Nicola McClafferty - The New Model of Venture Capital

I was delighted to interview Nicola, Investment Director at Draper Esprit, a leading venture capital firm involved in the creation, funding and development of high-growth digital technology businesses. Most recently Nicola was the Founder and CEO of a leading online retailer of pre-owned luxury fashion, offering women a hassle-free way of selling on the designer items from their wardrobe. She received investment from ASOS plc in 2012, who subsequently acquired the company in 2015. Read the interview to learn more about Nicola's investment experience, her success on the operating side of the table and more about Draper Esprit and how they have redefined the venture capital industry.  


Meet Nicola

Current Job Investment Director at Draper Esprit

First Job Investment banking analyst with tech M&A firm Broadview, which is now part of Jefferies 

Go to meeting spot In Dublin I head to Balfes, in London I generally go to timber yard in Covent Garden  

Favourite book To Kill a Mockingbird and I was also obsessed by the Roald Dahl books

Necessary extravagance A Henrick's gin and tonic on a Friday night! 

Favourite productivity tool I'm obsessed with lists so I use Trello a lot 

Recent inspiration The podcast How I Built This and whatever Lucy Kellaway writes

Most interesting tech firm right now Amazon, because I think it will transform more than one industry in the next five years 


The Journey

Can you share a brief history of your career before co-founding and what you learnt during that period?  

I went to University in Dublin where I studied International Business and French. I subsequently moved to London to work as an investment banking analyst at Broadview, a tech focused M&A firm. It was the early 2000s and we were doing a lot of advisory, working with VCs and PE firms on exiting businesses, although the valuations at that time were not in the billions! I learnt to read company financials and see value in businesses. I enjoyed working with management at exits but I was interested in getting involved at an earlier stage, so I joined Balderton Capital as an associate for the next two and a half years of my career. There was no better place to experience venture capital, I got to work with some of the best investors and entrepreneurs in Europe. At Balderton I learnt what makes a good investor. I then joined Ravensbeck, which was the team behind Disney, building up their practice in early stage investing. I spent another two and a half years at Ravensbeck doing early stage digital media investments through a network of angels and off balance sheet.

Although I had never thought of myself as an entrepreneur I had this idea of a start-up myself. I wanted to use it as a customer and I wanted to invest in it as an investor. Eventually the combination of seeing this gap and feeling this pain point, as well as being inspired by people who I knew had gone for it led me to launch

Tell us about, the motivation behind founding the company, the challenges you experienced and the path to exit?

Covetique was a marketplace for pre-owned luxury fashion and what we wanted to do was create a Net-A-Porter meets eBay experience. Around 2007 there was a confluence of things going on:

  1. It was early days of Airbnb and car sharing - collaborative consumption and the sharing economy were the up and coming vernacular. I saw a clear indication that consumers were thinking differently about assets that they owned and how to extract value from them. It felt like it was a real movement.
  2. The other models that were big and disruptive at the time were flash sales. These demonstrated an appetite for access and for making luxury and aspirational brands more accessible.
  3. The third thing that was emerging was the idea of secondary marketplaces. It was clear that the eBay experience wasn’t necessarily a positive experience for every vertical and fashion and luxury was one of them – for both buyers and sellers.

Covetique aimed to transform that experience and be a hassle-free way to sell on high value clothes. And for the buyer we wanted to remove barriers associated with buying pre-owned fashion as well as deliver luxury customer service and packaging.

I launched the business in early 2011 with a co-founder. We bootstrapped it for the first year and it was definitely unglamorous! We went to raise a seed round in 2012 and received a term-sheet from a VC only to get it pulled as they didn’t end up closing their fund – lesson learnt! We had capital commitments from angels and an EIS fund but we then spoke with Nick Robertson, the CEO and Founder of ASOS. The conversation was about him joining the round as an angel but he then gave us a strong offer from ASOS itself. We took funding from ASOS giving Covetique access to arguably the strongest e-commerce talent in the world. Over the next three years we grew the business and by 2015 we were doing just under $5m in sales and had 20 staff. 2014 was a challenging year for the business as a result of underinvestment in our infrastructure and we had a persistent problem with scaling our infrastructure in line with our growth and our ability to meet demand. This combined with the threat of well-funded US competitors led us to exit the business to ASOS, who we had built a strong brand with and proven co-marketing in transitioning their core customers to Covetique.

What did your time as a founder teach you that you now bring to investment?

There is no substitute for having been there and done that and having a real appreciation for everything that sits on the shoulders of a CEO and a founder. Having been in the trenches myself, grown a business, managed a board and shouldered that responsibility I would like to think I have far greater empathy when I speak to founders daily. It also reminds me how important it is for me to provide that guidance and strategic sounding board that I so valued from my investors.


Draper Esprit

Tell us about Draper Esprit and your investment philosophy

Our focus as a firm is backing Europe's most ambitious entrepreneurs. Money is a commodity and VC is becoming a commodity. How do you truly deliver value when in a way we all do the same thing? What is particularly unique in our firm is the way we are now set up. Under the patient capital model, we no longer invest under an artificial 10-year horizon. For me what is so exciting is this model uniquely aligns us with founders. It has removed all requirements to exit by a certain timeframe and it allows us to put more capital into businesses and recycle capital back into the winners. It also means that the partners aren’t disappearing to fundraise.

A big part of joining was that Draper Esprit are some of the longest standing and most impressive investors in European venture and to have innovated on the venture model is a brave and brilliant thing to do.

What drew you back to investing?

I did consider going into an early stage company again as you do get a buzz from that, but the opportunity came up to go back into investing and I knew the experience of having run a company would add to me as an investor. I was also excited by the diversity of people and the range of businesses I would interface with again as an investor. I always want to be playing a strong role in driving growth and I felt that the next stage where I could be most valuable was an investor.

What stands out to you when assessing early stage companies?

Similar to most VC firms, we look for a strong team, with relevant backgrounds and a smart approach to the market. I often look for a good balance between ambition and vision and their focus on the execution path in getting there.

What technology trends excite you right now?

Voice AI and how that will continue to improve a lot of end user behaviour which will be changed and controlled by voice.

Autonomous cars!

What makes an effective board?

I think boards are most effective when the interests around the table are aligned and there is a mix of views and perspectives. They are not mutually exclusive. Everyone should agree on what a successful outcome looks like. It is also very important for investors to have an empathy and a respect for each other and the management team.


Women in Business  

What advice would you share with female founders looking to raise finance?

I think there is a strong movement and openness to wanting to back more female-led businesses.

Women tend to be a little less vocal or strong about their ambition and they are maybe a bit more open about where they need help. My advice would therefore be to not undersell to investors who will discount everything you say anyway! If you truly believe that you can build a global business - make that clear

What support networks do you value?

An incredibly supportive husband, a fantastic childminder and amazing family support. I have two two-year-olds at home and I have an incredibly strong family network without which I couldn’t do what I do.

How can we do better to attract and retain more women in business and investment?

I think retention is the key point. I do see a lot of incredible women coming into the industry but we need to talk more about how senior women over time manage their careers and achieve that balance. We need more visible senior women discussing flexibility and companies being aware of how to make the balance work for both men and women. I would very much like to see more of this and be part of that conversation focusing on keeping more women in. As the saying goes you cannot be what you cannot see.