when your LP wants to be a VC
#60
Hello and Happy New Year!
It’s been only a two-weekends break and feels like a much longer time!
The pandemic situation escalated badly and countries started closing one by one. More isolation, and the worst months are ahead of us.
The Brexit drama played till the last moment so that Boris could justify his raison d'être as PM. But we finally got closure.
And then Trump’s pathetic efforts which suddenly became a reality show reminding me of the Iron Curtain fall, but with selfies in real time.
All these showing that, in spite of our comfortable bubble, we’re still living in a very rudimentary world ruled by idiots, 60 years away from WWII, which in history is a very little amount of time.
Anyways. In spite of all these, I took a long break disconnected from everything and it felt really good. But it’s great to be back and talk to you again!
Let’s do this.
Euro strat
❄️ Powder:
🇳🇱 BioGeneration Ventures
🇮🇹 Primomiglio
🇫🇷 ISAI
🇮🇹 Eureka
🇸🇪 eEquity
🇪🇪 SmartCap
🇬🇧 Julie Kainz joined Dawn Capital as a vice president, after having worked for Salesforce Ventures
🔥 Interesting deals:
🇩🇰 4 x $25M+ rounds in Denmark - robots, sports tech, food waste and digital health.
🇬🇧 SAAS for autonomous vehicles
🇫🇷 Fintech which brings in 2 mil in yearly turnover and raised €19 million, both in less than a year since being founded.
🇬🇧 SAAS aggregating offline retail inventory.
🇳🇴 virtual staffing assistant for healthcare professionals
🇸🇪 SAAS for music streaming service
🇳🇴 SAAS tool for capturing holograms
🤓 Observations:
🇪🇺 The EU started to operate the EIC Fund, an initiative announced last summer and which is a fund that wants to invest equity alongside venture companies from Europe. They call it a breakthrough initiative but it is unclear why, probably because it is a first of its kind within the EU.
From what I gather, it is an equity vehicle part of a grant accelerator that has been functional already for some time.
It is notable, of course, any fresh money in the market is a good thing - after all, more money in the market is better than less money, right?
The EU is already the largest spender on the continent as a fund of funds administrator - if you are an Euro VC and don’t have EU money in your fund you are at a competitive disadvantage. They’re not only an LP but also involved in many projects as customers, including media and research initiatives aimed to contribute to the private investment ecosystem (this is made with the EU’s money, for example). And, as always, when you spend a lot of money, you have a lot of friends who say nice things to you and about you.
However. While the intentions may be wonderful on the paper, the EIC fund is a head scratcher, for many good reasons, such as the fucked-up cap table example.
I will just mention one: this transforms a passive money distributor whose job is macro and policy into an active money manager having to micromanage in order to maximize ROI.
Make no mistake, they are two very different jobs. And, btw, it’s not a secret that politicians and state employees are not exactly the best (micro)managers in the world.
Oh wait, I hear you say, there is a catch - the EU fonctionnaires from the board have hired some VCs on their investment committee in order to get their valuable advice on how to handle this.
Yes, of course, you pay those guys for advice but the question is how accountable are they, since they are not employees but consultants. This is just a nice, hopefully well-paid, side gig, while their main job is their own fund, catering to their own interests of their own LPs and portfolio companies. Turning the tables a bit, if you were an investor, would you back a company whose core competence is outsourced to consultants?
Another instance - if a portfolio company of the investment committee members raises money from the said EIC fund, is that a conflict of interest? Or, the opposite, if those portfolio cos are not allowed to raise from the EIC Fund because of presumably conflicts of interest, is that a fair decision aligned to the EU’s mission to support all Euro startups?
There’s many scenarios that can go wrong in the VC business, it’s the job. And in the VC business shit hits the fan more often than you see happy times. When all is good everybody is happy and friendly but when shit hits the fan how are things going to play out? Here’s another example of a working scenario.
As an entrepreneur you will need to evaluate this, as dealing with the EU institutions is difficult at best and a mess in general, that is a fact. It is bureaucratic and slow, they have bad comms, bad PR, contradictory info and so on.
All of this red tape has been compensated until now by the fact that the money you get in exchange was quasi-free - you go through the bureaucracy hell to get it but it is equity free and don’t have to fight with those guys in your board until you buy them out.
Now you do.
Execution follows strategy, they say, and if you sit on top of a pile of money, as the EU does, decide that supporting startups is strategic for your job and then decide that one the solutions is to become a VC - it is telling about what problems the EU thinks the local ecosystem has.
And let’s be honest with each other, Europe’s problem is not the lack of VCs. Oh, sure, it badly needs good ones, but is the EIC Fund going to be a good VC just because it’s also the largest Euro LP?
🇪🇺 Speaking of Europe’s startups problems, here’s a cogent macro picture about what is going on on the continent (it’s free, the EU guys don’t even need to hire Ben for this :D).
Some points that kinda stuck with me (slide 21):
0.2% of the EU moved country in 2017 (as opposed to 2% Americans moving state)
only 16% of the EU is proficient in a foreign language
London/Oxford/Cambridge commanded 30% of $3-20M deals in EU in 2020.
