Interview with Joel-Oskar Räisänen

Claudia Zhang

Could you tell us about yourself and your background?

Sure and thanks for giving me the opportunity to be part of the AFA Quarterly. I really enjoy reading all the alumni stories here and I’m excited to contribute mine as well.

I’m originally from the remote suburbs of Helsinki called Suutarila. I grew up with computers mostly playing video games but also doing some kind of programming for as long as I remember. It’s a bit of an odd thing that I chose not to pursue a degree in computer science but I vividly remember thinking how I knew enough of computers that studying it more wouldn’t be good use of time. Clearly, I’ve never been good with judgement calls but I somehow managed to get myself in to Aalto University where I ended up doing my Bachelor’s and Master’s in Finance with (surprise) a minor in Computer Science. I’m very grateful for having the chance to study at Aalto and it transformed my life in ways I never thought could be possible.

So I’m very much a late bloomer when it comes to finance and as I began my studies I really knew nothing about the entire field. Perhaps for that reason I tended to default keeping myself busy in various extracurriculars ranging from KY-SUB to Representative Council to the immensely popular coffee club Kyhvi and all sorts of international case competitions. I’m not even ashamed to admit that I’m very proud about the abundance of badges in my dollar green overalls.

I always thought working as an investment banker in London was a bit of a recurring gag until I saw some of my friends interning there. I then asked myself if I had a chance and turns out I did. Despite being horribly prepared and still hardly knowing what finance really was I ended up starting my career at Citigroup’s Technology Media and Telecommunications investment banking team. I did that for few very long years eventually moving into venture and growth investing at GP Bullhound’s growth funds where I stayed for 4 incredible years. Within tech GP Bullhound is ubiquitous and it was an opportunity to be at the very epicenter of technology. We had the chance to review basically every technology deal that happened in Europe. It was a great place to learn what a ‘good’ looks like and I’ve been extremely lucky to have worked with dozens of household technology names such as DuckDuckGo, Revolut, Unity ranging from very early stages all the way to pre-IPO. I then recently got an equally attractive opportunity to join an established US-based multi-stage venture fund Paladin Capital as a Vice President and a European deal lead to do more investments in Europe where I am today. As can be seen, what was supposed to be just few years in London turned into few additional years and I should have my UK citizenship by the time this article is out.

You have an impressive career path, from investment banking to venture capital. What inspired your transition to venture capital and how your earlier experiences have shaped your approach in venture capital?

I didn’t actually know much about venture capital and growth equity until I did an internship at CapMan Growth (still Norvestia back then) which opened a whole new world for me. I don’t even recall private equity and venture capital being popular career choices when I was a student although it does seem the trend is changing.

When I was doing my investment banking stint I knew I didn’t particularly enjoy banking but also didn’t really have clear idea what I would like to do after. I did a few interviews at the usual largecap private equity funds like everyone but found it all too similar to banking with lots of process management, bureaucracy, politics etc. However, the great thing about starting your career in investment banking in London is that basically the whole world and every industry and position becomes available for a moment.

And that really happened one day as my phone rang and it was yet another headhunter looking to hire into a weird M&A role in some Dubai food delivery tech scaleup. Obviously I said no as I had never even been to Dubai and hardly knew where it was. But she was persistent and long story short, I agreed to take “one quick call” and was told a month later to start looking for apartments in the Emirates.

Clearly I’m still stuck in rainy London so that never landed but the whole experience made me realise that I’m really fooling myself with these private equity roles and immediate started telling all recruiters that I would only consider venture and growth roles going forward. In fairness, given how I grew up with computers, tech was, and still is, the only thing I really know. Knowing how computers and software works truly gives an unfair advantage in technology investing.

Could you provide some insights into what a typical day in your role as a venture capital investor looks like, and how it differs from other careers you've experienced?

Sure - there are three core things keeping you busy at all times: sourcing, execution, portfolio management. Sourcing is something you’re always doing in some shape or form and is perhaps a bit archetypical to VC no matter what stage you’re investing in. This means talking to founders, management teams, investors, brokers, banks... basically everyone. When you’re dealing with private firms the only way to know how a company is doing, let alone find shares to buy, is to know someone who knows something. So that’s a major difference to for example banking, where you don’t really start bringing in deals until much, much later in your career.

When an opportunity emerges the execution can take a bit of time which frankly looks similar to any other due diligence process. You’re putting together transaction and operational models, conducting expert, customer and reference calls, probing into the market and competitors, coordinating advisors etc all while putting together investment memos that can become hundreds of pages. This part is always work and but there is a fun element too: often you need to try the products you invest in and as a result we’ve gone through food delivery courier induction programs ourselves to see how delivery drivers are trained, tried state-of-art cloud gaming consoles, walked undercover to pharmacies around London asking if the clerks are using a certain software, and ordered countless amounts of fresh groceries through various delivery apps during pandemic in the name of diligence.

