Mike Bank (00:01)
Hey
how are you?
Tzakhi (00:03)
Great. So happy you're here. Thanks for coming. We're at the Meet .Capitol startup podcast with Mike Bank, a person who has done a lot in the startup world, is an investor, been VC and investment banker, now has Underdog Accelerator, which you'll tell us about, and Founder 15, which is a service for founders, which you'll also tell us about. And yeah, we'll talk about...
early stage startups, validation and the like. Would you like to introduce yourself a bit for our audience?
Mike Bank (00:39)
Yes, absolutely. Well, look, firstly, so happy to be here. Really, really, really great podcast. And I've listened to quite a few episodes, including some by a lot of people who I look up to. So it's my pleasure to have been invited. In terms of my background, I've done all sorts of stuff, as you rightly identified. And there is that VC blog. I forget who wrote it. Is it Mark Suster? But both sides of the table.
Tzakhi (00:52)
Thanks.
Okay.
Mike Bank (01:06)
that blog. And I like to say that I've sat on pretty much every seat around the table as a startup founder, as an operator, as an advisor, as an investor, both angel and VC. So I've done a lot and I've seen a lot over the past 10, 15 years or so. And that is why, and you mentioned investment banking, I don't tend to talk about that too, too much because that was a long time in my past, but that allowed me to cut my teeth and to bring...
I suppose a slightly different take to the world of startups when I first first entered it. And you've probably heard of Tim Ferriss, who wrote the Four Hour Workweek. That book? Yeah, yeah. So I was reading that whilst I was an investment banker working ridiculous hours. And I was thinking, OK, a four hour workweek is not what I would want to do anyway, right? I'll take 40 rather than 80, 90, 100. And.
Tzakhi (01:59)
yeah
Mike Bank (02:03)
He stopped talking about it now because it's probably not the smartest thing to do. But way back then, a long, long, long time ago, he was talking about the real world MBA, which is where you take your business school money and rather than paying it to Harvard, not that I got in, I probably would have got in, but rather than paying it to Harvard, you actually invest it in a hands -on way into very early stage startups. And you do all the good stuff that you might be doing at business school, network, make connections, learn.
but learn in a hands -on way. And you take it as a sunk cost, right? You don't get your business school money back. And I looked at that as not getting any money back either. Although I thankfully did, but you know, it was an investment in myself. Yeah, I went and did that. And that's how I first started back in 2011. And very quickly, I met a couple of guys, Lee Pickrell and Raj Ramanandi, who were running number one seed. That was probably the earliest stage VC investor in London at the time.
Tzakhi (02:42)
Okay, so you actually went and did that.
Mike Bank (03:02)
I mean, Raj is a really good commercial and sales guy. Lee is really strong, technical, you know, end -to -end technical chap. He's a CPTO. So he's product and tech and kind of bridges that gap. But they were lacking the, I suppose, the financial element, which is what I bought in, and someone to help them screen deals and all the rest of it. So I'm super lucky to have met them. So.
Tzakhi (03:26)
So what was the business that you built?
Mike Bank (03:31)
What businesses have I built?
Tzakhi (03:32)
No, when you combine with these two, so what was the startup that you created?
Mike Bank (03:40)
Yeah, so they were running a VC actually. So they had, they'd already built a really profitable business and they wanted to get to kind of give back. And they thought the best way of doing that for them at the time was to start a VC. So they got a bit of external capital and invested a ton themselves. I suppose these days we call it a CVC, so a kind of corporate VC, but they weren't a corporate, an SVC I suppose, a startup VC.
Tzakhi (04:01)
Yeah.
Mm -hmm.
Mike Bank (04:06)
So they were funding it themselves from the cash flows that their business was generating and they had some external investors too. So initially it was a VC just investing in really early stage startups. And I, as an angel, invested even earlier. So I co -invest with them. They didn't pay me, but we worked together and I got access to DealFlow and to their know -how. They got access to me.
