Introduction
Colin Hanna - Partner at Balderton Capital.
Balderton is multi-stage venture firm with over twenty years of expertise in aiding European founders from the initial seed stage through to IPO. According to Dealroom they have invested in over 30 companies valued at over a billion euros - among them Revolut, Sinch and Waye among many others.
Recently they’ve raised $1.3 billion, divided into a $615 million early-stage fund and a $685 million growth fund for more mature companies. The capital will be used to support emerging technology companies across Europe.
At Balderton, Colin invests in purpose-driven, product-focused founders spanning verticals including Cloud, Consumer, Crypto, and Fintech.
He began his career at Goldman Sachs in New York where he focused on raising capital for Asian internet companies, including Tencent, Nexon, and Tarena among others.
During this episode we discuss about his competitive swimming period from Princeton, the open-source movement and the crypto market.
Enjoy!
Conversation
Chapter 1: Competitive Swimming
Calin Fabri: I would like to discuss Balderton and venture capital and different trends with you. But before we go there, I want to talk a little bit about your competitive swimming period and try to learn a little bit about your competitive spirit. I found an article online that said that you helped Princeton win three straight Ivy League titles. Tell us about a memorable moment from that period.
Colin Hanna: For context, the Ivy League is not the fastest swimming league in America. People spend a lot of time studying at the Ivy Leagues rather than just training. But all that aside, competitive swimming was a big part of my career for a long time. Swimming is a sport that is unusual because you spend a lot of time alone doing it. You spend a lot of time with your head in the lane in the water, stroke after stroke, lap after lap, workout after workout. I am a very social animal. I have always loved the aspect of competing as a team. Swimming is something that you pursue individually. You are in that lane, swimming to the best of your ability. But the experience that I had in college was wonderful because while I was doing that, you were competing very much on behalf of a group of people, on behalf of a team. Certainly, the most memorable experience for me was my senior year. I was a co-captain of the swimming team with two of my teammates. We came into the league championships racing against all the other schools in the Ivy League. We were supposed to lose. It was the last evening, and we were very much, if you had tallied the scores on the basis of how everybody swam that morning in the preliminaries, we would have lost by a wide margin. We did not give up on ourselves. Actually, we went into that evening believing that we could achieve what really was statistically almost impossible: that we would win this thing. Race after race, individual after individual performance, slowly, people started to believe, one after the other. It collectively created this momentum and this palpable real belief on the deck of the swimming pool that each individual brought with them into the lane and into the water. That collective belief became a self-fulfilling prophecy. We ended up winning the championships, I think, by the narrowest margin in history. It was something like 5.5 points out of 1,000. A typical NBA basketball game is decided by about 100 points. So imagine winning an NBA basketball game by half a point. That was essentially what we did. To come from behind to do it, being a part of that team, being a leader of that team in that moment, contributing to it with a strong individual performance, but then sort of inspiring all of us to achieve what we thought was impossible, that was really cool.
Calin Fabri: I like the way that you described the collective belief and the momentum. Usually, the collective belief in the momentum gives you energy. Where do you find energy and hope when you are very far behind? What type of reasoning do you apply to say, “Okay, we can make this” even though it looks almost impossible?
Colin Hanna: I have always thought there are two kinds of competitors. I would consider myself a pretty fierce competitor. I am recognizing that about myself now. I did not think about that about myself earlier in my life, but I think if you pulled my friends, they would have all said I am a pretty fierce competitor. But the reason I would not classify myself as such is because I am maybe, let’s call it, a type B competitor. A type A competitor is, I think, a more stereotypical competitor who is focused on beating others, focused on winning by beating the other people they are competing against. I think that is a standard notion of what a competitor is. I think a type B competitor, and here is where I classify myself, is someone who fiercely tries to maximize one’s own potential in any given moment to do one’s best. I was raised really by my parents, and my mom who was a swimming coach. She went to the Olympic trials in 1976. The best thing you can do is your best time. It does not matter who you beat in any given race. It does not matter whether you got first, second, or seventh or 16th. If you do your best time, that is what you should be aiming for. Swimming is a sport where a lot of the variables are controlled for you. It is very pure in that way. You can go in there meet after meet, and race after race, and just try to beat yourselves and get better. That is the type of competitor that I am. It is the type of competitor also I think that I… At the top level of any sport, there is an athlete who is better than anybody else. Well, what continues to drive that athlete after they are already a veteran? If you are Michael Phelps and you have already won so many gold medals, you are already the best. You are not just focused on getting first place and touching the wall first. You are also focused on how do I make myself better every day. You have to be driven by acting by that.
