Today’s episode is a special one as we’re diving deep on Join Capital not only with Founding Partner Tobias Schirmer, but also with one of their core LPs, ‘The Architect’ Joe Schorge, Founding Partner of Isomer Capital.
Recorded as their raise for Fund II is coming to a close, we dive into the story and strategy of Join from both the GP and LP angle, uncovering perspectives rarely shared publicly.
Join Capital's Founding Story
First, let’s get the basics settled: Join Capital is a €150M early-stage venture capital investor in European technology startups providing access to industrial companies. Join has an established portfolio of 20 companies and notable investments include Flexciton, Valispace, Opteran Technologies, Digital Spine, and Frenetic.
Join Capital's founding story is rooted in a deep understanding of the European landscape. Their journey began when the previous CVC team gained early exposure to niche SaaS deals in Europe back in 2007.
Through their experiences and close relationships with GPs, they witnessed the remarkable growth of the European ecosystem. It was during this time that they astutely spotted a captivating opportunity to launch a new fund with a laser focus on B2B software
We founded Join Capital in 2015 as a team of previous corporate venture guys who saw an opportunity to invest in what we now call “The Neue Industry” (the new industry for the less Germany-savvy).
We called it Join Capital because it’s always been a joint effort between entrepreneurs and investors and corporate customers.
Exactly the role of corporate customers cannot be neglected as this is one of the things that truly sets Join apart involving industry actors closely as both LPs and Ambassadors. So if you’re thinking about leveraging the synergies between industry and VC, this episode should not be missed.
Putting The First LP Ticket into Join
True to form, the story starts before Join was even formed (in fact, even before Isomer was formed) but nonetheless, Isomer ended up becoming the first LP in Join Capital.
If you think raising a fund in today’s market is tough, try 2015!
I met Tobi and Jan when they still worked at a large German corporation and they had a big idea. Isomer didn’t even exist yet, but we both had each our own big idea … But I recognized the need for a fund like Join having worked in manufacturing earlier in my career and struggled with many of the industrial software problems Join was looking to back solutions for.
Join Capital’s Investment Thesis
The three main challenges that keep people awake at night in “The Neue Industry” are decarbonization, energy costs, and the shortage of skilled labor.
Decarbonization is a massive challenge, requiring changes in production, supply chains, and logistics. And failing to reduce carbon emissions will result in very costly penalties making this an important problem to solve for practically everyone. Energy costs are closely linked to efficiency, and companies that can optimize their processes gain a competitive advantage. And finally, there is a shortage of skilled labor, hindering productivity and growth for which automation and digitization hold important solutions for.
This has allowed Join to establish a strong and diverse portfolio spanning from Helsinki to Lisbon within deep tech all with innovative business models that can deliver outsized venture returns. Exactly the type of diversified investments strategy that can generate long-term value that is somewhat independent of market cycles.
Watch the full segment of the interview below 👇
The Join Capital Ambassador Program
The Ambassador Program implemented by Join Capital plays a pivotal role in their investment strategy. It serves as a valuable network of individuals who act as direct links to the shop floor, providing real-life experiences and feedback on the problems faced by industries within “The Neue industry."
The ambassador program brings together a diverse group of individuals, including chief digital officers, chief transformation officers, and other experts who possess deep knowledge and understanding of the challenges and needs within their respective industries. These ambassadors are often positioned in family-owned businesses that continue to operate and maintain their own ventures.
By leveraging the ambassador network, Join Capital gains access to unique insights and perspectives from those who encounter the problems firsthand. This allows them to identify startups with potential solutions and evaluate the viability of their offerings. The ambassadors provide valuable feedback during the due diligence process, helping Join Capital understand the market fit, potential customers, and the efficacy of the proposed solution.
The ambassador program serves as a two-way street. While Join Capital benefits from the expertise and insights of the ambassadors, the startups in their portfolio also benefit from this engagement. Join Capital's approach ensures that they don't disrupt the existing client base of the startups during due diligence. Instead, they bring in new people through the ambassador network, allowing the startups to gain exposure to potential customers and receive constructive feedback without the pressure of immediate investment decisions. This approach fosters a collaborative environment, where entrepreneurs can refine their offerings based on real-world input.