And that's how we first started. And then in about 2014, we started a venture studio before they were called. And from there, we spun something out. It was, I suppose you'd call it a B2B2C platform play is what you call it these days. And we did in hindsight a lot wrong, but we managed to spin it out of the studio to raise some external VC for that as well.
and run it for around 12 months. But we had what was back then a series A crunch. So our metrics weren't good enough to attract investors at series A, and we could see the runway running out. So that unfortunately failed, although I think if we had been able to, well, if we've been capable and willing to carry on, that would have been successful. I think we're a bit too far.
ahead of the curve with that particular business. But there are businesses like that that are flourishing today, 10 years later.
Tzakhi (05:35)
Yep.
But at least you were able to learn a bit of stuff and I think, I imagine this is what led you to building Underdog now.
Mike Bank (05:52)
Definitely. And I had a ton of experiences in the 10 years after that as well. So I went through Antler back in 2019, who I think are now the most prolific early stage investor globally. But back then they were just starting out. I think they were founded in 2018, maybe in Singapore. They just launched in London. So I was part of that first accelerated cohort there. And again, I kind of went in a little blasé. I thought, you know, I've been around the block. I know a lot.
And there was a ton that I learned by being part of Antler, both good and bad, right? As in what to do and what not to do. So that was an experience. And then I founded another startup after Antler. So I came out of Antler and I was chomping at the bit to get going with something. And the business that I pitched to them that they didn't invest in, but that I was going to go ahead with was...
something that at the time and still to this day, right, I really enjoy, which is the intersection between IRL in real life and URL online. And I mean, I've got so many side projects going on. I've got this weird scanner personality, right, exactly. I can't like sit still and do one thing.
Tzakhi (07:10)
Okay.
Mike Bank (07:11)
I don't think I'm neurodivergent. I do work with a business called Divergent Supplements, which is run by Steph Hamill and a couple of others. And I don't think I'm neurodivergent, but the supplements they give me do help me to focus. But even then, I still need to be juggling many things, which is why I think like VC, Accelerator, startup investing, and frankly, even investment banking does suit someone like me because you're always working on multiple projects at any one time.
Tzakhi (07:26)
Okay.
Yeah, and you're always excited about different startups and different things that you're learning about and meeting.
Mike Bank (07:41)
and one, yeah, 10.
And you hit the nail on the head there, right? I've got like this voracious appetite to learn, which I think for anyone who's investing in startups is really, really important. And, you know, without going too far back, you know, at school, most people in what we call high school, I suppose, and the Americans call college, you do maybe three subjects, maybe four. I did seven. Cause I was like, well, there's all these gaps in my timetable, right? And I just want to learn more. And even at university,
Tzakhi (08:11)
Okay.
Mike Bank (08:18)
I studied philosophy, but I studied philosophy because it enabled me to take lots of electives. So I did all sorts of, you know, anthropology, psychology, social sciences, right? I'm not a hard science guy and I'd probably never be a deep tech investor or anything like that. But when it comes to startups, yeah, I just love to learn and okay.
Tzakhi (08:37)
Yeah, I did that too, by the way. And yeah, in university. Yeah, I took psychology as my major and then it was like general studies. So I just took a lot of courses and a lot of topics.
Mike Bank (08:51)
And a lot of countries don't allow you to do that. We're very blessed in the UK at least that you can. I mean, we're not required to specialize. I think on the continent in Europe, from a very young age, you need to decide what you want to be. And I remember when I first joined Citigroup as part of that incoming class, there weren't that many Brits actually, to be frank. It was quite an international class, maybe a function of the bank being a bold bracket international bank.
And I remember talking to this French chap and he just couldn't believe that I'd studied philosophy. He was like, well, I was studying finance from the age of 16 in order to be here. How have you managed to do it? And for me, I think that is one of the blessings of the British education system is that we don't need to specialise. We can keep an open mind. And most of my life has been focused around optimising for keeping doors open, ensuring there's optionality going forwards.
