Don’t Be Afraid to Make Decisions: Interview with Dmitry Smirnov, Founder of Flint Capital
I recently went one on one with Dmitry Smirnov, founder of Flint Capital.
Adam: Thanks again for taking the time to share your advice. First things first, though, I am sure readers would love to learn more about you. How did you get here? What experiences, failures, setbacks or challenges have been most instrumental to your growth?
Dmitry: I grew up knowing what hard work means. I started working when I was 12 years old to get some extra cash: first by flipping grain in the barns for a few dollars a month, and later working at Mcdonald's and Auchan. However, I was always most interested in discovering the inner workings of things and understanding how money is generated.
After graduating as an engineer, I started working in one of the biggest mobile telecom companies in Eastern Europe. I was passionate about emerging technologies and growing mobile innovations, so I quickly became a manager there. At the same time, I started testing the waters as an entrepreneur and founded two tech startups in the fields of e-commerce and mobile in 2005.
In 2007, my tech knowledge and expertise helped me get a job at a big financial holding as head of the Mobile Technology department. There, a funny story happened that changed my life. The beneficial owner of the holding was urgently looking for a deputy director for the venture investment department. He asked me, "Have you ever worked with investments?," and I said no. I was surprised when he hired me on the spot! He said he needed someone with a fresh view on things, so my inexperience was actually a good thing.
My first move was to fire half of the team because I didn't get what they were doing there. They were just taking up space without providing value, and I knew this was ultimately dragging the department down.
After 3 months, I was promoted to head of the investment department and became a board member of the holding. I was overwhelmed with tasks and responsibilities but, at the same time, I was super excited. I knew that I was lacking a lot of knowledge, so I had to learn from scratch and learn fast.
My table was covered with books about investments, and I was constantly listening to investors on YouTube, but the best dive into the profession was throwing myself into the proverbial deep end by making and closing deals. I learned fast from practice, closing 2 deals per month in different industry niches like dating, gaming, mobile advertising, and entertainment. I learned how to diversify the investment portfolio by geography, industries, and companies. E-commerce was a red ocean back then, so I had to learn not only how to create a top product, but also how to survive in a deadly competitive market. At that time, the popular online dating network Badoo was in our portfolio. We invested at an early stage, and later, after I left the holding, it was sold for $3 billion.
Over time, I became a board member for several other startups, including enterprise and mobile telecom. As a surprise to myself, I realized that investment was something I wanted to do for life.
To sum up my early experience in the investment world: I was thrown off a cliff into the wild sea, even though I didn't know how to swim. So, I had to learn fast and in a super effective way. It reminded me of me learning how to drive when I was 16. On my very first day, the driving instructor took off the sign from the car (you know these signs showing that there is a newbie in the car?) and made me go to the busy highway! My hands were sweaty, and I almost had a heart attack, but I survived, and I learned fast. The same happened to me with investments.
In all of this, I made a very important rule for myself that I still follow today: If you don't know what to do, take a step forward.
I spent six years working as a hired manager in that financial holding gathering knowledge and experience as an investor, but I always knew that I wanted something that was mine.
I started Flint Capital in 2013, and the first $30 million I raised all by myself. From the very beginning, I knew that the focus of the fund would be cutting-edge technologies, early stage IT startups, and software development. To this day, this is still Flint Capital’s main focus, which proves that the initial strategy was successful.
Adam: What do you look for in companies you invest in? What are your best tips for fellow investors?
Dmitry: We are looking for early-stage companies that specialize in IT and software development and whose products are intended for big markets.
The most important thing that we check is the startup’s team. It is of crucial importance that these people are not only skilled but also have a strategy and vision. To invest in a startup, I need to be able to ask myself, "Can THEY become a unicorn?" and answer yes without hesitation. Why? One unicorn buys out the whole fund.
I have a couple of tips for investors, based on my experience on both sides of the business:
Tip 1: Be prepared for startup founders to make as many as three or more pivots on their way to success. Their initial strategy doesn’t always strike home on the first attempt. Be ready for this, and secure the money in advance to give founders (especially early-stage) more than one chance to try out their idea. Discuss these options with the founder openly, and divide the payment into tranches (sponsor his ideas "steadily," so to speak).
Tip 2: Don't give too much in the early stage. Giving more money than is required can tempt founders to make overpriced choices early on. For example, the founder might start to hire more expensive employees just because he/she can afford them. However, with a strictly set budget, he/she can actually make smarter hiring choices and be pickier. A startup founder always needs to have "a burning pan under his ass." Otherwise, they are already picturing themselves sunbathing in the Bermudas. With a limited budget, startup founders use their imagination much better and make smarter, more effective decisions.
Adam: What advice do you have for entrepreneurs on the topic of raising capital?
Dmitry: Pitches should be short, clear, and simple. A one-minute elevator pitch is called this for a reason. The presentation should be precise: One slide explains one thought. Investors don't have time to read 30-40 lines on the slide, so be concise. And it's best to keep the presentation between 5-7 slides.
