK looked at me like I was crazy. I went to a lawyer to get, um, to do preparation for the regulatory interviews, and the lawyer basically said to me, "I'll do the, I'll do the prep for you, but I don't know why you're trying. They'll never approve you. There's no chance you'll get approved as a CEO of a bank in the UK." And obviously, I did. Whereas in the US, I tell people I'm starting a bank and they're like, "That's awesome! How can I help? I can introduce you to this person and this person." It's like this, the American dream is not a reality that most people get to live, but it is a dream that a lot of people experience. They, that optimism, that idea that anyone can create anything if they try hard enough is so deeply American, and it's so antithetical to the British culture. Here, we've got this awful, like, know your place, don't get too big for your boots. You know, you, you grow up in a, a sort of middle class family and you aspire to be a doctor or a banker or lawyer or... I've been talking to students for the last few days at our top universities, and the high-status thing to do as a university CS undergrad is to go and work at Jane Street or Goldman Sachs or McKinsey. That's like what our most ambitious-

   4. HSHarry Stebbings15:39

      Still? 'Cause like-

   5. TBTom Blomfield15:40

      Still.

   6. HSHarry Stebbings15:41

      So funny, 'cause like, you know, EF have been touting that, "Hey, it, mindsets have changed, mindsets have changed."

   7. TBTom Blomfield15:46

      They're changing slowly, and it is, 15 years ago when I started out, um, being a founder, literally people thought you were crazy. But if you can compare it Berkeley or Stanford or MIT, like, everyone is starting startups there. You know, like every single... You talk to like a, a, an English literature major and they've got their startup plan. Whereas here, I've been talking to PhDs in computer science and, um, you know, molecular biology, and they're telling me they go to Goldman Sachs and McKinsey.

   8. HSHarry Stebbings16:15

      Was Monzo doing the US a mistake?

   9. TBTom Blomfield16:18

      It certainly hasn't worked yet. We didn't... Of all of the money Monzo has spent so far, probably only three... two or 3% of that was spent on the US.

   10. HSHarry Stebbings16:29

       Huh.

   11. TBTom Blomfield16:30

       And it didn't get very much management attention. I mean, it, it has not been a success so far, and I think, um, taking a kind of cookie cutter approach, taking the product as it is in the UK and assuming the same product will work in the US is not correct. And they've got a great new team, they've just hired a new CEO who has deep, uh, US sort of banking and payments expertise, but I think you need to fundamentally rethink like what a compelling product would be for US consumers. 'Cause you know, N26 has failed, Revolut's failed, Monzo's, the first goes failed, given another go.

   12. HSHarry Stebbings17:01

       Yep.

   13. TBTom Blomfield17:02

       Um, it's really interesting there's just not been a successful mainstream neo-bank in the US. Chime is good, but it's targeting kind of gig economy workers. And then for the, for the more affluent customers, Chase Sapphire and American Express just have the market

5. 17:14 – 19:47

   Transition from Angel to Investor in Partnership

   1. TBTom Blomfield17:14

      sewn up.

   2. HSHarry Stebbings17:14

      100%. I do wanna go back. We, we mentioned, obviously, the angel investing and the 76. We then moved to, obviously part of the move to SF, as you mentioned, was to be partner at YC.

   3. TBTom Blomfield17:25

      Yep.

   4. HSHarry Stebbings17:26

      That is a big transition shift from just being solo angel in London. How did you find the transition from angel to investor in partnership?

   5. TBTom Blomfield17:37

      So YC has this interesting model where you, they make you do a, be a visiting partner for 18 months, which is the like, the most brutal job interview I've ever done.

   6. HSHarry Stebbings17:47

      Is it different being a visiting partner to being a partner in terms of what you do, the actual role?

   7. TBTom Blomfield17:51

      Totally different.

   8. HSHarry Stebbings17:52

      It is?

   9. TBTom Blomfield17:53

      Yeah.

   10. HSHarry Stebbings17:53

       Huh.

