Interview with Philippe Schwartz of Square Peg Capital

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Philippe Schwartz

Partner at Square Peg Capital; Former president of Withings, Inc. and Founder & CEO of ooVoo

Philippe is a partner at the Boston branch of Square Peg Capital who invests in internet-related businesses. He brings his 20+ years experience as a business executive to form collaborative relationships with startups and help them achieve greater value.

Q: Describe your job. What do you do as venture capitalist?

As a VC for Square Peg Capital, I invest in companies while working very closely with the CEO and founders. We have a collaborative relationship with companies to help them negotiate difficult contracts with customers, for instance. The last role before I became a venture capitalist was running an Internet of Things (IoT) company in global health and wellness.  I have knowledge in how to maintain relationships with retailers and manage supply chains, etc. I work closely with the entrepreneurs so that they avoid the mistake that we all made when we were executives, entrepreneurs, and operatives, so we share the experiences we’ve had and help them solve real life issues, not just the investment issue. It’s an ongoing engagement, not a report-back relationship.

We are financial partners. We align ourselves in the interest of the company. We’re just another player in the company’s ecosystem. That sounds nice in words, but at the end of the day, they have to happen in reality. Sometimes we don’t agree on everything. There are often different views between us and the executives, but we always have healthy debates that are based on mutual trust and a willingness to prioritize the interests of the company.


Q: How does Square Peg go about choosing which startups to invest in and maintaining relationships with them?

For companies that we are currently invested in, our job is to help them with a lot of operational and strategic decisions about which contracts should be signed, recruiting people, helping them maintain relationships with retailers. We help them with day-to-day issues, so it’s very granular and down-to-earth. With new companies, I’m looking for opportunities in areas not because it’s a great technology and a great team, but also because it’s a company that I can understand because I’ve been in that business. Therefore, I can contribute something to the company, and they see us providing real tangible value. The two work hand in hand, since when you start establishing a reputation with an existing relationship, the word goes around and it helps making the new deals.

At the end of the day, when we look at investment criteria, one is really about quality of teams. And the next priority is finding good market opportunities. Sometimes they don’t necessarily feel huge, but they’re real and they become huge as the market evolves. I think if you can find these two things, that’s the winner. Finding great people and solving real problems. We really never invest in one individual. A collaborative team is the essence of a successful company.


Q: What brings Square Peg Capital to Boston in particular?

It’s amazing how vibrant the ecosystem is here, especially with MIT. I have a feeling that it is one of the most vibrant entrepreneurial community you can find in the US. It’s great for us to be able to tap on that. It’s not about finding people who can do the job best, but more about finding the spirit, finding people who think in similar ways in helping companies, providing ideas, forming a network. We are eager to work closely with any organization at MIT that is promoting entrepreneurship.

The question was sometimes, “Why yet another VC in Boston? How are you going to able to source deals that are unique enough? Are you just getting the deals that the big VCs don’t want?" What has been really fascinating is to see that we’ve been able to source some very unique deals, because of that mantra of helping the company, building a brand of close collaboration. We've been creating a novel alignment with founders by helping them with operational decisions, and investing in themes that we believe we understand well.


Q: What was the hardest moment of your career?

There’s been a lot of them. Being an entrepreneur is like a roller coaster ride. I deal with the fact that you wake up, it’s sunny, and 5 hours later you get an email from a customer or supplier, and the sky is falling on you. It’s difficult to deal with the volatility of good and bad news. While there are other hard moments such as not receiving sufficient funding or unfavorable market conditions, the hardest moments involve anxiety around teams and people. Many issues arise not because of the money or the market, but of people not getting along. A person may have specific technological assets yet still be destructive to the goals of the company. [In such a case,] don’t be overwhelmed by losing him even if he has good knowledge. Never compromise the DNA of the people, and the alignment of the individual’s DNA to that of the company. While running a company is tough, having the right team significantly increases the chances of success.


Q: What advice would you give for MIT students looking start their own company?

First, don’t be afraid. If you have a dream or something you believe in, then go for it. As an MIT student, I think that a lack of fear would be the most important quality. MIT provides such an amazing, supporting platform between professors, clubs, and incubators that help you decreasing the risk, which may compensate even more for lack of experience. Second, don’t be too myopic about the technological features of a product. Yes, technology is critical for the success of a tech venture, but always think products, brand, and user experience. Don’t forget that eventually, someone needs to buy and use the product. Don’t lose track of the non-technology aspect of business—the brand and emotion associated with the product.