Speedinvest, a seed-stage VC headquartered in Vienna with offices in London, Berlin, Munich and San Francisco, recently disclosed a new €190 million fund that brings the firm’s total assets under management to more than €400 million.
Its remit remains largely the same: Speedinvest broadly targets fintech, deep tech, marketplaces, industrial tech, digital health and consumer tech startups, writing first checks between €50,000 and €1.5 million. Meanwhile, the VC has set aside €100 million of the fund for follow-on investments in its most promising portfolio companies.
A few days before the new fund was unveiled, I put questions to Speedinvest’s CEO, Oliver Holle (picture right), to dig deeper into the firm’s remit and investment thesis, and to learn more about how a VC hailing from Austria routinely punches above its weight.
TechCrunch: Speedinvest is a pan-European seed fund investing in tech companies, writing initial cheques from €50,000 up to €1.5 million but also with the capacity to follow at Series A. Can you perhaps be more specific with regards to the types of founders and startups you look for, and what key indicators are important for businesses that are so early?
Oliver Holle: Speedinvest prides itself on its conviction-driven, founder-centric investment style. What this means is that we are ready to go earlier than most seed-stage funds, based on less measurable traction metrics or KPIs. We have our own pre-seed practice focusing on writing small checks between €50-250,000, which is pretty much pre-everything, except for the founding team.
At this earliest stage, we’re investing on conviction, which is built by our sector-focused teams and our long-standing industry expertise. We look particularly at the histories of the founding team and whether they’ve got a successful track record of tackling a big market. The second category of investments are where we’re essentially taking bets on more unproven teams, where we see early signs of that elusive “spirit of entrepreneurship,” for want of a better phrase. It’s this gut-feel, combined with some clear, differentiated reason why the team would be best suited for the given problem, that ultimately guides our decision.
Who are the LPs in this fund? And are any of them strategic or hands-on?
Our LP base has been historically comprised of private investors, many of them having backed us from the early days of Speedinvest, mainly coming from Austria and Germany. With Speedinvest 3, we have added major commitments from major institutionals, including EIF, ERSTE Bank and U.S.-based NEA, one of the world’s largest venture capital firms, with whom we have a long-standing, strategic partnership.
You say you have a team of 40 investment professionals working across five, sector-focused investment teams, along with 20 operational experts providing portfolio companies with “full-service HR, growth marketing, business development, and U.S. expansion support.” That feels unusually large for a seed firm: How can you afford all of these people, and how many are part-time (e.g. venture partners or scouts) versus full-time investment staff?
Yes, it is unusually large. This is because we invest every cent of our management fees — no small amount, based on our €400 million+ AuM — in building the resources to back up our vision and strategy as an operational VC with deep sector expertise.
Doing this, especially across Europe, does not scale, it needs investment in resources. We have invested and have built five focused investment teams with 6-8 team members each, spread across our different European offices, as well as a platform team, which includes HR professionals, growth experts, business development and M&A support both in Europe and the U.S. We have taken this approach in order to achieve tangible value-add. The best way to build and earn respect with your founders is through actually delivering value beyond your investment, whether through deep sector knowledge or deep functional expertise.
In terms of how we can afford this, fundamentally Speedinvest is from the startup world. Our mindset and expectations are formed by a bet on the future, not on optimizing today’s individual fee income. We expect, and have seen in the first funds, that this individual investment as (founding) partners pays off.
Secondly, we take an entrepreneurial approach. We formed joint ventures for our core operational units in HR and growth hacking to allow for outside income, we built most of the back office and operational teams in the far more cost-efficient location of Vienna and we share carry very broadly, offering upside for the broader team, just like any well-run startup.
Ultimately, all these efforts aim to produce value for our founders, thereby producing superior performance and brand equity. If this hypothesis holds, none of us have to worry about our finances.
You’ve got in on some promising deals over the last few years, such as investing in the insurtech Wefox or e-scooter rentals company Tier Mobility, which isn’t bad for a VC born out of Austria! Where does most of your deal flow come from, and have you faced resistance or misunderstanding from founders because of where Speedinvest is headquartered?
By now, we are proud to say that we received more than 6,500 pitches in 2019 alone, evenly spread among our core regions, Germany/Switzerland/Austria, U.K., CEE and the rest of Europe. We received more than 40% of this deal flow from our network of other VCs and founders, many of them passing on deals to us that are too early or too risky for them.