   11. TBTom Blomfield17:54

       Being a visiting partner is a great apprenticeship, but it feels like, a little bit like being a teaching assistant at a university versus being a professor at university. You know, the professor sets the syllabus and the exam questions and admits the students, and the teaching assistant tries to figure out what the professor is gonna do and, and, and mirror that, basically. It's training on the job, and I think it's great training.

   12. HSHarry Stebbings18:14

       What did you learn by being a visiting partner?

   13. TBTom Blomfield18:17

       Ho- I learnt so much different stuff from different people. So, um, I did a batch with D-, my first batch was with Dalton, and the way he can, um...... help young founders find new ideas, really deeply technical young founders without a clue what they wanna work on. Dalton can come in and sort of unpick their background and history and find some thread to pull on that they're super excited about and turns into a great startup idea, and it feels like it's their idea. But he somehow, like, conjures that up out of their background. Michael Seibel, I did, um, a batch with just before I got partnership, and he has this incredible way of giving the most brutally hard feedback you can imagine the founder absolutely needs to hear, and then finishing it off with this, this, like, heartwarming chortle, this, like, laugh that, that kind of makes-

   14. HSHarry Stebbings19:12

       Reassures you

   15. NANarrator19:13

       (laughs)

   16. TBTom Blomfield19:13

       ... yeah, makes you realize he loves you deeply. He might think you're a total pile of shit-

   17. HSHarry Stebbings19:17

       (exhales)

   18. TBTom Blomfield19:17

       ... but he really cares about you and wants you to succeed. So, being able to... And that's something I'm trying to learn. I think I can do the harsh feedback quite easily, that comes naturally, but the sort of the warmth and the empathy alongside that, I think I, I really wanna learn from Michael.

   19. HSHarry Stebbings19:30

       So, then we made the transition to partner, and now you're the teacher teaching the syllabus, so to speak.

   20. TBTom Blomfield19:35

       Yeah.

   21. HSHarry Stebbings19:35

       What's the hardest part about that?

   22. TBTom Blomfield19:37

       Accepting, again, we talked about this earlier, that I'm not in the driving seat.

   23. HSHarry Stebbings19:41

       Mm-hmm.

   24. TBTom Blomfield19:41

       That I'm a coach and a mentor, and I give advice, and it's up to the founder whether they wanna take that advice or totally ignore it.

6. 19:47 – 21:55

   Signals of The Highest Quality Founders

   1. TBTom Blomfield19:47

   2. HSHarry Stebbings19:47

      Do they, do they take it? 'Cause what I worry about is actually the weight of my words, which is, let's be honest, most founders kinda say, "Thank you, VC, for your advice, but fuck off and keep writing the check." Um-

   3. TBTom Blomfield19:56

      (laughs)

   4. HSHarry Stebbings19:56

      More than with YC partners, they might actually listen to you, which can be, could be great, but it could be dangerous.

   5. TBTom Blomfield20:02

      There's huge variation. You're right, if someone blindsly, blindly accepts everything you say without thinking, not great. If they come with, to you with every small decision, they're not gonna be a great founder. They need to, you know, take the training wheels off and, and ride the bike on their own. But honestly, we have founders who come to us for advice, listen to it, and, like, completely ignore it. YC is not full of founders blindly following advice, I can tell you that.

   6. HSHarry Stebbings20:23

      (snorts)

   7. TBTom Blomfield20:23

      Yeah. You, sort of, you meet a founder sometimes where the best founders are not neces- I'm very good friends with some of them, but, like, you're not investing in people who are gonna be your friends, you know? You're investing in people who you think are gonna b- build fabulous businesses and work very, very hard to do so.

   8. HSHarry Stebbings20:38

      Do you need to like them to invest?

   9. TBTom Blomfield20:40

      I don't think so. I mean, it, it helps, it makes your life more fun. But there are people who are just, like, a little bit scary, you know? It's like they're a little bit arrogant, perhaps a little bit obnoxious, a little bit too sure of themselves, and I wouldn't wanna spend every day with them. Um, but I just feel like they are, they have something special that's gonna build a really, really big business. And that's a bet I would take every day as an investor. I don't think founders are necessarily the most likable people, honestly.

   10. HSHarry Stebbings21:05

       Why?

