How to optimize your fundraise from VCs in Europe’s rapidly changing ecosystem
Europe’s VC game is changing rapidly and founders may find themselves trying to optimize for the new changes.
Christian Jantzen is one of the most prolific angel investors in Europe, having invested in more than 30 startups, many of which have raised follow-on funding from world class funds like Point Nine Capital and NEA.
Today you’ll hear how Christian got his start and his candid advice for founders looking to optimize and run a smooth fundraising process.
You’ll also learn how and why you should start angel investing as a founder or operator, and the optimal way to get going.
You can find some insight from the snippet below and listen to the full episode on Spotify here.
Full transcript is available below.
Collective Hindsight podcast — Episode 02, Christian Jantzen:
So today I’m sitting with Christian Jantzen and who is one of the most active angel investors in the Nordic region, and it’s based out of London. Christian and I, we have known each other for a few years already, as I actually used to work as Christian’s investment associate back in the day in the early days of his of his fund Christian previously was the founder of a comical reunited in the e-sports space. And so far he is invested in about 30 startups already, including the likes of grid, Pento, dream data, and a lot more and has consistently helped his portfolio companies with follow on funding as well from world-class investors like new enterprise associates and 0.9 capital to name a few. And I think today’s conversation is going to be really interesting for any founders who might be looking for candid and kind of unfiltered advice on fundraising. And it’s hopefully also going to be interesting for any new investors who are looking to sharpen their strategies. So Christian, before we jump into the meat of it, why don’t you start us off by telling us a little bit about your your journey to the point you’re at now?
Christian: 1:45
yeah, absolutely. No. And thanks for having me always good to be among friends. I really started my I guess you could say sort of entrepreneurial journeys quite early. Already when I was in university, I helped some, my first company which was not a real startup in the sense that it was sort of a real estate company that I did with my family and No, but it got off to a good start given that we were in the real estate market in 2010, and basically anyone who entered the real estate market in 2010 could hardly fail. But then as I went through a university, I always came from the sort of belief that entrepreneurship was something you did after you spent five years at a big company. And and I think that the closer I got to, to, to the big companies, the more I realized that that was, that was likely not, not going to be Sony. So actually after my after my degree, I I started my first startup, like, like you mentioned, reunited with a very good friend of mine today, still a good friend of mine, even though we failed which is the, the best outcome from it. Like but, but after doing that for around a year like how many never worked out, but but what I had seen as a, as a founder in, in Copenhagen at the time was that raising your first round of capital was, was, was quite tricky. This was 2000 and S we, we were, we were running the company in 2016 and I started investing out of the fund two 17. And I think at that time, what really dominated the, our local ecosystem and not so much anymore, but, but was that there was a lot of, you know, dispersed angels, but, but very few of them had actually made their money or had the, sort of had that success in tech. So a lot of the people who are people who are interested in investing in companies, but what really came with backgrounds from you know, traditional corporate companies that, that just run fundamentally differently to startups. And, and I think that you know, that meant that a lot of people were. Sort of, and, and I think, you know, generally this is good investment advice that, you know, that they were they were investing in and stuff. They sort of understood. And, and my plan was always to say, well Copenhagen and didn’t really, the Nordics had a problem with sort of what got funded was what you know, someone in their late fifties from from a big corporate understood that that’s not exactly sort of the dynamic ecosystem. So that, that led me to start the farm futuristic. This was where we met. And initially it was really me taking some of the money I had made real estate and selling a few sort of friends and family that you know, here’s what I want to do. And then the first fund was I believe we started out with 1.2 million. So something like this just really to, to try things out and, and see if, if things would, would fly and if we could get access to good deals. And I spent roughly a year doing that we then put more money into the fund. So today of what we’re investing out of is really a $4 million fund. And historically we’ve been well, I’ve been very focused on putting the first money into to companies. And I think the market has changed tremendously over time. So I think today I’m a lot more flexible and I, and I operate not so much anymore as say sort of dedicated pre-seed funding and a little bit more optimistic angel, I would say here. So today I, I do plenty of seed rounds. I do plenty of rounds outside of the Nordics, and I think I’ve really transitioned to. To a new place in the market where my primary value at, to found it used to be, you know, very good, solid first capital in that could help you raise your next round, I think to date this. Yeah. And we can get into this later, but I think that the seed funds fundamentally operate differently today than they did when I started. And then also on the side as a, as a new thing, I’m also now building another company which I do. So I split my time between investing and building a new company within renewable energy. So that’s really me
Daniel: 5:19
in a nutshell, exciting man. It’s it’s been an interesting journey so far. And you mentioned that you already kind of alluded to this actually that the investor mindset might have changed a lot since you first started out. What are like the more specifically in the last, like four or five years that you’ve been investing? How do you see that investor mindset in Europe has, has changed.
