#4 Itxaso del Palacio: launching Microsoft's VC in Europe, investing in product led B2B SaaS with Notion Capital ($500M+ AUM)
Partner at Notion Capital, London-based early stage VC investing in European B2B SaaS and enterprise tech with $500M+ AUM and 60+ investments
We are Pol Fañanás and Gerard García, two friends passionate and curious about tech, startups and VC sharing bi-weekly high value views from people creating the future. Thanks for reading !
Itxaso del Palacio is Partner at Notion Capital, London-based early stage VC investing in European B2B SaaS and enterprise tech with $500M+ AUM and 60+ investments such as Tradeshift (B2B commerce platform, $661M funding by Goldman Sachs and GP Bullhound, among others) and GoCardless (B2B payments, $122M funding by Accel and Google Ventures, among others). Itxaso is also a Teaching Fellow in Entrepreneurship at University College London, an Included VC supporter and has a PhD in Entrepreneurship and Venture Capital by UPC and UC Berkeley. Previously, she was a Partner at M12 (Microsoft Ventures) where she launched the UK office and led investments in companies like Onfido (ID verification, $188M+ funding) and Unbabel (Translation as a Service, $91M+ funding) as well as Teaching Fellow at Imperial College London and Kauffman Fellow (Class 18).
Summary
👤 Brief intro: engineering, PhD in Entrepreneurship, London based VC
🥇 Win: good investments like Onfido, Unbabel and YuLife
🚫 Fail and lesson: not spending enough time with the family
🚀 Ideal founder: product obsession, product-led growth
💸 Ideal investor: reimagine the future at scale, new product categories
📈 Markets: B2B software, cloud, dev tools solutions
🦄 3 startups: YuLife, ForestAdmin, Clarity.ai
👍 3 investors: Reshma Sohoni, Fredrick Cassel, Stephen Chandler
📖 3 books: “Hard Things”, “Product-Led Growth”, “Circadian Code”
And now, let’s take a closer look !
Could you give us a brief intro about you and your origins?
I studied engineering in Spain and started my career as an engineer at Daimler (car manufacturer). After a year I knew that was not for me and I moved back to the university to pursue my MSc in engineering and to explore the opportunity of doing a PhD. I ended up landing at UPC Tech Transfer Office in Barcelona, which back in 2003 had the first Entrepreneurship Center in Spain, where I could work with great professionals like Francesc Sole Parellada.
At that moment, the university wanted to learn how the best universities were doing tech transfer and building companies, which took me to Silicon Valley. I went there for the first time in 2006 and ended up moving there to finish my research in 2008. Specifically, I had the chance to work on my research with an investor who was leading the Lester Center for Entrepreneurship at the University of California Berkeley, Jerry Engel.
After finishing my PhD on Entrepreneurship and Venture Capital, I moved to London in 2010 and initially worked for Imperial College teaching Entrepreneurship. Followed on by creating my own company called Founders Fit, a matchmaking service for entrepreneurs. I ended up closing the company and joining a micro fund in 2012, where we did seed investments.
Since then, I have been in venture capital. Most recently, I launched M12 (Microsoft's Venture Fund) in Europe and led investments in Onfido, Unbabel and Beamery; and two years ago I joined the great team of Notion Capital, leading investments in YuLife, ForestAdmin and Mya.
What would you say has been the biggest win in your life?
From an investor perspective, I think I have done some good investments that are gearing to large exits.
With M12, I invested in Onfido in their Series B - the company is growing incredibly fast and raised a $100M round last year; or in Unbabel, which is also a Notion portfolio company, and raised $60M+ in 2019.
Recently with Notion Capital, I have done deals in companies like YuLife, which is in a hyper growth mode and following the steps of Lemonade, recently taken public at $1.6 Billion valuation.
Related to the above, and your biggest failure?
I am a very positive person so I never think of “failures” and I don’t think of any significant failure happening throughout my life. Unpleasant experiences and bad outcomes are learnings, not failures.
That being said, I would probably like to spend more time with my family in Basque Country, sharing with them my day-to-day life. In a not COVID world, I can be with them 6-7 times a year but still, you don't have the time to experience all the high valuable details of the people you love. For instance, I have a very curious and active father, he is always writing books and doing documentaries. I would like to be there more. I guess they understand that I am in a fast-moving industry and that London is giving me the opportunity to grow fast within it.