   11. TBTom Blomfield21:06

       Because you have to be, in a sense, contrarian. You, like, you don't... If you just agree with everything that happens around you, you're never gonna create something different. You have to... I was not a, a, a... My first job, I was not at all likable, honestly. I didn't, I didn't know that it was useful to be likable in my job. You know, I, I didn't suck up to my boss. I told my boss every time I thought she was wrong, and she hated me for it. Um, but I could see everything that was broken in the way we were working. My brain wanted to fix that. That's not a way to endear yourself to people, but I think it makes great founders when they're, like, just so annoyed if something's broken. They have to fix it, and they have to tell people when something's wrong. And it's a, it can make a shitty employee, but a really good founder.

   12. HSHarry Stebbings21:48

       And my family always say with me, it's like, "It's not calming to be around you," 'cause-

   13. TBTom Blomfield21:51

       (laughs)

   14. HSHarry Stebbings21:51

       ... you're just generally impatient, generally quite irritable, because you-

   15. TBTom Blomfield21:54

       Totally.

   16. HSHarry Stebbings21:54

       ... want to

7. 21:55 – 27:08

   Questions to Ask in YC Interviews with Founders

   1. HSHarry Stebbings21:55

      change something. ?So, when you are the teacher, the professor, uh, Professor Blomfield. Uh, it's got a nice ring to it.

   2. TBTom Blomfield22:01

      (laughs)

   3. HSHarry Stebbings22:02

      Um, I'm sorry for the kind of facile question. Do you, like, pick which ones coming in are yours?

   4. TBTom Blomfield22:07

      Yes.

   5. HSHarry Stebbings22:07

      So it's, so it's like a drafting process?

   6. TBTom Blomfield22:09

      Each of the partners has access to the entire application pool. But if I read an application and I, I'm the first one to say, "Yes, that's mine," then I get to interview it. And if I interview it and I'm the sole person who says, "Yes, we will invest," then it gets money. And then it's my responsibility to work with throughout the batch and throughout the lifetime of that company.

   7. HSHarry Stebbings22:25

      And how many do you choose?

   8. TBTom Blomfield22:26

      About 25 per partner per batch.

   9. HSHarry Stebbings22:28

      Okay.

   10. TBTom Blomfield22:28

       Roughly. But, I mean, you can do more, you can do less. It's not prescriptive. But it's an amazing sense of ownership and accountability.

   11. HSHarry Stebbings22:35

       When you go, "That one, I'm interested in that one," how often does the initial interest stay post-meeting? Like, how often are you right with that versus, "Uh, actually, I met them and it wasn't what I thought it was"?

   12. TBTom Blomfield22:46

       I mean, statistically, you can figure this out. So, um, I will invite approximately 100 teams to interview, and I will fund 25 of them. So yeah, I will pick 100 that I want to interview. I'll read several thousand, pick 100 to interview, fund 25.

   13. HSHarry Stebbings23:04

       For you, what is it that makes you go, "Ah, that one," in that interview?

   14. TBTom Blomfield23:08

       That they teach me something. That they're so expert in their domain and so obsessive that they've... and they've thought really, really hard about it, that they can come and, in 10 minutes, show me something new about the industry I didn't know before.

   15. HSHarry Stebbings23:20

       Do you really think you can get enough in 10 minutes?

   16. TBTom Blomfield23:22

       Can get enough in three or four minutes, but it seems rude to finish the interview so quickly.

   17. HSHarry Stebbings23:26

       See, I don't...

   18. TBTom Blomfield23:27

       (laughs)

   19. HSHarry Stebbings23:27

       I, I love that and I would hope so. But what if you just have someone who's come from bum fuck nowhere? They do not understand the process. They are brilliant and gifted, but they're just nervous as shit.

   20. TBTom Blomfield23:39

       That's okay. We adjust for that. I think-

   21. HSHarry Stebbings23:41

       Do you see what I mean? Like, eh, I'm worried that you may miss stuff, if it takes sometimes 20 minutes for them to come out of their shells a little bit.