Christian: 5:38
Yeah. And I think it’s I think that used to be a two from question of, of Nordics versus Europe. I think today, not so much anymore. I actually think Europe is increasingly becoming one ecosystem. Obviously it’s still certain regions of Europe that are very hard to say that they are interconnected, but I think especially for the Nordics and, and these kind of regions that have always produced great outcomes, I think that they are increasingly sort of converging with, with London or Berlin or Paris or wherever the, the capitalist is centered. For me, the main thing that has changed is there’s a lot more competent earliest angels today. If you’re racing your first round of Kevin’s a today it’s a lot easier to get a world-class operators to join your cap table or also to be on your cap table. Obviously a lot of that is, is time. You know, when I started out investing, a lot of people were still not very liquid in, in their companies, but by the, you know, when I started investing Spotify was not a public company just to take a Nordic another company which meant that there was not that much capital flowing and, and obviously today with a lot of the companies having IPO or, or having been sold to lots of players and, and, and, and you have really seen sort of the, snowball has started rolling on the major ticket exits in Europe which, which just means that there’s a lot more operational capital coming from early employees and founders of those companies. And then I, I always sort of with a bit of an essay that, like the main thing for me that’s changed is that the seed funds have started becoming seed funds. Because I think that when you went back into Europe again, circa 2016, 17, Actually a lot of the seed funds will not really operating as you know, and I say this in quotation marks, proper seed funds. I always reference a conversation I had with with a, sort of a good seed fund here in London back in those days and, and the sentiment of the Seaford market was really that, you know, if you are running a, a good you know, SAS company, that the time for you to go out and raise a seed round would be somewhere around 20,000 euros in monthly revenue or MRR. that, that was really the sentiment back then. And, and of course you know, the competition for seed was, was not that cutthroat at this day. And, and I think that that meant that a lot of the seed funds were, were, were happy to wait. They, they knew that the. The options were limited and they could, they could comfortably wait for the companies to grow into a size where they were sort of de-risk and they would still when the deals now I think if you look today this is really changed. I think that especially at the early stages campuses of conversion from all sides, you’re seeing, this is a trend you’re still not seeing that much in Europe, but I think especially if you look at the U S you’ve seen a lot more of the sort of would be angels that are now running essentially small funds. So all of a sudden seed funds are not only competing with other seed funds. They’re also competing with individuals that are writing larger checks. I’m 100% sure that we we’ll see this in Europe as well. It’s it’s a matter of time. I think that funding is definitely going more towards individuals And then I think the main thing that’s really happened is that. The larger funds have started deploying more and more money at, at the seed stage. I think a great example of this is you know, index ventures last week, I believe announced it then are launching a, a 200 million seed fund or something range. And I think increasing the, the big names and the big players are, are competing or the best deals across all stages. I think that that has really led to a funding landscape in which everyone is competing with everyone. And of course the appetite to take early risks has been forced very much. I mean, I think a lot of funds have had their hands forced. It’s going to be interesting over the next few years to see who can really adopt to this. More sort of a cultural landscape
Daniel: 9:15
and it sounds like it’s, it’s very much like a, I mean the more capital’s flowing around and the more competition there are amongst investors that’s presumably better for founders, right?
Christian: 9:25
I think yes and no. I think it, it in the broad sense, it’s absolutely better for founders, you know access to capital is crucial, especially within technology market. Right? Absolutely. I I’ve seen that in a few cases. I think generally speaking technology is, is a, it’s a product where it’s a kind of company where, where you sort of front load your, your research and development. Right. Which, which just means that you need capital to get companies off the ground given that, you know, it’s very hard to sell a product that hasn’t had. A certain amount of engineering hours put into it and someone needs to pay those engineers before, before someone wants to pay for the product. So generally speaking, you know, launching a company and getting a company off the ground has never been, been better in terms of funding, it’s, it’s a lot easier and you can raise a lot more funding today, even so that European companies can start to sort of compete with their American counterparts. It always used to be that, you know, if you had a European company, they would raise maybe a 1 million Euro seed, and then you had an American company that raised four or 5 million and then sort of like you had to compete with them. I think today, the play, thank you. It’s definitely leveled for founders. Still not to the point where it’s completely level, but it’s definitely going in that direction. And I guess we can also a little bit later talk about sort of the influence of American capital on the European ecosystem, which is fast. I think what I will say is that. Today as a founder, it’s also a lot easier to make mistakes in terms of picking funding because there’s so much competition. There are so many people who will sort of, it’s, it’s very easy to have, you know, around that it’s been beat up by, by multiple investors that you sort of lose track of like who would actually be the best partners. And I, I really believe that seed investing is still very, very, very different from, from, let’s say later, more institutionalized investing. I believe that at seed, you are still fundamentally investing in people. I think that if you’re a founder is always worth considering whether taking a a round of capital from, from a very big well-renowned fund, is this the right way to go at your stages because the support you’re getting might not be as dedicated as, as, as you would at a sort of a. More or less call it artismal fund or some who specialized in, in that exact phase of your, of your journey.
Daniel: 11:35
But that’s the thing, right? I think from my perspective, it seems like seed investing in early stage investing. It’s more of an art than it is a science in some ways. And then when it gets into, cause there’s not a lot of numbers to look at, right. It’s more about like human relations, trust and conviction in the broader markets perhaps. But then series a and, and later it becomes more of a data and numbers and analysis. So that’s more of a science. Yeah.
