Reshma Sohoni: “I don't think startups realize that investors are also customers.”

Reshma Sohoni is the co-founder and managing partner of Seedcamp. Seedcamp invests in early world-class founders who are dealing with large global markets and use technology for solving real-life problems. The firm has backed hundreds of companies, including unicorns Revolut, Wise, and UiPath.
This interview was written by Anette Tiitus and conducted by Rene Rumberg, members of the sTARTUp Day Marketing & PR team.

How would you explain investing to a child?

Investing is about using money to build something new. Build it for people for whom you can solve problems or give them something. Giving something they do not even know they want yet. By investing, you get money called revenue from your customers. You make a profit off of that. And you get more than it costs you to build. Investing makes sure that you keep finding people whose ideas you can support with money. From that, people build new cool things that they can sell to their customers at a profit.

How did you become an investor? Tell me about your first investment.

That is a funny story. Although, this is not a good role model example. As a child, I watched the movie “Wall Street” with Michael Douglas. Watching it, I thought how epic it was that he had this crazy big brick phone, and he was riding a helicopter. He was making all those investments in stocks. Not a good role model, but that was the first exposure to investing.

In my school years, I was always capable of mathematics and computation. Growing up, I was very practical, and as my undergrad, I did engineering and business – I was very clearly interested in the finance side of things. Spreadsheets and numbers were very exciting to me. Learning engineering and the way of thinking made sense to how my brain works. After graduating, I went into investment banking, where I was in mergers and acquisitions. So buying and selling companies side of things.

At the time, it was the dot-com bubble. All of us analysts started to trade quite a lot on the stock market. I believe that I started investing 20-years ago. I think it was pretty fascinating because public companies back then went public quite early. They would be in a series C right now because you could see the trajectory of these businesses. That was my first experience in public markets and investing with my own money.
It is important because I believe that you put your money where your mouth is.
It was the boom and bust. The time has taught me a lot about long versus short-term investing. At the time, I enjoyed buying companies like Microsoft, Yahoo, and Google too. Before the interview, I was going through my spreadsheets. The first time I invested in Google was in 2008. It was not the late 90s when there was the dot-com bubble. Back then, I was still investing in some of the first AOL Time Warner, so tech investing.

Fast forward a couple of years. I joined the provincial capital world as an associate of our analysts. We were investing in India either as a market or as process outsourcing. The great opportunity that I saw in the early 2000s was process automation and outsourcing. The first investments were indeed an EdTech world. It was a lot about delivering corporate courses online. There were a couple of founders digging in and helping them build their business model. Helping them even closing the deal of the legal documents. Another one of my early companies was in the travel tech space. Travel tech 20 years ago was entirely innovative. There was one Indian travel online company. I helped them with logo design, development, and marketing strategy. That is when I fell in love with the ground-level business – zero to one journey and pre-seed.

Do you now fly with helicopters?

No, I have realized what a terrible idea that all is. Although, it is funny to recall. You see an image on television as a child, and it amazes you. I did not know anything about this life. I was an immigrant from India, living in East Coast New Jersey. I only knew that New York existed a couple of driving hours away. Seeing this powerful image as a 10-year-old left a mark. Looking back, I don't even know why my parents let me see a movie like this.

Which three characteristics a successful investor must possess?

I think foremost, optimism. Investing depends well on the game one is playing, but the game we play is long-term. Hoping that our companies will build for the next 10-20-50 years. I believe a lot in optimism because I want to build a positive solution for our customers through investing.

Secondly, I believe that speed plays a significant role in investing. A successful investor has to make decisions fast and get the sync signal from the noise. Also, an important aspect is the ability to say "no" – decision making. Altogether successful investor has to be optimistic, indecisive and fast. The investor has to know when to say “no”.
Inevitably, you have to say “no” more than a positive answer. That is challenging.

What do you think about investing based on our emotions?

I think you have to understand how great you are with your emotions. I go with my gut a lot, but past experiences have told me that my gut feelings are pretty great. We have talked to some of our founders. We have said to them that they are not hiring suitable workers. Dramatic change is needed because you cannot make those decisions. At the same time, other teams keep making incredible decisions on people. You can get an amazing team based on emotion. I would rather stay with my gut feeling than emotions in decision-making.

What are the questions to ask yourself to find out whether you would invest in a company?

I have my own experience in the public markets. I still do a little bit of stock investing. The number one answer is to know for yourself (it depends on the market, etc.) what game you're playing. Am I investing in this company for the next three months, six months, a year? What game am I playing? Questions that follow from there are very different.

