Today we’re happy to welcome the Master of Chaos, Fred Destin, Founding Partner of Stride. Currently investing out of Fund II with a total £220M AUM with an established portfolio of approx 25 companies per fund and recent investments including Triver, Conceivable.Life, TechWolf and Hofy and some notable investments counting Zoopla, PillPack, Superhuman, LinkTree, Deliveroo, Secret Escapes, DailyMotion, and Integral Ad Science.
This was one of the most honest and gripping interviews we’ve done on eu.vc, so using the vocabulary of Stride, let us say: Dissenters welcome.
Fred’s Journey into Venture
Fred Destin, the maverick venturer and Master of Chaos, embarked on his venture odyssey amidst the tumultuous dot-com bubble of '99. Graduating in '92, Europe was an arid wasteland devoid of the thriving startup culture that would ignite the soul of this future European Venture Investment legend. Adrift from his future calling, he succumbed to the seductive allure of derivatives and the drudgery of corporate finance, meandering along a path far from his destined rise to startup investment legends.
But as Netscape emerged, Fred’s attention was captivated. Amidst whispers at Goldman, Fred was already party to clandestine conversations about a peculiar entity known as “Google”. In retrospect, the rise of the web ignited a social revolution that resonated with the defiant spirit of French youth, evoking memories of the frothy wave of crypto in 2018.
Hierarchies be damned, the rule breakers were leading the charge.
In a serendipitous twist, Goldman promoted Fred, prompting introspection and disillusionment. Gathering insights from weary 45-year-olds, he confronted the dismal realities of corporate existence. Resolute, he bid farewell to the established and ventured into the incubator realm.
At Speed Ventures, he took a brave pay cut, rediscovering the joy that erased the Monday morning blues. There, he found his true calling—a fervent devotion to the art of venture, transcending the mundane confines of a mere job.
At Speed Ventures and Online Markets Technology Investments, Fred molded his acumen as if in a cradle of entrepreneurial dreams, testing his mettle and finally leading him to a new home.
Altas Venture beckoned—a name steeped in '90s glory, albeit past its prime. Amidst a labyrinthine maze of too many partners and bloated funds, Fred thrived, orchestrating a transformative turnaround at Atlas Venture with the indomitable Jeff Fagnan. Thirteen partners became three—a phoenix rising from the ashes.
In Boston, the Atlas Venture name bore the weight of a fallen titan, shrouded in negativity. But armed with nothing but sheer determination, Fred, Jeff, and their ally Ryan Moore stormed the battlefield, beseeching others to join their cause. And so, they paved their path, unsaddled by preconceived notions.
Seeking a new chapter, Fred set his sights on Accel —the pinnacle of prestige. Yet, a dissonance arose within the rebel. The allure of industrial-sized funds lost its luster. The ambiguity and creative spirit of early-stage ventures tugged at his soul, prompting a yearning for the untamed.
A desire burned within Fred to forge a foundation rooted in trust—a sanctuary where the power dynamics of founder and VC would yield to collective greatness. Stride emerged as the embodiment of this vision, devoid of empty claims to value add, a bastion of trust to shape a shared destiny. A place to thrive in Chaos. A place to build a firm that will thrive on the Stride values:
Hear Fred tell his story below.
Take a stance round: To fix the system, we must fix the man.
In a yet-to-be-released episode with Simone Brummelhuis from Borski Fund, she shares the controversial statement that “to fix the system, one must first fix the man.”
We challenged Fred to take a stance on this. What ensued was one of the most honest, gutwrenching answers, as the quote compelled Fred to share a profound and deeply personal revelation.
Fred shared with us that he believes listening, truly listening to women, holds the key. But first, inspiring to us all, he acknowledges unconditionally the frustration, the anger, the justified collective fury simmering beneath the surface.
In our quest for change, Fred recognizes the pressing need to pause, to take stock of the systemic forces at play. The relentless pursuit of progress based solely on performance and the grind has left scars on both genders. It's time to challenge the norms. Acknowledging this, Fred shared with us that he has embarked on an audacious undertaking that he refers to as "Band of Brothers," Together, he and a group of other men have embarked on a transformative journey, guided by a seasoned feminist therapist. Within this safe space, they confront their shame, guilt, and unchecked anger—unearthing patterns that have held them captive for far too long.
Fred envisions a curated curriculum, a roadmap to redemption. Origin stories, shadow work, and introspection form the stepping stones towards personal growth. They’re forging a movement—a rallying call to themselves if no one else, seeking redemption and a chance to rewrite their narratives. The divine feminine beckons, a beacon of change that can reshape identities for the better.