   22. TBTom Blomfield23:48

       Maybe, but it's not just the interview that we go on. I'd say the interview is, like, 10 or 20% of the entire process. We make them write a long application form, so we get all of their academic and career backgrounds. We ask a bunch of weird-sounding questions to try and pull out stuff like that, like-

   23. HSHarry Stebbings24:03

       What's the weirdest questions?

   24. TBTom Blomfield24:04

       "Tell me about a non-computer system you've hacked to your advantage." So, what i- what system in your life have you figured out the intricacies of in order to use for your advantage?

   25. HSHarry Stebbings24:12

       Venture capital. (laughs)

   26. TBTom Blomfield24:14

       (laughs) Yeah, you started... Right, and that's the kind of thing we would love to see as a... What were you, 17 years old or something?

   27. HSHarry Stebbings24:20

       Yeah, yeah.

   28. TBTom Blomfield24:20

       I started a podcast in-

   29. HSHarry Stebbings24:21

       In a bedroom in London.

   30. TBTom Blomfield24:22

       In a bedroom, and I did 400 episodes without making a penny in revenue, but I got this amazing Rolodex, and then I parlayed that into raising a fund and becoming a, a VC.
8. 27:08 – 43:38

   The YC Batch: How it Works

   1. HSHarry Stebbings27:08

      but I actually, I listen to a lot of startup podcasts, I don't hear this. Like, what does the time look like then for you with the 25? One hourly meeting per week? Wha-

   2. TBTom Blomfield27:17

      So, um, by default, um, every week there is a ... So, YC's split into four groups. So it's not a whole YC, it's four separate mini YCs, it's sharded.

   3. HSHarry Stebbings27:28

      Mm-hmm.

   4. TBTom Blomfield27:28

      And, uh, you'll get a very different experience in each one of them. The partners are specific, and then we have our own speakers. So, um, one night a week will be your group event, and you'll get someone like Brian Chesky or Paul Graham, or we had Kevin Systrom, the Instagram founder, come and talk to our founders. Um, so you've got the, your Tuesday dinner, um, you've got pre-scheduled office hours, sort of one-on-one or one company with one partner every two weeks, and then group office hours every two, the alternating two weeks. Which is a really great mechanism I think was introduced in 2011, where you have seven to nine companies who all come for a sort of one-and-a-half to two-hour session, and you might bring ... And they're organized thematically, so we had a FinTech section and a, uh, biotech or whatever it might be. Ideally all at roughly the same stage of, of company life as well. And then we, basically the founders are sort of problem-solving with each other, you know, "How do you find a banking partner in FinTech?" Or, "How do you deal with government regulation?" Or, "How do you find your first, how do you sign your first enterprise deal as a B2B SaaS company?" So this group office has a really good way to share knowledge between founders, and then set goals. So you say in front of these 20-odd people, "We're gonna go from 25K at ARR to 50K in two weeks." And you come back in two weeks, and like, the public pressure, even though it's only 20 people in a room, pushes people to work harder than they ever believed was possible. And that's, it's really those three things. So the Tuesday night, or the, the dinners, the individual office hours and group office hours, that's the core of YC. There's a bunch of other stuff. So there's in- incredible internal knowledge base, a forum, a, a user manual on how to, how to run startups. Um, but for the in-person stuff, it's those three things.

   5. HSHarry Stebbings29:04

      What do you think are the most common mistakes that founders make in the batch process when they are working with you in that three-to-four-month process?

   6. TBTom Blomfield29:12

      Not launching early enough, very often. So, being a- too afraid to get something out there and iterate.

   7. HSHarry Stebbings29:20

      I agree. I saw a tweet the other day, they were saying, "Actually, it's never been harder to capture consumer attention than stay." And so actually this idea that you can release an imperfect product is not true, because you release that imperfect product, Tom engages with it, goes, "Ugh, that's not great," churns, it's so hard to get them back. I disagreed with it.

   8. TBTom Blomfield29:38

      Yeah. I think you need to make the scope narrower. So I differentiate between A, f- a breadth of functionality versus a level of quality and polish. So I would en- always encourage founders to go for a very, very, very narrow feature set. Like, even narrower than they possibly could imagine, and polish it, uh, to a very, very high level of quality and get people, only a few people, a few hundred people, really excited about that really narrow thing, and then broaden out. What way too many founders try to do is they're competing with Google Docs, say, or something, and they try to, they try to replicate every single f- feature of Google Docs to a mediocre level of quality and then release that, and they're surprised when no one likes it. So keep your pr- initial product super, super, super narrow so you can build it quite quickly, but keep the quality bar super high.