At the beginning, we had to battle against the image of Speedinvest as a regional player, but over time we have been able to articulate our differentiating factors — the deep sector focus, such as our exceptional fintech portfolio or investments in marketplaces and industrial tech, as well as our unique operational support platform — in a way that has led us to win very competitive deals in the most competitive hubs in Europe, such as London, Paris or Berlin.
I firmly believe that setting up in a fringe region in Europe has forced us to focus on these key differentiators. From day one, we had to ask ourselves why great founders would pick an Austrian fund — a question that continues to keep us honest about what we offer and where we can create value for our founders.
You cite investment areas of interest as fintech, deep tech, marketplaces, industrial tech, digital health and consumer tech, so I wanted to drill down into a few of these.
If I were to sum up the current state of play, I’d say that the first phase of fintech is largely done — the unbundling of various consumer and business financial services, such as fx or savings or credit etc. — and from that a number of companies, such as challenger banks or money management apps and platforms, have emerged in an attempt to re-bundle these products but in a way that puts the user more in control, i.e. the elusive financial hub strategy.
I’m interested to know what open spaces in fintech remain, either consumer or B2B, at least in the short- to mid-term?
We would agree, although there are still pockets of opportunity in less crowded markets and/or regions, such as Spain/LatAm (think Bnext) or CEE. But overall, we see a massive shift from fintech to techfin, meaning startups that are much more enterprise focused, using innovative technology stacks to innovate within the fintech value chain. We also continue to see opportunities in the underserved SME space, even niche plays can turn very big here. Last but not least, rethinking services, such as tax advice, financial consulting, bookkeeping, from a tech angle is still in its infancy and remains a huge opportunity.
Perhaps even more than fintech, one could argue that online marketplaces are “done.” Yet we could have made that same argument three years ago, five years ago or even 10-15 years ago. What do you look for in new marketplace-oriented startups and how do you see incumbents being disrupted all over again?
I’ve been in the startup world for more than 20 years and have heard that assessment many times. Yet still, many of our fastest growing portfolio companies run a marketplace model. What we look for in both B2B and B2C are models that target a global niche that has not previously been addressed through digital channels, and that is substantial enough to build a big business. If you go through different sectors, there are huge numbers of such verticals that are still yet to be transformed and we see this in our daily deal flow — from construction to education to food verticals to luxury goods. Nothing is safe from disruption. And yes, these vertical niche leaders all bite away from the current incumbents, which have all been challengers themselves until recently.
Lastly, let’s talk about industrial tech (or so-called Industry 4.0). Even though it is still quite early days, it would appear to me that Europe has already demonstrated a particular strength in this area, perhaps because of its strong technical universities and being a home to some of the world’s most engineering and manufacturing-oriented companies and brands. Is that a fair summary, and how can Europe really cement itself as an Industry 4.0 leader?
The amazing opportunity around industrial tech is the density of talent and research we have in the ecosystem, especially as long-standing hidden giants in manufacturing emerge and engage with startups. This, in combination with excellent research institutions, creates uniquely fertile ground for the sector. Still, we are in the early days of this development and we need to see how many of these new founders are willing to build truly global companies, instead of going for the early exit.
You currently have people on the ground in Berlin, London, Munich, Paris, Vienna and San Francisco, and say you will be increasing your presence in France, where you have already made a number of investments. Why France, and what European hubs do you see as up and coming or perhaps still flying under the radar compared to the quality of founders and startups?
France is one of the most dynamic ecosystems in Europe, so if we want to fulfill our vision to be a truly pan-European seed fund, we need to be strong in Paris. It is fascinating to see how a change in cultural attitude by a next generation of French founders, in combination with a clear political will to drive the startup agenda, has created a momentum other countries can only dream of.
With regards to other European hubs, we are doubling down on our sector strategy, which hopefully continues to give us an edge with top founders, even if they have a local generalist investor at their disposal. We see opportunities across Europe, particularly in the Nordics, which already has a rich and mature ecosystem, and the CEE region, where ambition levels are constantly rising. Perhaps slightly behind those, the European South will also produce amazing success stories given time and investment.