While the allure of success looms, Fred remains steadfast. This endeavor isn't merely about profit—it's about making an impact, influencing the lives of men and society on a profound level by rewriting the rules of engagement.
Deep Dive: Founder Value Add and false VC narratives
The perpetual question of how one shows up as a venture capitalist and board member incessantly troubles the industry.
If we take a look at the feedback from founders, it typically ranges from poor to average, occasionally even dipping into the realm of terrible.
While there are genuine success stories, there is an evident flaw in the way venture capitalists engage with founders—a flaw that is sometimes ineffective or even harmful.
Returning to first principles and immersing himself in the founder's perspective, Fred Destin contemplated the primary requirement from a partner, particularly someone sitting on the board. One quality reigned supreme:
Mr. or Ms. VC, do you have my back?
In the wild journey of building a startup, one must anticipate chaos, relentless challenges, and moments of both triumph and near failure. This chaotic path is a well-known pilgrimage undertaken by every single startup. It's just how it is.
And unfortunately, more often than not, investors succumb to anxiety or anger, often arising from their own anxiousness.
The problem with VC, is simply that people are too busy. They think they understand and they use dramatic shortcuts to decision making.
We all know the story. You're on 12 or 15 boards, you land in a boardroom, you've read the board pack in the taxi and the company’s in trouble. You have two hours and by the end of the two hours you want some kind of outcome. And then the inevitable happens:
They storm into board meetings armed with a figurative baseball bat, ready to strike the founder's head.
Blindly neglecting that the founder has likely lost countless nights of sleep over the past six weeks, fully aware of the missed numbers and the company's struggles. There's no need to reiterate what they already know. Instead, it's imperative to sit down together and strategize, to dig into the root causes and find solutions.
Too often, we as VCs are destroying the energy of our founder. What is the most valuable resource we have in the world that is not replenishable easily? It’s the energy of the founder. So I think in terms of an Energy Balance Sheet - am I adding to it or am I distracting from it?
Part of the misbehavior on the part of VCs likely comes from a well-placed desire to make decisions quickly to help the companies, and the problem is always in the quality of the analysis.
Instead of thinking, your founder doesn't know what he or she's doing, why don't you start by saying, they probably have thought about this very carefully for the last few months and are on top of things, and have thought about the many different viable options. If people just showed up in the room with that kind of attitude, we'd be in a much better place.
Also: Don't make the decision real-time. Let the introvert in the room go back, internalize the data and then come back with the insight none around the board table saw. Don’t be afraid to run everything a little bit differently.
In this world of chaos, it’s imperative to ask the question: can your partners be relied upon to come forward ready to deal with uncertainties and unknowns?
More than anything, the ability of a VC to sit with someone and go; “I know this sucks, but we have to do it” is the true test. Can you show genuine empathy with the loneliness of the leader? Being a big leader is lonely as hell, and being a leader of a startup is lonely as hell and hard. As a VC, you need to have the experience to be able to show empathy with the true circumstances of founders.
Know your spheres of potency
Continuing his train of thought, Fred contemplated the importance of VCs knowing their spheres of potency. Each person has their own areas of expertise, their underwriting surface where they excel and can genuinely assist founders.
Looking at a partnership, the questions become: What is that sphere of potency for each person? And can they effectively deploy it to assist founders in a meaningful way? There are countless models and approaches that can be adopted.
Numerous models exist, an obvious one that most would recognize is that of being a "ghost in the machine" like Y Combinator, where the product is the network. Focus is on facilitating introductions and connections.
Fred took us through examples of how the spheres of potency concept has shaped the Stride partnership:
Gabby thrives on narratives. Narratives propel the world forward. They shape brands, instill culture and values, craft messaging, and influence sales and recruitment. Gabby's zone of expertise is in constructing narratives, breathing life into a startup's journey.
And so Gabby goes across the Stride portfolio asks the question “can I help you build better narratives? Can I help you understand your culture and values? Can I help you understand your messaging? By the way, can we build a narrative for fundraising?
So if you look at the makeup of the team that we've put together at Stride, everybody has some sphere of expertise that is their own and that they can deploy specifically across our portfolio.
Lina's story is nothing short of fascinating. She started off at a school for gifted children, which set the stage for her exceptional journey. Her path led her to Secret Escapes, where she quickly climbed the ranks, securing six promotions in just three years. Talk about a rising star.
In her role as the head of growth, Lina dived deep into various aspects of the business. She effortlessly maneuvered through data, analytics, customer relations, and product development, gaining a comprehensive understanding of the growth engine powering Secret Escapes. She possesses a unique ability to bridge these different domains, effortlessly connecting the dots.