   9. HSHarry Stebbings30:22

      A lot of founders worry, "Yeah, but I'm gonna have a super specialized product then, and I can't sell that big vision to VCs." What do you say to them?

   10. TBTom Blomfield30:29

       So this is a key skill of a founder.... which is holding these two realities in your head simultaneously without cognitive dissonance or driving yourself crazy. One is the big vision of 10 years. You know, say the, the 1% best outcome, if this really, really works, what could this become, and h- holding that in your head. And for Monzo, it was, "We're building a bank for a billion people around the world." That's the big vision that you have to hold in your head. And then you have to hold the, "What is my top priority today, and this week, and this month?" Which is very, very different from this billion people around the world, right? And you have to execute on that and get your team to focus on it. But you have to have both. If you only have the big vision, and you think that's today, you're a bullshitter.

   11. HSHarry Stebbings31:12

       Yeah.

   12. TBTom Blomfield31:12

       You're just full of hot air, none of it's real. Whereas if you're too execution-focused and you continue that for several years, you build a small business. You build a very successful, or rather a, a medium-sized small business that's very profitable, it's never gonna get big. So, you have to have both simultaneously.

   13. HSHarry Stebbings31:27

       How many of the companies pivot in the batch?

   14. TBTom Blomfield31:29

       Mm, 20, 25%.

   15. HSHarry Stebbings31:31

       20 to 25%. What do the successful ones do that the others don't?

   16. TBTom Blomfield31:35

       Pick an idea and stick with it. It's simple as that. The worst pivoting founders just, um, can never get the conviction to stick with anything, uh, and they just pivot and pivot and pivot, 'cause they, they overthink it and they... I hear this more and more from young founders, like, "I'm not sure this is my life's work. You know, I can't, I can't commit to it because I'm not sure I'm passionate enough to spend my..." It's like, dude, I'm asking you to spend six months on this, not your entire life.

   17. HSHarry Stebbings32:05

       No, but I actually (laughs) ... align it to dating. I'm like, no one goes to the first date being like, "You are my partner for life."

   18. TBTom Blomfield32:10

       Right.

   19. HSHarry Stebbings32:10

       It'd be terrifying. (laughs)

   20. TBTom Blomfield32:11

       Yeah. Um, Dalton said something very funny, uh, a couple of weeks ago. Pivoting i- is like divorces. Like, maybe one or two is reasonable, but if you're doing it multiple times in a row, maybe the problem is you.

   21. HSHarry Stebbings32:23

       (laughs) I like that a lot. What are the big challenges for you advising these batches? Is it that VCs come early and you're like, "Don't take their money, don't take their money"? Is it that... What's the hard parts for you?

   22. TBTom Blomfield32:38

       Uh, no, the f- the VC funding thing is, is fine. I think we've got to... Shutting down Continuity, our growth fund, has enabled to have a mu- enabled YC to have a much more collaborative relationship with, uh, multi-stage VCs. Previously, it was very competitive. So, that's fine, I think everyone behaves pretty well. The hard-

   23. HSHarry Stebbings32:56

       Do a lot of your batches get approached while in batch?

   24. TBTom Blomfield32:59

       100%, yeah.

   25. HSHarry Stebbings32:59

       Yeah.

   26. TBTom Blomfield33:00

       But we set a sort of... You've got demo day, and the, the, the trope was always, "Oh, everyone raises before demo day," which is true. Like, the best companies absolutely always raise before demo day. And so now, we've just set a deadline, like two weeks before demo day, and said, "You may start fundraising on that day, two weeks before demo day."

   27. HSHarry Stebbings33:17

       And they're not allowed to start before then?

