This is the 31st edition of Sunday CET, a weekly curation of practical observations from the European investment and startup landscape.
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More money in the market
Interesting bets
Research, data, observations
Books, interesting reads
More money in the market
🇫🇷 Cathay Capital, a French-Chinese private equity firm focused on France-China growth capital, announced securing €1.3bn, split in two: a €500 million fund to invest in startups, Cathay Innovation II, and a €800 million for a private equity fund, Midcap II.
🇳🇱 Main Capital Partners closed Main Capital VI at hard cap of €564 million for enterprise software buyouts in Benelux, DACH and the Nordics.
🇫🇮 Bocap announced a €50 million first closing of a fresh new PE growth fund.
🇬🇧 Praetura Ventures has launched the Praetura EIS Growth Fund, an evergreen fund to be deployed for early-stage businesses in the North and across the UK.
More:
The Chainsmokers are expecting to invest $50 million in startups, with a newly formed firm, Mantis. Yes, the band.
Interesting bets
🇫🇷 marketplace for manufacturing ecologically and socially responsible items
🇫🇷 medical tourism marketplace
🇩🇪 a holistic service provider in the area of construction planning
🇩🇪 developer of an adapted Android operating system for industrial environments
🇮🇹 VR SAAS for distribution and sales processes at a B2B level
🇪🇸 producer of soy-based meat alternative
🇸🇪 subscription based bike maintenance platform (awesome buddy model)
🇸🇪 AI-based coaching platform for gamers (also very good)
🇨🇭 Yet another grocery app - looks like a Jow clone, space became crowded in Europe, interesting to follow the development.
🇳🇱 e-bikes (still pricey at €2k retail, waiting for the sub model) + another one
🇬🇧 Absolutely No-Nonsense Admin
🇬🇧 manufacturer of a reasonably-sized ‘fault-tolerant’ quantum computer
Research, data, observations
🇸🇪 GP Bullhound published a Marketplaces Report looking at public and private market valuations across the transaction spectrum
🇪🇺 Investments in European FoodTech 2014-2019
🇸🇪 There are investors who find the insurance space exciting and full of opportunities.
🇪🇸 Robotics will eat the world
🇩🇪 How Facebook almost bought a German clone with 5% of its stock in 2006.
🇫🇮 MOG went bankrupt. Investors include Heartcore, Index, Proxy Ventures and Initial Capital.
🇪🇺 Why corporate accelerators fail. Only corporate? Most of them suck.
🇫🇷 Oh no, the French want to *beat* Airbnb. They also tried to beat Google a few years ago. Who knows, maybe next they want to be the next Silicon Valley too. Oh, wait!
Being SV has been an European obsession for a long time, you hear it in every hub. But, you know, pretending to be something that you’re not will not take you very far, will it?
🇪🇺 And btw, here’s a little example of why Europe will never be like the Silicon Valley.
Let’s assume you developed a mobile app that is still in beta and has about 5000 users. A consumer app in a vertical conventionally looked upon as either too small or too unspecific and requiring additional explanations - it is not a no brainer, looks stupid anyways and there’s no clear TAM in sight. It’s never been done before so there’s no relatable previous case - duh.
And so if you pitch any respectable early stage VC from Europe, this is a plain no. It’s categorical, this will not even get you a meeting.
You will be most likely offered polite feedback along those lines:
It’s too early for us, there is no traction and the market is too niche. I just don’t understand how you make money and I can’t imagine it at 1 million users or 100M ARR.
But keep us posted - if you cross the chasm and become successful, maybe we will look again. (this standard ending is actually insulting but I digress)
All in all, it looks like reasonable feedback though. It makes sense, right? It sounds a bit defensive tbh but those are some decent points any first year analyst would make.
This is something you say if you play not to lose. You don’t want to make mistakes, you play it safe, this is the discipline - you will not get fired for this.
You seem like a nice guy and I would like to invest but I don’t want us to lose money if this doesn’t work out - you can get the same response from a bank teller upon reviewing your mortgage loan btw. Nobody does like to lose money!
However …
… in the USA though, respectable VCs will not only back this idea, but can also give you a $100 million valuation if you play the FOMO cards right.
Why - because they play to win not to no lose. This is a very important distinction.
Professional investors take risks even though they know that not all deals will be winners.
They know they will lose some money on some deals and not because they made mistakes but because they do not take the chance of missing out on what seemed crazy, stupid or hard to understand since it is outside of their comfort zone or of conventional thinking.
They play offensively, the opportunity costs are just too high if they pass and in general they put their money where their mouth is: they take risks.