Calin Fabri: Although you said that a lot of people would say that about you, that you were like a fierce competitor, so Tristan Hastings said, before the race, he has a killer look in his eyes that makes people like me never want to race him.
Chapter 2: Getting in the Zone
Calin Fabri: How were you getting into the zone to compete? Do you remember that? Did you have a routine to get into the zone?
Colin Hanna: I did. It is fun watching sports because you get to see people like Noah Lyles now who is the sprint champion coming out of America and the way that he gets himself amped up. Back in the day, you had a big pair of headphones on, put on a playlist of exciting music. Back in the day, it was mostly hip-hop music and rap music. Just get into a space where I was getting in touch with maybe a deeper emotional part of yourself but that you are drawing energy from, that you are drawing excitement from. You are going into that moment feeling super positive and energetic about what you are about to unleash. It is going to be the exclamation point on countless hours of sweat and tears and row up and early mornings and all this stuff that you have had to go through to get to this place. At this point, enjoy it. Celebrate. That entire race should just be a celebration of not only yourself but the sacrifices you made to put in there and the relationships that you have had along the way, your parents, your teammates, your coaches. If you can treat it like that and think about it like that, then I think you can unleash a best version of yourself. Maybe what Tristan was referring to is, if you can come in there with that degree of confidence and he is just not even paying attention to the other people in the lanes around you, then some people can be intimidated by that. But it is not meant to be intentionally intimidating.
Host: Did you have a favorite song? A favorite hip-hop song?
Colin Hanna: There was a song by Lupe Fiasco called “Touch the Sky” that I liked a lot. There is also a song by the Red Hot Chili Peppers called “Don’t Stop.”
Host: Love that song.
Chapter 3: SoundCloud and Balderton Capital
Host: If we move to your professional life, before joining Balderton, you worked at SoundCloud. What did that teach you about growing the user base for a consumer business?
Colin Hanna: I joined SoundCloud in 2015. SoundCloud is still one of my favorite things on the internet. SoundCloud is a permissionless marketplace for human creation. In particular, it is expression through music and audio. SoundCloud grew tremendously organically through the content that humans were uploading. At the time, it was about 150 million monthly uniques. I was pretty junior at the company, but I got to focus on a set of markets that nobody else was really looking at specifically. These were in particular places like Egypt, Brazil, Indonesia where we had tremendous user bases. At the time, in Egypt, there were 90 million people, 20 million smartphones. The install base was 20 million smartphones. There were 8 million monthly active unique listeners in SoundCloud. So 40% of the smartphone install base were monthly active listeners. I got to go to Cairo and meet with artists, the telecommunications companies, and the music industry and start to unpack why that was. It was really about unique content that people were putting there. I thought, “How cool.” I think it was the best job in the world. You got to meet with people for whom your platform represented a huge opportunity for their personal careers, an opportunity to become known, to be listened to, to connect with other humans over something that they loved and had created. It had been driven by a particular genre of music that was created in the slums of Cairo called Mahraganat. That was spreading through like wildfire through that community but had not really been picked up by the traditional A&R function of the music industry yet. Your only choice was to listen to it on SoundCloud or YouTube. The problem with YouTube was on Android, it was, at the time, still difficult to do background listening on mobile and data was so expensive on a relative basis. It was a really exciting time. The other aspect of SoundCloud that I really take with me in my venture investing was the power of consumer marketplaces at scale and content. That was one side. The second side of it was really building the infrastructure that could scale to that kind of user base. SoundCloud was super early on in terms of deploying Kubernetes. They, in fact, developed something called Prometheus, which has become the de facto standard for observability and monitoring on top of Kubernetes. That was developed in-house at SoundCloud to help support, very early on, internet scale or planet scale deployment of their software. It was neat getting to be exposed to that software being crafted.
Host: Wonderful. You mentioned that now you are investing with Balderton. You are a partner at Balderton, one of the premier multi-stage funds in Europe. You invest in purpose-driven product focused founders spanning verticals including cloud, consumer, crypto, and fintech. Do you remember the first meeting with Balderton? Do you want to tell us a little bit about Balderton? Why did you decide to join them?
