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“I had to convince myself that the internet was going to be a thing,” Hickson says, recalling a call he’d had with his father 22 years ago after he accepted an offer to join lastminute.com. His now late father, at the time,  was incredulous and couldn’t help using an expletive.“It’s going to go out of business in like two months. It’s not a real business!”. His dad was proud that he was building a legal profession in London and hoped he’d get a career in one of the big law firms – in the nineties, this was the most sensible option open to you. Besides, Lastminute was losing money every quarter after their IPO as they acquired businesses and built their technology stack. It did not make sense.

That was 22 years ago, dotcoms were hot, the bubble was invisible, and the Internet was just becoming a thing thanks to mobile broadband. Fifteen years later, after seeing Lastminute.com’s $1.2bn exit to Travelocity, merging mydeco.com with Made.com, founding Tribesports, and raising £2m from Adidas, as well as a stint as NED for Simba Sleep, David Hickson was ready for the next thing. That next thing became Founders Factory, which he joined as part of the founding team alongside Brent Hobberman, Henry Lane Fox, and George Northcott in 2015.

When I think of a factory, I imagine stepping into a brightly-lit workshop, with sparks flying off machines, shielded heads engaged in quietly intense conversations by the corner of the welding, and a rough metallic scent that seems to say, “We make things!”. Only, of course, this factory does not make ‘things’, it makes businesses, high-growth companies, and the people weird enough to want them. So earlier this year, Aarish had a sit-down with one such human, a founding member of this type of factory.

David Hickson is a serial operator, and part of the founding team of the award-winning accelerator and incubator, Founders Factory. In this latest episode of Nothing Ventured, he talks about how the Factory started, his personal journey as an entrepreneur, and what he’s learned since taking the crazy leap onto the Internet from the heady dotcom days to working with entrepreneurs in todays’ web3 infatuated earth.

Building a foundry for entrepreneurs: how the founders of Founders Factory think.

When David Hickson was at the end of his stint at Tribesport, which was started off as a social media network for sports nerds which he co-founded in 2010, he got a call from Brent Hobberman, his old boss at Lastminute. By the end of that call and subsequent meetings with Brent and Henry Lane Fox, Founders Factory was born.

That is the short story. The long story is that Hickson who once practiced law, 18 years ago now, now identifies 100 percent as an operator, and he felt that the popular accelerator models of 2015 did not do enough for founders. Together with the rest of the founding team, Hickson would rebuild the accelerator model into something that was tailored to individual startups, and where hands-on would really mean hands-on. “Brent is an operator. Henry is an operator. I am an operator. Everyone in and around Founders Factory are operators,” he says about Founders Factory’s thesis, “We want to operate on a portfolio basis… Nobody really does that. Or at least nobody does it at scale. Nobody has a venture portfolio where you’ve operated for them, or with them.”

Accelerators are usually designed to be finite entrepreneurial programs that take in early-stage companies at one end and release them at demo day after intense mentorships and some hands-on support for three to six months. Hickson says that while these programs can work very well for participating startups, it looked a bit like a Bed of Procrustes model that forced startups to conform to a certain model. He adds that the reputation of a lot of these accelerators began to suffer as the average-rewarding model of accelerator programs began to affect the quality of demo day pitches. “That’s how we ended up with a blank piece of paper which was a venture studio on one side,” and became Founders Factory where others would choose to start a venture fund, the co-founders decided to build a new model that would see them intimately involved in helping ideas become companies and grow. They would be hands-on (and hire the best operators globally) operating partners to help build the portfolio businesses from very early on in the venture studio program. “That’s kind of the idea for Founders Factory,” Hickson says. 

Today Founders Factory is one of the leading accelerators with over 300 portfolio companies, and localised Founders Factory operations in five cities on three continents. 

How is the Founders Factory different?

“I have never considered myself an investor and I never will” Hickson intones, “I actually think it’s a terrible job. I don’t know why anyone would want to be a VC. But I am a serial operator.”. He says that when you’ve “done this for a while, you begin to have a strong intuition about the things that are useful, and the things that aren’t.”

Hickson says Founders Factory has an odd business model for some people. “We are a company that does not generate any revenue,” he says laughing, “we do nothing that scales, what we do instead is that we take equity in the startups in the startups in the accelerator and we provide the best operating talent to help these startups, not on a mentorship basis, understand, show them what they should be doing.” Some of the talent Founders Factory provides end up in the startups themselves, making the Factory a hunting ground of sorts for talent. Hickson says further that the founding team holds very little equity in Founders Factory because they believe in properly incentivizing great talent by making sure they have a “great ownership in Founders Factory,” which then inspires Founders Factory employees to work harder for portfolio companies because this is how they get their returns.

What’s blindly obvious when you hear David speak is his operational insights. As he says he’s an operator, not an investor. It’s these insights that we think make this such a valuable conversation for founders out there. Head over to the podcast and find out for yourselves.

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Growing up in Hong Kong, Cleo’s mother wanted her to become a lawyer. It was respectable and a safe professional path. Besides, her parents were both working professionals, her mom was a lawyer with the Hong Kong government and her father was a medical doctor.

By the time she was 16, and about to get into the university, she had also grown on a mind of her own, and in her mind, a legal or medical career was not in the picture. “I wanted to be able to define my own path. I was always curious about business, but knew nothing about it.”

