The power of “Radical Candor” with investor and Productsup co-founder Johannis Hatt

Robin Haak: I wanted to start with a concept I encountered in one of your blog articles regarding the often-missing common understanding between founders, investors, angels, and VCs.

Johannis Hatt: For me, the realization only really came when I started investing. Having been a founder multiple times, I've learned that it is only by shifting your perspective that you can genuinely grasp the other person's viewpoint. Even within the same ecosystem, common interests and understanding aren't always guaranteed. I don’t know if this is a good analogy, but for me it's a bit like going to a doctor and they explain something in a language that you don’t understand.

I mean, you're speaking about the same thing, but you’re speaking different languages. And I think the same holds true also for founders, angel investors, and VCs. Even though we’re all in the same ecosystem, we often struggle to understand each other's realities, even when we’re speaking about similar topics. To alleviate the situation, I like to bring people together in an environment of "radical candor" – being nice but being direct with content – to facilitate open exchange.

How are you addressing this disconnect with the JVH, and what's your approach to fostering this shared understanding?

For example, I organized an event where the different groups that I just mentioned came together. At this event, I asked the VCs to share their fundraising experiences. One of the GPs shared his story. He had five calls with a potential LP, and after all that time, they just said, “Ah, no, we don't invest in the category that you're investing in,” and he realized that it had been a complete waste of time.

By creating this openness and showing people that they’re often in the same boat, just on a different level. This helped the founders to understand that VCs also face challenges like repeated pitches and wasted time with potential LPs who ultimately decline investment. This shared experience highlights that despite different levels or perspectives, they are often "in the same boat." Creating that knowledge can improve the collaboration between the different groups.

If a founder knows what angel investors are looking for, they can prepare better pitches and communicate more efficiently. It’s not an automatic outcome, but a better understanding of the other person's perspective can lead to more effective communication.

I achieve this through the events I host and through sharing my thoughts in writing. I write about things the way I see them. This helps bridge the communication gap within the ecosystem, where people may not speak the same language or fully grasp each other's positions. Similarly, many investors don't fully appreciate the operational struggles of running a business, having never experienced it themselves. Bringing them closer to founders and sharing the "operational hustle" helps them develop greater appreciation.

What is the power in telling somebody the real truth about things?

For me, the power lies in the fact that by telling someone the truth, they can adjust. If you don't tell them the truth, then you don't know where to start. When it comes to giving honest feedback regarding a potential investment, I always put myself in the founders’ shoes and ask myself what kind of feedback they need.

What you need is somebody who says, "Hey, I believe in what you're building. I believe in your idea, and I believe in you as a team. So, I'm going to put my money into it." You don’t need somebody who tells you, “If Sequoia invests, I am in as well.”

Once you have the first convinced investors on board, you can start building momentum on top of that. But I think it goes the other way around, too. So, when founders approach you and say, "Yeah, we have soft commitments from XYZ," But then I say, “Tell me where these commitments have come from, who has signed, and who hasn't signed.” Then we're in a discussion.

I don’t like it when people say you should “fake it until you make it” in the startup world. I'm not the biggest fan of that. You can have a positive way of communicating things, but what builds the most trust for me is if people are open and honest about their fears and the things that didn't work out. I don't know who it was, but I read a quote once from an investor, and he said he determines the quality of the founders by how quickly they call him when something goes wrong.

I tell people this when I invest in them. From the point where I write a check and I wire the money, I want to focus on the things that are not working, because that is where I can help you. We all know a thousand things will go wrong in a startup, and I think tapping into the knowledge that other people have and trying to understand how we can fix these problems is the best way to work.

Is there such a thing as communicating too positively?

Yes. Founders need investors who give them good feedback and guide them. But for this, you need a foundation of trust, and you can only build trust if you have open and honest communication.

It’s not about bullshitting. I don't want to get the “happily ever after” bullshit reporting for investors because then it's like “January was all great, February was all great, March was the best month ever…” and then in May comes the email, “we need a bridge round.” And then I have to ask myself, “What part of the information did I miss?” This sometimes happens because when you take other people's money, you tend to want to tell them a good story about what you're doing with it. But it doesn't help either of the involved parties if you communicate too positively about things.

What's the setup at JVH Ventures? How do you invest, and what does your portfolio look like?

Initially, I got into investing because I realized that I might know a little bit more than the average person when looking at startups. So, I wrote the first check in 2016. Since then, I have invested in over 80 companies in the early stages. I set up JVH Ventures as I'm an entrepreneur. I set it up in a way that I can ensure I’m doing it successfully. Successfully means creating returns, so I thought about what the underlying fundamentals are that you need to look at to realize returns. To do that, you need to have a big enough portfolio.

I have access to great deals, and I’ve built a great structure. So, I now have somebody supporting me with admin tasks. I have somebody supporting me with screening and creating the deal flow. But at the same time, there's no fixed structure in terms of the type of deals that we can make and when.

I try to come in as early as possible. Also, if somebody approaches me with an interesting seed round and it's not pre-seed or even series A, then I can, of course, do that too because, unlike Robin Capital, we have no LPS to report to.