Tzakhi (09:48)
So you still do that. You work with a lot of startups and when you work with startups, you each time get a door open to a new world, a new idea, a new niche in the market. So maybe tell us a bit about your work now with startups at Underdog and also what from all this fast experience that you've had in the startup world, what is the main thing that you think?
you put a stress on when you talk to startups nowadays.
Mike Bank (10:24)
Definitely. Well, I'll give my take as in like what I had, which might be interesting to people. And then maybe we can talk more about our way of working, which I think will kind of feed into the kind of five takeaways as well. So it was at my last startup and I was the, I guess, number one employee slash the first co -founder hired by the...
Tzakhi (10:38)
Yeah.
Mike Bank (10:51)
former COO of Google in Europe, to essentially build his later startup, his idea. And he'd never really built startups before. What he had done is built, you know, he worked for Google and built a big ad tech company, or gone and been the CEO of that. But he hired me, because he saw something in me, I suppose, he ran a big recruitment process. And I learned a ton from him about recruitment, off the back of that, actually.
And that's what I'm a big believer in. You look at what works and you beg, borrow and steal essentially. Yeah. You kind of hack other people's systems and you take the best bits and apply them going forwards. And I think I did ask him once, or maybe he just volunteered. I said, why the heck did you hire me? Or maybe he just told me this and he said, Mike, one of your superpowers is this ability to connect the dots. And he said, you've got a breadth of experience. I've done a ton of stuff, right?
And because you've got that breadth of experience, you're able to take learnings from one area and apply them to another. I was like, right, okay. I've never really seen that in myself, but it totally clicked. As soon as you said it, I was like, wow, this makes sense. Okay. And that's essentially why I keep my options open and I like working with as many people as possible. And we're having a bit of an internal debate at Underdog at the moment.
As to whether or not we want to focus and we'll talk more about what we're doing there later. But do we want to focus on one specific industry or vertical or type of business model? Because right now we're stage specific. We go very, very early stage. We're a bit like an Abner, a day zero accelerator. I .E. people can join us without even an idea, without having started anything. All they need is a team. Oh, yeah. No team. Yeah. As individuals for sure.
Tzakhi (12:38)
and without having a team, just as individuals.
Mike Bank (12:45)
And that's where we differ from an accelerator like Antler or Entrepreneur First. And that is from the pain of my experience at Antler, to be frank. There was a lot of good there, but this principle of getting a hundred people into the room, all of whom are motivated to start a business, but may have different motivations, et cetera, but also all of whom, at least at the time, were or were supposed to be strangers to one another, and then forcing them in a matter of weeks to...
coalesce and form a startup team. And we know, right, especially at the early stage, you're likely to be working on that startup for five, 10, 15 years, right? So it's almost like a blind date that leads to marriage in two weeks. And my prediction, having lived through it, was that a lot of those startups would not survive because, again, as we know, the stats tell us one of the key reasons for startup failure, top five reason,
is co -founder conflict. And that is the beginning of the...
Tzakhi (13:47)
Yeah. And not every startup needs co -founders. Some startups only have one founder. That can also work.
Mike Bank (13:56)
And a lot of these, this is again, like a little bit of an education piece. A lot of VCs will only invest in teams. And of course there is enormous benefit to having a team. No doubt, right? And I've got a co -founder, Steve Franco, in almost everything that I do at the moment. And I couldn't do it without him, or I wouldn't do it as well, that's for sure. So finding the right co -founder is great, but I don't think that needs to happen at day zero.
I think that can happen later and there are different ways of bringing people into the business at different stages and incentivizing them and frankly de -risking it for them so that you can get the best quality person on board.
Tzakhi (14:34)
Could we say that you're like a pre -accelerator?
