Founders & topic. That’s all you need to cook an exit: top founders and a great ‘topic’. Which one is the butter? I’m leaving this technical question to you but we need both. And I’m arguing we don’t need to focus on anything else.
What’s a top team of founders? Easy, it’s Nicolas (CEO) and Raphael (CTO). Not a very scalable investment thesis you may say. So let’s listen to the Grand Master investment officer: Warren Buffett named his personal trilogy a long time ago: “You look for three qualities: energy, intelligence and integrity. And if you [as an investor] don’t have the last, the other two will kill you”.
Just a word on this often underrated startup requirement: “Energy”. Taking a startup off the ground requires more than the usual “high energy profile” from the founders. It requires the mental strength equivalent to those of top-league sport players. And sometimes, entrepreneurs are pretty good sport players — take Nicolas on a bike or Raph on a volleyball field.
Now orchestrating a trajectory to exit like Shine’s is not a sport for the faint of heart. A lot was at stake for the 2 VCs, the co-founders and the whole team behind them. Here are two of their (bold) key moves I’ll never forget:
A great startup topic is one in a hundred, as are top entrepreneurs. We investors settle too often for ‘good topics’ : a sweet DNVBaby, a cool AI which is more of a feature than a product, or the rehash of some good old services. And that kills us, investors and entrepreneurs alike. In contrast, a great topic withstand this simple test: will it still be here in 10 years? An average series A investment remains 7 years on board, from start to exit. The acquirer needs to see at least 3 good years of credible business post acquisition. So, with or without a crystal ball, we need to pick topics that are likely to still be juicy, attractive, with tail winds, on the right side of history — call it what you want — in 10 years. The few cultural hubs around this planet that generate above-average amounts of unicorns have this feature in common: they let great startup topics emerge. A great startup topic frequently looks odd — or outright ridiculous — at birth (as do bad topics — that’s the thing): hitchhiking, a bus operator, paid music distributed for free, an ERP for small businesses.. pro bank accounts for delivery bikers.
Shine was created for entrepreneurs launching a personal business and looking for straightforward banking management. Food delivery bikers were among the first clients, quickly followed by taxis, ambulance drivers, and soon enough by a thriving population of consultants and freelancers. In other words, Shine’s client base is an accurate sample of the entrepreneurial crowds of our time. Transparent banking for all entrepreneur categories and way beyond the gig economy. Is it a ‘great topic’? We at XAnge believed it was.
The recipe to attract (and keep) these customers is easy on paper. Not as much to put into application. Here are the key ingredients of relevance.
. You don’t have to be tech-savvy or any kind of expert to start using Shine. It’s ultra-easy to use. From onboarding to loading pages and daily operations, everything is carefully thought of by the best designers / developers in town. The team (and especially Raphaël the CTO) carries a very strong culture of design and product. They reminded us of Zendesk, the reference, when we invested in Series A. With this in mind, Shine successfully developed their product and turned it into an “copilot” for entrepreneurs to streamline their admin and focus on their business.
Especially with pricing. A freelancer that joins Shine knows exactly how much it’s going to cost, and even more importantly what he’s paying for. This is essential for a population that cannot afford unnecessary or unexpected overheads. And because the team is coherent and pragmatic, it applies this transparency to itself: the pay grid is public at Shine.
Nicolas and Raphaël’s ability to leverage all intelligences around them is absolutely key in Shine’s success. Women are present at every level of the company, at the board and in management positions. They fight the gender pay gap by publishing the team’s wages and by paying a 5-week childcare leave to all parents, including same-sex couples.
We were not surprised when Shine was certified B-Corp, a label for companies that thrive to become better for the world — rather than best in the world. The founders even encourage their teams to take 1 day off each month to pursue freelancing or personal projects. Shine and their clients are on the same level. We love that, and so did Société Générale.
Ok now we have the great Shine team and the great Shine topic, so let’s fast forward to the exit — 2 years later. Those guys are fast.
A common misconception is that “investors make investments, therefore they make exits as well”. I’d love that to be true. Actually, no word can describe how much we venture investors would love that to be true. It would be such a game changer for our business — but I’m diverging. The reality is that VCs don’t do exits. Entrepreneurs do.
Granted, a great venture investor may have ‘seen’ an order of magnitude more exits (good and bad) over his life span than a good entrepreneur. A great VC fund (GP) may have ‘seen’ 2 orders of magnitude more exits than a single entrepreneur. But the exit is a sales act, and a sophisticated one. So even if investors can leverage previous patterns, initiate discussions, suggest models, pray or rain-dance for an exit, in the end the CEO makes it happen (or not). That’s in stark contrast to our cousins in the majority-owned LBO space. In early stage venture, even when investors collectively own a majority of the capital, the CEO remains the captain on the vessel.
In the case of Shine, Nicolas & Raphael made it easy for their investors, Daphni and XAnge: they brought home a sweet deal, even if it was much earlier than anticipated.
Not all exit situations are as easy as this one. But regardless of the financial performance for shareholders, it’s such a risky bet to tell management to “go back to business and keep growing”. Information asymmetry, management motivation and an acute sense of timing are so decisive in our line of business. So when my management opts for an exit, good or bad, I turn my tongue seven times in my mouth before arguing against it.
KissKissBankBank, Lydia, Fidor, CurrencyCloud, Ledger, Coinhouse, Deposit Solution… and Shine. Our expertise in fintechs keeps growing year after year. And while we’ll absolutely remain multi-experts (it’s part of our investment strategy), the team will continue to scout and invest in the best startups of the beautiful fintech industry.
The technologies we promote at XAnge, those that will emerge, mostly fall under the broad categories of Trust, Care or Data. Because it fits in all three of them, Shine is a perfect example of the kind of startups we’re looking forward to work with.
I’d like to address a warm thank you to my dear colleague Marie at Daphni. Exits can be tricky with all the parties involved, but never with such smart and straightforward co-investors. We’re looking forward to the next one.