Target Global is firming up its bet on Barcelona’s entrepreneurs

The European VC "startup" talks talent in Southern Europe — and why regulation is good for tech

VC firm Target Global has just announced it’s expanding its European network by adding a local office in Barcelona, Spain — building on its existing presence in Berlin and London, plus Tel Aviv and Moscow.

The firm has €700 million under management and a broad investment range that covers SaaS, marketplaces, fintech and insurtech, as well as a big focus on mobility.

TechCrunch sat down with general partner Shmuel Chafets and investor director Lina Chong, who will be heading the firm’s push into Spain, to talk about its decision to set up shop in Barcelona — discussing how they see the local and national ecosystem, as well as picking their brains on wider investments trends and regulation in Europe.

Want to know what it takes to get a meeting with Target Global and factors they weigh when they’re deciding whether to cut a check or not? Read on…

The interview has been lightly edited for clarity. 

TechCrunch: Why choose Barcelona and why now? Why not Spain’s capital, Madrid — or even a city like Paris?

Shmuel Chafets: First of all have you been outside!?

I started coming to Barcelona four or five years ago just to see things and we had some angel investments here and it feels to me today — or when Lina and I started getting more serious about Barcelona it seemed to us that Barcelona has the attributes of Berlin eight or nine years ago. When I at least started coming to Berlin and Lina moved to Berlin, it has the same attributes. It looks like it’s just about to happen

I think it has a few factors. The first one is that it’s a great place to live and you can’t ignore that. In Europe, if you’re a team and you’re an international team there are very few places that you can live in. So London is the original ex-pat city of Europe and it still is amazing but very, very expensive. Berlin is the second one. And I think a lot of Berlin’s early success was fuelled by people who were not necessary German and definitely not Berliners coming and starting a company there.

It’s a good place to live, it’s also a cheap place to live, and it’s a cheap place to do business. Salaries here are quite low but the quality of living is quite high and that makes it very good for startups. Particularly when you need young people, developers, creative people to move. It’s an easy place to convince people to move to.

It doesn’t have a dominant industry. And that is very similar to Berlin — Berlin is not where Germany economically is, and that means that the smartest people around want to go in for startups. That’s the best employment option. There is no banking industry sucking people in with high salaries. And also driving costs up. It is in its culture a very creative city, a very open, very creative city and that I think is also very important.

And lastly, there are these early success stories that fuel the idea of entrepreneurship and also fuel financial entrepreneurship. So one of the interesting things about entrepreneurship is that people who start need to know where it ends or where it’s going to. And the early success stories — first of all they make the smartest kid graduating — who has a McKinsey job offer and a Goldman Sachs job offer and a startup idea — he needs to know that the startup idea has a future. That there’s a future in being an entrepreneur and he needs to look up to people around him. It’s not enough to know that Mark Zuckerberg dropped out — that’s fine but that’s very far and very large.

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Image via Getty Images / Pol Albarrán

But to look at Carlos [Pierre, founder and CEO] from Badi and say okay there’s a guy, he’s a few years older than me, he started a company, he’s doing very well — this is the path that I want to take.

Also, there are more and more mentors. People who’ve done it before. And they can help you figure things out. You have to be able to call someone up and say hey let’s have breakfast and explain how they do it.

And there’s more money — for seed. Because you look at a lot of people starting funds, and we were just talking on the way about the Ticketbis guys. They’re starting a fund. And that’s a great example of one of these early success stories and now they’re putting it back into the ecosystem and helping it grow.

Rocket Internet did a lot of that in Germany. They had early exits and then they went and plowed it all back into the ecosystem in their own particular way. People like [serial entrepreneur] Lukasz Gadowski — who we work with a lot. He built Spreadshirts… [then later] he founded Delivery Hero. So through Team Europe. So people who were early, early entrepreneurs — and then in the second wave helped build an ecosystem. So I think there are more and more people like that that we see here.

That usually fuels the ecosystem. Also as companies here start to scale and as more of these European startups start to build hubs here there’s more experience. You can find people who’ve been through a couple of rounds.