For example, you are investing for ten years plus. You need to ask yourself, can the founder stand the test of time. Can their CEO be conceived as a public company? The probabilities stay when the CEOs want to leave or when is the good time for a replacement. Versus. If I invest for the next three months, it does not matter what the CEOs are doing.

Question number one is: what is the game that you are in? What is the game you are playing? It is crucial to understand if the solution is relevant for the next six months or a year. As for Wise, the solution they offer is still relevant. How big is the market? Are a thousand, million, or billion people going to want to buy this product?

Another aspect we look at in a company is its advantages. What is their differentiation? Do we believe you can raise money? In a game we are playing, do we want to invest in you?

In your opinion, what is the biggest mistake that early-stage startups make when they seek investment? How could they prevent that?

I do not think startups realize that investors are also customers. They do not appreciate the visual story that they are pitching for the investor team. In reality, they are pitching a product to get an investment. To fix it, startups need to find the right investor for their company, for their area of interest. The right investor provides a stage for the company.

A great amount of homework is associated with the investor. Are they an angel or VC? Startups need to know whether investors are early in the fund or late in the fund. Depending on that investors need to play a different game because they do not have the same horizon. Investors are customers of your story. Therefore the story has to make sense and be logical. Based on storytelling, can we believe you? I think founders probably make it like they almost feel entitled to be invested versus treating investors like customers. In the end, you need to take into consideration that most of the investors have their philosophy.

As I have understood, the mainstream philosophy for investors is that they invest in a team. Not so much in the idea. Because by the team you know if they will deliver the idea.

It depends a lot on the investing stage. When you are raising to 300 million then honestly, we do not care about the early team. Significant factors are the company management and governance in the country. It all depends on the investing stage and what game we play. We do care about the team, but risks are surrounding the actual product and the idea. For example, if you are investing in Wise, you do not care who is on the team anymore because you know they can deliver.

How do you analyze your investments into startups to evaluate if it has been a success or not? Do you have any specific methods for that?

We look at the short-term KPIs and long-term KPIs. And because our money tends to last about 12 to 18 months, one of the first things we look at is the development of hiring. Has the team grown from two-three people? Whether the startup had doubled or tripled the team in that time.

Another significant aspect is product launching. Unless we are investing in deep tech, they are three years from the product. As well, if there is a sort of product-market fit or if there is further traction depending on the procedure.

The third important factor in fundraising. Is the startup able to raise from the next round of investors? Those are the three key pieces we keep in mind. We look at aspects in the 12 to 18 months after our investment.

What are some of the most exciting sectors or developments on your radar at the moment?

At a very big level, we strongly believe in personalized health. For 7 billion people on this planet, it is going to be a reality increasingly, and that is an unfathomable market opportunity. We are big health-tech investors, around that 50-year vision of personalized individual health.

We also invest in financial services because money makes the world go around. Whether it is crypto or normal money. We are investing in crypto infrastructure companies for financial services. Infrastructure companies as well fintech consumer companies. We believe that these are going to be massive muscle markets. We love the enterprise space – workflow automation productivity. We always love those spaces, especially when we are meeting this moment of the remote-hybrid world. It is a massive shock that has happened to humans in the last 12 to 18 months. We are excited about the future of productivity and work. These are the three sectors we are very thrilled about.

Are there any books you would suggest to someone who wants to get better at investing or business in general?

I am probably one of the worst people out there for reading business books. But I do love biographies and fiction. I love writers like Yuval Noah Harari (author of "Sapiens: A Brief History of Humankind"). Before Harari’s books, I would recommend reading Bill Bryson or the book called “Guns, Germs, and Steel: The Fates of Human Societies” by Jared Diamond. In my opinion, it is an incredible kind of book about the history of the economy. History of humans and how we have developed. Why different regions of the world have developed in certain ways. I would say that it is a fundamental book. As previously mentioned, Harari’s ideas are brilliant. I also love the book “The Martian” by Andy Weir. It is astonishing problem-solving. What do you do when you are stuck on Mars by yourself? How would you solve the problem?

In terms of optimism, one of the most amazing books is “The Alchemist” by Paulo Coelho. It is about a teenage boy's journey into life. The book is about optimism, travel, and curiosity – all the aspects we have discussed in our interview. They are fundamental to my investor journey.


On August 25, Reshma will conquer the stage at Investor Day, an official side event of sTARTUp Day 2021, to talk about building a successful VC fund and the synergy with founders.

Investor of the Month is a column focused on wise and experienced investors in the startup scene. We talk about how and why they got into investing, biggest successes and failures, mistakes founders make and so much more!

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