Europe is a difficult market to tackle.
🇫🇷 The state of the French tech ecosystem in 2020
A bit puzzled to see a mixture of VC and PE investors tbh but good effort nonetheless, helpful to getting some general pointers about what is going on in France.
Also, now that the Brexit is consumed, the French are quickly to underline that Paris is the #1 tech hub in Europe. This local ego, that’s partly a NIH syndrome indicator, is a general thing in Europe (it’s the same in Stockholm, where I live) and am still struggling to find it a positive in an ecosystem where the big boys play globally from day 1, regardless of geo location.
🇪🇺 Yannick & Stefano tracked €12.3B across 142 new funds announced in Europe in 2020 - 10% below the capital raised in 2019 and largely in line with the number of funds.
🇪🇺 The EU started providing quasi-equity via EIB. Speaking of which, am I the only one that finds it difficult to understand the language used by the EU organizations? Need to read at least a few times to make sense of what is said.
⚡ Quickies:
🇪🇸 BBVA sold its U.S. business to PNC Financial Services Group for $11.6 billion. In the process it closed down two US-based neo banks it had previously acquired - Azlo and Simple.
🇮🇸 AngelList CEO Kevin Laws spent three months in Iceland. Here’s what he saw.
🇬🇧 The fintechs that quit the UK in 2020.
🇪🇺 Four Euro investors chime in about 2021.
🇬🇧 Are we finally seeing the disaggregation of venture capital?
[No]
🇫🇷 The rise of the BlaBlaMafia.
🇪🇺 China tried to punish European states for Huawei bans by adding a last minute clause that would have frozen benefits for EU states that banned Huawei. The EU negotiators didn’t flinch though.
In Sweden the Chinese made the (Swedish) CEO of a private company threaten to leave Sweden if the government didn’t allow Huawei to participate in the rollout of 5G.
🇩🇪 Deutsche Bank to pay nearly $125 million to resolve U.S. bribery scheme and commodity trading violations.
🇪🇺 Discovery and Vodafone have signed a multi-year deal that will make Discovery TV content and new streamer Discovery Plus available to Vodafone subscribers in the U.K. and 11 European territories.
🇩🇰 Two British nationals charged by Denmark in alleged $1.5bn dividend tax fraud. The defense says that they just took advantage of loopholes in Danish law, but never did anything illegal.
🇬🇧 FT journos are going to offer each other's kids online classes to help out with homeschooling.
🇬🇧 Brompton, maker of the great foldable urban bikes, announces it's made an electric version, and plans to sell 10,000 of them.
🇬🇧 Many of the best Italian restaurants in the U.K. are products of the single market. Now, with small mixed consignments all but ending they will struggle to source and import niche produce, such as cheese.
🏴 Scotland is not a normal, rational, modern country.
Graph of the week
How people spend their time
Other stuff
Kevin Rose wants to buy back Digg for $1 million.
On one hand, I kinda miss the old online products from 10-15 years ago which were just working and were not cluttered by algos and “stories” and a lot of BS aimed to engage the mainstream passive audience.
On the other, Digg’s failure and implicitly KR’s as founder back in the day was exactly his business inability to make it a product available for the mainstream audience. Dude has become a VC since then, fwiw, so not holding my hopes high.
Elon Musk tweeted “Use Signal” and two things happened:
- the stock of Signal Advance Inc. shot up from $0.60 to $3.76 per share (that company has nothing to do with the below-mentioned comm app.)
- Signal, which is like WhatsApp but better, saw a surge in downloads.Speaking of WhatsApp:
WhatsApp will share its users' personal information, including phone numbers, IP addresses, contacts, & more with Facebook from Feb. 8, according to the new T&Cs. No opt-out. The only way to object is to leave the service.
That’s if you’re the kind of person that cares about this.
2020's been a breakout year for creators:
Substack has more than 250,000 paid subscribers and that its top 10 publishers collectively earn more than $10 million a year.
Patreon is now valued at $1.2 billion, after raising $90 million in September. More than 6 million people pay creators through its service globally.
OnlyFans will earn $300 million in profit this year, per The Information. The subscription service lets creators monetize exclusive videos, sometimes racy ones.
Twitch has doubled the number of streamers on its platform during the pandemic.
The state of sound in 2020
Live, Social, and Shoppable: The Future of Video
Looking ahead to the future of computing and data infrastructure.
Anti-Aging: State of the Art
Some general bad Twitter takes explained.
The problem with ad-tech.
Hyundai Motor says it’s in early talks with Apple to develop a car.
Epic Games purchased a North Carolina shopping mall for $95M and plans to redevelop it as a global headquarters.
Google workers launch unconventional union.
60 new magazines were launched in the US in 2020.
Happy Sunday!
Thanks for reading 🙌
Created every Sunday by @drnovac.
Please share it with your networks and encourage your colleagues to sign up here - thanks!
Feel free to reach out if you have any questions, comments, feedback, or if I can be helpful.