And the last thing which is not about Barcelona it’s about Spain in general. There’s a decent local domestic market and there is a natural second market in South America. And actually in the US too — because Spanish is the second most commonly spoken language in America so when you start a company here you have that second market built-in. Which is very important — you can scale it.

Latin America is a fascinating market right now, a fascinating time. So in a way, it’s a way for us to make a side bet on Latin America in a way without going out of Europe and insetting far. My first boss told me never to do business in a place where there’s no direct flight from where I live and I adhere to that. If things go belly up you don’t want to be stuck in transfer in some airport sitting there waiting for a transfer.

TechCrunch: So in a way being in a second city — this isn’t Madrid, Spain’s capital — is a more interesting proposition for startups because there’s less competition for talent?

Chong: It’s a bit of an underdog here. There are not these big dominant industries. It’s not cosmopolitan like how Madrid is perceived. There’s a lot of creativity, a lot of people who are more entrepreneurial in spirit.

Chafets: If you exclude London and you look at the top ten tech hubs in the world — and to an extent exclude New York — they’re cities that didn’t have a natural industry. San Francisco didn’t have a natural industry really before tech, Tel Aviv doesn’t really. And Berlin has government and that’s it. So I think that’s a significant part of it.

TechCrunch: You’ve made a bunch of investments here already. What’s going to change now you’ll have an office here? Deal flow I guess is one area you’re hoping will increase…

Chafets: We got to Barcelona professionally, investment-wise, through TravelPerk. To an extent that was easier because Avi [Meir, co-founder and CEO] is Israeli. But it’s easier, right? It was a good conduit to come in with someone who we’re comfortable with — or get to know. It’s hard not even to know your first Spanish entrepreneur. And Avi was extremely kind in helping us network here in the beginning.

I think about a year ago Lina and I said okay let’s take it more seriously and she started coming here regularly and finally decided to move here. So for me, it’s always about people and to open an office here we needed the right person to do it. And Lina — we’ve been working together for a very long time. And we thought she’s the right person to build this ecosystem out for us. So if we have a person who’s willing and able to do it and we believe in the market let’s take it seriously.

But we have been here on a day to day basis for six, nine months, working out of TravelPerk’s office. Now it’s time to make it more serious — and also to think about more people here. I think it will take time but over time we’ll build a team here, like we have in Tel Aviv, like we have in London.

I don’t know if it will change but it will continue. In less than two years we did three deals here and we’ve seriously looked at three or four more. So to due diligence. I think we’ll probably continue to do between one to three deals a year in Spain and probably most of them predominantly in Barcelona — so be pretty active here.

We have one late-stage investment here — DocPlanner — so we have three and a half investments here because three were made here. DocPlanner’s a company that relocated here. It’s a Polish company — they bought a local business. It’s, by the way, a great example of how a company headquartered here does very, very well in South America.

We have a few funds. We’ve done early-stage investment here, and as the ecosystem matures I hope and believe we can do more and more growth investment because I think — as much as there’s a need for [Series] A here there’s a much bigger need for B and C. So that piece between the early stage and when the global platforms come in with big checks, that piece really doesn’t exist here locally at all.

There are good, great seed investors and A investors locally, and we co-operate with them, we talk to them; there are four or five really great teams. So we’re working alongside them. But I think in the B, C rounds there aren’t any local. So we will really be the first local growth investor.

And we do want to be local. In Berlin, we’re local, in Tel Aviv we’re local. In London we’re local — and we want to be local. We are a global or a pan-European fund but for an entrepreneur here we want them to feel that we’re local, we understand the ecosystem, that we have deep-rooted connections, that we’re committed, that we show up.

Not only for a quarterly board meeting, not only when things are good — that we’re around all the time. That’s part of why we’ve decided to make it a formal office. Tell people we’re not just coming here, investing in this wave and if things are a little choppy we’re going to be out. We’re here for the long term. We’re committed.

TechCrunch: In the near term do you expect to be making mostly early-stage investments from here?

