Exploding term sheets, mobile gaming, and GenAI with Rob Moffat – Partner at Balderton

Robin Haak: Hello, Rob. Great to have you on the call with us today! You’ve been a partner at Balderton since 2016, and you recently wrote an article for Sifted about exploding term sheets. I thought we could start there—maybe you could share your perspective on what founders need to consider when it comes to term sheet conditions from investors. In your article, you mentioned that an offer expiring in 48 hours isn’t necessarily a bad thing…

Rob Moffat: Yeah, I think from a founder's perspective, it’s important to realize that VCs do this all the time and are optimizing their process to work best for them. One of the tactics they use to close deals is applying time pressure. But what founders need to know is that those deadlines are almost always false.

There’s been a lot of writing about this—Fred Wilson wrote a post years ago explaining that good term sheets never actually explode. If a venture capitalist truly wants to do the deal, they’re not going to walk away after 48 hours, even if they say they will. So as a founder, you have the power in that situation. It’s great that you have an offer, but you should make your decision based on what actually matters to you.

That said, you also want to get back to running your business—you don’t want the fundraising process to drag on for too long. But if you have, let’s say, three great VCs who are close to making an offer, don’t just go with the first one because they sent their term sheet on Sunday instead of Monday. It’s worth taking an extra day to decide which of those three is the best option for you.

Let’s talk about your own experience in the industry. You’ve been in the Venture Capital game for some time. What would you say has changed in terms of funding, particularly since 2022? Are we seeing a new breed of founders?

Yeah, I think it’s hard to point to one specific tipping point or sudden shift. But there have been two major developments over the past three years.

The first was the market correction in mid-2022 when valuations dropped significantly. That forced founders and investors alike to adopt a much more profit-focused approach, really honing in on business fundamentals. It was a return to reality, in a way. The outlier wasn’t 2022—it was 2021 when things got completely out of control, and valuations skyrocketed to unsustainable levels. The mindset now is more about building something truly valuable and long-lasting rather than just chasing capital for the sake of it. The second major shift is AI. AI is transforming every sector, and that’s incredibly exciting. These businesses are generating tens of millions in revenue at an unprecedented pace.

We recently announced the next funding round for Writer, founded by May Habib and Waseem AlShikh in London. The company is now valued at nearly $2 billion. They’ve done an incredible job applying GenAI to industry-specific content—whether that’s FMCG, luxury, or finance. The technology is mind-blowing, and the speed at which these companies are scaling is remarkable. That’s driving a lot of excitement and inspiring a new wave of startups.

On that note, let’s talk about regulations for AI as they stand right now—do you see these as a hindrance to innovation, or do you think founders can use these regulations to thrive and succeed?

No one likes regulations. That doesn’t mean they’re not necessary. If you look at the pantomime of Trump and Musk at the moment, it’s a great campaign message, but the reality is, you can’t just do away with regulations. They exist to protect people, ensure fair competition, and ultimately, to safeguard the human race—if you take the extreme view on it.

That being said, regulatory capture is very real. Big tech companies have massive regulatory teams working to tilt the playing field in their favor. And some of the proposed regulations over the past few years have been aimed at stopping startups from scaling while protecting incumbents. For example, blocking the development of new AI models—is impossible, because the world is a big place and there will always be someone developing a new model, and it also directly benefits the large, established players.

How do you assess the value of AI startups at this moment in time?

Revenue growth is a big factor, but at the same time, some companies are growing fast just because of the sheer excitement around AI. There’s a lot of trial budgets, a lot of consumer spending—it’s a hot space. So you can’t just look at revenue growth alone; you also have to look at the underlying technology and whether it’s truly defensible and lasting.

And maybe you can tell us about Writer—what was it about their company that made you think, “Okay, this is different, this is exciting”?

There are two key things about Writer—and I’m not the board member, so I probably won’t do it full justice—but first, they’re building their foundational model, what they call a "Palmyra" model. That’s giving them a real USP in the kind of content they produce.

They focus on high-quality content with no hallucinations and no errors. If you’re in finance or healthcare, for example, you can’t have something that’s approximately right—it has to be exactly right. And they’re doing this in a really efficient way, without requiring hundreds of millions of dollars to build the model. They’re operating with tens of millions or even single-digit millions.

The second thing is how deeply embedded they get with their clients. They’re selling into enterprises and building a broader software suite around that. And that’s what makes them really stand out—if users within a company are deeply engaged with their product, it becomes much harder for the enterprise to switch. Whereas if they were just offering an API, a company could easily swap them out for another provider.

Changing the topic slightly. Since you do a lot of investing in games and mobile gaming, what excites you about this space?

The interesting thing about mobile gaming is that the first iPhone games came out, around 2010. And the first real successes—like Angry Birds—came shortly after. Then Candy Crush followed, which was on a whole different scale. That’s over ten years ago now.

If you look back five years, a lot of investors thought mobile gaming was done, and everyone was saying "Let’s move on—what’s next?" They started looking at VR games, AR games, or massive multiplayer online games with huge, ambitious universes and complex processing. But in doing so, many lost sight of the fact that mobile gaming still had a long way to go.