Christian: 11:58
Yeah. I definitely think that there’s the serious AEs that transition around between the art and the science. I think, I think the main issue or the main sort of focus point I would have as a founder is do you want to be part of a pipeline? And I think it’s very easy to. So you look at what some of the large funds today are doing and, and, and obviously no one will ever tell you that this is the case, but, but I do think that a lot of what you’re seeing at CDs, that you have large funds to say, okay, we are okay to take no multiple seed on, on, on great founders or sort of things that are promising. And then, you know, hopefully we can double down and, and deploy sort of the, the grownup capital in the later rounds. And, and that see tickets really sort of a foot in the door type of ticket functionality. It is, it is. And, and I think that especially, especially when you’re dealing with people and look, what I will say is that there are absolutely some of the big funds that have phenomenal people. I’ve been lucky enough to work with a few of them in, on some of my own companies. And, and I think that. Those partners are always worth it sort of you know, having an on your board or your cap table. But I do think that there are funds who are actually most specialized in, in the traditional round. So the more data-driven rounds, but who again have had their hands forced in terms of heading to do earlier stuff, just because it gets too hot for them to lead the serious piece. So now instead of doing that, they might want to try to lead the series day or similarly for, for serious day funds that have realized that they’re losing a lot of their, as you say, that’s, now they’re trying to, I do seed. And I think really the, the question you should always be asking is, is really sort off the partner themselves. Like, I mean, how much time will they dedicate to a million dollar check in In a fund where they are essentially responsible for 150 million than likely is not too much. I think there’s, but, but yeah, you know, it’s always like on an infrastructure. I
Daniel: 13:51
think there’s even more extreme examples, right? There is like some billion plus fines that have written, like stop million dollar checks into, into seed stage or pre-seed companies. And it’s, it seems like, and like, these are like big brand name, like tier one funds in some cases, don’t you think there’s a lot of risk for a founder in case like in terms of signaling risk and things like that.
Christian: 14:13
This is like the age old question of signaling risk. What people mean when they talk about signaling risk is obviously that let’s say Sequoia, which is, I believe $8 billion in their latest fund. And then double digit billions under management. Obviously, if a fund like that writes you a 1 million or 2 million seed check, and then let’s say they do not want to lead your series a or, or maybe might only want to take that process. We would say, of course, a lot of the other players in the market will be asking themselves well why is that? Why is it that a $8 billion fund is happy to only put 2 million into this company when we know that for them to re make real, a real density, that they are fun, they will need you know, to deploy probably a hundred million. Right. So of course, as a founder, you’re running that risk. But I will say that I think what runs counter to that is, there’s so much money in the market today that different funds have different conviction on different things. And I think that I’ve seen plenty of examples with, with, with founders who raise capital from early stage or from, from tier one funds at an early stage who still had no problem racing you know yeah, big checks. I mean, I can give you an example from my own portfolio. So I have a portfolio company which will remain nameless, but they, in their very, very initial round raised at $1 million check from from an, from a us very they’re still hasn’t followed on, but, but, but since, since that, since the check, I, I believe the company has raised $10 million and that has not had issues with it. So I think that, you know, I think signaling risk is always a little bit it’s always a little bit something that, you know, in theory it’s true. But I do believe that, you know, things change also in funds. It can be that the person who wrote that initial check is no longer there. And then, you know, maybe the fund doesn’t really know what to do with it. I mean, my general advice to founders is always to, to pick the best partners for them. And I think that C just really not the, the, the round for you to shop around for the best valuation or whatever. And I think that that’s, that’s obviously where a lot of founders get sort of blinded by this. And in the sense that, you know, the bigger funds will likely give you more money for this ownership simply because for them it’s an option. I do think that different companies require different things and I’ve absolutely seen at work, like in the. In the sense of my portfolio company, if I went back to them and would I, would I advise something else? No, absolutely not. I mean, I, I think they made, completed the right call, the fund, edit pencil value. And it was fine. You know, I think that, you know, it’s always the, of course it’s, it’s a natural sort of I think, I think generally funds have different narratives that they like to tell founders because they think that most of us know that certain narratives have, have a have an in with thunder. I think this narrative of signaling risk and whatnot is certainly the preferred narrative of any seed fund out there. But of course everyone is talking down book. And I think as a founder, you have to be very, very keenly aware of this, which is why, you know, my advice would always be to say, Look at the individual partner look at like, how is that kind of chemistry? And, and I’ve seen now plenty of examples of very big funds coming in with small checks and still adding pencil values. Maybe
Daniel: 17:12
that signaling risk is a little bit overrated, you would say.
Christian: 17:15
I think it’s, it’s, it’s definitely a thing, but I think it’s not as big of a thing as some people make it out to be. And I think that the people who make it out to be a huge thing are very biased in the sense that you know, these funds are coming after you know, their lunch and you know, again, I said, like I said, it’s, it’s the preferred narrative of NDC fund. there are cases where it’s true. There are cases which are not true. Again, my advice is to exercise caution and, and, and really get to understand the partners that you want to work with you know, get them to really be in on your company. Find someone there who. Has, you know, great conviction and not just someone who sort of, I think the worst thing you can probably do is to take a partner. Who’s mainly doing it for fear of missing out on your next round. Because I think that those, like those funds tend to probably be willing to pay up, but they might, but they might also forget about your wing. I mean, I think around a fundraising event, you know, companies always hot, but, but you know, it doesn’t mean that you can sort of sustain that hot streak for the next 12 to 18 months. And of course you’re looking for someone who’s also potentially has to support you if, if the road tends out to be a little bit more murky than, than you already expected.
Daniel: 18:18
And speaking of things that are, that are, that are hot right now, the whole discussion of a us Capitol coming into Europe. And you were, you actually blocked about this, like before it was kind of like a big discussion, I think. W I think maybe two years ago it was something how have you seen that evolve since you first came up with that blog post?