Then finally there is portfolio management. This can vary a lot from company to company and when things are well there is not much to do, but once issues emerge this can take a ton of time. For example, when there is a black swan event like Covid-19 the urgency to act becomes palpable and ensuring portfolio companies have liquidity becomes an all hands on deck. Otherwise, it can be anything from recruiting (everybody is always looking for good sales people and tech talent) to acting as an appendix to the finance team to working as a strategy consultant for expansion related matters. Board meetings, and especially preparing for those, always takes some plus there is always internal reporting that needs to be done. It’s a delicate balance between being helpful and being in the way.

In my view, venture capital is probably one of the most fun jobs out there and sometimes it’s crazy that they pay you to do it. While it’s still finance it has relatively speaking quite fantastic work/life/pay ratio out of all finance industries. It’s amazingly analytical yet incredibly social at the same time and you must enjoy both aspects. It very much becomes a lifestyle and it’s not uncommon to combine a coffee with investor/founder with, say a leisure trip to NYC just because you’re both in town.

Are there any specific skills or qualities that you believe are essential for success in the venture capital industry?

It definitely has a deeply engrained social aspect which is why, if I tease a bit, you don’t see many Finns in the industry! But at the end of the day venture capital is still finance and good finance knowledge is tremendously helpful. Modelling-wise it’s arguably less intensive than in some other areas of finance and you focus more on just the key value drivers which is almost always the revenue. Those revenue build-ups, however, can get quite detailed when you’re investing at billion-dollar valuations and need to build a credible path to 3x returns. It’s also not uncommon to dig really deep on the unit economics and all its components and modelling out returns with unorthodox structures can get nuanced too. Perhaps the earlier you invest the less detailed the technical part becomes but even then it’s important to know finance as you certainly need to review and approve budgets and financial plans.

Most reading this probably come from finance background where the first few years of career are spent doing extremely analytical work where getting each detail right is like the difference between life and death. But then if you jump to VC you’re suddenly supposed to basically start doing the same stuff that your ex-seniors were doing, which is to form relationships and proactively generate work for yourself. It’s frankly a massive jump and I at least had a huge imposter syndrome when starting because I felt so young and I was suddenly talking to people with Stanford degrees building companies valued billions. But you get used to it.

I call it the ‘hunt’ – sometimes getting an audience with a decision maker in a top-tier company requires an introduction after introduction and talking to multiple people and being as relevant as you can until you’re put through to a founder or an opportunity emerges. I think one of the greatest rushes is to bring in a brand name blue chip deal to investment committee you’ve been after for almost few years because that’s how long it can easily take. Study negotiations and persuasion and most importantly learn to get lucky – it comes handy everywhere!

You have been involved in investments in companies like Slack, Klarna, MariaDB and Unity. Can you share some insights into your investment philosophy and what you look for in potential investments?

I suppose this is where you want to put the disclaimer that this is not investment advice, but you rarely get it wrong if you maximize traction and minimize price. And when talking about traction in our world it’s most often the revenue traction. If there are profits on that revenue that’s great but lack of it is not an issue as venture capitalists often are there to finance the burn – as long as the unit economics work. In the long-term VC like any other investment always comes down to being able to generate cash flow. Then you need a good price as well which is its whole separate topic and you can always include some structure to the security to put bandage on some blemishes. I’m certainly still building my track record as an investor but the beautiful part of this job is that the learning journey probably never ends.

As someone with experience in the tech industry, what are your thoughts on recent trends, particularly from 2020 to the present? Additionally, do you have any interesting insights related to key players like FTX, the evolving crypto landscape, Tiger Global's strategies, SPACs, or other factors influencing tech and venture capital?

Oh boy it’s been incredible time to be a technology investor and I’m lucky to have experienced this sort of an economic cycle relatively early in my career.

As mentioned when I started to make the move venture capital or growth equity wasn’t something people really talked about. Then the 2020 pandemic came and everything changed. At first, people wondered whether it’s even possible to do deals without ever meeting people in person, and what followed was basically for VC what the 80s/90s were for private equity. Suddenly everyone and their grandmas wanted to either work in technology or invest in technology.