People default to convenience, and the most convenient gaming device is your phone—it’s always there. It takes two seconds to open a game and start playing, which is a fantastic experience. Gaming is about relaxation, and being able to play anytime, anywhere is a much better experience than, say, strapping on a VR headset or even turning on an Xbox, finding the controller, and waiting two minutes for the game to load.

There are practically no barriers to accessibility. You just pick up your phone, download a game, and within seconds, you’re playing. And the gaming audience is so broad now—you look around on a train, and there’s a 70-year-old with an iPad playing Royal Match. It’s pretty phenomenal.

A lot of VCs lost sight of that and moved on too soon, thinking mobile was over. That’s why we invested in Dream Games at the pre-seed stage—before they even had a game. What stood out was the team. They were incredibly impressive, and they had an unshakable belief that their first game would be a massive success. And they absolutely delivered—Royal Match reportedly now has more than $2 billion in revenue.

What’s the payment model? How does it work?

It’s mostly in-app purchases. So, you play the game, and you can buy extra game currency or power-ups. The spending is usually triggered by the desire to reach the next level, unlock a card collection, or progress faster. You can always play more and grind through it, but sometimes, players choose to spend a little money to speed things up.

You invest in fintech too, as well as in banking, and gaming, right? How did you end up with these three as your main focus areas?

Yeah, so banking is part of fintech—they're closely related. But gaming was more of a coincidence, which I’ll explain in a minute. For fintech, before I worked in VC, I was at Google working on financial comparison products. Google was building a financial comparison site, so I spent a lot of time looking at that sector. Before that, I worked at Bain & Company, mostly with financial services clients, so I had a bit of a finance background. Then, when I started in VC in late 2009, fintech was just starting to take off. You had companies like Wise and Adyen emerging—it was an exciting time for fintech startups getting off the ground, so it felt like a great space to dive into.

Gaming was more of a coincidence. I was invited to join the board of Wooga, a Berlin-based gaming company we had invested in. At the time, they were still on Facebook games and pre-revenue. I started working with them, built their first financial model, and then saw them shift quickly into mobile gaming. It was a great journey through to a successful exit to Playtika, and I learned a lot through that process. That experience gave me the foundation to invest in other mobile gaming companies.

I love that in gaming, we tend to invest early, so it's all about the team. It’s a very pure kind of investing. You have to ask yourself whether you believe in the approach. But more importantly, whether you believe this is an exceptional team. Gaming is a competitive market, with a lot of companies trying to break through. So, what makes this team different? Then, once companies start scaling, there are a lot of metrics to analyze, which I enjoy. I originally studied math, so I’m comfortable getting deep into the numbers. I guess that’s the only common thread between gaming and fintech—both are very data-driven.

What is it that drives you? What gets you up in the morning?

I think it's two things. First, meeting an exceptional founder. You walk into a meeting not knowing what to expect, and an hour later, you leave buzzing because they’re working on something incredible. They’re making amazing progress, and they’re just a really impressive person.

The second is seeing the companies I’ve worked with for years reach massive scale. I’ve been working with Carwow for 11 years, and of course, the credit belongs to the CEO and founders, but I’ve been there alongside them, helping along the way. Watching companies you’ve backed from the start grow into something huge is really rewarding.

In terms of Europe and European startups right now, what do you think are some of the biggest challenges we face in mainland Europe and the UK?

I think a lot of the historic challenges are starting to go away. One of the biggest past challenges was funding, but now there are a lot of venture firms, particularly in the early stages. There’s still arguably not enough big growth capital, but even that is improving. And the reality is if you’re building a great company—like Revolut, for example—you can raise money from the best global investors. So, while a lot of Revolut’s late-stage capital came from outside of Europe, that’s fine—it’s still an amazing company being built out of London.

Another past challenge was European investors being too risk-averse, but I think that’s also changing. We just announced our investment in The Exploration Company, a space tech company building re-entry modules—super ambitious, high-risk, but also high-reward, with a fantastic founder. We also invested in Wayve, an autonomous driving company that raised a billion-dollar round led by SoftBank this year. Autonomous driving is extremely capital-intensive, but it’s a massive opportunity. So, I think we’re seeing more investors in Europe backing high-risk, world-changing projects.

The biggest challenge that remains is fragmentation. Brexit hasn’t helped, and there are still differences in regulations across European countries that create friction. Even within the EU, there are discrepancies—like the slow rollout of open banking or different stock option rules in each country. There’s a real need for more harmonization across Europe, making it easier for startups to scale across borders.

We always talk about the US and Europe, right? The US has always been faster at growing startups. Do you think that’s still the case, or do you think Europe is catching up?

I absolutely think Europe is catching up. Look at Revolut—it’s 10 years old now, and I can’t remember what’s public, but the numbers that are public are pretty impressive. It’s an enormous company. US VCs acknowledge it as the most exciting fintech in the world today—maybe second after Stripe—but it’s a super impressive company. And it was built out of London. It has global operations, but it’s been driven by a Ukrainian-British team based in London.