   28. TBTom Blomfield33:19

       We s- strongly encourage them not to and will be very, very disappointed if they do, because it's not in their interest. Because running a competitive process with lots of people bidding is gonna get them better terms. And what happens is nervous founders will fundraise early, because they're like, "Well, what if demo day doesn't go well? So, I'll just talk to some early." And then what happens, either the VC looks at you without much progress and writes you off 'cause you've not made enough progress, or they like you so much, they give you a preemptive offer, but the valuation is not as good as you would get by demo day, 'cause that's why they're doing this, right? So, they give you an offer of two million on, pick a valuation, I don't know, X, right?

   29. HSHarry Stebbings33:53

       10.

   30. TBTom Blomfield33:54

       10. Two on 10. And the founder's like, "This is-
9. 43:38 – 58:25

   The Hype Surrounding AI

   1. HSHarry Stebbings43:38

      is the hype surrounding AI a hype cycle or is it justified?

   2. TBTom Blomfield43:43

      I think it's justified. Um, I am so excited about what the future holds. I th- I was really annoyed, actually, back in, like, '20, when I was starting GoCardless and, and Monzo, I was so annoyed that I wasn't around for the dawn of the internet, you know, like, '95 to 2001. It was like-

   3. HSHarry Stebbings44:02

      I always heard about Netscape in '95 and I'm like, "Fuck."

   4. TBTom Blomfield44:04

      Yeah.

   5. HSHarry Stebbings44:05

      Negative one.

   6. TBTom Blomfield44:06

      We're way too late. It's just like, it felt somehow like all the ideas were obviously, uh, not taken, that's just a, a silly thing to say-

   7. HSHarry Stebbings44:14

      I get you. Yeah, yeah. Low hanging fruit.

   8. TBTom Blomfield44:15

      ... but, like, we missed out. We missed out on that time. And what I actually realized is that, um, Monzo rode the smartphone wave. You know, smartphones and apps were 2010 to 2020, say, and that was the predominant, like, technological wave. We are now going through another which is AI, which is gonna be as big as the internet, I think. Really it is a technological revolution that I think will impact every part of our lives in small ways over the next year or two, and in very, very large ways over 10, 20, 30 years, and I think it's gonna transform every industry and there's so much opportunity to build right now.

   9. HSHarry Stebbings44:47

      There's kind of two opposing camps to this, Tom, I think, which is like, having interviewed many different people on both sides, which is really interesting actually, having the different perspectives. But there's the thing, it's like a sustaining innovation, which is like an add-on to Adobe, to, uh, any of Notion, all the existing, and it enables a better experience for existing products.

   10. TBTom Blomfield45:04

       Yeah.

   11. HSHarry Stebbings45:04

       And then there's others who say it's disruptive and it creates entirely new categories and markets.

   12. TBTom Blomfield45:08

       I'm gonna cop out and say kind of both. Like, I do think big incumbents with distribution who can add sort of AI co-pilot functionality will make their products more effective. But I think there are huge new categories that will be created as well. I'm really excited to see what it does to consumer, um, consumer behavior, because consumer companies tend to be winner takes all or winner takes most, and they tend to be created when a new tech- technology shift happens, so internet or smartphone. And we haven't had a lot of exciting new consumer companies for, like, the last five or six or seven years because they all started in, like, 2011 to 2015. Clearly AI is that technological shift, and I think it enables a whole generation of new consumer companies to be created. And I don't even know what they are yet, but I think we're gonna find out in the next... They, like, they're gonna be created this year and next year and the year after.

   13. HSHarry Stebbings45:55

       Okay. I, I, I just wanna then kind of unpack that a little bit, 'cause there's obviously the sustaining versus disruptive and then there's also kind of infrastructure versus application, right?

   14. TBTom Blomfield46:04

       Yeah.

   15. HSHarry Stebbings46:04

       If we start on infrastructure layer, we see so much money going into the core providers today, your OpenAIs, your Mistralas, your Anthropics.

   16. TBTom Blomfield46:11

       Mm-hmm.

   17. HSHarry Stebbings46:12

       Do you think there's money to be made investing in foundation models?

   18. TBTom Blomfield46:16

       I don't know and I sort of don't really have a horse in that race. What I hope... The best case for, for me and for YC probably, and for you, and, like, humanity I'd argue, (laughs) is that, um, roll forwards 10 years and there are, like, five or six foundational model companies, and they're probably attached to Google and Microsoft and Amazon and Facebook and Apple because they have the funds to power them.