Christian: 18:36
Yes. I wrote just to get some Rhoda, I believe roughly one and a half years ago, I wrote a blog post titled before the American floods. And I think what I was seeing back there, both in my own portfolio and, and also hearing from fences that really your lift in this sort of weird transition period where most funds were still telling themselves that American money was not really a thing. And they would, they were still coming around. You know, the, the, the, again, the classical sort of narrative was that the, the, the Americans would come and lead the scale-up series C type rounds. But, but really what was happening around the time was that you were seeing the early innings of us funds competing for the best suicides. And I, I mean, I, it was obviously very timely in the sense that if you look at it today, the, the, the flood Gates are wide open and us capital has been pouring into to Europe for, for the last year at a rate that’s been previously completely on precedent. And I actually think today, if you’re if you’re if you’re a good series a company, you might end up talking to as many, if not more, you us pumps than you would European funds. so I think that’s sort of the backstory in that sense. And I think that what I was afraid of back then was that, you know all of the ownership of the underlying assets in terms of the shares of the companies would go to essentially You know, us top tier universities, because those are the people who have money in the actual us funds or what could be. So, so, so for me, it was as much a call to, towards the European LPs to really start thinking about,
Daniel: 20:04
can you clarify that a little bit for the audience? Like you’re talking about like endowment funds and stuff being LPs, and
Christian: 20:10
obviously you have to look at, when you look at funds, you have to see who’s, who’s, who’s owning the underlying fund. And and of course, when you are speaking to Sequoia or whatnot, in your view as entrepreneur Sequoia is the general partners that you’re speaking to because they are the ones deploying the capital. But, but actually you have to look at the bit who owns the capital. So the, the people who own the capital or the limited partners, and in most cases, I mean, in some cases the general partners have made so much money that they actually own the majority of the funds, but that’s quite rare. And in most cases it is still it is still. Mainly owned by, by biological piece and, and, and in the case of, of us funds, a lot of the university endowments and and whatnot are, are the owners of the capital. So of course a lot of the European tech success with would flow back into the, you know, the Yale university endowment or whatnot instead of into the European pension, because obviously if Europe has to become a great tech continent, but as you’re seeing, seeing happening now you want, you want ownership to sort of lead stay within, within Europe, because obviously what, what a tech ecosystem feeds itself on is it’s the recycling of capital. Like we talked about earlier, when not only when, when founders and employees become liquid. But also when LPs become liquid, of course, their, their tendency to re to, to reinvest into those funds or to the new funds obviously goes up. And of course for the last, I believe five years, everyone has been talking in Europe about, Oh, how do we get pension funds and whatnot to, to invest into venture? And of course the entered funds are going to keep saying that will you know, venture is not a good returning asset class. If, all your money is flowing back into the U S and not activity into the European funds, it’s very important that, that at least some of the ownership stays within Europe because, you know, you make money in ownership. For sure. So that, that was my, that was my sort of concern back then. I mean, I, I don’t think that’s much to stop it in that sense that I’m fundamentally a capitalist.
22:01
So,
Daniel: 22:01
but the concern makes sense that like it would be kind of strange if all the, like most successful companies produced out of Europe the returns. Just go back into, into the U S system, right. Instead of coming back recycling over the long, long term in here.
Christian: 22:16
Yeah. I think generally speaking European investors at least big pension fund, so on, they’ve had the chance to do this for, for many, many years. And reality is that, that still a lot of the capital is being deployed from, from European funds comes from the EU. And, and, and it doesn’t seem to be as, at least on a broad scale that that institutional investors from Europe has been that interested in technology and whatnot. And obviously the, the issue is that you know, that’s, that’s a very long feedback cycle in, in, in. Intake tickets, as I think everyone knows it takes a long time to build a company, scale it and then sell it. It can take 10 years. So obviously when the returns are coming now, you know, they’re actually lagging indicators from post financial crisis. A lot of the great European companies that have exited now are from 2011, 20, 10, 2012, that th that kind of vintage. And of course, if you’re looking at it now as an institutional piece and saying, Oh, well, now it’s safe to dip your toe. Yeah. It’s too late, you know, it’s it, it, most likely it’s, and, and I think that that’s always the hard part for, for conservative institutions. And, and, and certainly, I mean, it might
Daniel: 23:20
be, we’ll see. Right. I mean, it might also be, I mean, I think it’s always easy to say, Oh, we’re at, we’re at the top of the market, right? Like, there’s this quote from Mark and recent that like, he, he, he moved to Silicon Valley, like 1995. And he said that he thought he’d missed it. Like he thought he missed like internet revolution. Right. Yeah, no, no. I think so. We never know right
Christian: 23:40
now. It’s very hard to say. I think so my main worry would be that, that, because the, the U S allocators so far, I guess, in terms of fund size, in terms of speed, in terms of just operational excellence I mean, obviously my main worry is that of the European money ends up becoming, you know, second or third tier options in their own backyard. What
Daniel: 24:04
I see is I think it feels like like just the way that us investors operate versus like European ones, it seems like USVCs, and also angel investors are way more open to just kind of being just like, or even to these things that are completely unproven, just say like, Yolo, like let’s do it just like Mrs. Rider check and see if we can get this off the ground. Yeah, but I don’t think that’s the case in Europe yet, but hopefully what I’m hoping is that these us funds coming into Europe they’ll force the European investors to, to adopt that kind of bold mindset. Yeah.