And speaking of the UK—you’re based there now. What are you seeing in terms of UK startups? Brexit happened so are there more challenges now, or is it still fairly easy to raise internationally, as you mentioned?

Yeah, raising hasn’t been a problem. That hasn’t really been affected. I think the biggest issue is talent, and the recent budget has made that worse. If you’re trying to attract a top American AI expert to join your UK-based company, there’s a lot of red tape, and then they’ll pay a lot of tax. In Europe, the tax situation is probably worse, but there’s still that Brexit red tape, which is a real pain.

If you’re a big company, it’s fine—you just pay the lawyers to deal with it. But if you’re a startup, you don’t have the resources to navigate all that, and it limits your hiring pool. A lot of companies are just adopting remote models instead. So, for example, you hire a great person in Estonia, but they stay in Estonia. That’s fine for the company—though ideally, they’d want their team in one place—but the UK loses out because that person isn’t moving here.

That’s good to hear. Let’s use the last couple of minutes to talk about you—what got you into venture capital in the first place?

I was working at Google, as I mentioned, and I knew I loved the tech sector. I was really excited by it as a driver of growth and innovation. A common theme among a lot of VCs is reading science fiction and thinking about what the future could look like. That was definitely me.

I knew I wanted to be in tech, but I also hated working at large companies and never wanted to do that again. So my options were: to start a company (but I didn’t have a great idea), join a startup (I interviewed for a couple), or join a VC firm. So, I figured joining a VC was a great way to learn a lot, get exposure to startups, and then maybe go off and start something myself after a couple of years. But then I ended up loving it and staying.

So you've had a lot of investments over the years. What would you say maybe has been one of your most exciting stories or most exciting investments that you've made?

One especially good one would be Cleo. Cleo is an AI that talks to you about your money, focused on young people in the US. You link up your bank account, and Cleo says, "Rob, you're going to run out of money five days before payday. This is what you need to do to avoid that. You're spending too much on Uber—you need to cut that back. And if you're not going to make it, here's a $100 loan to make sure you do get to payday without hitting unauthorized overdraft fees." So that's how Cleo works.

When we first invested, it was a UK-focused business with early-stage revenue. It had a basic version of an AI, and one of the first employees was a scriptwriter. Really impressive idea, but quite early in execution. Now, it's at a more than $180 million revenue run rate, super impressive AI, really adopting the latest techniques, and building a world-class AI setup to have a clever, smart conversation with users and drive better engagement. They also have a huge ambition to go much further than that. It's just a super exciting company—very young, high-energy, and with a really impressive founder.

And we already talked about the fact that you enjoy meeting founders. How do you source deals?

I look into new sectors. So I spent some time in the last 12 months looking at the legal sector and what you could do with AI in the legal sector, for example, or robotics as well. So I spend time exploring new sectors, and that leads to, "By the way, this company's interesting," and reaching out to them. So that's a big part of it. And I think increasingly, it comes through network and people who have worked with me in the past and hopefully think that I'm a good investor. And so they'll say I should be looking at certain companies.

What do you think you bring as an investor to a company at the early stage?

Where are we going to spend? How do we make the best possible use of the cash we have to get as far as possible? Does that get us to profitability? Does it get us to another funding round? If so, what does that mean? Thinking all of that through is a major part of what I do. And then we spend a lot of time as partners with our companies. We also have this platform team of deep experts in marketing, tech, product, talent, and legal who will spend a lot of time with founders helping them think through their questions in those areas.

It sounds like you're quite hands-on with the founders that you work with.

Hands-on in support. Yeah, we're a minority investor. We're not trying to control anything. We're there to provide anything the founder asks us. We should be super responsive. Sometimes we say we can't help, but most of the time we can help in some way. But we should also be thinking through, "What's the founder not thinking about that might hit them in a year or two years?" and how do we stay ahead of that?

Where do you think your drive comes from—to find the best deals and invest in the future?

There’s a lot of psychology in that! But I think there’s a general sort of push to whatever I do—to be the best at it or one of the best. And so that’s probably a unifying thing of never being satisfied, being quite self-critical, and pushing on that.

If you’re always thinking critically and pushing for the best, how do you find balance? How do you switch off?

It’s hard. My wife definitely calls me out sometimes—she’ll say, "Rob, you’re in investor mode. Switch off, get back into family mode." So having family and friends who will pull you out of that mindset is important. And I think you need activities outside of work that require focus. I think there’s a reason founders get into extreme sports—kite surfing, for example—because when you’re doing it, you can’t think about work. You have to be fully present, otherwise, you’ll end up with a face full of water. For me, staying fit is really important, more for my mental health than anything else.

What would you say are your top three achievements? Personal or professional, up to you.

Having a happy marriage and two amazing kids—that’s first. Making Partner at one of the top global venture funds focused on Europe—that’s one. And in terms of investments, I think the companies I’ve backed still have so much further to go. The ambition is huge—Dream, Cleo, and others. It’s still a work in progress.

Thank you so much for your time and for sharing your insights. It’s been really interesting to hear everything you’re working on.

Thanks very much.