James Green - DQventures

Welcome to another VC Wisdom Podcast. We have James Green from Deque Ventures with us today. James is in Stockholm, one of the few that visited Oaxaca. He's also founder, ex-founder, I would say, ex-head of growth. Interesting guy altogether. James, welcome to the pod. Tell us a bit more about yourself and what you're building at Deque.

Thanks, Charles. Uh, well, the, the quick intro to Deque is that I have been angel investing since 2012, uh, with my own money and also forming a small private fund with a friend of mine. I've invested about $2 million of private money over that time and realized that almost all the money that I made was coming from investments in companies with older founders. And in trying to find older founders, more older founders to invest in, I realized that older people, more experienced professionals, tend not to start companies because there's so much risk involved. And especially once you've got a mortgage and children and responsibilities, that, that risk only, only increases. And so we set up Dekey Ventures in, uh, 2019 to, to try to solve that problem by, instead of writing checks into older founders, by actually helping them start their company before they have to quit their job, uh, and doing a lot of work for them in that first year. And we've been doing it for 6 years since then.

That's an interesting thesis. It's pretty much the first time that I hear it. Usually I'm not bullish on old people for the reasons you mentioned, but they've got troves of experience and they can potentially move faster due to their maturity. Where do you see their, their little moat vs. young and agile and energetic founders with no Nothing to lose, basically.

Yeah, well, I mean, the statistics say that older founders are statistically more likely to be successful and to have outside success than younger founders. There's an MIT report done in conjunction with Harvard, very famous report. And other research shows that actually the older you get, the higher your chances of success are. So a 60-year-old is more likely to succeed than a 50-year-old. And, and so on, amazingly. Uh, but actually for us, we, um, our model is very different, that we're not looking for outliers, we're not trying to find unicorn returns. Uh, we take a, we take very first equity at idea stage. So for us, we're looking for tens of millions of exit value rather than hundreds and billions. So we're not necessarily— we don't necessarily depend on extremely large success in order to get that, that kind of outlier size return.

I'm curious about that study. I'd love questioning studies themselves. What was the factor of success? Was it just making it over, I don't know, $200K a year? Was it not shutting down? Was it not accumulating debts? Do you remember the findings of that study?

I think it was total returns. So it was, um, it was literally outlier success. Like, how many— if you look at some of the, uh, all the companies that returned a, a higher than $500 million outcome, an unexpected and outsized number of those returns came from founders who were over 40 years old.

Let's check it here. Is it this one here? The Azule Jones, Kim Miranda, 2020? That's pretty recent.

I think no, it's older than that. It's older than that. If you type— if you search for MIT Harvard research, all the founders, you find it. It's a pretty well-known study.

Uh, okay.

I didn't read it. I didn't write it, unfortunately, so I can't, uh, I can't tell you exactly what's in it.

Okay, I'll research it a bit more. It's still very intriguing. Um, the founders that you pick, like, what are the specific profiles? Have they worked into corporate, which is usually a reason why I'm not bullish about them, is that corporate like zombified them for years? At least if they started many companies, yeah, I'd be like, oh, okay, yeah, possibly a winner. What profiles do you pick generally to work with in your program?

So, so what we're quite good at building companies, what we're not good at is having sector expertise in lots of different sectors. So we look for people who've got sector expertise but who also have what we consider founder qualities. So that our thesis basically is that there are a lot of entrepreneurial people who are trapped in corporate, who've always felt like an outsider, have always been entrepreneurial, but who had a family early or who've been extremely successful and have just ridden that wave. And often when those people reach their 40s, late 30s, 40s, they feel that something's missing and that they want to go and start something of their own and be their own boss. So if they have something in their past that demonstrates to us that they are an outsider, so maybe they're an immigrant, maybe they traveled when they were younger, they went around Oaxaca and Central America all sorts of signals that show that they don't necessarily fit that normal corporate stooge type role.