Christian: 24:32
I think the issue. So I generally agree. I think the, the issue in a sense is that for you to adopt that mindset, it, it requires you to have seen those kinds of returns. And obviously some of the things that it’s an issue in Europe is that you still have a lot of funds that’s been around for a long time without having seen those crazy hormones. And I think part of the reason why us investors are more comfortable putting $10 million into a Roosevelt company is that they’ve done it a hundred times before. And they’ve seen what it looks like when those $10 million turned into a billion. And of course the more you’ve done that, the more your, your appetite for, for doing it again, increases. So I. I agree. I hope that that this will force the hand of some investors. But I do want to say that I think it’s very hot and I think it’s, it’s very hard if you’ve operated with a mindset of abundance and they will, they will come to us for 10 years then to sort of overnight, have to switch into, we’re actually always competing with five other term sheets for a deal, and we really have to sort of sell ourselves and really have to to be speedy. I’ll give you another example of another portfolio company that shall remain nameless mainly because they haven’t announced much yet. At least not at the time of recording when this comes out, they might have announced them them. Fair enough. But a portfolio company that was releasing a fairly large round obviously speaking to. A lot of a lot of investors, both us and European investors. And, and sadly, in the case of, of this company multiple of, of the European investors actually had to pet back out because they felt like the process was moving too fast. It’s it made me think a lot because one of the advantages, and again, I say this in quotation marks that, that, that European funds always have touts is that we’ll sort of, we have a local advantage because the companies, a founder in our backyard, and we really have a time, we really have sort of like an opportunity to get in there with the founders and, and and and sort of work with them and get to know them before the Americans come in just to, for a quick meeting, brief to the city or state. But what really ended up happening was that, you know, even though the American funds were further away and hadn’t. Build the same kind of relationship to the, to the founders. You know, the process ended up moving too fast for the, for the Europeans who had a year essentially to build those relationships. And I think that the transition in mindset is it’s a lot harder than you think. If you’ve been doing something like this for eight or 10 years, and someone comes up might say, Hey, now you actually really have to sort of flip a switch. Is there a harder so yeah, that’s maybe a first mover advantage in the case of your effective can end up becoming
Daniel: 26:57
an adult. So B being local is not actually that big of an advantage anymore. And I think maybe it’s also like, I don’t know if COVID has something to do with the fact that like, you know, everyone is remote anyways, so it doesn’t really matter if you’re an hour away or like, you know, 10,000 miles away. But I think
Christian: 27:12
it met us in some ecosystems. Again, I think that what matters is You know, if I was a local fund saying Eastern Europe or somewhere that’s still disconnected, you know, I would love it, the government to, to ban flights from London or whatever. Because that’s a, yeah, that’s at least the transition I’ve seen in the Nordics. You know, they used to be this again, they used to be a embarrassment. Why do we help believe that your first round would always be local? Your seed round would always be local. And local funds really had an advantage. I think that has really been put to shame in recent years. I, I personally always been telling them sort of the sort of local events was a little bit of a threat of McDonogh. And when you have an ecosystem where competition will increase and where the flight time is two hours, it’s a matter of time before the big guys in the big ecosystems finds out that actually they can go. To the smaller ecosystem, spend a week there and get to know most of the people and because they have a better brand or more recognition, if they just maintain that network, they will actually get to see and compete for a lot of the business. So to me that their local advantage was always sort of a little bit of a but I do think that it’s, it’s COVID has certainly accelerated.
Daniel: 28:16
Of course, it’s definitely you you mentioned earlier a little bit about like operators and founders becoming more liquid, like for example when Spotify went public and as well as many other companies having, having a fairly sizeable exits. So there’s a lot of like operators now that are starting to write angel checks in Europe. Like, I think it’s been a normal thing in the us, but now it’s becoming pretty normal here as well. What do you have some advice for people like that who are just starting out that maybe have a good network, but they don’t necessarily have expertise in angel investing. What would you think is the best way to get started?
Christian: 28:46
Yeah. I mean, I think, you know, it all comes down to your, your appetite for risk. I think that’s as an angel, certainly you’re bound to make some mistakes you’re bound to make to invest in some companies that you, you think are great companies. And so not to be I think the main question to ask yourself as an investor, especially as an angel investor, is like sort of, how do I get access to the top 5% deals? If, if not top 3% deals within my sort of news show or whatever I wanna do. So maybe it might be that you want to invest only in the industry where you already made an exit or, or where you’ve been working in, where you can really add value to the founders. And then that that’s a little bit more natural for you probably to, to get to get access to two really great teams. I always at least when I started out. I was always a little bit sort of cautious of not making too many investments at, at the same time in at least in the beginning. Just because I wanted to really make sure that that, that the deals that I thought were so talk to your deals actually turned up or start to show some sign that they worked up to date. And I think like, like everyone you know, when, when you start out, you will see you know, a certain amount of deals and, and you will, it’s very easy to then think, Oh, well I saw 20 companies. I’ll I’ll only invest in the best one. So that must be a top TTO, but that’s not really sort of how it works. My general advice will. Yeah, for sure. So I do think I would always be a little bit sort of you know, patient with with how fast I was deploying capital. But, but I do think that especially for operators who have an edge in certain. Industries absolutely jump into it because you might have simply the S that you already know all the best people in the space and, and naturally a lot of the best deals for folks to use. And I think also for, for most of the generalists angels like myself it’s, it’s great to have operators to bring into deals both because it helps validate you know, a certain thesis or a certain sort of approach to building a product. But also because it’s of, it’s more original advice. And I think that it’s only speaking for myself here, but that’s certainly the part that, where I can’t really help founders that much. At least I don’t try to. I think a lot of people who want to help with operations vice with, but without necessarily having it