The ambassador program has proven to be a key differentiator for Join Capital. It facilitates efficient and effective communication between investors, startups, and industry experts, enabling better decision-making, targeted investments, and improved go-to-market strategies. The program also enhances Join Capital's ability to source deals outside of their home base in Germany, leveraging the expertise and connections of the ambassadors to onboard startups from various locations across Europe.
“Among those 70-odd funds we’ve invested in, there was one group that gave us more cash back in 2022 than any other - and that was Join Capital. And this is particularly notable considering the challenging exit market. But Join Capital's success aligns with the thesis that B2B companies with longer sales cycles can provide consistent value to customers, resulting in resilient returns. Again, this is not a metric we particularly obsess about, but analyzing the data we realized “wow! Well done!” and it proves that with a thesis like yours, you can create long-term value that is somewhat cycle proof if you will"
17:01 - 19:05, Joe Schorge (time stamp for the video above 👀 )
🔫 The Quickfire Round 🔫
What advice would you give your 10 year younger self?
Tobias, Join Capital:
Fundraise smarter — spend time with investors that want to allocate to VC and don’t spend time with people that are sceptical or have no mandate to invest.
Try to find people like Joe, who are dedicated to committing, and not spend too much time with people. You want to spend it with those you know they want to commit and looking for the right team to join. In fact, we could not have done it without Joe and his team. Later, you can build on that. Don’t try to force the sale of your LPs. It’s not going to work.
And Joe pitched in:
I totally agree with Toby. You need to spend time with the people who really want to allocate. It’s difficult to learn and evolve because everybody loves to talk. It’s free learning. However, you have to figure out a way to determine if you are an actual potential investor. Are you allocating capital to this space? In the early days, it's vital to find those groups who are going to do something versus those, who maybe come later, but love to talk to you for learning rather than an investment.
Be careful with spending too much time with investors just looking to learn but who have no real intention to invest. Time is your precious commodity.
Q: What are your top tips for emerging VCs across Europe who are raising?
Joe, Isomer Capital:
Think about your fund like a product. We don't do that enough. VCs are always advising founders on their product, build a better product. Think about what value does it add? What are the key features? Who wants to buy it? What are the margins? Apply that same logic to your fund. Why does the world need another fund? There are thousands of VC funds in Europe - ask yourself why the world needs another one? There's already too many funds. You need to come up with a really strong answer for that and keep building competitive advantage.
Plan ahead for the downside case. There is a chance you may never need it, but fortune favors the prepared mind.
It’s going to be harder than you think - hang in there, perseverance is the only thing that works.
Tobias
Find a way to do deals early - if needed, on a deal by deal basis.
Close what you can and then keep fundraising, your fund becomes more attractive over time.
Build long-term relationships even if they don’t commit to your Fund One
Work with an experienced fund-admin partner. This world is very complicated.
Q: What’s the most counterintuitive thing you’ve learned in venture?
Joe, Isomer Capital
Try to get to a no decision as quick as you can. And that applies on the fundraising side, but also on the investment side. And it's counterintuitive because we all work very hard to make things work, to make things possible, to make things happen. But if you really believe that time is your most precious commodity, you need to really do everything you can to get to the no decision. In other words, we're not gonna evaluate this investment more cuz it's just not fitting. Or we can't spend more time with this potential LP cuz they're not allocating, they're not working. And the quicker you can streamline your process, also building your team to get to know that actually will pay you back and be very helpful and spend your time on, on the Yes.
Tobias, Join Capital
In VC you always think about investing and giving money and investing more cash. I think for me, the most counterintuitive is that it's not always the best answer. More money is not always the best answer. So we learned some lessons where we should have probably invested less and figured out product-market fit better and bootstrapped longer period and be more stingy with the money. For the benefit of the founder. And that's sometimes very counterintuitive when everybody thinks “I need to raise big piles of cash”. And I think that for us, especially in our vertical, that’s been a very counterintuitive learning.
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EUVC #190 A GP/LP discussion of Join Capital's journey, thesis and ambassador program with Tobias Schirmer & Joe Schorge of Isomer Capital