When it comes to the go-to-market side of things, Lina shines brightly. Her expertise in navigating the intricacies of bringing products to market is second to none. She knows how to strategize, position, and execute with precision. Lina's multi-faceted skills and extensive experience make her an invaluable asset to any team or project. Her ability to synthesize knowledge from diverse areas and apply it cohesively is truly remarkable. Lina is the go-to person when it comes to charting a successful go-to-market strategy.
Fred’s value-add, on the other hand, is different still:
I derive simplicity out of complexity.
Let’s paint a picture: your team of 12 or 14 is tangled up in the mess that has become your collective consciousness. Disagreements arise, language falters, and focus wavers. This is where Fred excels as he gathers everyone in a room for a day-long session and by the time they emerge, clarity will reign. Clear focus areas, decisions on what not to do will have been made, and the entire team will have undergone the disagree and commit process. Facilitating this transformation is Fred's superpower.
With his extensive experience spanning more than 40 startup companies, he has encountered every imaginable mode of failure. These analogs from his past help him unravel complex challenges and provide invaluable insights. Fred excels at simplifying the convoluted and untangling the chaos so startups can thrive.
But Fred is equally conscious that not every domain is his stronghold. Commercials? Definitely not his forte. Network building? Not his cup of tea either. Fred identifies as a thinker, a creative mind.
His strengths lie in contemplation and idea generation. Customer introductions might happen by chance, but that's not his primary offering. He refuses to pretend to possess skills he lacks, placing utmost importance on self-awareness and transparency when working with founders.
The crucial question is whether the areas of expertise for a VC are evergreen. Most specific techniques and strategies, such as growth hacking, have a limited lifespan, typically no more than six months. To remain valuable as investors, we must continuously evolve our skillsets, adapting them to consistently benefit companies over time. That's where the game changes. Which is why at Stride, Fred sees it as an ultimate goal that they all become exceptional leadership coaches. By helping founders and teams enhance their leadership capabilities, they can perpetually generate value. In a firm where each partner is a world-class leadership coach, in addition to being skilled investors, that firm is indispensable, immune to the threat substitution.
Now, Fred points out that we have a problem in VC. Namely that too many individuals lack the profound understanding and expertise required to truly navigate the intricacies of building successful companies.
In Europe, where numerous intelligent individuals reside, Fred questions whether they have delved deep enough, displayed sufficient commitment, and possess the specific skills and expertise to truly make a substantial impact.
Whether it involves influencing decision-making processes, making strategic hiring choices, or successfully securing funding, Fred believes that these areas demand a depth of knowledge and a level of care that is often lacking. He perceives a systemic issue where VCs feel entitled to respect merely based on their ability to write a check and secure a seat on the board. However, Fred asserts that this should not automatically grant them a sense of superiority or importance.
To illustrate the problem, Fred highlights the existence of mid-size funds whose significance in the broader financial landscape is relatively diminutive. Merely investing in a company does not confer any extraordinary status upon the VC. This prevailing perception within the industry exacerbates the issue, as individuals believe they hold immense importance by virtue of being VCs. The constant flattery and attention from entrepreneurs seeking their funding on their own terms further perpetuate this ego-driven dynamic.
You know, people call me a legend. I'm like: I'm a legend of what? Like, I’ve had a few exits. But, I mean, I'm a divorced dad of three with a messy house. That's who I am. There's like, no legend inside of here.
In the episode, Fred advocates for a shift in mindset, where the focus is placed on genuine expertise, specific skill sets, and a deep understanding of the craft of building companies. By fostering an environment that values substance over superficiality, Fred envisions a more balanced and effective venture capital landscape.
Clearly, this critique of the industry exposes the need for introspection and a reevaluation of the dynamics between VCs and entrepreneurs. It encourages a departure from the ego-driven mindset and a renewed emphasis on genuine expertise, fostering a more meaningful and mutually beneficial relationship between investors and founders.
Fred’s shout-out 💌
Fred Destin directs his shout-out to the dynamic duo, Matt Robinson and Hiroki Takeuchi, whose journey deserves special recognition. It all began when Hiroki, deep in contemplation about company strategy while cycling through Region Park, unexpectedly collided with a stationary car, resulting in a grave accident that dramatically altered his life overnight.
In the midst of this challenging ordeal, Matt, Hiroki's co-founder and the mind behind Nested, which had secured funding from esteemed sources like GFC, promptly resumed full-time management of GoCardless.
Yes, you heard that right—running not just one but two companies simultaneously. The level of agility, precision, and unwavering dedication exhibited by Matt left an indelible impression.