That is why crazy ideas are funded in US and not in Europe. And also a related tangent as to why Europeans want to clone Airbnb and Google instead of building something crazy original - it won’t get funded!
In Europe it is hard to come by this kind of investment mindset - they are usually skeptical of everything and only comfortable to discuss if they see an immediate path to profitability, ideally laid out on a 3 year projection spreadsheet. Yes, at very early stages.
It is not right or wrong, it is just different. You can achieve an outcome with multiple strategies, especially in portfolio building management.
But this will deeply influence the founders market - ideas they come up with, how they sell the pitch and execute if they raise are all strongly correlated to the investor mentality. Founders job is to close the deal and adapt to what they find in the market, of course, but make no mistakes, they never build their startups not to lose, they build to fucking win, it is their only card in their hand.
It is a disconnect. But yeah, let’s copy Silicon Valley, we’ve got shitloads of money in Europe too. So guess what will the founders do when they have a crazy idea that can be the next Facebook? They will simply apply to YC and go to US, a place where investors speak their language and is just a $500 plane ticket away.
🇬🇧 Speaking of investors passing because they don’t get it but wanting to keep the windows open because you never know…
… if an angel passes investing on you at the beginning but wants to do so later when it’s clear you’re on to something/VCs want to invest, do you take them in the round?
Should you ever work with someone (no matter how valuable) if they didn’t believe in you?
🇫🇮 Riddle time:
We have 4.3 billion unique player accounts, with close to 4 billion unique devices. If each player has owned 3 devices, that means at least 1.3 billion people have played our games.
They also just turned 10. I gave you more than enough clues. :D --> ok, fine.
🇪🇺 Here’s a list of startup webinars happening in Europe next week.
🇪🇸 Common sense in venture capital
🇪🇺 Euro investors who have done a 100% remote deal as a lead investor
🇫🇷 This is a fun read: discover VC fears and be able to reassure them
🇬🇧 Decksender added a community section. Looks good, curious where this will go.
🇬🇧 BuzzFeed pulls plug on UK and Australian news operations. Closed Germany too.
🇪🇸 Hey, look, TNW made a jpeg with logos of some Madrid startups. And of Krakow too.
More:
Fundraise from home - pitch early-stage investors at once, from the comfort of your own home.
Online pitching sessions will become an industry standard, you read it here first.
The most shared video on social media this week
The cheap price of fuel is causing ocean carriers to go the long way around Africa instead of paying the Suez Canal fees. The Canal lost $10M in fees in April and May.
Bank of America data on consumer spend Apr-May. Online is growing 100%+
* Berkshire Hathaway shareholder letters
* Amazon shareholder letters
* Constellation Software president's letters
If that’s your thing, more compilations here
the VC market is small:
*The assets of the 2 largest US hedge funds: $353B
*The assets of the single largest US PE firm: $512B
*The assets of *all* 1,328 active US VC firms: $444B
In general, businesses earn reduced profits when their markets are in recession.
But those that cut their advertising expenditures in a recession lose no less in terms of profitability than those who actually increase spending by an average of 10%. In other words, cutting advertising spend to increase short-term profits doesn’t seem to work.
More importantly, the data also reveal that a moderate increase in advertising in a soft market can improve share. There is a substantial body of evidence to show that a larger share of the market generally leads to higher return on investment.
For the aggressive marketer, the data suggest that a more ambitious increase in expenditure, although reducing short-term profit, can take advantage of the opportunity afforded by a recession to increase market share even further.
Bay Area, second quarter of 1999:
Books, interesting reads
📚 Books
Sex, Evolution, and Consumer Behavior by Geoffrey Miller
I have been involved in a little project looking at correlations between explicit signaling such as investors Linkedin/website presentation profiles and implicit ones, namely their behavior - either in social media or offline.
In other words, do investors behave the way they would like other people think they are like? I just thought that the disconnect between the projected image and the one reflected by own behavior can be explained best by the hypocrisy of the human nature.
And here’s Geoffrey Miller writing a book by linking six personality traits to consumer signaling i.e. we buy stuff to advertise various aspects of our personalities. Trick is how you build stuff on top of the relation between signals and behavior - if you build stuff, that is.
🗞️ Interesting reads
The Inherent Friction between Founders, VCs, and Venture Debt
Should Game Designers Listen to Negative Feedback? - replace *game* with product and the advice is still valid and very good.
Corona boredom: If you had to ask every investor that you admire most the same single question (and they had to answer truthfully), what would you ask them?
Let’s finish on a positive note :D
Happy Sunday!
Thanks for reading 🙌
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