- Paul Murphy is a partner at VC fund Northzone in London. He worked at Microsoft during its $8.5 billion acquisition of Skype.
- That experience, alongside helping to realize the fund's exit from Spotify during its IPO last year, helped shape his vision for what makes the best companies.
- Murphy helped Giphy make a set of tough choices that paid off in a startling growth strategy and says he applies the same methods to other investments.
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Taking risks is an inherent part of the world of investing and founding a company. The role of an investor is to help guide a company through the riskier moves.
Paul Murphy, a partner at VC fund Northzone, has learned that risky tactics are often the best way to get a startup out of first gear. He worked on Microsoft's acquisition of Skype.
For example, one of Murphy's investments, Giphy, had a forked path in terms of strategy. It could opt to develop its own GIF content or it could take on the much harder task of indexing the world's best GIFs. The latter was certainly the riskier approach as the GIF file format has virtually no meta-data attached to it, making it so hard to categorize that even Microsoft's Bing and Google's image search engines had, at that time, failed to do it well.
"Giphy was founded as a company after its founders made a product in three weeks and said to people, 'Do you want this?' It turned out they did," Murphy told Business Insider in an interview. "Their site crashed from all the traffic almost immediately, but they had spades of ambition, so we encouraged them and said, 'We will back you.'"
So, at a bar in New York on a Friday night in 2013, Murphy, then at Betaworks, alongside Giphy's founders made a handshake agreement to fund the business based on a mutual belief and confidence in the company's plans. By Monday morning they had a team of five and the paperwork was signed in the following days.
Murphy was an investor at Betaworks who led Giphy's Series A funding round and participated in the company's B and C rounds taking its total funding to $150 million. He says the decision to take the less conservative growth option paid off and has emboldened him to continue down this path.
Giphy now has around 300 million people using its services daily and has raised $151 million to date.
"You're always taking a leap of faith with an investment and most investors are more wrong than right," Murphy told Business Insider in an interview. "The important thing is to be able to articulate that leap of faith in a company as an investor, it can't be blind faith."
He joined Northzone in 2018, a few months before the fund took Swedish music giant Spotify public. The company's bold streaming model has completely changed the industry and has taken massive risks to push for growth.
One of Murphy's investments at Northzone has proven to one such company that's benefitted from massive growth. Berlin-based electric scooter firm Tier is a good example of a business which takes the right kind of risk, according to Murphy.
"They have everything they need to succeed," Murphy said. "Instead of trying to make just a few cities profitable, they are taking the riskier approach, competing with incumbents and beating them by focussing on unit economics and execution, aiming for a global leadership position."
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