But that's not all. Matt's unwavering commitment extended beyond the boardroom. He stood by Hiroki's side throughout his hospitalization, going above and beyond to ensure that the financial burden of medical care was expertly handled by the investors steering the company. Amidst a series of daunting challenges, Matt adeptly balanced the responsibilities of two thriving ventures, demonstrating his incredible ability to thrive under pressure.
Meanwhile, Hiroki's tenacity and remarkable resilience paint an equally awe-inspiring picture. Despite finding himself confined to a wheelchair, enduring intensive rehabilitation, and grappling with agonizing pain, Hiroki wasted no time in getting back on track. Swiftly resuming communication via email, he steered his multi-billion dollar company with unyielding determination. Hiroki's journey was one of adaptation, requiring him to reconfigure his living space to accommodate his new mobility challenges. The sheer turmoil he experienced in every aspect of his life showcases his unwavering spirit.
Together, Matt and Hiroki exemplify unwavering solidarity as they navigate the treacherous waters of entrepreneurship. In their shared endeavor, Matt emerged as Hiroki's savior, rescuing not only him but also his business from the brink. Fred Destin expresses his profound admiration for Matt's ability to shoulder an immense load, juggling copious amounts of information and responsibility across two thriving enterprises.
And let us not forget Hiroki's triumphant comeback—a testament to his courage and determination. His ability to rebuild his life amidst the chaos and agony is awe-inspiring. Together, their collective efforts have contributed to the establishment of one of the most remarkable payment companies to emerge from the United Kingdom.
Fred Destin hails their journey as a heroic odyssey, an arduous trek through adversity. Their unwavering commitment, perseverance, and unwavering support for one another exemplify the true spirit of entrepreneurship in the face of hardship.
Fred’s Three Biggest Learnings in life
If you haven’t gathered it yet, Fred Destin brings a unique blend of philosophical and spiritual wisdom to venture capital.
Learning #1: Acknowledge the infinite power of presence
Reflecting on his experiences, Fred’s first key learning is acknowledging the infinite power of presence. He believes that most people spend their lives consumed by thoughts of the past or the future, missing out on the beauty of the present moment.
To be present is to allow yourself to experience the infinite beauty of the world and your own life in it.
By being fully present, one can immerse oneself in life's richness and cultivate deeper connections with others. Fred likens it to savoring a cup of coffee or experiencing a profound human interaction, where true connection and celebration can occur.
The costs of not being present are infinite and enormous. So to give you an example, maybe your little girl is coming home from school, and she's upset, but you're not feeling her cuz you're thinking about that podcast you have to record tonight. What's the cost of that loss?
Learning #2: The pointlessness of attaching to outcomes
Moving on to his second key learning, Fred discusses the futility of attaching oneself to outcomes. He highlights the tendency to fixate on results, leading to stress and anxiety. Instead, he encourages individuals to focus on the process and let go of the need for specific outcomes. By accepting fear and exploring its root causes, one can gain a new perspective and overcome the limitations that hold them back.
The futility of attaching to outcomes. We're constantly talking to the voice in our head, stressing us out or making us hopeful. By accepting fear and exploring its root causes, one can gain a new perspective and overcome limitations.
Learning #3: The power of relating better
Fred then delves into the power of better relating, his third key to learning. He believes that personal growth and self-awareness are essential for building meaningful relationships. Individuals can foster trust, vulnerability, and companionship by understanding oneself and others deeper. Fred acknowledges that this aspect of personal development is uncomfortable and challenging, but the rewards are immense, offering freedom and enhanced connections.
The beauty of personal work is that over time, you understand yourself, the stories you tell yourself, and how you show up better and better. Personal work leads to freedom from conditioning and trauma, enhancing the quality of relationships.
While Fred's insights resonate strongly with his philosophy, he clarifies that his primary focus with founders lies in core strategy and business-related matters. He believes his highest impact is helping founders navigate the complexities of business models, pricing, and go-to-market strategies. However, he acknowledges that personal work and self-awareness greatly enhance the quality of these discussions.
Regarding firm building, Fred emphasizes the importance of decision-making processes and fostering trust within venture capital organizations. He advocates for a shift towards systems thinking and meritocracy, where debates are centered on the scalability and feasibility of ideas rather than personal opinions. Trust and aligned incentives are crucial for maintaining healthy partnerships and preventing conflicts.
Trust is fragile and needs to be rebuilt time and time again. Build an internal culture and incentivize people in the right way. Focus on culture deeply and make sure your decision-making engine is protected.
Fred recognizes the delicate balance between building a championship team and maintaining a strong company culture. While venture capital requires diverse skills and qualities, including networking, assessment, and strategic thinking, he acknowledges the challenges of finding individuals who possess this holistic blend. Building a championship team is an ongoing learning process that requires humility and constant adaptation.