The valuations got out of hand. There is a legit argument that software should trade for higher multiple vs. a balance sheet company, but we started to see deals clear at 30-40x revenue multiples which hardly made sense. There were literally term sheets where the valuation was just a paraphrase of ”highest offered price and 10% on top”. The craziest was this crypto sports platform that had €4M of revenue in last 12 months and then ended up raising at multibillion dollar valuations from basically every tier one VC on board. At times like this it's hard to pass when you see every big name fund in the round, but it just didn't make sense. The DD on some of those crypto names was just completely different to what you’re ever used to. I vividly remember looking at this one established crypto platform, just browsing through their files and suddenly coming across this excel where they had listed several billions of off-balance sheet cryptotokens. What do you even do then?

As the valuations rose the natural ”beta” in tech became too interesting to pass causing all these large hedge funds jump the bandwagon. The whole period with Tiger Global caused gray hairs for many funds as Tiger employed hedge fund mindset in private asset being able to move extremely fast with limited information shooting term sheets basically after an intro meeting. They just changed the game. The portfolio companies I worked with saw those term sheets as well and they were literally just one page quoting fat valuation and ticket size enough to cover next few years – that’s it. Founders loved it. They had memos on the companies – we saw them as well - but (a) they outsourced a significant part of the dd to consultants and (b) just generally required less granularity to get over the line.

Finally, you had the SPACs. They provided a way to get liquidity for existing shareholders and a brilliant alternative avenue for becoming a public company. The economics were quite skewed towards the sponsor basically rewarding them as long as they just found a target. But at one point many of these started trading at multiple times over their cash. There is hardly ever a reason to pay $20 for a wallet with $10 of cash in it.

In hindsight, the peak was probably when I visited Helsinki probably around Slush 2021 and there was a giant advertisement on the wall of Finlandia building about some squirrel cryptocoin encouring people to invest. That moment felt surreal.

I think we all know what happened next in 2022. As quickly as technology became cool, as quickly it also became the person nobody wanted to talk to. I don’t think anyone expect 70-90% drawdowns in valuations even in their wildest dreams – even if that’s precisely where you end up with if you do your fancy DCFs in normalised the world.

And just as things couldn’t get worse SVB happened. It was possibly the craziest weekend I’ve experienced as nobody knew what was happening. I think people outside of technology just didn’t fathom how important SVB was to technology. Sure pretty much every major tech firm kept their bank accounts on SVB, but so did many funds investing into these firms and SVB also provided personal credit lines to many individual investors as part of their own fund commitments. SVB was the technology sector. For a moment that completely eroded all trust people had in tech.

While we’re still recovering it’s hard to know who’s to blame, if anyone. Capital was cheap and a lot of fundamentally flawed businesses, like 10 minute grocery delivery companies, got funded for wrong reasons. But equally a lot of actually good ideas are feeling the aftermath. There are a lot of good businesses out there right now that are being put to administration for making a poor decision, raising at too high valuations or their boards preventing highly dilutive raises. This probably showed that while many investors are great financiers, they are on aggregate poor economists.

Right now C-stage rounds are basically gone and B-rounds down like 50% from year before. The late-stage venture landscape is basically at halt and it’s hard to get deals done. Yet there are still like $300Bn of dry powder on market raised in past few years that will need to be deployed. We’re seeing tech slowly recover and I’m of course biased but I do think it’s still the best asset to own – if you don’t believe in technology powering the future, what kind of a future you believe in?

Your career has provided you with opportunities to live in different locations, including London. How has living abroad contributed to your personal and professional growth?

I feel incredible lucky to be able to live and work in London doing something I really enjoy and I don’t take it for granted. I never planned to move to London. I didn’t even see it as a possibility until quite late in my studies. Even when I did make the move I was convinced I’d be back within two years as almost everyone do.

I think there is little downside to spending few years of your 20s in London. It broadens your perspective, you get to work with incredibly talented people and you learn to understand how small dot Finland is on the world map. That said, I’m not surprised when most people move back to Finland after only few years. It’s a whole new city, you hardly know anyone, and typically when you move here you’re so early on in your career your that you’re in the office all the time and don’t really get to enjoy the city at all. I remember when almost all my Finnish friends moved back to Finland there was a huge FOMO for me to move as well. But I really think it only gets better the longer you stay. Not only does your lifestyle improve, but you also start to know the places and the people and it becomes more like home.

I’m totally open to moving back to Finland one day when the time and opportunity is right. I’m always open for moonshot ideas and if someone there reading this has any feel free to reach out. Finland definitely has its perks when it comes to family planning and I keep missing proper rye bread. Equally, someone told me that if you’re over 30 and still in London you’ll always be in London. That milestone is long gone and I’m still here so there could be some truth to that.

What would be your advice for a 25-year-old Joel-Oskar?

There are countless number of things, but someone recently told me that if you’re not at least a bit embarrassed by how you were few years ago you’re not making progress and that sort of stuck with me.

Claudia Zhang is a previous Editor-in-Chief of AFA Quarterly.