Colin Hanna: I was at a fork in my career. The time at SoundCloud had been really exciting, but also, it was a fairly turbulent time for the company. A funding round had gotten blocked after the company was sued by a songwriters association in the UK. I had felt distinctly at that time that I wanted to go to a place in my career where I could combine what I had learned in the financial services industry and that financial abstraction layer with what I had learned on the software side working with product and users and developers. Venture felt like a very natural place to marry those two skills, and to maybe be in the room to have strategic discussions about the bets that a company was going to make to be successful. At the time, in Europe, there were very few established venture firms that I felt like were approaching the industry as a craft. Balderton, having been around as long as it has, having seen some of the successes it has been a part of, and the experience of my partners, felt like a compelling place to work. I remember early on in the interview process with my partner Daniel Waterhouse. I was on the phone. I think I was walking around my living room, still in my pajamas, but we were talking in the early morning about how I would decompose smartphones. When I was in college, people would break a screen and toss them. It was early on with the iFixit kits and taking the smartphones apart, buying new panels, and putting them on in. I had a year’s worth of supply of iFixit gear that I was always supposed to be swapping out. People would come to me and even pay me. It was stuff like that that Danny and I would be geeking out on. That was one of the early memories. I remember just feeling like every single conversation I had with one of the partners was just something that I really enjoyed. Their intelligence and their humility and their kindness really shown through.
Host: You have been now for about 8 years with Balderton. How did your approach to assess founders change, or how did your approach to assess an investment opportunity change?
Colin Hanna: That is a great question. Early on, when you are in your venture career, your job is to network heavily, get to know the different players in each ecosystem, and sell the firm that you work for in terms of why that founder should be engaging with you. As you mature in the role and start to gain experience as a board director, as a significant investor in a lot of companies, it is also important to take not only the fiduciary duty of being a shareholder and a board director seriously but also to ensure that the relationship you develop with founders is one of mutual respect, where you know ultimately you are business partners. In the software industry, early on, I think, there is a notion that you need to be very close and friendly. I think leading with that at the outset is actually… That is something that should be earned between the two of you over time as you work together as business partners and confront challenges, as you confront crises. That closeness and that proximity should be earned through how you react to those situations together. Over time, that respect can grow between the two of you. So I think what I have learned is to understand that fundamentally it is a business partner level relationship and needs to have mutual respect at its core. In terms of the types of founders, I think, a little bit… To borrow from Charles Darwin’s concept, it is not the biggest or the strongest or the fastest species that win over time, but it is the ones that are most adaptable to change. These last 5 years in the markets have really demonstrated that truism, which is that it is the founders that are most adaptable to change that end up surviving and end up thriving. To me, that means not only must one be optimistic and think big and dream big, one must also have an element of pragmatism, the ability to change strategic direction on a whim, make sure that you are doing it decisively and carefully and intelligently and thoughtfully, but also be reactive and be flexible. That is a very important quality in founders. This combination of optimism with pragmatism is really important.
Chapter 4: The Crypto Market and Open Source Software
Host: You are looking at several industries, among them, crypto. I was wondering how did your view on the crypto market evolve during these years?
Colin Hanna: We first started looking at crypto maybe in 2016. Actually, some of my colleagues looked at it before I joined. At that time, Ethereum was trading below 10. Bitcoin, I think, was well below 1,000. If you look at it on a total market cap basis, it was trading between 10 and 100 billion, depending on when you look at it. Most of them, below 10 billion in total. If you think about it, that is the same market cap as a company like Asana or, for a cloud company, a company like Confluent, something of that nature. These companies are a platform in a specific area that other companies are important, whether that is event streaming or work productivity, but they are not dominant forces yet in our economy or our society. What happened from 2016, over the course of 2016 and 2017, there have been two major boom and bust cycles. Crypto has become a part of our economy in the last eight years. You now have a total market cap trading often above $2 trillion. You have hundreds of billions of stable coins now in issuance, which is starting to compete with fiat currency. You throw in the use as a medium of exchange in our economy. It is the first kind of money that is truly software native. The private keys that you have in crypto are software. Money as code, code is money. Along the way, you have had a lot of shenanigans. You have had a lot of people who have taken advantage of the permissionless nature of crypto to take advantage of customers and loopholes and regulations to market things in inappropriate ways. That has been largely to the detriment of the ecosystem. It is a very interesting place to be paying attention to as an investor. It is not the only place that I look at or that we look at. But as someone who is looking at software and looking at fintech and trying to understand how technology is shaping society, I think you have to be paying attention to it and have to be reacting to it. My feeling right now is that it has become overly politicized. It is lacking a certain narrative. The narrative has been co-opted by a lot of centralized players. It needs to have a back to the roots moment that has nothing to do with presidential politics or regulation, but really about empowering the small player at the edge of a network to be able to fully leverage that network in a permissionless fashion. That is what crypto is about for me. I think it needs to get back to those roots, and it will. It will take time, but we remain excited about it as a theme.
Host: As you mentioned, you are looking over several verticals or industries like cloud, consumer, crypto, and fintech. What recent deep dives have you done recently that get you excited?
