Scalefast Founder and CEO Nicolas Stehle spoke to the French Founders club in Silicon Valley (www.frenchfounders.com) last week to share lessons learned from his startup journey: from founding, to funding, to acquisition. Stehle’s quick-to-market e-commerce platform sold to global logistics giant ESW in May of 2022, strengthening the company’s vertical integration and reinforcing a cross-border DTC expansion that serves as an attractive alternative to Amazon for retail brands seeking expansion to new markets. In a rare event, the Scalefast founder was joined by Independent Board Member Philippe Bouissou, and Lead Investor Eric Buatois of BGV, for a deeper conversation about Scalefast, and the entrepreneurial endeavor.
A summarized transcript of the discussion is posted below.
Philippe Bouissou: I’ll open with a question for Eric Buatois. As the lead investor, you have always supported Scalefast, through thick and thin. Does this make you crazy, naive, or a genius?
Eric Buatois: Haha… my wife may think I’m crazy. But I think I’m just a venture capitalist. To do this work, you have to be an optimist, and you must be able to see the forest from the trees and discern the macro trends. At BGV, we’ve cultivated an investment thesis around Enterprise 4.0, which refers to a new wave of B2B startups that combine data, cloud and AI and niche expertise in a specific vertical, to develop full stack solutions that layer seamlessly into a customer’s existing workflows. Scalefast meets the mark, and this is, ultimately, why they were an attractive acquisition for ESW, as it strengthens their offering and vertical integration in the logistics space.
You also have to be able to identify what is going right. We believe deeply in a cross border investment model that focuses on a strong CEO and management team. Nicolas established his R&D team in Spain, and built his business development and fundraising arm in California, so we shared the same DNA as far as our outlook around scaling and growth. Given the relationship that we had built with Nicolas, and his team, we were fortunate we could maintain confidence, even through challenging times.
Philippe Bouissou: Thank you, Eric. Now, Nicolas: They say you must be totally crazy or incredibly naive to build a startup. How would you classify yourself?
Nicolas Stehle: I think it’s a little bit of both. There’s an aspect of crazy and chaos when you launch a startup. You also have an aspect, maybe not of naivete, but of insouciance, meaning you shouldn’t necessarily be afraid of what will happen. There are always obstacles and complications along the journey, but that’s just part and parcel of the startup endeavor. So, in my opinion, it really requires an alchemy of both of these aspects at the outset; but it certainly helps if you have a little fun along the way too.
Philippe Bouissou: Before Scalefast you built several other companies. Please share with us a bit more about your journey as an entrepreneur.
Nicolas Stehle: I launched my first business when I was around 20 years old at Ecole Centrale. I managed to secure authorization from the school to do my required internship at my own company, and we went on to raise the highest funding round in France at the time. Unfortunately, we found ourselves expanding to the US just after September 11, 2001, and when we expanded into Asia we ran into the SARS outbreak. Somehow, we managed to survive the crash of the Internet Bubble, but, we did not manage to survive the subsequent crash of the Telecom sector. Because we had raised such an extraordinary amount of capital, especially by French standards, and then went on to lose it, I quickly learned an important lesson in startups: fundraising is not at all the key to success that many think it is. It’s funny, when you raise a $10M round of financing, as an entrepreneur, everyone congratulates you. Yet when you sign up a major client account, to the tune of $50M, no one does. It’s very bizarre, as the latter is typically much more indicative of your startup’s prospects than the former. In any case, this experience taught me to be much more careful about economics, efficiency, and running a lean startup operation.
I proceeded to retreat to the consulting world, where I took on a position at McKinsey. It certainly came with prestige and perks, which I appreciated, but I thrive in the operational world, at the front line of decision making, not the back bench. So I missed the startup environment. It didn’t take long before I left to create several other companies, one of which was acquired by Google. In fact, I always have my beloved Android with me because there’s a very small piece of technology that my team built for these smartphones.
It’s this same team that migrated with me to Google, that joined me to found several other startups. We built a database on Facebook, and eventually made our way back to e-commerce – the last company sold was generating 30M Euros/year in revenues. So we had some sense of what we were doing. Only this time, we wanted to go big, and to span two continents: Europe and North America. So we placed our Technology & Engineering teams in Spain, while situating our business and fundraising teams in the US. For the e-commerce competencies, we figured our North American options were Los Angeles, Seattle or Montreal. As I didn’ want to live in Montreal or Seattle, we chose LA, which is still just one hour away from Silicon Valley where you need to be to raise funds. So I packed my bags, with my wife and child, and moved to LA. And that just about summarizes my last 20 years as an entrepreneur.
Philippe Bouissou: You’ve earned a reputation as a serial exiter. Do you get better at this each time? What lessons do you learn from one instance to the next?
Nicolas Stehle: Let’s keep in mind that I failed miserably with my first company, but managed to successfully sell all the other ones. Certainly, each one provides learnings. One key lesson, for example, is the way I think about financing. I never raise a round of funding without thinking about the subsequent round; so, I never embark on raising Series A without thinking about Series B; or launch a Series B raise, without thinking about C; and so on and so forth. At one stage, I learned to run a ‘dual track process’ and pit the venture capitalists, on one hand, against the potential acquirers on the other hand. So while we were preparing potential investors to raise a Series C, and preserved the option of closing that financing round, we actually went straight from Series B to the exit. In practice, we managed to place potential new investors in competition with potential acquirers, which permitted us to raise our valuation. Because these are two worlds that don’t know one another – the industry acquirers don’t know the venture investors, and vice versa – that means that each side maintains a healthy distance, and fear, of the other. This dynamic permitted us to leverage term sheets to keep our valuations high in time for the acquisition, and paved the way for Scalefast to move from Series B directly to an exit with ESW.