Chong: We’ve been seeing decent deals in both stages. Definitely. Across Spain. I think there is just more — by numbers — way more early-stage seed than A. I think that’s just the maturity of the ecosystem here. The big companies have already raised a lot of money — like the Glovos, Typeforms, Red Points as well — so they’re growing well and I would say that there’s probably another wave of that level of company coming. But until then we’re active in all stages. We’re more of an investment firm. So have multiple funds so we’re very flexible with what we can do here.

Lina Chong

TechCrunch: What about areas of investment? Are you keeping the same focus?

Chafets: I think it’s a pretty broad mandate. But I think from what I’ve seen Barcelona is sort of strong in creative. It’s a very creative city. It’s always pretty strong in mobile, historically. It had more mobile successes. I think that’s where we are sort of here. SaaS, particular SMB (small and medium-sized business) SaaS, is pretty good here. I think it would be harder to find enterprise sales companies and companies building this very deep tech stuff right now. But definitely in the marketplace, SMB SaaS space, mobile space you see great stuff here.

Again that ties into the creativity right, because it’s a product-driven environment — not a tech-driven environment. I think Berlin is a very operationally driven environment, Tel Aviv is a very tech-driven environment, this is a very product-driven environment which actually complements well our other hubs.

One of the things that we try to do is to bring something from the other places where we’ve active in — so to bring technical know-how from Tel Aviv, operational know-how from Berlin, to bring financial know-how from London to Barcelona. To connect people to the right advisors, to the right early employees, the right executives and the right investors to help them scale. I think that’s probably our biggest value add here today.

As opposed to maybe bigger, more established funds from the US it’s easier to bring a Berlin advisor or employee to come here. We see a lot of people happy to [help].

You also have to understand regional differences. The regional differences in Europe are real, right. You have to understand them and know what to look for and how to also make that connection.

TechCrunch: Earlier this year you opened a London office. So this is quite a fast expansion. Do you see other potential local offices you could open in Europe — or are you happy with this combination of Berlin, London, Barcelona?

Chafets: First of all never say never. [Before opening an office there] we said London, listen, we’re not going to be in London. So, first of all, we are ourselves a startup. We’re already kind of established but we’re fast-growing, we are still developing ourselves — and I think one of the things that we’ve done pretty well is know how to identify the next ecosystem, and be willing to travel and to immerse ourselves and be around. Our team is constantly looking around. So every investment profession in our team has been encouraged to take a geography he doesn’t live in and go and spend time, spend money, spend resources and try and make the case why that’s the next place that we need to spend time in.

We’ve been looking at five or six other cities. Will we open new offices? You have to make the case, first of all start investing, see there’s traction and see there’s a case for an office. Not everywhere needs an office but if we find the right place and we have the right person then there’s nothing that prevents us from doing it.

But right now I think we want to focus on Spain, on Barcelona. This is a big commitment for our organization. We’re not a big organization. Lina’s here full time. I come here once a month or even more sometimes… So we spend a lot of time and effort on making this work.

TechCrunch: And in Spain are there other tech hubs that are interesting to you?

Chong: Actually yes, surprisingly so. We see entrepreneurs coming from Valencia, Malaga, Basque Country. A lot of these entrepreneurs move into the cities from smaller parts of the country. So it’s been fascinating for me — that I see two, three quite deep tech companies out in the south of Spain where I thought it was mostly retired or vacation people.

Chafets: There are good universities in Spain so I’m sure that around those universities there[’s talent]. But being here will give us an opportunity to explore.

It’s all a function of time and effort and just being here and having breakfast with people, lunch with people and helping out even the people we don’t invest. You get more connected and then you start to see more deal flow. Again we saw it in Germany. And as Barcelona develops I’m sure Valencia will also benefit. And also more and more companies from Valencia will start relocating. We’ve seen a few good founders who show up here.

TechCrunch: And from the fund’s perspective having a network of local offices is a way to respond to the increased competition in Europe for early-stage investing, right?

Chong: Absolutely, sure.

Chafets: And also entrepreneurs are getting way savvier and they’re starting to ask the right questions about who’s going to invest in them. One of the questions that I’ve heard recently and I love — I really love — is: How committed you are to my business?

