Welcome to this week’s edition of The EUVC Lowdown 🗞️ The show that wraps up the week in European Venture with some of the key people making the headlines. Today, we cover:
This week’s events
This week’s podcasts
This week’s GIFs & MEMEs
This week’s LP syndicate news
We’re hiring an investor relations manager
Acrobator lookin’ hot
500 EE invests in Ddosify
This week’s stories
Why the US VC will continue to blast ahead of Europe 😿
Program of the day 1:00 PM - Tapas & chill 2:30 PM - Professional program 👩🏫 💬 4:30 PM - ☕ break with 🎂🍥🍰 5:15 PM - Professional program 😴 6:00 PM - Tasting Portugal - regional 🍷, 🫒 and 🛢️ 7:00 PM - Cooking our dinner together 🧑🍳 20:30 PM Munch tiiime 🤤 LATE: End of program - i.e. wasted 😵
& as always, 🪣’s of love for Affinity.co for supporting us in connecting Europe 💖
We’re living through crazy times in VC and even the most experienced investors say “I have no clue” when you ask them about what will happen. Join us as we deduce what has happened in 2021 and the first half of 2022 to get a better understanding of what WILL happen going forward.
The rate of unicorn creation in Europe vs US - what are we seeing and why?
Capital efficiency across geos and it's importance for shaping VC returns.
The role of networks in pan-European investing and how the best build competitive advantage via community.
How our panel thinks about the coming 6 months, what they see in their pipeline and how they plan to act.
This week’s podcasts 🎧
The European VC, #120: #120 Why business Angels should invest in VC, live from the Engaged Investments Conference
Recorded straight from the Engaged Investments conference in Prague, hosted by our friends from Depo Ventures - a huge shout out to Petr who was kind enough to invite us. This is the recording of the panel “Why Business Angels should invest in VC"
The panel members were:
Moderator: Andreas Munk Holm, EUVC
Petr Sima, Fouding partner at DEPO Ventures
Mikk Orglaan, Angel & Partner at Fstage.vc
Vojta Rocek, partner at Presto Ventures
Tobias Rataj, Active angel investor.
The European VC, #119: Borys Musielak, SMOK Ventures
Borys Musielak, Founding Partner at SMOK Ventures. They help fund top early stage entrepreneurs (checks from €50k to €1M) based in Central & Eastern Europe, focusing on software and gaming startups. We were fortunate to record live with Borys during this years edition of How To Web.
In this episode you’ll learn
Why Borys is in love with Bucharest and the How To Web (hint: it’s not only coffee!)
The hilarious story behind the name SMOK and how it ties into a small kiss, a hairy ball AND a dragon
What the Silicon Valley roots of SMOK impacts how Borys and his team acts, works and invests
How Borys thinks about growing from a 10M€ Fund I to a 50M€ fund II and its impact on SMOK
Borys’ views and insights on the state-backed VC programs that have been run in Poland and the CEE region
How Borys thinks about the Russian/Ukranian crisis and how the VC market is reacting to it.
The NextGen VC #11: Bérénice Magistretti, Alma Angels
In this episode, you’ll meet Berenice Magistretti, early stage investor in Healthtech, Writer and Disabilities Advocate. She is a Tech journalist turned investor. Berenice has written for TechCrunch, WIRED UK, Fast Company and Sifted, and acted as the Venture Capital Reporter at VentureBeat.
In this episode you’ll learn:
The future of HealthTech investing
How Berenice has transferrered her skills from journalism to VC
How to get started at angel investing early in your career
This week’s GIFs & Memes 🙊
Founder reacting to lead VC with full ratchet terms
Emerging Managers raising capital from the good ol’ FOs these days
VC version of British politics these days
The cost of bad hires just went up in the UK
This week’s LP syndicate news 💸
We're looking for a super cool investor relations manager💥
We’re dedicated to Europe and are setting up more and more partnerships with angel clubs, VCs, ecosystem players and corporates and honestly, David and I start feeling it 😂 So if you think our memes are fun, our mission important and want to join us in putting European VC on steroids via LP syndicates we want to meet to you 😍
Acrobator looking sexy on their new website 🥳
500 Emerging Europe invests into Ddosify - a platform focused on simple observability for distributed systems.
Fatih and Kürşat have built quite a company and movement in just a year and we’re very excited that our investment into 500 EE will alow us to be part of the journey! 🤗
Enis’ TLDR on the investment rationale (full article here) 😯I haven’t seen such early solid signs of PMF for a while. Neither did you. 🤩The bottom-up community-building efforts and the quality of the product resulted in a steep organic growth of 5k+ GitHub stars and 1M downloads on GitHub and Docker Hub (yes, 1M!). 😫The conventional process for bottleneck identification involves multiple stakeholders (DevOps, QA, dev team, and manager) and multiple tools, making it way too costly, providing low performance and frustrating everyone along the process. 🥊Kursat faced the same issue repeatedly and eventually decided to go head-on to it with Fatih.