Philippe Bouissou: What was the role of the board in the shaping of Scalefast. Was it a blessing or a curse?
Nicolas Stehle: I’ve always had a very particular relationship with my boards. They can be extremely dangerous, as a non-CEO controlled board can derail everything in a company. After a few bad experiences, I learned to change the rules on my board and invert the dynamics. For example, today I provide my board members with homework; they must come to our meetings prepared, and they have assignments to fulfill between meetings, and real responsibilities in the company. Further, I make it abundantly clear that I will be running the board, and if members fail to meet their responsibilities they will not maintain their position. It’s a tall order, but if you can pull off this transformation, then all of a sudden your board really serves you, and the meetings become very useful and interesting.
Reporting to the board, for the sake of reporting, always struck me as an incredible waste of time and energy. Instead, our reporting is fundamentally an internal process to support the health of the company. So if board members are, themselves, tasked with the reporting, for the company, this creates real value-add. On one hand it provides the board with direct access to the employees and an under-the-hood look at how the business is running. On the other hand, it helps employees lift their heads from the daily chaos they live in and gain a healthy perspective. By giving employees direct contact with the board, and working together on reporting metrics, the workers also feel the gravitas of their positions. Both sides win, and board meetings become a much more valuable asset driving the company forward in a harmonized way that is aligned across all interests.
Philippe Bouissou: You’ve raised a serious amount of capital in your career, even before Scalefast. What advice do you have for entrepreneurs as they seek to raise funds?
Nicolas Stehle: At Scalefast we sought to hold off fundraising as long as humanly possible. So, quickly, we emerged with a growing business netting $1-1.5M in ARR. Our competitors, however, raised a war chest in financing, and then scaled to acquire 15 customers, while we had only one. So we knew we had no choice but to raise. My advice would be to take your time and find the right VC firm for you. There are many good VCs, and many more terrible ones. If you have to raise, and I believe this should be an obligation, then make absolutely certain that you build the right relationship. This relationship is almost more important than the investor himself – so prepare it properly, and build the relationship, and the expectations, correctly, as I mentioned with the board.
What surprised me most while fundraising in Silicon Valley was a bizarre tribalism that oftentimes emerged without rhyme or reason. “We only look at companies from this side of the Valley,” some would claim. Or “we don’t invest in that sector,” others said, while obviously overlooking alignments to their own investment thesis. The Valley is brimming with brilliant people and incredibly accomplished investors, but many of their critiques were so arbitrary that it was clear they simply didn’t understand our market. Ultimately, we found some exceptional investors in Silicon Valley, including BGV. But the most interesting observation I can make is that, in my experience, there is virtually zero relationship between the size of a fund and the quality of the investor. Instead, entrepreneurs should focus on alignments and the relationship.
Philippe Bouissou: Creating a company is often compared to riding a roller coaster. On a personal level, could you share with us your ups and downs, and the tradeoffs you’ve had to make along the way?
Nicolas Stehle: It’s true that startups feel like rollercoasters, and the ups and downs can be overwhelming at times. For this, family has been absolutely critical to lifting me out of the chaos and changing my mind when I needed it. Even then, a CEO cannot escape the chaos. His or her team will deal with the smaller storms, as they emerge, but the bigger ones always land on the CEO’s desk. That’s a critical part of the job. To deal with these stresses, there are physical approaches and emotional approaches. I adopted a physical therapy of sorts, in the form of running. Running became my ‘drug of choice’ to unplug from work and to keep my stability. When things got rough at work, I’d round up some friends and we’d jog 5, 10, 15 miles; it does wonders to reset your perspective and situate your feet on the ground. On the emotional front, the trick has been preventing the stress from work to follow me back home. Because of COVID, 85% of my time at Scalefast has been ‘work from home,’ so this really wasn’t easy. On top of that, my wife worked at Scalefast, so that became doubly challenging. However, maintaining a healthy balance, where you spend your weekends with groups of friends, and with family, and taste that other side of life is part of the emotional therapy that every founder should take very seriously. Because when you have stress at work, you can’t have that reemerge in your home.
Philippe Bouissou: What general advice do you have for entrepreneurs?
Nicolas Stehle: The truth is that there’s no general advice for entrepreneurs. It’s usually particular and specialized advice that helps. Overall, I might say that the journey itself is more important than the destination. Scalefast had an amazing exit, and a wonderful story, but the crises we shared with our team, the journey, and everything along the way, in large part, is the reward in its own right. We love every step of this process, and you have to enjoy each moment. There’s moments in startup life that simply don’t exist in regular work life, and the bonds you make, and memories you share are everything. These are the people that you want to work with in the next venture – there’s something incredibly special about this journey.
Philippe Bouissou: Thank you, Nicolas. We hope to see you on your next journey very soon!