So I think they understand that for early-stage or even mid-stage investing, having your investors present is very important. And getting maybe a big brand that is very far and puts a small check for them, and people who don’t show up and say ok sort of taking a bet on you has its disadvantages [vs] on the other hand having someone who’s committed and local.

We have tried to have our biggest deal flow generated via our work on boards. It’s one of our biggest deal flow generators. So we want to always want to be the MVP on the board — the most value-creating members of every board and partners to our entrepreneurs. And for that you need, again, to be on the ground.

TechCrunch: Do you have a view on how and why Spain’s startup market has evolved over the last few years — and what’s feeding growth here?

Chafets: I definitely think Spain coming out of the crisis with high unemployment, low wages, educated population has… done a pretty good job in rebuilding itself. You see it in real estate prices in Barcelona. It has some industry but not like Germany — again, very far from where central/Western Europe is. So it is rebuilding itself and that I think will be a very good thing for Spain long term. There’s more dynamism than you see in other places in Europe.

It’s still lacking a lot of things. It’s lacking financing, it’s lacking real local capital market. One of the things that we see in Germany that’s kind of impressive is the ability of the local capital market to support the startup industry. We were invested in Delivery Hero — it went public in Frankfurt, it’s been a very good IPO, it’s close to double from where the price was from when it went public, it’s provided a lot of liquidity for investors. And being able to take a local company public locally for — I think it’s an €8.5 billion market cap — that’s really supporting the next step of the market, and same thing in London. It doesn’t really exist here. They’ll have to find that avenue. Is it London?

For Israel, there is no local capital market either but NASDAQ is a local capital market in the way they’re over a hundred Israeli companies in NASDAQ. More than I think any other country except the US and Canada. Maybe it’s [also] China today. But there are a lot of Israeli companies in NASDAQ. It’s a very well-recognized route. They’ll need to find that route here. Is it London? Is it Berlin? Is it local? Maybe it’s the US.

But I do think you can definitely feel it; there are a lot of early-stage companies around — the deal flow here surprised us.

Chong: When you talk to guys like Carlos [Pierre, Badi founder] who before was at one of the big four accountancy firms — we asked him why would you leave such a nice cushy job, especially after such a recession. You’re earning a decent salary, why would you then go off and make Badi? I think part of it is he really sees the opportunity. First of all, not everyone has the chance that he had at such a career. But also there’s just a lot of pent up — I don’t know, there’s some energy here.

Again it’s very similar to Berlin where there’s a lot of willingness and there’s a lot of dreaming but there’s not a lot going on around. So I think the younger people here they’re just creating that. And then you see San Francisco, London, Berlin, Stockholm all of these other areas in the world just developing massive very interesting companies — new generation products. And I think they kind of just go for it. What do they have to lose, right?

I was very curious about why Carlos chose to start Badi with such a job. Also his cousin [Oscar Pierre] with Glovo.

Chafets: They’re the Kennedys of Spanish entrepreneurship!

Chong: But there’s something in the generation, right? They want to create that surrounding and that future. Very optimistic.

Chafets: It’s a very interesting place to be right now, it’s very dynamic, and I think it’s really just at the very beginning.

TechCrunch: What does it take to get a meeting with Target Global?

Chafets: Usually you just need to send an email!

TechCrunch: You’ll meet with everyone?!

Chong: I think we do, actually.

Image via Getty Images / dane_mark

Chafets: Yeah we try and meet everyone. First of all, definitely in a place like this — you never know. And it’s a part of the ‘service’ in a way is to meet entrepreneurs even if you know that they’re not exactly people [you’re likely to invest in].

My partner Yaron [Valler, managing general partner at Target Global] taught me when I was starting off in VC that when you finish a meeting with someone he should get value from you. And it’s a great thing.

You can’t 100% of the time do it but often if you say ok it’s not for me but here’s someone it might be for. Everyone should walk out of the meeting getting some value. And that’s why it’s important to meet.

I think it is always better to get to a VC through someone they’re invested in — that’s as a general rule. Or as somebody they invest with. But that’s not necessarily specific for here.

We look for people as an investment who are going after big markets. So markets that are real. And have something unique to offer.