Before pitching, prepare a list of investors who will increase the overall expertise of the company. Every investor should strengthen the total value of the company/team. The board should become "smarter" with each investment, so don't hesitate to add independent board members and consultants. They speed up the development of the company and bring new expertise and ideas. Build relationships with the investors that you are only planning to pitch, and always update them on the status of your startup even if they didn't invest in you after your first pitch.
One piece of advice is to never "take passengers" (investors whose profile and expertise are irrelevant to your company). Otherwise, you will have to "set these passengers off" at some point, which can be challenging and stressful.
Adam: In your experience, what are the key steps to growing and scaling your business?
Dmitry: Always search for ways to make your business multiplier higher. For example, say your business has a multiplier of 3. The company can earn money at its own speed, developing "organically". However, if you add tools like Big Data analytics, ML, Computer Vision and AI, the multiplier can quickly and easily become 6-8-12, etc. The valuation grows much faster than its financial metrics if you add high-tech solutions to your product line.
Adam: What do you believe are the defining qualities of an effective leader? How can leaders and aspiring leaders take their leadership skills to the next level?
Dmitry: Don't be afraid to make decisions. A true leader isn't afraid to make mistakes. In fact, he values mistakes because he achieves greater results thanks to them. It’s important not to get depressed or disappointed from making all those mistakes.
Rather, he needs to have a good sense of humor. If something bad happens, it's ok to get emotional and say some bad swear words to "release the steam," but then you calm down, smile, and go on with your thing. You need to become immune to mistakes and use your sense of humor to move forward.
Adam: What is your best advice on building, leading and managing teams?
Dmitry: The ability to form a team is an essential skill of the founder. Founders need both professional and personal skills to succeed long-term. My best tip for leaders: Take the process of hiring seriously, and organize it wisely.
First, you should hire the team leads and then, through a series of interviews involving the team leads, you should hire the lower-level employees. As a single person, you are able to effectively manage a maximum of 5-7 people, no more. We are 9 people in our fund in total right now (the front office being my two partners and I, plus two principals).We have 55 companies in our portfolio, and we achieved 18 exits, 3 unicorns and 2 IPOs. This management strategy has proved to be successful for us so far.
Adam: What are the most important trends in technology that leaders should be aware of and understand? What should they understand about them?
Dmitry: We invest in the niches that keep growing regardless of crises: cybersecurity, enterprise software, remote services and health tech. The pandemic showed that you need good health, and you need tech to achieve that goal. You also need to protect yourself against cybercrimes with the growth of digitalization, so these solutions are in high demand. Corporations with huge tech holdings are still interested in buying small companies to catch up with the tech trends. If they don't do mergers & acquisitions, their competitors will have a more high-tech product line than them, so leaders should keep this in mind.
Fun fact: Before the pandemic, we invested in a healthtech startup focused on recovery after diseases and operations. During the pandemic, when people couldn't leave their houses to do medical check-ups, this technology became extremely in-demand. Of course, we had no idea about the pandemic before it hit, but we turned out to be visionaries!
Adam: What are your three best tips applicable to entrepreneurs?
Dmitry:
Never stop working on your personal development. While doing business, don't forget about yourself. You will need your inner power, new knowledge, strength, health, a sound mind, and confidence. We had a few founders that developed greatly this way. Reading books about business, team-building skills, and business education (from sources like Stanford and MIT) will help you greatly on your entrepreneurial path. They will always stay with you and will help you bounce back if things with your business go south.
Don't forget about work-life balance. It's so easy to go crazy with the highly stressful schedule of an entrepreneur! Use fresh air, sports, art, or whatever fuels your passion for life as a tool to relax and step back from work. Trust me, you will become more effective this way.
Communication and networking are critical. Attend parties and conferences, get feedback from relevant people, and don't be afraid to be open about your ideas.
Adam: What is the single best piece of advice you have ever received?
Dmitry: Don't spread yourself thin. Focus. Your brain always craves new experiences, but you cannot achieve great results if you are engaged in multiple things at the same time.
Adam: Is there anything else you would like to share?
Dmitry: It's important to have a hobby that ISN'T connected with work. For example, a couple of years ago, my investor friend and I organized a tennis club. Investors and entrepreneurs attend the tennis club, but we have a rule: No talking about work, only tennis! Now we have more than 20 members. I am also planning to organize music and art evenings for our community in the future. Giving yourself a rest from work allows you to come back to the company recharged and full of new ideas.
Adam Mendler is the CEO of The Veloz Group, where he co-founded and oversees ventures across a wide variety of industries. Adam is also the creator and host of the business and leadership podcast Thirty Minute Mentors, where he goes one on one with America's most successful people - Fortune 500 CEOs, founders of household name companies, Hall of Fame and Olympic gold medal winning athletes, political and military leaders - for intimate half-hour conversations each week. Adam has written extensively on leadership, management, entrepreneurship, marketing and sales, having authored over 70 articles published in major media outlets including Forbes, Inc. and HuffPost, and has conducted more than 500 one on one interviews with America’s top leaders through his collective media projects. A top leadership speaker, Adam draws upon his insights building and leading businesses and interviewing hundreds of America's top leaders as a top keynote speaker to businesses, universities and non-profit organizations.
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