🔫 The Quickfire Round 🔫
If you were stranded on a desert island, what book disk and luxury item would you bring?
If stranded on a luxury island, I would not bring anything to read or listen to. I'd bring stuff to make with me.
I would want a big fat box of journals and many pens. And maybe something to draw with or work wood with. And the music would be in my head.
What advice would you give your ten year younger self?
Number one: Take way more risk. When you're young, you can take every risk you want in the world, and you should. You have no mortgage; you have no kids. What's the worst that could happen? So do crazy stuff early in your career.
Number two: Start personal work earlier. I cannot express how much doing the seeking, and the personal work has helped me become more connected to the world and others around me. And I think it is a lifelong journey and a great one. And I would wish I'd started 10 years ago earlier.
What are your top tips for emerging VCs across Europe who are fundraising?
When Harry Stebbings and Fred embarked on their journey with Stride, the initial days were tough financially and in terms of skepticism from others due to the unconventional team dynamic. However, they consciously adopted a mindset of determination, refusing to accept failure as an option. It became a crucial prerequisite for their success, though it didn't guarantee it.
The second piece of advice Fred gives is to avoid being generic. LPs encounter countless pitches, and standing out from the crowd is essential. For instance, focusing solely on underrepresented founders is not sufficient in itself. You must identify your unique strengths and differentiate your value proposition. This process involves truly understanding what you excel at and effectively demonstrating it, rather than merely filling slides in a deck.
Fred’s third recommendation is directed at emerging VCs who often overlook crucial aspects like portfolio construction and reserves management.
You have no excuse not to be sophisticated when talking about portfolio construction and reserves. All the knowledge is out there. Learn. This matters to LPs.
You must become a student of venture and develop expertise in portfolio diversification methodologies, such as Montecarlo simulations. Demonstrating your ability to be a competent money manager is essential in gaining LPs' trust and investment.
Lastly, don't shy away from making the ask. Never leave a meeting without clearly expressing your desire for financial support. In sales, everything hinges on making the request and pushing for a commitment. When closing deals, inquire about the likelihood and scale of potential investments while also discussing the subsequent process.
Making the ask is crucial.
What’s the most counterintuitive thing you’ve learned in venture?
Investing in "Decacorns" or billion-dollar companies is a daunting task, as their potential is often disguised in the early stages. Fred reminisces about Dropbox, which initially appeared as nothing more than a feature. He recalls its humble beginnings in the athletes' venture offices in Boston, a far cry from its eventual Decacorn status.
The most challenging aspect, in my opinion, is predicting greatness.
The notion that you want to invest in Decacorns. Nobody knows what a decacorn looks like in the beginning! Everything looks tiny and fragile in the beginning.
As stellar examples of this, Fred reflects on Dropbox which when it was initially developed in the Atlas Ventures offices in Boston looked like a mere feature - it didn’t look like a decacorn at all! Similarly, Zoopla was never expected to sell for more than 150 mn pounds by most VCs in the UK at the time.
All my best investments have been the most controversial ones. I had to pound the table with Zoopla, I had to pound the table with PillPack, I had to pound the table on Integral Ad Science which is a 4½ bn outcome. I returned 700 mn in cash on this thing.
Fred’s Controversial Statement
There is a sort of trope in the venture industry that goes something like this, especially in European venture: “Great operators make for great VCs”
However, Fred shares with us that he believes this generalization is fundamentally flawed. To truly understand what it takes to excel as a VC, we need to delve deeper and consider multiple layers.
A founder who successfully navigates the journey from inception to exit and also possesses the ability to invest wisely can indeed be a phenomenal VC. Similarly, a financially astute investor who is well-versed in their domain can make for a solid investment partner.
Being an operator very often means being given a playbook that was designed by someone else, maybe in California, and then going and deploying that playbook in a local market with minor adjustments.
While this skill set may make one an exceptional manager with expertise in delegation and team performance, it doesn't necessarily translate seamlessly into the role of a VC operating at the Series A, B, and C stages. VC requires a blend of creativity, lateral thinking, and the ability to think in analogies. Moreover, as VCs, we often face resource constraints and must build things from scratch, requiring a founder's mentality.
Therefore, the oversimplified notion that operators automatically make great VCs does not do justice to the multifaceted skills and qualities necessary for success in this field. While operators may possess some of the core skills we seek, there is a need to recognize the nuanced nature of the VC role and the specific attributes that contribute to excellence in this domain.
Got provoked by this statement? Let us know!
EUVC #194 Fred Destin on the inception of Stride, his life's core learnings and advice for emerging managers