Daniel: 30:51
so how much do you think that social signals matter for, for new investors? And when I say social signals, I, I mean, especially other investors. So like, let’s say let’s say I wanna invest in a company. Maybe I am just starting out. I don’t necessarily have expertise. But I see a big brand name fund,
Christian: 31:07
That is also
Daniel: 31:08
investing in the company. How much do you think I should pay attention to that in my decision? I
Christian: 31:12
think, I think a lot of this comes down to your investing experience, right? I think certainly when I started out so I wasn’t, it’s this there’s multiple reasons why social seconds are more important than people make it out to be. Obviously if you go on Twitter, you’ll see a lot of investors saying, Oh, you know, like it pays to be contrarian. And that is true. What you of course have to sort of look at it that it pays to be contrarian and right. Most people are configured and wrong so I do think that the way I see social signals, especially for new nurses would be that it shows you that the company is certainly within, you know, some upper limit of, of not being. Like a poor company. It probably tells you that the opportunity is, is a reasonable one, but I don’t think that social signals should replace your own conviction. I mean, I’ve seen plenty of companies that had great social signal where I still ended up passing and it ended up being the right decision simply because I didn’t have the conviction. And I think, you know, you don’t know why the partner or whoever made that investment at that fund, why they did it. You know, it could be that they have a completely flawed thesis. It could be that. And I think that again, the more you know about the space and they should be to rely on social signals to, to make decisions there. I think that know social settings can be great for, for a number of reasons. Like they can be, like I said, a signal to you that, that your deal flow is not entirely off. But I also think that a lot of people end up having various false confidence in something. Because you know, fund X invested. And I think, especially when it’s, when we’re talking about lottery funds I’ve seen a lot of people make make this mistake of saying, Oh, well, fund X invested. So that’s a much bigger company. And then we actually speak to the fund. You realize that no, actually the person who invested it was a second year associate who, who have like a Cedar lounge and like nothing wrong with that. Right. Nothing wrong with it. That’s a great way. And most of the associates that work at the big funds are tremendously smart. You know, talk to your people, but it’s not the same thing. So they might not have that much investing experience. So if you think that you, that you’re actually co-investing with, like, I talked to your GP at sokaiya and, and the person who actually investing in, whether it’s a, a second year associate, but I do think that you should be a bit cautious in terms of those things, but I mean, I think everyone has to start somewhere when I started out. So the social settings meant something also for the confidence of my, my investors. But I was very inexperienced at the time. I, I was 26 years old and didn’t have that much experience with the startups either. So I think that for that time, it helped me a lot. And then I think one of the things that that is really beneficial for you is obviously when you speak to founders in, in the next company that they wanna invest in, you know, it doesn’t hurt that you’ve already proven that you can be on the cap table with the top two fund or whatever it might be. You know, I mean, generally speaking founders are. All right. Attracted to people who are also in other attractive companies. You know, you, you want to be like, there’s a reason why despite them being great investors and board members and whatnot, there is a reason why people want to have the best funds.
Daniel: 34:01
But I, I think that this is something I’ve thought a lot about. Feel free to agree or disagree with this? And I’m just mostly curious to hear your thoughts. I think that if a like true top tier investor invest like a Sequoia or AXA XL or index, or these types of funds, right? The creme de LA creme it’s almost, in some ways a self-fulfilling prophecy it removes a lot of the future financing risk and it makes it easier to hire people. And maybe even with some enterprise customers, it creates a lot of a lot of help. And I think that removes a lot of the barriers to a successful company.
Christian: 34:33
That is, it’s certainly true. I think you could argue with that, that is also true at the earliest stages. Like I said, I do think that it’s become more common for a lot of these big funds to put a lot more early stage checks. And I don’t think that those are necessarily bound to turn out in the same way that they used to. I do think that if you get the chance to the best in a top to your series, a led by a top tier fund that’s almost always a no brainer for new investors. But I do still think that, you know, it’s interesting, there’s really an interesting conundrum going on. Are there stages where it’s never been easier to raise a seed funding? There’s so much seed funding out there. There’s so many funds we’ll put two, three, 4 million into your company, but the baffle racing, a good series, a. It’s still increasing. And I, and I think that what you’ve really started to see in Europe also is that we always assumed that when there was more capital’s, who’s a, that mean that like a lot more companies got funded but that’s not necessarily true. What’s actually true is that a lot more capital goes into the good companies. So now where a company used to be able to race say seven or 8 million, once they hit a hundred K MRR, which used to be sort of the golden standard for, for for a serious day in Europe, they’re now able to raise, say 15 to 20 million even though they’ve hit only 60 or 70 K MRR. So I do think that there’s a little bit of a thing there where again, I think seed is fundamentally different round than, than, than an institution later States to say wrong. Do think that as a new investor, you should be a little bit cautious because again, I think that let’s say you’re a top tier investor putting in 1 million into a seed company. You know, that’s not necessarily a signal that they have like phenomenal conviction or whatever it is, or, or we’ll leave it double down in the next round. It, it is like we spoke about earlier. It’s an option. So I think, again, it comes down to sort of do you have personal conviction in that case, but absolutely. If you can get access to the really pretty good rounds and the big rounds, you know, it’s, it’s almost always worth.