   19. HSHarry Stebbings46:44

       Mm-hmm.

   20. TBTom Blomfield46:44

       And they are all about as good as each other. It's like how, you know, GCP versus AWS versus Azure. They kind of do this... You know, slightly different things-

   21. HSHarry Stebbings46:53

       Sure.

   22. TBTom Blomfield46:53

       ... but there's great functionality and commodity pricing because they've all, like, beaten each other down on price. And that is not so great for the investors who invested in those companies, but great for the world, great for humanity, great for startups.

   23. HSHarry Stebbings47:06

       I think this is exactly what happens, which is they realize that actually the cloud services is where the cash cow is. You acquire them as, like, the, the tools that help you acquire amazing customers, but absolutely, they're kind of acquihires to aid the core cash cow business.

   24. TBTom Blomfield47:19

       Yep. And, you know, maybe LMs themselves are kind of part of that infrastructure, but I see them being, in the best, in the, the case that's good for, frankly, for, for YC and for most of the world I think is that they're more or less e- equivalently good and you could build on any of them, you could swap any of them out. I think the dangerous case-

   25. HSHarry Stebbings47:37

       I'm insanely impressed. I was meeting a company the other day and they were talking about how quickly they swap out different models on a real-time basis-

   26. TBTom Blomfield47:44

       Totally. Yep.

   27. HSHarry Stebbings47:44

       ... for different use cases.

   28. TBTom Blomfield47:44

       Yep.

   29. HSHarry Stebbings47:44

       It was a language learning app and it was literally like, "We use 12 different models at once and vary it in real time."

   30. TBTom Blomfield47:49

       Because you can... I mean, the US has made, uh, like, non-competes even less enforceable now. People, talent is gonna jump between these places so quickly. So you discover an innovation at one place and weeks or months later it's replicated everywhere else, I, I think.
10. 58:25 – 1:10:17

    Quick-Fire Round

    1. HSHarry Stebbings58:26

       Right, we're gonna do a quick fire, so I say a short statement, you give me your immediate thoughts, okay?

    2. TBTom Blomfield58:29

       Let's do it.

    3. HSHarry Stebbings58:29

       What's the biggest takeaway from PG?

    4. TBTom Blomfield58:32

       Relentless optimism. He will meet with founders and get so excited by their idea and imagine the future they could build if this just works, in the one percent chance it works, how it's gonna change the world, and he'll get so, so excited. He will excite the founders themselves, and they will come out with way more optimism and self-belief than they went in with. Like, it's a superpower. It's astonishing to see how he can, um, jazz people up and just get them so, so driven and motivated, and it's something I really wanna emulate.

    5. HSHarry Stebbings59:03

       It's really interesting, the unlocking investor enthusiasm gives to the willingness to open up of the founder.

    6. TBTom Blomfield59:09

       Yeah, totally.

    7. HSHarry Stebbings59:10

       Yeah. I, it totally makes sense. If you have a pessimist, "Well, this won't work, this won't work, uh."

    8. TBTom Blomfield59:13

       And it's b- the British culture, you know?

    9. HSHarry Stebbings59:15

       Mm-hmm.

    10. TBTom Blomfield59:15

        It's so easy to trash an idea and be kind of sarcastic, and yeah, it's great- f- Makes for great comedy, makes for terrible startups.

    11. HSHarry Stebbings59:23

        (laughs)

    12. TBTom Blomfield59:23

        You need that, like, uh, boundless energy and optimism, and it's not a natural British state, but it is Californian.

    13. HSHarry Stebbings59:30

        You can start one company again and choose a board member. Who do you choose as a board member and why them?

    14. TBTom Blomfield59:36

        If I was doing fintech, I would choose Miki Malka from Ribit. Um, they finally invested. Uh, Ribit, I don't know if this is public, I should check. (laughs)

    15. HSHarry Stebbings59:44

        What, in Monzo?

    16. TBTom Blomfield59:45

        Yeah. Um-

    17. HSHarry Stebbings59:45

        I love Miki.

