Earlier this month, La Famiglia, a Berlin-based VC firm that invests in seed-stage European B2B tech startups, disclosed that it raised a second fund totaling €50 million, up from its debut fund of €35 million in 2017.
The firm writes first checks of up to €1.5 million in European startups that use technology to address a significant need within an industry. It’s backed 37 startups to date (including Forto, Arculus and Graphy) and seeks to position itself based on its industry network, many of whom are LPs.
La Famiglia’s investors include the Mittal, Pictet, Oetker, Hymer and Swarovski families, industry leaders Voith and Franke, as well as the families behind conglomerates such as Hapag-Lloyd, Solvay, Adidas and Valentino. In addition, the likes of Niklas Zennström (Skype, Atomico), Zoopla’s Alex Chesterman and Personio’s Hanno Renner are also LPs.
Meanwhile, the firm describes itself as “female-led,” with founding partner Dr. Jeannette zu Fürstenberg and partner Judith Dada at the helm.
With the ink only just dry on the new fund, I put questions to the pair to get more detail on La Famiglia’s investment thesis and what it looks for in founders. We also discussed how the firm taps its “old economy” network, the future of industry 4.0 and what La Famiglia is doing — if anything — to ensure it backs diverse founders.
TechCrunch: You describe La Famiglia as B2B-focused, writing first checks of up to €1.5 million in European startups using technology to address a significant need within an industry. In particular, you cite verticals such as logistics and supply chain, the industrial space, and insurance, while also referencing sustainability and the future of work.
Can you elaborate a bit more on the fund’s remit and what you look for in founders and startups at such an early stage?
Jeannette zu Fürstenberg: Our ambition is to capture the fundamental shift in value creation across the largest sectors of our European economy, which are either being disrupted or enabled by digital technologies. We believe that opportunities in fields such as manufacturing or logistics will be shaped by a deep process understanding of these industries, which is the key differentiator in creating successful outcomes and a strength that European entrepreneurs can leverage.
We look for visionary founders who see a new future, where others only see fragments, with grit to push through adversity and a creative force to shape the world into being.
Judith Dada: Picking up a lot of signals from various expert sources in our network informs the opportunity landscape we see and allows us to invest with a strong sense of market timing. Next to verticals like insurance or industrial manufacturing, we also invest into companies tackling more horizontal opportunities, such as sustainability in its vast importance across industries, as well as new ways that our work is being transformed, for workers of all types. We look for opportunities across a spectrum of technological trends, but are particularly focused on the application potential of ML and AI.
La Famiglia has a lot of ties to “old economy” companies (and old money) via the fund’s LPs and network, which you argue makes it well-positioned to help industry and B2B-focused startups scale, including overcoming hurdles such as long feedback cycles and opaque industry structures.
How does this work in practice and can you share any examples of where this has actually happened?
Jeannette zu Fürstenberg: Coming from an industrial family business background, I have grown up with many other next-generation family business owners and have built deep relationships with a broad range of entrepreneurs from the established industries. Rather than providing a mere network, which is often highly transactional, this exposure has allowed La Famiglia to form strong relationships that are built on trust. No matter what the age or the industry, when you put entrepreneurs face-to-face they often speak the same language, and this allows for fast time to impact for both sides. Our industrial network has thus proven to be a substantial source of support for our portfolio companies and has helped them to a great degree. We engage our LP and broader industry network already in times of diligence and subsequently support go-to-market for the companies we back, e.g., in customers for digital freight forwarding company Forto, partners for process intelligence company Bigfinite, and strategic advice for various others.
Judith Dada: I come to this world from the perspective of someone who has previously worked at the intersection of large tech companies, such as Facebook and Amazon, which have defined a playbook for building massive companies. Today, thanks to a range of new tools that democratize product creation and distribution, starting a B2C business has also never been easier, whereas within B2B, access through trusted partners remains key and can often become a bottleneck, and so our value proposition really resonates with B2B founders.
From La Famiglia’s first fund, four companies have exited already. Can you share details of those exits, and more broadly, how is fund one performing so far?
Judith Dada: We have seen some early exits where companies have found a new home merging with successful businesses, such as Coinbase or Personio and are still holding a range of great companies that are showing strong acceleration and market validation. We see this as a testament to La Famiglia’s unique value proposition, which is also reflected in a strong early performance.
La Famiglia is a female-led fund, which is especially notable given that VC is extremely male-dominated, and, I suspect, so are parts of the old economy. How has La Famiglia been received in this regard and has it made it easier or harder to get in on deals or forge partnerships with follow-on investors or industry?
Jeannette zu Fürstenberg: First and foremost, we win deals because founders believe us to be the best partner for them. Being female can provide an additional value in a male-dominated industry, especially as founders look for increased diversity on their boards. Me now being a mother of four young children, we have fostered a team culture of inclusivity also when it comes to mastering the challenge of combining a highly dynamic work environment with the joys of family life. This includes a flexibility that unfortunately isn’t yet achievable in the rigid corset of many corporate structures. Incidentally, many founders start companies at a stage when they also start families of their own and are seeking advice on how to excel in both.
What are you actively doing (if anything) to ensure you back diverse founders, including relating to gender, but also ethnicity and socio-economic background? Or to shape the way the companies you fund think about diversity?
Judith Dada: With regard to diversifying the funnel, we acknowledge that educational change and encouragement of diverse entrepreneurs will take time, especially within the B2B sectors we invest in where diverse founders can be even rarer than in fields closer to consumer products. Unfair bias within the VC and other industries aggravates this problem.
In this vein, we are active in various fields, including mentoring for female pupils to encourage them to consider entrepreneurship and STEM subjects. We also drive various mentoring programs for female founders at the earliest stages with various partners. We are confident this will contribute to the overall market education to reduce bias against diverse founders and also provides prime access to great talent we can subsequently invest in.
Within our own portfolio, our personal network within strong female talent also enables our portfolio companies to build diverse teams early in their development, as recently happened with two companies that hired fantastic women as their first employees.
In the next 5-10 years, what are the big opportunities within industry 4.0?
Jeannette zu Fürstenberg: Industry 4.0 has become such a buzzword, but what we are seeing is that technology is becoming a key enabler and driver across all layers of industrial value creation, starting from device connectivity at the bottom of the stack to data intelligence and concrete applications that optimize and automate business processes. We are particularly excited by companies that provide a platform and create an ecosystem within a given industry segment. This allows for cross-pollination between different partners, which will drive operational efficiency and will allow them to capture a significant part of the shifting value creation.
Judith Dada: Traditionally, it has been hard for Industry 4.0 companies to generate fast scale needed for big venture outcomes, which was also due to a cultural aversion to change, as well as difficult data integration and highly complex production processes. However, we are seeing that engineering mindsets are changing, driven by both fresh talent and a realization that adapting to the changing tides of value creation is now only a question of the how. Especially when it comes to data and machine learning, we are seeing a range of companies driving deep transparency and efficiency within industrial processes and an ability to push through challenges around data integration and deployment.
Lastly, what is the one startup you had the chance to invest in but chose not to (or were unable to) and now regret the most? Why did you miss out?
Judith Dada: As a seed stage fund we have to be comfortable with the fact that we miss great opportunities here and there. We therefore have a process for flagging and reviewing opportunities we might have missed and understanding what we can improve in our pattern recognition going forward. Within seed, outcomes can take a long time to materialize, so we’ll happily answer this question in a few years!
Jeannette zu Fürstenberg: At La Famiglia, we are constantly refining the art of saying “yes” and trusting our ability to anticipate transformational abilities. We will continue to be on the outlook for founders with an eye for product, a taste for deep technology and bold visions.