Daniel: 36:29
And I think this ties into FOMO a lot, right? Like everyone has this fear of missing out. And there’s also this kind of anti portfolio, what are your thoughts on kind of the anti-portfolio thing I think that the more great opportunities that you get in front, the more you’re also going to be missing.
Christian: 36:43
Yeah, no, absolutely. I think that’s interesting. Because like you said you need a great asset portfolio. And I think that a lot of investors have better auntie portfolios than they do have actual portfolios. And. So for me personally, I used to say, Oh, that’s a hugely negative thing because it means you can’t select. But I think when you get into investing and you have a few of those yourself that, that ended up racing I was entertaining some of my friends the other day when one of my portfolio companies raised $50 million from two of the best parts of the U S like tasks of the
Daniel: 37:12
pre-seed.
Christian: 37:13
Well, it doesn’t feel good. No, but if you think about it from a mathematical perspective you know let’s say in my case, made 30 investments. I’ve probably seen, you know, few thousand companies and of which what would you say? A couple of hundreds of them were companies I would consider within my range of things that were good enough opportunity that I could invest it. Not saying that they were all taught to you opportunities, and I only could pick 30 but, but certainly companies where I thought there’s a shot at this working out this, this is a good opportunity that, you know, in some other life I might’ve invested,
Daniel: 37:45
but you only need to be right at once.
Christian: 37:47
Exactly. Get to that. But I think that if you think about that from like medical point of view, you’d really say, well, of course you’d want perhaps even more of them to turn out great than the actual companies you’ve invested in because you know, to hit a home run, you have to be able to take a certain amount of swings. And you know, you get it wrong and it doesn’t feel great. I mean, I remember when, when I saw, so the other company, it definitely did not so great. And then I think that there’s a bit of existential drift, but I do think that like you just mentioned. You only have to be right once if you’re doing your job very well. And if you have a great follow on strategy and that’s actually something else, I would also advise to investors that, you know, if, if you, if you have a great company that that is really breaking out and then hitting the sort of famous escape velocity, you know, I, I really consider whether you know I think a lot of people sort of said, well you know it’s better for you from an returns point of view, to just to take a checks at your stages. I think that that’s something that’s really changing because the getting allocations in the rounds it’s increasingly challenging, meaning that if you’re an angel say it’s not necessarily the right variety for you to try to do as much as you can upfront. Well, it is, it’s always a good thing for you to do as much as you can. But I mean that the problem is that the path, or what can you actually get into those companies? Keeps sort of going lower which means that you might want to think about billing ownership over time. What do you sort of preserving ownership over time? And I think that there, you really want to try to double, and this is for my personal sake, and then that might be right or wrong. I do believe that when you have an early stage portfolio you know, you need a few companies to be great, but you also need to make sure that your campus is relatively concentrated into those few companies. And you know, if and in an ideal world, we would all love to start with a big chunk of ownership and that we could just invest sizable money into it, to accompany. But of course, that’s not really how humans deal with risk. I mean, we like stuff that’s a little bit more de-risk we like to see our teasers working out. And I think that’s, that’s, that’s the second part of, of that sort of equation is that, you know, you have a thesis when you invest in a company and of course you want it. You want to see that this is true. So when they start delivering and when the market turned out exactly that you sort of had hoped, you know that’s when you want to double down. And I think that’s becoming increasingly important with applications being increased and scarce.
Daniel: 40:01
And it’s tricky, right? It’s like I mean, you’re now you’re referring to like a pro rata rights, which just to clarify as basically the right for you to keep investing in a company that you have already invested in, in the past but I think as an angel investor, it’s like, that’s something that maybe a lot of people they don’t really think about when they’re first starting out that you’re just thinking about, Oh, let me just invest in this company upfront. Or like, I have this pool of capital that I’m going to allocate to whatever 20, 30 companies, but maybe a lot of people don’t actually think about this provider and follow on problem. I know in the small kind of small Midian angel investments I’ve personally made, I didn’t think about it At all in the beginning. I was like, I just want to invest in as many different companies as possible. And then I quickly realized that, okay, shit, I, I should probably just like focus on trying to invest again into companies that are actually killing
Christian: 40:44
it. So, so here’s the thing. If you look at it, if you look at a portfolio, let’s say you take my current portfolio, let’s say, start investing tomorrow. And I have 30 companies and let’s say in every company, I would naturally put money in at the sort of subsequent round of funding correspondence, my prosperous. Let’s just, let’s just think about it that way. And that’s like a very happy if you then whenever that portfolio is seen through all the companies have gone down or been sold or gone public if you then go and measure the investments I’d waited in, in most cases. Actually you will not rank the investment of saying, well, initial investment in company a than, than initial investment company B the initial investment competency actually you’d say, well, actually the best investment I made was the initial investment company. A let’s say company is the home run. The second best investment I made was the followup investment in property. Then the third best investment I made was the second follow on investment I made in company and so on and so forth. And that’s really the dynamics of most other stations, portfolios. And I think knowing that you want to try to allocate capital to more than life. I think that where I’ve really come around to this is as the market has changed, because obviously you could make, you could make these sort of counter-argument, which was to say, well, if you have a, if you have a what’s a good number here. If you have $3 million and you will invest in 30 companies, You know, from an ownership perspective, you might be better off putting a hundred thousand dollars into, you know, all the companies at once. Like, and then just say, well, this is my ownership, like maxed out. And I took it in the earliest possible routes. It was the equity was the cheapest. And then, you know, I have significant portfolio diversification, and then like when I have a home run, I just let it run and then I’ll, I’ll be diluted. But, but still because I own so much more with equity with cheap, you know my ultimate outcome would still be better than it would be if I had allocated more capital in the later rounds where that’s really changing, is that what used to be hurricane locations and our 50 care locations is not less. Right. So all of a sudden, a lot of people are standing with, with the decision, not. Whether or not to try to buy X amount of shares in the company at the first round, but rather, should you now go from investing? So again, if you go back to the examples, should a dowel say, well, rather than investing just in my 30 companies now invest in 60 companies because I have, you know, I can only put 150 K into the ground and that’s, that’s probably where I’m coming around to the fact of saying, well, okay, if you can only get 50 K it’s probably better for you to research the other half of the capital and then just like try to put it into your one or two winners, or it’s not that simple, right? I mean, it’s it’s really a, it’s really a race where, you know, a lot of companies will make it through maybe it’s next round. And then of course the fuel and fuel company that it’s also
Daniel: 43:13
subsequent, but like, do you even get pro-rata rights as an angel investor? Sometimes, sometimes you don’t even get, in some cases you don’t, I mean, in a lot of cases, you probably don’t. Right. Or you might, I mean, you might even get squeezed out or your pro-rata in like worst cases.