Mike Bank (14:38)
That's almost how we talk about ourselves now at Underdog. Yeah, a pre -accelerator for people who have got this burning desire to start a business, but for whatever reason, they are an underdog, i .e. they're not in the game already and the odds are stacked against them. And we don't offer a silver bullet, right? And I always say, if anyone does offer you a silver bullet and says, just do this and you will succeed,
No, you know, in startups or outside, they're probably a charlatan and you shouldn't listen to them. So we definitely don't offer a silver, a silver bullet. But what we do say is we probably have an ability to stack the odds slightly in your favor. That's all that we're trying to do. Stack the odds slightly in your favor and hope that you can succeed in some way, shape or form, or at the very least learn from this and then bounce back and do something else. And I think that's another important part. And.
something that's maybe missing in terms of what we do or anyone does. And I spoke with Tristan, who was the partner at Ignite, which was another very early stage accelerator that I invested in as an LP back in 2015 or 16. And he was saying, so a lot of VCs track their anti -portfolio. Who did we not invest in that's then gone on to do well?
which is interesting, right? And then you try and learn from that and figure out why you didn't invest so that you can do better later. But what Tristan also did is he tracked the, I don't know what you call it, right? But the legacy portfolio, I suppose. So founders who had started off and built their first startup in Ignite and had been backed by them, and that startup had maybe done moderately well.
They've maybe had a 50 million pound exit or something like that, which is great and life changing for many people. But what he then did is tracked what happened after. What did those founders then go on to do? And yeah, I forget the exact stats, but it was like multiples of what the Ignite funds have returned. And if there is like for me, if there's a way to have like an alumni fund of some sort.
Yeah, we backed you in the early stage, hopefully built a great relationship and we've helped you. When you then go on to do your next startup, we will then back you again. And this is where the PayPal mafia and this type of stuff happens, I think, right? Rather than...
Tzakhi (17:08)
But you're talking about a relationship kind of based investment, not signing them up on some kind of term that commits them to that.
Mike Bank (17:19)
No. Yeah. Yeah. No, I'm against anything that kind of forces people. Again, I'm big on optionality, right? People should have options. So yeah, I would shy away from forcing anyone to do anything, but I think having that relationship is super, super important. And that's basically what my life is built around as well. Right. And as a startup founder is also what you should be doing. Building relationships, planning for the future and in my view, trying to help as much as possible.
Okay.
Tzakhi (17:50)
Okay, I know that at underdog you also have a methodology which is around validation, so maybe you want to say a word about that.
Mike Bank (17:59)
Absolutely, yes. So at Underdog, we look at ourselves almost as a validation studio or a validation accelerator. And what we see happen all too often, and we see it more probably in Founder 15, which we'll talk about in a bit. So Underdog is for people who've not yet started, and we help them to start. And Founder 15 is for people who've already started, so they're probably not underdogs, they're already on the road.
but they've come across some sticking points or some roadblocks that we help them to shatter. And like so many founders come to us at Founder 15 and they say, right, Mike, I've got, you know, I spent the past two years and I've spent all my life savings building this product and now I'm really struggling to sell it.
And I liken it to the boxer that's already been punched in the face and says, well, how do I not get punched? Unfortunately, you mucked up a long time ago, right? You should have done other things first. You've come at this the wrong way. And that's what we try and again, like slightly de -risk and slightly move the odds in the favor of the founder at underdog, the pre -accelerator.
Uh, and what we try and do there is say, well, actually go out and understand, you know, choose your playground is ultimately what we say. We say, choose your playground based on a whole variety of things, but your network, network and connections, your skillset, your experience, the resources you have available to you as well, for sure. And then we have a fifth kind of bonus, which is your reputation in the specific market, which can be super helpful too, but ultimately.
with the, you know, what is the confluence of all of that or the intersection of all of those points, pick your playground and then choose who you want to play within that playground. Cause the world is your oyster really. And the reason we say this is having run three, I think four cohorts of underdog so far. Some people, some of the founders were reaching a sticking point where they were like, right, I've tried something.
I've gone out and tried to validate it, which is what we pushed them to do. Go out there and try and sell before you build one of our key mottos and validate that people actually want whatever it is that you are proposing to offer them. And they were saying, well, I've failed in this area. I'm going to try something else. So they'd be like, I don't know. I'm going to do something in B2B SaaS for e -commerce businesses. Oh, that didn't work. Okay. Let me try B2C marketplace in something completely different. And.
Tzakhi (20:12)
Yeah.