Interesting. I found this study, by the way. I just want to cover it before I go to my next question. I'm such a nerd when it comes to this, um, and apparently it's the same that I cited, uh, but yeah, is it this one here? So 50 years old are 1.8x more likely to hit unicorn territory than 30 years old. Is that the one? 30 years?

I think that's— yeah, that's, that's probably the later of the two studies.

Um, to be honest, I wouldn't be surprised by that finding because it's so hard to build a unicorn as a young person. And I do think there's like maturity factor in there because unicorn, you enter enterprise territory, right? And you need to close enterprise deals. Most of the time you need to manage people, right? And most of the time, 30 years old, don't have a clue how to do that.

Um, I read something literally— sorry, I just— I read something literally today that was saying, if you're— particularly for younger founders, if you are going to go on and build a unicorn, you literally have to become a different person along the way. Oh yeah, I really believe that.

Yeah, I run ultras, you know, and I, uh, reread this, my last story about Brazil, because obviously I tend to forget about these. I did a lot, and my main finding in the last 110K in Brazil was that I had to change to finish it, right? Because it was 5,000 vertical meters of mountains, and it's like no one in their sane minds would climb mountain for— climb mountains or run in them for 23 hours. So you know, I really had to change to get to the other side. There's no other ways. Do you think it's still the same scenario in the current landscape with AI nowadays? For example, younger people not needing to manage humans but can manage agents and can scale faster, can have these agents sell to larger clients. Do you feel the landscape has changed? Do you feel that the study is still somewhat relevant nowadays?

I do, I do. I think you're right. I think that older people are more reluctant to adopt these new technologies, and so that's probably going to swing the balance more towards younger people. But I also think that what this technology does, and actually a report that I read by Claude, I mean, apparently it's written by Claude itself, one of the biggest takeaways was that that the biggest unlock of this technology is that it's going to give people who aren't technical, who can't write code, but who have deep subject matter expertise, it's going to unlock their ability to build their own company. So I think we'll probably see a bit of both, to be honest.

I feel, you know, technicality won't even be a skill in itself in the future. Technicality is just like having spent lots and lots of hours to understand a machine, which is a bit silly when you think about it. Like, why, why do I need to learn to code? You know, like that. I think if a machine can do it in plain words, it's way better. Why would I learn Chinese? You know, it is challenging for my brain. It will create like extra, um, neuroplasticity. But I mean, learning Chinese is no use for me. So I, there's I think being technical, yeah, not just for old people, but just for pretty much everyone. I think it is meta skills though, right? Like meta skills that are deeper than that. For example, patience, right? Uh, yesterday or before yesterday, I was onboarding a client that's like 65 years old, and he was literally swearing at technology, right? Like, it was like, okay, um, sure, you're not technical, but you're also like not patient, right? And I think Patience is one of the top skills when it comes to building anything, because even if you vibe code, it will fail, it will fail, will fail. And then you just need to stay the course until you can have something that works. And then most importantly, in my opinion, deploy to customers, right, with product-market fit and sales. And that's another place where I think older people have a moat, right, like sales and getting out there. They're not afraid to do that, and they've knocked on doors, they did cold calls. I mean, when I started cold calls, I don't know, 12 years ago, like, that's how I started my career. It was like horrendous, right? It was a shock to my system. But they internalized that and now they're comfortable with that. So they do have like an easier time selling, right?

Definitely. I mean, we look at founder fit through the lens of 3 traits, which we consider one being earned edge. and that could be expertise, reputation, um, some kind of technical skill that others don't have. And then, uh, we have, we have, uh, trusted relationships, which is, I think, is where sales comes in. It's very difficult to, to sell to a cold network. It's so much easier to sell to a warm network. So if you're from a specific sector you're known in that sector, you have credibility in that sector, people are going to take your call. And the people you know are— if you're senior, the people you know are senior too. So you're going in at the top, you're not getting blocked by the, uh, the, the kind of, um, gatekeepers. Uh, so what that just leaves are the kind of raw founder qualities of drive and character. Now, are you resilient? Are you patient? Are you able to get up after 100 different people tell you no? And I think that, that can be shared across younger and older people. But I think the earned edge and the trusted relationships is definitely biased towards older, older founders.