This week’s stories 🗞️
Why the US VC will continue to blast ahead of Europe 😿
European VC performance might be better than the US - but until we manage scale, i.e. crack open the major endowments, pension funds, etc., we will always be US' (/SV's) little brother 👨👨👧👦
As of 2021, 𝗣𝗿𝗶𝘃𝗮𝘁𝗲 𝗘𝗾𝘂𝗶𝘁𝘆, 𝘄𝗵𝗶𝗰𝗵 𝗶𝗻𝗰𝗹𝘂𝗱𝗲𝘀 𝗩𝗖 𝗳𝘂𝗻𝗱𝘀, 𝗮𝗰𝗰𝗼𝘂𝗻𝘁𝗲𝗱 𝗳𝗼𝗿 𝟯𝟯% 𝗼𝗳 𝗦𝘁𝗮𝗻𝗳𝗼𝗿𝗱’𝘀 𝗮𝘀𝘀𝗲𝘁 𝗮𝗹𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻, an increase from about 25% in 2015. We should all do our best to make the European LP ecosystem understand the magnitude of this.
“As our endowment gets bigger, the amount of capacity that we receive from these very carefully controlled, very disciplined early-stage funds doesn’t go up proportionally,” said Wallace, referring to funds like Sequoia Capital’s. “We can get more than we got 15 or 20 years ago, but it’s not enough.”
Over the past decade, VC funds in Silicon Valley, China and India have delivered $10.9 billion in returns to Stanford, according to its financial reports. That success has encouraged the endowment to expand in VC.
“We’re trying to find other ways to gain access to these venture capital investors, this elite part of the community,” he said. He didn’t elaborate, but other ways for an LP to increase its exposure could include buying a fund stake from another investor that wants to sell in what’s known as a secondary transaction. “Of all the things we do in our endowment, the least scalable is early-stage venture capital.”
What will it take for European VCs to unlock this potential? I'd really love to know 💞
Indexing venture - the hot new route to go? 🤔
Patrick Ryan recently put out an article arguing you should index venture. He makes some solid points 👇
If you have a 300 deal portfolio instead of a 30 deal portfolio, your chance of tripling or quintupling your money is ~80% higher
Perhaps more surprisingly, your chance of 10xing your money doesn’t decrease. The upside of a true outlier outweighs the downside risk of losing money on all the others.
Plus, as your portfolio grows beyond 30 companies, the chance of losing money altogether declines from as high as 10% to close to 0.
Research from Abe Othman at AngelList (the biggest startup investment platform in the world, with a larger dataset than any other organisation) supports Crossan’s findings:
“We did do some simulations… on what indexing at seed actually looks like over human timescales. Over a ten-year investment window, indexing beats 90-95% of investors picking deals, even when those investors have some alpha on deal selection. So the idea that there are some terrific seed investors that soundly beat indices is not inconsistent with our results.”²
This all sounds like common sense to public markets investors. It’s very similar to the strategy first promoted by Jack Bogle (the founder of Vanguard) almost 50 years ago. Indexes and ETFs now dominate the public markets.
However, as we spoke about with Patty this morning on the Lowdown - you still need a quality filter when investing into funds.A pretty serious one at that.
We’ve got north of 5.000 VC funds in Europe. And - unfortunately - returns for “the average VC” aren’t exactly spectacular.
That’s why at EUVC partner with one of Europe’s very best institutional LPs around sourcing, diligencing and picking the funds we bet on in our LP syndicates. Together, we’ve screened more than 2.500 funds, actively track more than 1.000 and have invested in more than 65 funds, yielding an underlying startup portfolio in excess of 1.500 companies.
In Europe, some have made it very popular to talk about “indexing venture capital”. You don’t want to index VC - not even at the fund level. The difference between “indexing” and what we do is dramatic. If you index, you get the average. And you don’t want the average. So if anyone tries to sell you on indexing, my advice would be to say:
Instead, I’d say go for a highly diligenced set of funds and optimize for both strategic value and returns. Much more on that in later editions of the Lowdown - until then, join us in the EUVC LP Syndicates and hit us up for a convo around this 💬
Let’s put some faces to these celebrity angel investors 👇
Similarly, when TechCrunch’s Brian Heater spoke to Draymond Green, one of US’ most prominent NBA-turned-Tech investors and asked whether he was looking to start an investment fund, Green replied:
“Ihave some of the best friends in the world, especially when you’re speaking of funds, and so I don’t personally feel the need to go create my own when I have experts like that in my life that can help guide me. So, I am invested in some of their funds … I take pride in learning and I never want it to come off as if I know more than them … It’s not something that I see for me, trying to start my own firm, but I do enjoy and appreciate being an LP in their funds.”
In Europe, one of the chaps leading the charge in bringing Athletes into tech investing is Jason Esseboom, founder of Joyned Capital. Keep an eye out for this past and future champion - amazing things are bound to come ⚽ 👇
🇺🇸 Next Play Capital - $200m, fund 3, fund-of-fund - Redwood City 🇺🇸 BlockTower Capital - $150m, fund 1, crypto - Miami 🇺🇸 Propeller - $100m, fund 1, ocean-tech - Boston 🇩🇪 Vireo Ventures - €50m, fund 1, sustainable, climate-tech - Berlin 🇬🇧 Founders Pledge Ventures - tbc, fund 1, impact - London
This week’s hires 👩💼
EUVC (yup, us) are hiring for an Investor Relations Manager. Reply for more info.
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