We’re very focused as a group on market sizing — so people who’re tackling big problems, big markets. Particularly because I think first of all it’s easier to build a business around big markets rather than a startup. But also if you’re going after a big market and you’re an early-stage or seed-stage company you can make more mistakes and the market will support those mistakes. If the market is a trillion-dollar market then even if you didn’t have the first product right you’ll pivot a little here, you’ll pivot a little there and you’ll eventually find your fit.

And [we’re focused] on people. We like people who’ve done something extraordinary with their lives. Who are clearly ready to be entrepreneurs, able to be entrepreneurs. And again I think this is probably slightly philosophical but not everyone should be an entrepreneur. I was an entrepreneur; it’s not a great job. If you don’t really love it, you probably shouldn’t be doing it. It’s not a great way to make money — again, on an averaged out basis.

I think there’s a sense that we’ve gone through this very very long cycle of maybe less liquidity but [there’s] a lot of at least up rounds and stuff [now] and people read a lot about it so they feel it’s going to be easier than it is. But even the good cases require a lot of stamina. Even the best cases. And we try to figure out — we like people who are not lifestyle entrepreneurs. They have something they are actually passionate about and want to build. And want to do something significant.

TechCrunch: How important is the idea/product when you’re looking at early-stage startups?

Chafets: It’s pretty important. Again, the market might be oddly a little more important. The product’s obviously important. Again I think it’s also important to see what people have done alone or with friends and family money. The great entrepreneurs that I’ve worked with have been able to do a lot with a little in the beginning. I think it’s a great indicator.

I love people who show up and say we’re two guys who’ve been working, we’ve got $15,000 of recurring revenues on $100k that we got from our uncle. Or we have no revenues but we have 200,000 users. Not necessarily because it shows product-market fit, because usually it’s too small, but because it shows what they can do. It shows that they know how to sort of hack their way into the business. That’s for me very important.

TechCrunch: How quickly after a meeting do you make a decision that there’s something here — how much of a gut process is it?

Chafets: It’s obviously a triage business. And like any triage business, 80% of the noes are pretty quick. They’re not always right. It’s the worse thing about being a VC is that you have to say no to a lot of people. Because we can only do [so much]. We’ve got X amount of bullets, we have a strategy for the fund, we want to structure it in a certain way, the portfolio. So even sometimes things that I personally think are great we don’t get to do, so you have to tell people no a lot. And you have to tell very passionate people no a lot. So probably 80% of the noes are pretty quick because it might not be a good fit for us.

We do try to keep in touch. There are a lot of people where we say no but it is interesting. So it’s not for us right now but it is interesting and then stay in touch. I’ve had situations where I invest in a company two years after I’ve met them. And people who keep in touch — that also shows you something, right.

And then the yeses take longer. Obviously it depends on what stage the company is at. I like to think of ourselves as on the one hand rigorous, on the other hand quick. We are not the fastest. We’re definitely not the fastest people you’ll work with because we are rigorous but we try to be transparent and quick. And we can sometimes make quick gut decisions — particularly in the seed stage.

In one of our Barcelona companies, actually, Lina and I said we’re going to do it 15 minutes after we met them. It was a small check, it was a seed check. Some people are just extraordinary and we said okay this is an extraordinary person sitting in front of me. Guillem [Serra, co-founder and CEO] from MediQuo. He’s an extraordinary person, he’s a doctor, he’s a mathematician, he’s an engineer. The traction he had was so amazing. It’s a seed ticket. I can’t sit in front of him and have coffee and not support him! I have to support him. No matter really what he was doing I had to. I was compelled to support him, and that’s a part of seed investing, right. It’s about saying here’s a person who’s so extraordinary I’m going to support him.

Sometimes these people actually tend to sort of wiggle their way into something great, sometimes they don’t. But you’ve built a relationship and maybe his next thing will be great.

There’s an element of that in what we do — that seed bucket, where you should be a little bit more experimental, a little bit out of your comfort zone.

TechCrunch: Are there any local startups that you regret not investing in?