I think people trust more older people as well than kids to play with their important stack, right? Why do you recruit them when they have a job? Right? Isn't burning the boats entirely making the— statistically making the venture more likely to succeed?

It is. And if you look at Y Combinator's homepage, or at least it's a homepage that it used to have, the first thing they look for is, is someone going to go all in or not? And if they don't go all in, they're not interested. And I think for us, the reason we, we've chosen that as our unique position is that a lot of people just aren't in a position to go all in. And we don't, you know, if it's our friends, this is actually how we started. We were telling our friends, do not go all in on the startup at this point in your career. It is potentially career suicide. If you're 40 years old, it's probably going to take you 10, 15 years to get your startup off the ground. You're going to earn very little money in the first few of those years. And at the end of it, if it doesn't work, maybe you're not gonna be able to find another job. So don't go all in. And so for us, it was about unlocking founders that other people weren't reaching.

But looking at your site, it's not like 60+ or 50+, right? It looks 40. Is that like your, your sweet, uh, zone? 40 years old-ish?

Yeah, but I mean, we know ages.

I'm 40 years old. Yeah, they're like the sweet mix. They're not like deprecated, uh, and they're still active. They have kids, they have responsibility, right? They, they know enough about life to scale. So yeah, I'm bullish on that thesis as well. I don't know, when we started, in my mind was like 60+ years old, uh, ex-corporates.

Okay, no, no, we're not looking for retirees. We're definitely looking— I mean, we don't, we don't specify age in our application process, but we do specify experience. Somebody has to have been in, in a, in their niche for at least 5, probably 10+ years. And so most of the people that apply are probably 35+.

And that thesis, um, why are you the right guy with your partners to get behind that one? Did you find that working with younger founders was a pain, or is it just like a market thesis that the stats are clear there's a place for a contender like you?

I think what makes us really good at what we do is that we're really good at zero to one. And I think younger people are actually pretty good at zero to one. They, they're scrappy, they don't know a lot, they're willing to do the hard work, find out the hard way. Older people want that— they can take a company from 10 to 100, but they've probably never done zero to one before. And the truth is if, if you're building a company, you only need to go from zero to one once, uh, and a lot of those skills are important, like being able to sell, but a lot of them are not important, like being able to build an MVP or being able to do— to run your own email outreach campaign. Most founders don't do that once they get some momentum. They've got someone else to do it, but zero to one, you have to do that yourself. And so having a team on your side who can do all that basic stuff that you just don't need to learn makes you a useful partner.

And I have this thing in me that I need to see someone crack 0 to 1 for me to have faith that they'll go from 1 to 100. Maybe that's false, maybe that's just emotional, right? Because I don't know, me, I'm personally not so good at 1 to 100. I also know that one-man billion-dollar companies are coming. They're already there, arguably, in rough shapes. But, um, I don't think we'll need like that many humans and we'll have agents. But am I, am I wrong in like trying to filter always like from zero to one-ers just to get respect? And just because it takes so much, right? And zero to one, it shows that they still have something in them and that they, they crack the chicken-egg problem, the momentum, the energy problem, which is a physics problem, which is a fundamental problem, right? It's like deploying so much energy that you create the Big Bang and then things start scaling by themselves, right? So no, I agree, I do agree with you, I agree with you completely.

Yeah, and, and I think we made that mistake in the early days. We, we did too much for our founders. So we have a couple of founders who looked like they were going to win.

Taking the tough part, the bossy part. Rather than sitting back and watching.

Kind of. Yeah. So we had companies who made a lot of progress, raised capital, looked like they were going to win, and then they fell apart. And so these days it's very much a collaboration. We don't do the zero to one part for our founders. We help them do the zero to one part. So they still have to do it themselves.

You attack specific niches with them, and how do you know? What are your, your criterias to filter that you're like, oh, this is the right founder for the right niche?