Mike Bank (20:35)
I had to sit down and say, okay, there's something not coming across in how we are explaining things. We don't want you to be dotting around and trying different things. That's kind of our job, right? If you want to do that, you shouldn't be a startup founder, in my view. As a startup founder, you've got to be extremely focused on your playground and on your audience. I .e. who within that playground do you want to play with? Do you want to help? And as soon as we started verbalizing that and focusing on that,
that there's one particular, that they're two brothers actually, we call them the BG bros, and they were bouncing around and I said to them, look, enough, pick your playground, pick your audience and work from there. And as soon as we said that, they just rocket shipped because they start.
Tzakhi (21:20)
So you're saying when things don't work, instead of trying to move to a different market, just to iterate within the same market if you've done a good job choosing it until you find what clicks.
Mike Bank (21:31)
spot on. Yeah, you're failing forwards and you're reaping the benefits of the learnings rather than starting from scratch again. And I think that is a common thing that people, again, like maybe it's the profile of people that we attract. They're generalists, we're generalists. They're excited about starting a business and they want to do something, but they don't really care in what area. That can be a failure, right? So we help them to identify what is core to them. What they be, you know, it's like,
Ikegai model, what you're good at, what the world needs, what the world's prepared to pay for, and what you enjoy. And when you find the intersection of those points or the center of those concentric circles, that's when magic starts to happen.
Tzakhi (22:16)
Yeah, and I know that your methodology is also about first trying to do that without raising capital and then going to raise capital once you've had some kind of initial validation. Make it easier for yourself.
Mike Bank (22:29)
spot on yet. And actually we say, create your offer off the back, obviously of customer discovery. And a lot of people shy away from customer discovery and they think they know best. And like the common refrain I get is if you'd ask someone in the 1700s, if they wanted a motor car, they'd look at you a bit funny and they'd say, no, I just want faster and more horses. But that's a fundamental misunderstanding of customer discovery. In customer discovery,
I didn't say this, but you know, I'm going to borrow it. In customer discovery, the customer owns the problem. What is the outcome they want to achieve? But you as the founder own the solution. So you should never be going out to the customer and say, do you want a motor car? You try and understand what it is that they do want. Maybe they want to get somewhere faster or without needing to feed and water a horse and all the rest of it. And then you come up with a solution to whatever desired outcome.
they want to achieve. So something they want, but don't have, or a problem that they have, but don't want. And that's how we approach it. And then we present or we tell our founders to present an offer to their prospective customers, to their audience, to the other people that they're playing with within their playground and see if they want it. But don't just ask them, do you want it? Actually try and sell it to them. And off the back of that,
Either say, oh, I'm really sorry. We don't have it yet. You know, be transparent and upfront, but we'd love to work with you to build it or deliver it to them in a non -scalable way. Cause again, a lot of people think that technology is the core of the business. In my mind, it's not. And again, maybe this is a function of not being in deep tech. I think there are certain businesses where the technology is core. Well, actually fundamentally in any business, the outcome.
is core and is key. Helping an audience achieve an outcome is what's important and that's the foundation of the business and then the technology simply boosts that. So rather than focusing on technology, we focus on outcomes.
Tzakhi (24:37)
Okay, Mike, this is all very interesting stuff and I think very valuable for early founders. Maybe we, let's kind of try to wrap up with, as we do here, five tips that you have for startup founders. From all of your vast experience and from your work now with an underdog, please give it to us.
Mike Bank (25:02)
All right. So first and foremost, understand your why. Why the heck do you want to become an entrepreneur in the first place? Because as we know, the failure rate is extremely high and depending on which stats you believe, as much as 97 % of all startups that launch fail in their very first year.
and many, many more never even start in the first place. So unless you understand your motivations, your why, why the heck you want to start a business, you're going to find it really, really tough to pick the right path ahead for you. Because as an example, if you simply want to make loads of money versus you want to have a positive impact on the world, two motivations that can be aligned but might be in conflict, the path that you take for your business might be fundamentally different.