Chafets: You should only regret the deals you’ve done, not the ones you haven’t. If I regretted every deal that was on my table that I missed I’d never get out of bed. There are amazing companies we’re not invested in — Lina mentioned Glovo. Definitely. Every time I meet them I’m in awe of the team and what they’ve done. There are many others — we’re still small here.

TechCrunch: What sort of size investments are you going to be making here at the different stages?

Chafets: Here for the early stage $2, $3, $4 million has been where the entry ticket is and up to $10M. For the growth $10-$15 million initial ticket is I think a good range. We will also probably do some seed and we could probably do more seed here. I’d very much like to do more seed here; seed, pre-seed to help people at the beginning of the way and build a funnel for ourselves.

TechCrunch: Aside from money what additional support do you offer the entrepreneurs you invest in?

Chafets: Generally our rule — or my rule — for working with entrepreneurs is as long as things are progressing we let the founders set the pace. So some people want you to be very involved and engaged and some people don’t. Some people need you at certain moments, some people don’t. Sometimes people really need you for a certain point in time because you can add value at a certain point. And sometimes I can’t. I 100% try to invest in people who know — you were asking about entrepreneurs, I’ll add one thing: They have to know more than me. If we sit in a conversation and I know more than them then it’s not going to be a go. I want people who are experts, who really understand what they’re doing, every niche, I love that. People who really understand the space they’re in.

So with all respect to us our contribution is, in a way, limited. We need to help drive the next round, to help strategize and bring the right investor to the table. And have a brand that’s strong enough to get trust from those upstream investors. Sometimes help recruit advisors and board members and executives and experts who are out of the ecosystem. Drive connection — so be a broker for connection. Help find early clients. And then bring strategic advice. But I think the most useful strategic advice is always cross-pollination. I’ve probably invested in close to 40 companies and I’ve founded a couple. So [I can say] I’ve been in this many situations — and in this situation here are three ways I’ve seen someone solve this situation — and just put that on the table. It’s rare that you have some piece of great advice.

Our friend and partner Lukasz Gadowski [Target Global entrepreneur in residence] says that what he expects from investors is to have — he calls it — picture changing advice. He says the good investors he’s had have had picture changing advice once or twice in a five-seven year span [so] great advice twice. And I’d rather be a person who gives great advice twice than someone who gives mediocre advice all the time.

So there are certain people that we talk to sometimes on a daily basis. There are people we just check up on once a month… and let them do what they’re doing. So it really depends.

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Image via Getty Images / cornecoba

TechCrunch: Do you think the structure of having multiple offices around Europe helps with that?

Chafets: For sure. And we very intentionally have big offices, physical. We encourage people to come and spend time. You can grab a desk in Berlin or have your first guy in Berlin work out of our office for a few months. Or in London. That’s a part of what we’re trying to do.

We also try to have this open architecture internally. We take all of our CEOs skiing once a year… It helps because it lets the CEOs know the other investment partners who they don’t necessary interact with on a daily basis. And they can always pick up the phone. And also interestingly it lets them know each other. So a lot of our companies have ended up doing business together or taking advice from one another and I think for Spanish entrepreneurs it’s particularly interesting because you can come and meet the Berlin crowd, the London crowd, the Tel Aviv crowd which you might not be necessarily connected to and build your networks — and get help, advice.

Speaking of advice, I think one of the best things we can do is tell someone here’s someone who’s building something that is in a way similar to what you’re doing in our portfolio; he’s a CEO, founder who’s gone through your trip, he will advise you. On this situation, he is a person who’s handled it really well… talk to him directly, get advice.

It’s just easier to take advice from someone who’s not an investor in your company. This conversation is pretty complicated if you think about it. You have to talk to someone who, on the one hand, he’s a board member on the other he’s a stakeholder. Do you want to tell him everything? Again, I was on the other side… You could say I want the person to invest in my next round, how much can I expose him to problems?

So some people you have that relationship with and many people you don’t. But you still want them to get advice. So you say hey here’s a person who’s not me — he’s not a stakeholder, but he’s good, talk to him.

TechCrunch: Have you seen any changes in how startups are raising money across Europe, including non-VC/alternative routes?