    18. TBTom Blomfield59:46

        Like, the quality of thought that I got from Miki and the deep personal connection I felt with that guy was just on a different planet, and I'm sad I haven't had the chance to work directly with him.

    19. HSHarry Stebbings59:59

        Yeah, no, listen, I think he's incredible. What investor would you never have on the count table?

    20. TBTom Blomfield1:00:05

        (laughs) Probably SoftBank. I had a very, uh, unpleasant experience with the SoftBank London team. Um, just a bunch of pretty arrogant, like, Deutsche Bank traders turned venture capital investors. They were not fun at all. I, I met tons of really bad investors through my time, honestly.

    21. HSHarry Stebbings1:00:21

        What was the worst investor meeting you had?

    22. TBTom Blomfield1:00:23

        There was one, and I can't actually remember his name, even. I proba- I shouldn't name him, even if I could remember. He was an intro through one of our existing investors, and he, on the first call, was like, raving. He was like, "This is so exciting. This company's great. I really wanna be in. Reserve, like, 10 million. I want 10 million allocation. Will you give me 10 million?" And we're like, "M- yeah, we'll, like, yeah, sure."

    23. HSHarry Stebbings1:00:45

        (laughs)

    24. TBTom Blomfield1:00:45

        "Like, we're raising 100 million, but yeah, we can, we'll earmark 10 for you if you're that keen. Like, we'll go through diligence." And we got the rest of the round together over the next few weeks, and...... like, a week before signing, he was like, "Oh, I've," you know, "I've been looking at your numbers and the cohorts. The cohorts really aren't as good as you said they were, and really, this valuation that we agreed doesn't really make sense anymore, Tom. And really, I," you know, "I agreed at one, but actually I'm only going to do this at 500 or something." And it was, like, three days before signing the term sheet. And I was like, "Okay. No worries. I'll just give your allocation to someone else. Thanks." He's like, "No, no, no. What are you doing?" I was like, "Y- you're backing out. Like, I, we agreed on something. You, you're backing out. Like, y- you've not got it." And he went fucking apeshit. And I heard from another investor, he, this is just standard practice for him. He will go in super, super, super happy, like, supportive, "I really want in," and then at the last second, he'll be like, "Oh, no, there's actually something wrong," just to try and squeeze 20 or 30% out of the round.

    25. HSHarry Stebbings1:01:39

        I don't understand, though, why he'd do that, 'cause you've got to have ball control on the round to squeeze it 20 to 30%. Do you see what I mean? So it's like, as, if you're at 10 million or 100 million, you're not even going to be able to do that.

    26. TBTom Blomfield1:01:48

        It was nuts.

    27. HSHarry Stebbings1:01:48

        Like, even if you wanted to, you couldn't without carving out a separate deal for him.

    28. TBTom Blomfield1:01:52

        Yeah, I don't know what his plan was. It was really stupid, and I was just like, "I don't want to work with you." And, uh, he has been blacklisted from, he's tried to invest even after I left, and to their credit, the Monzo board have said, "We're not working with you." And I was just like, "Fuck you, dude. Don't treat founders like that. It's not cool."

    29. HSHarry Stebbings1:02:09

        Okay, which is the most helpful angel? I know angels are different for different companies, obviously for different... But, like, the one where you're like, "Ah, they're amazing." So, like, you know, I, Guy Podjarny at Snyk, for me, consistently in companies I've i- invested with, with him, founders love him.

    30. TBTom Blomfield1:02:26

        For me personally, it was Eileen Berbic. I'm not an angel investor, but our, our seed investor was the most personally helpful. We were obviously her biggest position and she stood to make a lot of money, so, like, economically it makes sense. But she went above and beyond. I mean, she was like, offered for me to go and stay in her house, cook me meals. She would, um... When we lost a chief product off- sorry, chief people officer, she came and did an exec job at Monzo effectively for like four days a week for six months. She, like, put her portfolio to one side and just said, "I'm just going to come and turn up every day and work with you at the company." It was just astonishing. So, Eileen is, for me, head and shoulders above everyone else I've worked with.

Episode duration: 1:10:17