“I felt there was something out there that I could do that would probably be more interesting and be more fitting for me.” That fight to reject every single offer from UK universities to study law lasted for 2 years before finally, against her family’s wishes, she started off on a different path.<

Her first big venture. “That was [probably] a first big moment for me. Big leap of faith, I guess, and making a bet on myself ” Like diving off the steep side of a cliff dressed like a bungee jumper but clearly without the emotional support that is the safety harness.

Finding Uber. Finding China.

In 2013 Uber launched a Shanghai pilot as part of a wider China entry strategy. Other cities soon followed and the business took off, ultimately setting a record of Uber’s first 1 million trips in a week in Guangzhou. That figure grew to over 4 million weekly trip bookings in just two years in Guangzhou . Cleo was the Guangzhou General Manager.

So fast forward several years after Cleo won the fight to freely pursue a naive passion as a business student, she got hired to lead Uber’s entry in Guangzhou, China. Entering any new market is always going to be tough. Entering a new market with completely different business dynamics like China is a different level of tough.

“I was really just looking for a learning experience. In the end that was way more than I had expected and a really meaningful experience personally.”

China was (and still is) home to hundreds of millions of urban commuters. As General Manager, Cleo had to deal with government friendly hostile competition, and the general fast-paced nature of work in China. Ride-hailing is one of the toughest 21-st century business models to crack, and in China, that was reinforced by the fact that Uber was competing with not just anybody, but with Didi.

Where Uber relied on disruption to thrive, Didi was the exact opposite. It’s business was built on the back of the status quo. Uber needed drivers to sign up, Didi simply connected riders to already licensed taxi drivers, operating as a sort of government taxi app. It even helped city governments manage traffic lights in some areas!

Didi had also started operating in China a good one year before Uber’s experiment started. So how do you grow a business in a new market where everything is completely different?

You become Experimenter-in-Chief.

As it happens, in China, you will have a lot to learn. Uber’s early experiments helped the company realize that onboarding users who needed to validate credit card information before opening an account was a major roadblock. “So we needed to integrate with Alipay which was additional work on the engineering side. And then due to the firewall, Google maps clearly didn’t work in China, so we had to invest additional effort to integrate with Baidu.”

Cleo describes some of their earliest tactics as throwing things at the wall to see what stuck. 

“We had to be very creative around doing stunts that didn’t cost very much money, again leveraging partnerships with bigger brands and coming up with real hacks like partnering with a mobile game development company to create a viral mobile game that people played and shared on their WeChat which basically gave them promotions.”

Bring a war chest and some thick skin

Ultimately, Uber sold its China business to Didi, but having those first crucial resources to experiment, put out the constant fires, and hold up against blindsiding regulation helped them gain substantial market share (in 2016, China accounted for more than a third of Uber’s global business in weekly trips.).

“We had to be relentless, we had to be very decisive. Within 24 hours of ideation, we would already start to execute. That was what was needed to keep pace and also to gain market share at the time.”

You also need thick skin. Cleo’s role as General Manager was a very public-facing one, which meant, dealing with the city’s government, the press, and responsibility for tackling a litany of what you could mildly describe as black-hat guerilla marketing – ghost accounts planting fake cases on Wechat, accusing Uber drivers of harassing passengers, smear campaigns, or even drivers faking trips to collect on Uber’s subsidies. “We had a fire pretty much every week that we had to deal with while still trying to scale the business and hire the team and grow like 10 percent every week so it was just very intense.”

Wherever you are, be all there.

Every city is different, and relationships are important. What this essentially means is that you will need to be on ground, and with people from that ground. “ I think for any company looking to go into China, having a localized project management team would be essential and also would enable you to iterate faster,” Cleo says. She adds that eventually, Didi was able to catch up to Uber, as they had a more localized context.

In China, “There’s no such thing as dipping your toes in the water.”

Moving from operating to investing

“I started out in consulting, traded stocks for a while before going into operations, Angel investing felt like a good way to combine everything, and now VC which feels like a great way to leverage everything.”

Cleo is now Partner at Stride VC a London and Paris based VC firm that backs early stage founders with a clear vision and bold prototypes they are already working on.

Carrying over operating lessons

You would expect operators who back founders to have more nuanced insights and a bit more empathy. Here’s some of what Cleo believes are the important lessons and skills she has carried over from her time as an operator.

1. How to communicate what you know with examples, storytelling and abstract concepts without being too much in the founders’ business.
2. Finding a rhythm and discipline to be free and still productive.
3. Learning how to empathize with the other person.
4. Understanding stakeholder dynamics and being situationally aware.
5. Building trust, knowling how to get feedback and how to influence the people who do not directly report to you.

“Those soft skills are super important in venture, they’re just utilized in different ways in VC than in operating.”

Finding the best fit startups.

Stride VC sounds very poetic, so I’ll just end with an extensive quote from Cleo’s conversation with Aarish on Nothing Ventured that captures that spirit and what she and other partners at Stride look for in the projects they back.

“When I was looking at potentially joining a venture fund, what was really important to me was really the software aspects of it, the vision and the values and what size of team, what stage you’re joining the fund at. What I really found alignment in was the ethos of Stride and the fact that it’s still a startup.”

“We really believe that the job is a privilege and that we need to earn our seat at the table to be with the founders.”

Listen to the entire conversation with Aasrish Shah, linked above.