Chafets: They’re raising more of it. Does that count?

I think it’s actually the other way around… We used to see more non-VC alternatives. There is obviously more of everything right now. But there’s particularly more real institutional, professionalized VCs. Particularly Series A round. VCs locally there are great; great, great teams that weren’t there five or six years ago.

So teams like Cherry in Berlin. They come from the operational side. They really know the market. Here there’s Cabiedies & Partners… There are a bunch of these great teams who are professional VCs which I think is a part of the European ecosystem getting more and more mature.

Chong: And as an add on to more experienced entrepreneurs we also find very often these new kinds of round terminology — pre-seed, pre-A — which is effectively extending out that early-stage capital so that they are properly building a product with proper traction. It’s a way for them to compete a little bit with what’s happening in the Valley or in Tel Aviv where capital and scale is a lot better versed.

It’s interesting that that’s happening also in Spain. The entrepreneurs I speak to here they’re saying I’m raising three rounds before my proper A round — and I’m like, your effectively raising a proper seed round, right.

Chafets: It’s still not the US.

Chong: The volume is not.

Chafets: We are seeing more and more European corporates starting to invest and this is — I haven’t seen it here actually, I’ve seen it in Germany, I’m sure it’ll come here — the more localized family-oriented corporates are also starting to invest. Which is interesting right. It’s not just the big multinationals but you’re starting to see corporate VCs from smaller organizations which I think is great. My hope is they’ll also start acquiring them. Acquiring more innovation, I think they’ll need to. And I think you’re seeing it on the sort of lower level. There’s relatively less European to European M&A than I think there should be.

I think it’s a cultural thing. European businesses — and again I’m talking more about Germany — since they’re family-owned they’re very profit-driven. It’s hard for them to pay big money for losing businesses. It’s not their DNA. They need to develop that DNA and say here’s a company that’s not making any money and I will pay a lot of money for it — it’s not going to be a multiple based deal; it will be a future based deal.

That’s still something that needs to be developed. But like everything it will happen. Europe is adding 5% of global digital market cap, 10% of startups and 20% of GDP.

The 5% is 20, 15 years ago; the 10% is today, the 20% is the future. That trend line is really there and we will get there.

TechCrunch: Given rising regulation of Internet businesses in Europe, where do you see the growth areas for startups?

Chafets: Europe does need to do more to support [tech] — not only to talk about it and fund it but also to simplify the areas that are more complex here. I think in a way a lot of the digital regulation is a good thing. To be honest. It will help clarify things that are opaque. There are a lot of companies that are getting built around it. I also think it’s fair. Companies that make money here should pay taxes here and I just think it is fair and to sustain these countries they need to.

We have a business in Israel around VAT and VAT compliance and we see how the digitization and the clarification around the rules around, for instance, VAT, you can build a company around that — a great company. That supports corporates but also I think brings value to governments. It helps them digitize their piece. But it’s natural and I’m sure it’ll happen more but it’s happening everywhere.

The one thing I think Europeans have a sense of Europe as being extremely over-regulated. And to be perfectly honest I think the US is pretty highly regulated today too. Europe is still [not harmonized] — it depends where. And certain places have some arcane systems but it’s not that extreme.

Image via Getty Images / erhui1979

TechCrunch: How is the fund thinking about climate change — in terms of potential opportunities for certain types of investments?

Chafets: We’re not really there from the spaces we invest in right now. I think the one place we are starting to focus more and more on is food. We were pretty early on the sort of Delivery Heroes of the world and the delivery piece but I think the future of food is very interesting.

First of all as an issue for sustainability — and it is is, unlike a lot of other things that might be great [green] PR, this is actually pretty important. Even more in a way than transportation. Growing meat is a huge drain on the environment and you need to feed more people. Israel is a very interesting hub for [food startups] actually. And we’ve seen some great things, some interesting things in Barcelona. Because it’s this avant-garde vegan city people are doing interesting things around that. It’s something that we will explore here. So I think that’s one area we’ll do more around. Meat replacement. Protein-based but also non-protein based. We’re seeing some pretty incredible things. So that’s probably the most important.