Uh, so they need to know the niche. Uh, we're not, we don't, we're not sector-specific, but we are business-type specific. So for us to build a company, it has to be some kind of manual service to begin with. Because we believe in building companies without external capital for our, for our model to work. Nobody wants to invest in an idea stage business, especially now. 10 years ago, yes, but now, no. And so our business, our companies have to get their initial momentum and ideally get to profitability without raising any external capital. So which almost always means starting with some kind of service And then we have to be able to see a path to productization. So it has to— in our minds, we call it manual to product.

Why did you choose Singapore?

I lived in Singapore when we started, as did my co-founders. Funnily enough, none of us live there anymore. So the company is based in Singapore, but my team is scattered around the world from me in Sweden, Australia, Malaysia, Thailand, India. So we're all over the place.

And you started that one 6 years ago. Can you give me like case studies and ballparks of potential exits for you that were pretty juicy?

Uh, uh, kind of most successful startup is doing about $5 million a year in revenue. Um, we've got, we've got a couple doing millions in revenue. We've got 14 companies. Spread across all sorts of different industries. We've not had an exit yet, but we take a 20% stake in each portfolio company, so, and it costs us about $100K per company. So it's— the economics look good. So as I said, for us, a unicorn exit is like a $50 million exit.

They pay you $100K to start? Is that the— no, no, you invest $100K. Okay, sorry, yeah, I'm not sure why.

We did invest cash at the beginning. We don't actually invest cash anymore, so we invest services. Um, so it— our, our cost is approximately $100K per company. Got it.

In what? In partners? Or do you hire people from that side of the world as well? Like, what are the, the main services you pay for, and what do you hand them, uh, the founders, in return?

Uh, so I mean, we are doing— we're responsible for building products, for running campaigns, building websites. Anything tangible comes from us. So there's costs associated with that, and a lot of that we do in-house. A lot of it is becoming more and more automated, um, thanks to the new technologies that are available, but there is still a hard cost and salary cost to running our, running our organization. So that is the cost to us.

What do you do when there's no traction and like all gloomy and nothing's happening?

Then we tell our founders not to quit their jobs, basically.

And you write it off and that's it and goodbye? Yeah. Yeah. How much percent of the time does that happen, granted that product market fit is so rare?

Ah, because we're building service businesses first, less. Uh, it's, it's so much harder to build a software product company than it is to find a, a client willing to pay for a service that you think you can automate later. Um, but I don't know what the actual statistic is off the top of my head, but if we've got 14 companies, then we must have started about 30 ventures, I think. So it's probably 1 in 2 becomes a company, maybe less than that. That might be a bit optimistic because we don't actually consider a venture a venture until we've got a paying customer. Um, so we aim to get a paying customer within the first 4 to 6 months depending on the business, and if we don't get that paying customer, it was never a venture. It never really had a name. It was just a project. And at that point, the founder has definitely not left their job. No one's lost anything really, apart from the founder loses a bit of cash and we lose a bit of cash.

And at least they're trying. At least they got the founder experience, touristy experience.

Yeah, we've done a podcast with some of our founders, and when I asked them what was, what's the cost of not building a startup, It's always, I would have always regretted it. I would have always retired wondering what if.

Yeah, yeah. And yeah, that, that, that regrets are pretty brutal. Apparently it's not just, uh, it's not, it's not just like books, right? Like people actually have regrets on their deathbed, and that's so bad. It's a rock you carry with yourself for a very long time. Why would they pick you? And, uh, for example, I know about Bilaji's Network School in Singapore, for example. I'm not saying that you guys are local or whatever, but you have a lot of quote-unquote competition, right? Like, even I as a VC, founders, they can choose which tech they accept. I'm raising as well myself for some of my other ventures, and I'm choosing. I'm like, yeah, I want more than your money. I want your network. I want your expertise, right? Why would they pick you?