Christian: 43:27
Yeah. I mean, I think it’s still quite in Europe, still quite common to get Peraza rights. But I think I’ve also unfortunately learned the hard way that having a PriceRite doesn’t mean you can exercise the for us. Right. Which of course is, you know, triggering the founders because again, it’s the flip side of a lot of capital being allocated. There’s a lot of great people to have on your cap table and you know, I think early stage folks, we add value in like a certain part of the journey but not necessarily in the later parts of the journey. And of course it’s natural to founders to want to take more and more money. So I think that, you know, I always strive to be flexible. I think the best advice I can give you as a new investor is to build a very tight relationship with the founder, such that when the time comes you know, it won’t necessarily be your writer’s cut away first. And even in a few cases I’ve gotten close enough with farmers that I actually got to do, even, what do you call super Parata? I mean, that’s big my ownership in, in subsequent round. And of course if that’s the case and you turned out to be right, that those adjustments are great. But I think it’s tricky and I think you always have to sort of stay mindful about you know, what’s, what’s sprayed on, on paper and Excel is not necessarily what works in real life. And I think that the market is changing so fast today in terms of like how much money is being allocated that today it’s really, it’s really a land grab. You’re just trying to hold onto whatever slice of the cake you can get up. Definitely that, and that might mean having to spread your investments out
Daniel: 44:46
and I think also coming back a little bit to that Like kind of like the anti portfolio. I also think it’s you just need to like, learn to be at peace with it and you’re going to sometimes even have like a anti-portfolio for your pro-rata, if that makes sense. Like maybe you didn’t, do a pro-rata when you should have, or you got squeezed out of it for whatever reason, but I’ve noticed it happens even to the best of the best I mean, Sequoia has a story where they, they passed on Twitter and they lost out on Facebook. I read Hoffman tasks on Stripe, so if it’s going to happen and take it as a positive sign, if
Christian: 45:14
anything. Yeah, no, I think they’re the important part is always to go back to your decision-making. I mean, because for us and enter portfolios and whatnot, they’re only really actionable for you going forward if if you can use them for someone in, in your future decision-making right, right.
Daniel: 45:29
But before we before we wrap up here do you have any closing kind of advice for, let’s say new founders who are talking to investors for the first time, what are some things to avoid? And some things that that are good to do.
Christian: 45:41
Yeah run a tight process make sure that you, you speak with with a lot of people naturally, and I think a lot of the, sort of the classical mistake I see for for sort of first or early stage founders would be that they, they go out to speak to seed funds. And then once he funds seem quite interested, so they decide to just drop the process because, you know, ah, they might as well, and then let’s see this through and hopefully they will invest. And then four meetings in they decide to pass because, you know, see for themselves a path as the four meetings, it’s not like four meetings means that you’re, you’re bound to get a check or 20. And then now all of a sudden, all your two to five hours, it’s completely chapels and you essentially have to go and start over. So the best seed rounds I’ve seen, I’ve almost always come with a good process where you’ve we’ve spoken. I think I know that’s always, you know, talk to your companies where they will have a term sheets without trying too hard. I think that’s, those cases are increasing and then in that case, it’s, it’s great. But I do think for the, for the general solver, I would always say, you know, the better, better process you run, the higher, the chance of science you’ll at least get a good term sheet. That’s one thing. And then, I mean, I think the, the standard advice is really knowing what do you need to take your company to the next round? I think that, especially in the early days, companies very much live between fundraising laws when you’re on the venture round, that that’s certainly true. So knowing exactly what kind of partner do you want what kind of help do you need? What kind of, sort of what’s the most critical value add in terms of you getting, if you’re a seed company, what, what does a 18 months do I need to seriously look like? Is it that you need introductions to all the best USVCs is it that you need help with hiring a great head of sales? And, and then I think, you know, press, press funds and potential partners and those kinds of things. And yeah, so I think that would be my best advice.
Daniel: 47:25
Definitely. And I think that’s very good advice, very actionable as well. And I would also recommend trying to get a angel investor who has a large network like yourself on board But a Christian. Thanks a lot. I think you give a lot of actionable insights both for founders who are raising and investors who are starting out. So I just want to say thanks so much for for taking the time.
Christian: 47:44
Yeah. Thanks.