And then we have a mobility fund, a mobility and logistics fund and around that we look at a lot of technologies that have to do with electric vehicles and efficiency of electric vehicles and things like that. Scooters — we’ve got Circ.

[Mobility is] a very complicated issue. You have to really separate the rhetoric from the reality. What’s really sustainable and what’s theoretically sustainable… I think a lot of the things that are marketed as environmental, they’re not. But things like meat are actually environmental.

Sustainable meat, lab-grown meat will have a drastic impact on life on this world so the time I spend on it I’d rather spend on something with a real impact.

TechCrunch: On alternative mobility, what’s your view on regulation?

Chafets: I’m 100% for regulation of scooters. First of all, it’s super dangerous… No.2 I think for the industry to survive it has to be regulated. For an industry to thrive over time there has to be some regulation and I think regulation would help the professionals, the serious players — and we invested in a professional, serious player so it will probably benefit us. And it’s a European player. And I think European players tend to understand regulation better. Rather than the Americans who just say I’m going to put it in the street and then fight the regulator and lobby and figure things out — it’s a great advantage, it helps companies become large fast — but I think European players tend to say okay we’ll work with [cities].

And in this case, it seems to me like governments have caught it pretty early. It’s interesting to me that governments have learned from the ride-hailing, the apartment sharing — have learned how the sharing economy works. I mean it’s taken them time but they’re starting to figure out, okay we see something, there we are let’s grab it because when it becomes too big…

Somebody told me there are about half a million people in Tel Avi and 70,000 scooters going in every day. And Barcelona has the same weather, basically. It’s actually better because the streets are wider, there are more bike lanes than Tel Aviv. It’s the perfect city for scooters. Scooters can really change the way the city works. It’s also small and has relatively good public transportation from outwards in but they need to be regulated, you need to really make sure that [they aren’t misused] — because I think you see a big backlash in the US.

That hurts the industry and we don’t want to get to that point in Europe. We should be regulated and we should be reasonable and maybe it’s a little bit more expensive or maybe it’s a little bit less comfortable but it’ll be sustainable. It’ll be long term. You can count on it. And that’s the important piece. The important piece in making scooters is I go get Circ, I know it’ll be there when I need it, I know it’s going to be there for me. Because the problem with alternative mobility is there’s a reliance question.

I don’t own a car — I haven’t owned a car since Gett became a thing in Israel and it’s amazing and I can rely on it and why would I need a car? [With scooters] it’s the same.

We built the mobility fund because we believe it’s obviously something that’s fundamentally changing the way we move, the way we travel.

TechCrunch: But there’s all this ‘legacy tech’ on the roads — so the big challenge is how to move from the old to the new?

Chafets: There’s a lot of rolling stock, it won’t happen in a day. Autonomous cars by 2020? It’s not going to happen… It’s going to take a longer time and it’s going to take time to ease into it and to find solutions that work. But we’ll probably see it first in the center of cities — some combination of scooters plus autonomous vehicles. You’ll probably see cars around for a long line time.

We see a very small sliver of the world, right… [There’s] 100 years of building infrastructure. This city’s built for cars, it’s planned for cars, so you need to re-plan it. You need to rethink so much.

It’s a great challenge and it will be a huge moneymaker on the one hand — that’s where we want to be right, multiple trillion-dollar businesses!

This mobility revolution — European OEMs have been on this pretty early. Not like other waves of industry innovation the Europeans were almost the last. Here they’re almost the first. And they’re doing it in quite an interesting way so there’s still hope.

Europe is [generally] massively underinvested and structurally it’s very bad for tech but it’s improving — it’s still not there, there’s a lot more to do. I think immigration internal and external is a way to solve it. There are a lot of things that need to happen to make it work but it can work. You do see more and more and more significant at least Internet businesses — so Spotify and Zalando and Delivery Hero, FarFetch, Wirecard. You see more and more European companies staying independent, becoming significant. You don’t see the $100 billion — yet.

TechCrunch: So when are we going to see the first investment from your office here in Barcelona?

Chong: Very soon I hope.