We get everyone that we work with at Underdog and at Founder 15 to do a founder motivation survey. Simplistically, 10 statements that they reorder from most important to least important to them. So understand yourself first, absolutely critical. And secondly, identify your spike or your edge. What is it that you have the potential to be world class at?
Tzakhi (26:04)
Okay, excellent.
Mike Bank (26:15)
Because the world of startups is not a zero sum game. It is possible to, you know, for many startups and many founders to actually create value in the world. And that's what makes it so exciting. But at the same time, in order to optimize your chances of creating value, you've got to understand what you are good at and not just good at, but have the potential to be world class at. So that's the second most important thing. And again, that will be then driving you towards your playground.
So once you know what you're good at and you've identified your superpowers, you can then choose which area you want to work in. And I would add to that also who you want to work with. So which audience you want to serve and stick within that playground. Cause as we talked about before, if you're bouncing around different ideas, you're not getting the benefits of the learnings that you have made, the failures, the mistakes. They should actually allow you to, they should be your springboard into moving forwards.
as opposed to saying, right, I failed, I've jumped into the water, it's not worked, let me start again. So that's the third thing, picking your playground and picking your audience. The fourth thing, and probably the most important thing, is to sell before you build. And we get a ton of founders who are very product -focused. And this is particularly the case in technical founders, who've got that ability to create products.
Tzakhi (27:23)
Okay.
Mike Bank (27:38)
But even non -technical founders who aren't fixated on technology think they should. And this is because, you know, I mean, technology and software is wonderful. Software, like media, like this podcast, right? We'll record it once and then we can replicate it into perpetuity for minimal cost. So it can have enormous impact. But actually that is stage two, right? Before you film a podcast, you've got to have something to say.
Before you build technology, you've got to have something to build. And technology should be that booster, that supplement, that ability to make yourself redundant. And we talked about Tim Ferriss in the four hour work week earlier, right? One of his big things that really stuck with me was he wanted to make himself redundant in any business he started. Probably not worked in the podcasting game that he's done. He needs to be there, right? But certainly in his original supplements business.
He tried to remove himself from every system, every process and plug the holes with other people. So that's exactly how we should use technology in the startups that we build. We, in my view, should be doing it manually at first, learning what works and what doesn't, and then build the technology to make us redundant, not be product focused. So that's tip number four. And then tip number five is don't be too fixated on raising capital.
in my view, especially in the current funding environment, actually go out there and prove that people want and are prepared to pay for whatever it is that you are proposing to offer them. And it will make it way, way, way easier to raise capital off the back of it. And Jamie Halford, who you had on your podcast the other month, he's a good friend of mine, and he talks about proof and promise, the two different ways of raising capital.
And promise is definitely possible, right? You can go out there and sell a vision and promise to achieve things. And if you've got the right pedigree and the right pitch, investors can back you. But those founders are few and far between. For most of us, and certainly for the underdogs, you've got to go out there and you've got to prove. Yeah, you make a promise and then you prove that you've achieved it. And with all of those traction points, all of...
all of that goodness, that is what you can then take to market and go and raise off the back off and say, actually, look, it does work. We said it was going to work. We've gone out, we've built it. It has worked. Now why don't you back us to get us to the next stage?
Tzakhi (30:14)
Okay, excellent. I think these are very useful, especially for people that are just getting started or thinking of getting started with a startup. I'm guessing for people that are already in MidJourney, it can help them maybe correct course or also reflect on how they started their current venture startup. And Mike, thanks so much for coming. This is very, very useful and very helpful. And I know that...
People that just want to get started, they should probably go to underdog and sign up there. People that already have a startup and need help operating it or need advice, they should offer that at founder15. And we'll put those links in and yeah, I guess we'll add the link to your LinkedIn account.
Mike Bank (31:08)
That would be lovely, yes, please do. I'm always open to connections.
Tzakhi (31:12)
Okay, that's great. Thanks so much.
Mike Bank (31:16)
Cheers, Aki. Thanks, everyone.
Tzakhi (31:17)
Thank you.