What is your ideal founder profile?
I am a product-driven investor which means that I invest in companies that are product-centric. I am a big believer in companies that use their product as a way to engage with customers and sell, what is called product-led growth (PLG).
Providing that, I look for founders that are obsessed with product. That is my dream. Great products solving real problems. I really believe companies building amazing products have higher probabilities of being successful, get stickiness, and low churn.
Last but not least, obviously founders that are willing to break walls to build category-leading businesses
What is your ideal investor profile?
When I think of an investor, I think of someone who needs to be able to read into the future. It is not about a 10% improvement of what exists today, it is not about a patch in the status quo, it is about critical improvement of the future.
Who is reimagining the future at scale? The pursue of products that are disrupting an industry is important and, in some cases, that means that they are either new product categories or they are reimagining the way we operate today.
So for me, a good investor is the one who can evaluate the way people and businesses will be using a product and validate the initial traction of it. That is why I believe product-centric founders are usually much better suited to identify trends and build products even before customers are looking for them.
What present and future markets are you most interested in?
I am very much interested in solutions that help people be more efficient - that might include collaboration tools, process automation, or remote working. Based on my experience at Microsoft, anything that can make Office 365 remotely better is a great improvement already.
I do believe that it will be difficult to replace Microsoft or Salesforce, but solutions that make these tools “smarter” are at the core of what I am interested in.
Other than that, I am interested in developer solutions. I am a big believer that devs these days have big decision power and are becoming the gateway to new growing markets that can be tackled through bottom up strategies.
And that is clearly related to the product led strategies, letting users try and engage with the products before they buy, focus on product obsession.
Could you share with us 3 startups you like and why?
I would like to share 2 companies from Notion and 1 from outside:
YuLife. It is a B2B company following a PLG (product-led growth) approach for expansion to reinvent life insurance with a product that is helping employees be healthier and happier, following the vision that it is precisely a happy and healthy employee the key factor for a better output at work. Each employee gets an app, you can track different health metrics with it and you are given rewards to incentivise taking action in favor of your health. Now they are also allowing employees to buy life insurance through the app for them and their family members.
ForestAdmin. Dev tool for companies to build a low code internal admin panel of the applications of the business while providing an API -based framework to implement all specific business process needed. A good example of embracing a developer 1st bottom up approach with a product led strategy.
Clarity.ai. Software solution for investors to optimize the societal impact of their investment portfolios. They use AI technology to provide reliable and comprehensive tools to understand and optimize social and environmental impact with the ultimate goal of focusing investors and key decision makers towards the targets that make the most positive difference through data-driven actionable insights.
Could you share with us 3 investors you like and why?
I like to think about investors on a basis of specific people, because I believe it is a way of recognition they deserve towards what they do. That being said, I would like to highlight:
Reshma Sohoni, Founding Partner at Seedcamp. She has pioneered and contributed to build London’s startup ecosystem. She was there from the beginning, in 2010, and she has led investments in companies such as Transferwise, UIPad, Revolut and many others.
Fredrick Cassel, Founding Partner at Creandum. I was on the Board of Kahoot with him when I was at M12 and I have always been incredibly impressed with his ability to communicate with founders: he is constantly setting up goals and making sure everyone is delivering accordingly - but always in a friendly way. Super efficient communicator with some great investments in his track record such as Spotify.
And last but not least, I would probably say Stephen Chandler, Co-founder and Managing Partner at Notion. He won the Investor Allstar Award recently and I very much think he deserves it. Good investor (he led investments in Tradeshift which is today a Unicorn and GoCardless which is doing incredibly well) and good fundraiser - which is very important for the firm. So both, a front-office and back-office force, great all-around professional. :)
What are the 3 books you feel everyone should read and why?
“The Hard Things About Hard Things” by Ben Horowitz. It is a good read for investors so we build empathy and understand better what our founders go through when building their businesses.
“Product-Led Growth: How to Build a Product That Sells Itself” by Wes Bush. A great starting point to build a PLG company.
“The Circadian Code: Lose Weight, Supercharge Your Energy and Sleep Well Every Night” by Sachin Panda. Fantastic example of how restricting your eating to certain hours a day can improve your mental and physical performance.
Big thanks Itxaso for sharing your views with us !
Big thanks to you, reader, for your time and interest !
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