Over time, I’ve become more selective in the areas where I invest. I’ve realized that I'm not a good hardware investor because there's a lot of stuff that I don't know about hardware. So I don't do hardware investments anymore. When it comes to B2B versus B2C, it often has a completely different dynamic. I think that I'm a better B2B investor than B2C. A lot of the companies in the portfolio are in B2B software, because that is where I gained the most knowledge as a founder.

I’ve been running a B2B software company for 15 years and scaled that myself. So that is really where I can support founders, with the knowledge that I gained from that experience. That is, most of the time, the most valuable thing I can offer.

Let's take it back to your early entrepreneurial ventures. What aspects of an entrepreneur's life captivated you and made you want to found your own company?

My parents were quite young when they had me; my dad was 21 and my mom was 23. They were still studying, which meant they had a lot of time but very little money. This led me to constantly come up with creative ways to earn my own money.

To some extent, it goes back to my earliest experiences as an entrepreneur. I would go to the supermarket and weigh the Kinder Surprise eggs. The ones that contained toys were slightly heavier than the ones without, so I would weigh them, see which ones had toys in, buy them, and then sell them on the schoolyard. For me, it was always about finding ways to improve my pocket money.

Now, looking back, when someone asks me the question, “What would you have done if you hadn't become an entrepreneur?” I have a hard time answering.

Ultimately, I love being an entrepreneur because it's a deeply creative endeavor. Every day presents new roadblocks, and the challenge lies in finding innovative solutions. If one approach isn't working, you try another, iterating and refining until you achieve your goal.

It’s about the execution, about the tenacity, about trying it over and over again. I like the creativity in the process. It’s like being an artist, right? When you start creating, you take the paint, you take the canvas, and you start drawing. Then, at the end, you have a nice image. And as an entrepreneur, it's kind of the same, right? You start off with an idea, and now, for example, the company that I run as a CEO that I co-founded, we have a team of 259 people, and it's making $30 million ARR, and it has offices all over the globe. It’s something that would not have existed if we hadn’t started it. That’s super cool.

What about your role as an investor?

I think the same applies to investors, too. So, as an investor, you need to understand every day how you can improve your deal flow, how you can get access to the best deals, and how you can work out which startup or idea will become a really big company. In a sense, being an investor is like being an entrepreneur; it's not that different. So everything that I touch, I do so with that entrepreneurial mindset. And I ask myself, what’s the best way to do it? How can I improve it? How can I do more of it?

And how can I make more money, right?

Of course, when I invest, I want to earn money, right? But I think the money is rather the ultimate proof point that something worked. Because, for me, at a certain point, how much money I have in my bank account isn’t so important. I only eat dinner once a day, and I don't need to fly first class every time I go on vacation. So I think the real question is, what do you need more money for? And what is the ultimate proof that what you do as an investor works? It's the DPI that you have; that’s an important metric to look at as the only way to prove that you’re a good investor.

Let's go to Productsup, you are currently the CEO again, and you’re running JVH Ventures, how do you balance the two?

I'm the CEO again. So, when I stepped out of the operational role as CEO at the end of 2021, I then focused for a little more than three years on my investment activities at JVH. Then, I got a call from the board at the end of 2024, and I stepped back in.

When it comes to running JVH Ventures, it doesn’t necessarily mean that if I put more time into it would lead to better investments. It's really about the question of being able to identify the right investments, building a network, having the right people who think of you when it comes to certain deals, and it’s about sharing the deal flow.

As an investor, it's important to create the right hypothesis. For instance, at one point, I increased my communication, and by writing more articles about investing, I generated increased deal flow. However, more deal flow doesn't inherently translate to higher-quality deal flow.

I'd say 90% or more of my deals originate from my network—from other angel investors who grant access to deals, or from early-stage venture capitalists who are bringing on additional angels for a company they plan to invest in. Therefore, it's largely a network-driven endeavor and a matter of staying top-of-mind for other investors when they're considering a deal and seeking co-investors. Consequently, as an investor, I believe that simply dedicating more time to deal flow creation and generation doesn't automatically guarantee better results.

What's it like returning to Productsup after having a bit of a break?

It’s like what I said earlier, as an investor, it's easy to lose touch with the founder's perspective. I was surprised by how quickly I forgot the intensity and demands of running a company. It was a swift reminder of the challenges involved. It was like “ah, here we go again.”

It was a good refresher and has reminded me to be more respectful. I always appreciate what the founders are doing. But taking a step back, doing something different for three years, and then being in charge again has made it crystal clear to me how demanding and challenging this job is compared to being an investor.

You have the same struggles, like raising money, finding LPS, and so on. In some ways, it's similar, but starting and running your own business introduces increasing complexity. Being a CEO is a daily challenge. It’s creative. It’s chaotic. And when it works, it’s magic.

What was it that inspired you to start Productsup in the first place?

We started by looking at the market landscape, and it was a little bit like it is now, when you look at Perplexity and OpenAI. Everybody was starting initiatives to work out how things could become “shoppable” and how they could do something more product-oriented.

When we started, it was the same, but with Google. Google introduced Froogle and Google Base, and we were looking at what you could do with product data to have more results appear at the top of the page on Google.