Colin Hanna: I think one area that we are looking at as a firm very actively, that I have invested in actively for several years, is the power of open source software. To me, there is a link there in terms of permissionless and transparency to crypto. But open source software as a modality is very powerful for our society. The idea that I can go and publish a repository or publish a set of code that enables other people to get there faster, that enables other people to build application software on top of it implies trust. Not only am I trusting the people by putting my hard work out there, they are trusting that they can go through and look at it and understand what the vulnerabilities are, how it is going to perform in certain different contexts. This fabric of open source software that is open… It is there on GitHub. It is a living, breathing organism at this point that is constantly changing, constantly evolving. The open source large language models, and generally, the generative models that are now being published are extraordinary distillations of human knowledge that are just available as an openly published set of weights that all of us can tinker with and play with and use and weave into products. I think that it is a modality that has been an instrumental force for why software has become as successful as it has been as an industry. But it is also driving forward technological change for us that is helping… It comes with its own set of challenges. But we are big believers in open source software. I have invested in three or four companies, and we continue to look very actively both across infrastructure software and AI. We are generally excited about it.
Chapter 5: Challenges and Learnings
Host: Just to change gears a little bit and get personal, tell me about a moment you struggled in your career and the learnings from it. From the outside, it looks like everything is perfect. You were the co-captain of the swimming team, you worked in finance, and now you work at one of the most prominent VCs in Europe. Did you have a moment where things were not going perfectly?
Colin Hanna: Yeah. 2020 was a jarring moment for everybody. It was particularly jarring for me. I started a family in February of 2020, meaning I had my first child. Going through the disruption of COVID, not being able to do the kind of work that I drive energy from, which is meeting founders in person and spending time with entrepreneurs, and doing that at the same time as having the global pandemic around you and taking care of a newborn human stretches you in a lot of different directions. That year and a half, that 2-year period, it was obviously a wild one in terms of the markets. But I think it forces you to prioritize in a diligent fashion because the norms are shifting under your feet, the markets are very dynamic, and the entire priority set in my personal and family life was changing. When those times are in flux, I think it is important you have a mechanism to get back to what is important, get back to prioritization. We had companies that were wildly successful in that period and companies that went under during that period. Oftentimes, I think, the way that we can cope with that best is by spending time with one another, walking through, untangling hard problems. Sometimes we did not have all those tools available to us at that time. I would say that it was both an incredible time and an incredibly challenging time. We are almost… A lot of the companies… You saw the news this week from Amazon. We are still reacting to that time in terms of how we are getting back to work. It has been a huge, rich learning experience for me in my career. A lot of orthogonal learning and a lot of things that we took as granted and took as gospel 3 years ago, we have been having this conversation… We are revising now again. To do all that with the diversity of companies that you work with, with an industry that is rapidly changing, and the competitive nature of it here in Europe is changing, and then to be starting a family at the same time, there was just a lot of three-dimensional chess going on.
Host: What was the mechanism that you used to cope with all the change?
Colin Hanna: I am actually a pretty avid believer in meditation, in Vipassanā meditation.
Host: I just came back from one, actually, a 3-day… in Sweden.
Colin Hanna: Terrific. Then you know what I am talking about. Whether it is going out for 10 days or going out for 3 days, nothing like the opposite of doing psychedelics. Just getting to a place where it is you and your breath and the world around you, and realizing how strong that can be. I think it acts as an extremely strong filter. What you are left with is just what is very real, paying attention to what is very real. Having the full bandwidth of your attention focused on something that is very simple makes you realize how powerful the mind is. That mechanism for me is a tremendously powerful one. I will also say, as a young father, that frankly, just spending time with your young kids can be… It is a fully immersive experience. Just being present in that moment with them is something that is special. Tuning everything else out, it is helpful. Lastly, I mean exercise. I still try to get into the pool, get on my bike, get on the tennis court, get into a place where you are focusing on a single task and using your body. All those things are helpful tools.
Chapter 6: Advice to Your Younger Self
Host: Wonderful. I can attest to the Vipassanā. I started doing it in 2017. I cannot yet attest to being a young father. Hopefully, soon. We should also play some tennis when we are in the same city. The last question: if Colin from 10 years ago working at Goldman Sachs would listen to this episode, what would you tell him?
Colin Hanna: I have been asked this question before, and I am going to give the same answer, which is I would not want to tell him anything. Honestly, I think the mistakes that you have made, you make them for a reason, and you learn from them. I feel lucky to be on the path that I am on. If I told him anything back then, I would be on a different path. You are going to make mistakes. The important thing is how you react to them. I would not want to give myself cheat codes. I prefer to be right where I am now.
Host: Love that. Go on and make the mistakes that you need to make them. Colin, thank you so much for taking the time.
Colin: I appreciated the conversation and hope we can meet again soon. Thanks for the time.