Well, you've seen a very different side of the fundraising world than I have, because in my experience, it's extremely difficult to raise capital unless you are one of the very, very few who is building something that is taking off and gaining momentum all on its own. I think my— the way I describe venture capital, I'm stealing it from someone else who was a VC, but they told me that My job is 99% of the time finding ways to say no politely, and 1% of the time begging companies to let me invest among all the other VCs who also want to invest. So I think raising capital is virtually impossible for the founders that we're working with. They're not the latest AI guru. They're not building something world, earth-shattering. Even though many of them think they get there, they've got an idea that's going to become a unicorn. But the reality is they, they have no traction. They have just an idea. They have no technical skill to speak of that's going to set them apart. So raising capital, unless they can find someone, a friend, family, or fool, raising capital is pretty much going to be impossible. So they're going to have to—

yeah, well, the 3S, great add-on.

Yeah, and, um, so, so they're gonna have to build traction, they're gonna have to build an MVP themselves, they're gonna have to get something into the market, they're gonna have to find their first customers. And most of the founders we work with don't know how to do those things, so they need somebody who can do all three and who's not going to charge them $100K for doing it, because people don't want to invest all that money, they want to share the upside with somebody. So actually there aren't that many companies like us out there who specifically look for this type of founder to back with our own resources.

And what does your pipeline look like? Uh, how do you get people to apply? Is it just inbound? You have outbound? You invest in that? Is that—

we don't do outbound. Yeah, we don't do outbound, um, mainly because we— because we're not sector-specific. It's very difficult just to say professionals who are experts in what they do over 35. I mean, that is a big pool of people. It's very difficult to specialize. So we're, we're predominantly inbound, so we do a lot of networking, uh, social media, we do some advertising.

Um, yeah, interesting. And when you say network, yes, uh, and I think you absolutely need like a deal flow to get an edge, right? Like in a predictable one. Um, But the physical network, is it in Singapore? Is where exactly do you, uh, do these physical networking events?

We do them where we are, so Europe, the UK, Southeast Asia, Australia. There are big markets. You know, when we started, we used to get one application a month maybe, and but now we get a couple of hundred. So we're, we're doing much better than we used to be.

Yeah, yeah, for sure. 1 to 100, it's pretty good. Um, do you find that there's a better quality of founders or better, uh, success propensity in one part of the world, Australia or Europe, or a specific country in Europe? Uh, what are your findings on that level?

I can tell you that we get the most, the most applications we get come from the Middle East, but we are yet to found a successful Middle East-based company. So we find that the quality in the Middle East is lower. If we get applications from the UK or Australia, then we think that they're generally going to be stronger, and Southeast Asia is probably somewhere in between.

Interesting. What's next for you, for the, the, for what you're building? Like, what are your goals this year? What do you want to achieve?

Uh, so we, we're currently investor-driven, so we have, we have our own version of LPs, uh, that, that enable the business to function, but we want to get to profitability So we're launching our own services and, and tools to bring revenue into the business so that we can do what we want without having to go out and raise more capital. So, you know, you're finding it easy to raise capital, but we found it quite difficult. We're quite an unusual business. Uh, we don't fit into, uh, the fund structure that traditional LPs look for when they're investing in VCs. But we're also not really a startup because we're taking equity in other people's businesses. So we decided that we wanted to self-fund, uh, and so that means breaking even. So breaking even is goal number one, uh, and then getting to the point where we can scale what we do. At the moment, we have 4 general partners, so we have 4 people who actually work hand in hand with our, with our founders, with a team underneath that, that, that provides a lot of the assets and outputs. We want to get to a point where we can bring in other venture partners who can run founders through, through our program, earning equity for us and for them in the process.

Love that. Where can people find out more about you and the company, James?

Our website is dqventures.com. I am on LinkedIn, as is the company. I'm James Green, Deque Ventures. Hopefully there's only one of them. Uh, and then we've also just launched our own podcast, um, which is on DQ Ventures Official, either on most podcasting platforms or on YouTube.

That's James and Charles.