What’s the journey been like?

We started to play around and get products to rank well on Google, and we realized that it was all about the quality of the data, and it was all about the keywords. We started working out the changes you needed to make in order to reflect how people search for data and products. In the end, we started offering that optimization as a service to customers.

We started as an agency, and then after a time, we realized that an agency was not the best thing to scale and not the best business model.

At first, we tried to optimize as much as possible internally. We built tools and little helpers for our co-workers so that they could become more efficient and more productive. Over time, we realized that we could package those helpers and put a user interface on top of them, and then give this to people as software. In the end, every one of our customers knew their product information better than we ever could. So, ideally, we would give them all the tools and technologies that they need to optimize this data, but they could do it themselves. After five or six years, we switched from being an agency to being a software-as-a-service provider.

What made you make the switch?

We needed a little bit of a push to take the leap. This happened when Froogle and Google Base were turned into Google Shopping, which advertisers then had to pay for. That created the perfect moment for us because we were heavily relying on this channel.

Some of our customers stopped using it because they needed to see how it would develop, and now that they had to pay for it. We also realized that we were too dependent on Google as an export channel, and the agency model was not something that we wanted to scale long-term. That’s when we decided to switch to software as a service and focus on more channels. We took roughly a year to make the transition, and then we started selling our product as a software-as-a-service solution.

We’ve co-invested in a few companies, and you’re an LP in Robin Capital. Why did you decide to invest with me?

I first met you at a Slush conference in Helsinki. I was at a bar, and you walked in and I thought, "Oh, it’s just another German guy." But we kept running into each other over time, as we were working in the same ecosystem. Then, when you started Robin Capital, we got back in touch, and I decided to invest as an LP. I really admire how you embody the entrepreneurial spirit as an investor. You hustle every day to move your business forward, and I truly believe that kind of dedication leads to great results. You really do everything you can to secure the best deals.

You’re also a co-investor in Spare-it…

That’s a funny example, right? Because the first time I heard about it, I thought it was one of the craziest things I'd ever heard of. Measuring garbage? I wasn't sure if that was interesting. But then, of course, I started to look a little deeper. The realization for me came with the traction they already had, having discussions with customers who needed their solution.

And then, when I understood how the process is done today – that consultants are going through companies' garbage to fill out those required reports and understand what's going on – I thought, "This is an area where technology can improve the whole setup." Is it the final version that’s being sold to the customers right now? Probably not. But if you're the solution partner for those larger organizations that can help them do this more efficiently, then they will also go with you in the next iteration. And I love it when you have a B2B business model that you can sell indirectly via partners.

I think this is a really good business model to be sold via partners like the consultants and auditing companies of the world. And then, of course, the founding team. That's one of the elements we have in common. Sometimes, I mean, I've ended up investing in companies where I think, "I'm not sure if the idea is going to fly, but I'm sure this person is going to create something that works." Then it becomes more of a founder bet. But sometimes you're just amazed about the people who are putting their brains into something, and you think, "They're so brilliant. If they do that every day, they're going to come up with something that works."

Do you think there is a certain spark in a founding team that tells you that this is a good investment? Have you worked out what that is?

For me, it's personal. I don't have data to back this up, but I think there are two types of founders. One type wants to build something, to engage in that creative process—I'd put myself in this group. The second type, and I believe they're often more successful and build bigger companies, are those who are truly obsessed with a problem. When you meet them, they explain a specific topic, and you just know they won't rest until they solve it. That's the spark and energy I look for in founders. I'm not saying the first group, including myself, can't build great companies or solve problems. But sometimes you meet people who talk about a problem, and you can tell they've examined it from every angle and won't stop until it's fixed. That's what really excites me.

I read on your LinkedIn that you've got into collecting street art. What excites you about collecting art?

I'm drawn to street art, the Banksys and Shepard Faireys of the world. I see it as a relatively new art form with potential for appreciation in value, which led me to invest in it. It's fascinating to learn about the market, how it operates, and how authentication is done, as it functions in a unique way.

What would you like to do more of at this moment in your life if you had the time and the energy, and the space?

Oh, so many things. The number one thing I would do if I had more time, energy, and space is I would want to spend more time with my family and friends. I would also like to try new sports and read more physical books. I’m pretty much hooked on audiobooks, but reading physical books would be nice too.

What kind of new sports would you try?

I got my diving license, but after that, I haven’t really been diving. So that's something that I would like to do. I'm definitely not into skydiving or something like that. I think archery would be fun too.

Where do you see yourself in the next five years?

I prefer beaches and palm trees over snow and skiing. I think life is better in flip-flops. Over the next five years, it would be great to see one or two successful exits from my current portfolio that return a significant portion of my investment. Of course, I also wish for everyone around me to be happy, healthy, and super fit. That’s the most important thing. Especially when you have kids, you want to see them grow up. We always speak at home about how lucky we are that everybody around us is still here and that we’re all healthy. Time really flies when you have little kids. It's really about appreciating the time that you have together with family and friends.

That’s great. Thank you for your time, Johannis.

Thank you, Robin.