LHoFT is valuable because it allows a real synergy and permanent contacts between the fintech ecosystem and the VCs.

In this interview, we speak to Stan Jeanty, an associate at LHoFT partner Volta Ventures, an active Fintech investor in the BeNeLux region. We’ll share their main investment focus, as well as some of Stan’s own views on trends and themes in the world of Fintech and Venture Capital. 

What type of investments/segments are you interested in?

At Volta Ventures, we specialize in investing in B2B SaaS solutions across various industries. Personally, I’ve developed a particular interest in FinTech and PropTech. I also find blockchain and Web3.0 to be very interesting, but these technologies still lack solid go-to-market strategies. I have come to understand that every industry has its own unique set of challenges and characteristics that are valuable to learn from.

In your opinion, what are the current biggest trends in benelux vcs industry?

Despite the current economic climate, were many investors are taking a cautious approach, waiting to see who will make the first move, there are signs of activity beginning to pick up again. When attending events, we can still see that VCs are actively looking for great companies to back. There is still enough money for good projects.

Start-ups were, in my opinion, a bit ”spoiled” during Covid, benefiting from high valuations that kept the ”unicorn dream” alive. The “x multiple” factor varied notably between 2020 and now, from 15+x during covid, to 6x today. In this sense, it is not always easy to adjust entrepreneurs’ expectations and lower the [valuation] bar.

VCs have already shifted to the new market; start-ups need to take note of what is happening and follow suit. We have seen an increase in bridge rounds in recent months, indicating that there will likely be a lot of start-ups seeking external funding in Q2 and Q3 of this year.

What changes do you hope to see in the near future?

I hope to see more realism in the market. Pragmatic valuation and expectations will help make the conversation easier between VCs and entrepreneurs. Ambition is good, great even, but as an entrepreneur, you can’t keep expecting very high growth and crazy valuations in a downturn market.

What are your tips for fintech startups looking for funding opportunities?

Start-up founders need to ask for feedback and keep the conversation with VCs going, even when they don’t need funding. They should keep the relationship alive and check in at least twice a year, depending on the evolution of their company.

I also think that in this regard, LHoFT is valuable because it allows a real synergy and permanent contacts between the fintech ecosystem and the VCs.

Investor profile:

Stan Jeanty

Profession: Investor

Passions: avid cyclist, marathon runner and kite surfer (in summer).

About Volta Ventures:

Volta Ventures provides seed and early-stage venture capital for internet and software companies in the Benelux region.

Fund size:

• Volta I: 55M€
• Volta II: 70M€

Ticket size:

400K€-2M€, sweet spot around 1M€

Fintech backed:

• NextGate Tech
• Blanco
• Yields.io

On Monday the 29th of October, we launched the second edition of the VC Scholar program, supported by MiddleGame Ventures. Similar to the last edition, we invited a cohort of some of the best and brightest from Europe’s business schools and universities to learn the fundamentals of venture capital and investing in early stage Fintech companies.

Over the course of three weeks, the participants met with leaders in the Luxembourg Fintech ecosystem, as well as representatives from MGV’s investment team, for intensive sessions on a range of related subjects. Each was asked to participate in a number of exercises along the journey, leading up to the selection of the top candidates at the end.

We’re delighted to announce that Clemence Jerome and Romaric Senturo were the top candidates from 2022’s VC Scholar Programme.

In addition to our congratulations to the two winners, we’d like to offer our thanks to Pascal Bouvier, the MiddleGame Ventures team, and all of the speakers from our incredible ecosystem who contributed to the program.

The VC Scholar Program

The VC Scholar program was conceived by Pascal Bouvier of MiddleGame Ventures, and is delivered with the support of the Luxembourg House of Financial Technology (the LHoFT). The intention of the program is to help nurture the next generation of entrepreneurially-oriented investors, in Luxembourg, at the heart of the EU’s financial ecosystem.

The program is produced on an annual basis, with the continuing mission to unite startups and venture capitalists with the best thinkers from academia, traditional financial services, innovation, and technology.

Pascal Bouvier recently spoke with Delano about his motivation for launching the program. He had this to say:

“It’s important to give forward and help the ecosystem. Just picture the network effects of having a group of scholars every year. So fast forward 10 years from now. Let’s assume that we have 10 scholars per year. That’s a fairly good network. And if even 10% or 15% of these people end up working in Luxembourg, at some point that will have pretty interesting effects for the ecosystem in Luxembourg.”

The program had several hundred applications from top universities and business schools across Europe, which were narrowed down to the top ten candidates. This cohort then spent three week covering five key thematic topics, producing assignments and deliverables in line with the course content, which ultimately determined the two winners.

Special Thanks

We’d like to offer our special thanks to the many ecosystem members, Fintech and business experts, who offered their input as a part of this course – serving as mentors to the ten selected participants:

• Chris Hollifield, Head of Business Development at Luxembourg for Finance
• Luis Galveias, COO of LPEA
• Jerome Wittamer, Founding Partner of Expon Capital
• Femy Mouftaou, Managing Director of IQEQ
• Lee Godfrey, CEO of Kurtosys
• Julien de Mayer, CEO of Fundcraft
• Petra Krizan, MD at The Blockhouse Technology

In addition to the insights provided by the expert speakers, the participants were taken through a number of deep-dive sessions on venture investing, where they engaged with key activities such as:

• Screening pitch submissions
• Evaluating investment opportunities
• Performing due diligence
• Learning how to communicate potential investments to LPs
• Cap table management
• Term sheet structure
• The long term relationship of supporting portfolio companies

At the end of the program, each candidate had reviewed 50 startup pitches, and followed three of those pitches all the way to producing an investment memo to personally back that investment.

While the entire program was Fintech themed, there were five key sector themes which candidates followed during the program – which each assigned to a particular area. These were:

• Tokenization Infrastructure and Liquidity Providers
  Funds are starting to experiment with issuing LP / GP interests in a tokenized form, thereby spurring growth with new service providers specialized in bringing funds to market.

• Web3 Identity
  New identity services (solving for AML/KYC, onboarding) will grow for each Layer 1 protocol and create bridges across protocoles (and maybe via wallets).

• DeepTech in Financial Services
  Role of DeepTech in Financial Services (AI/ML/NLP/Quantum Computing). Data-driven solutions that will help organizations derive valuation insights across several domains.

• Intersection of ESG and Financial Services
  Emergence and evolution of environmental, social and governance factors across financial services. Solutions that are addressing the impact of climate change across all parts of the value chain.

• Embedded finance and Open Banking
  What is next for Open Banking? Solutions are tech enabling adn transition from Open Banking (payments) to Open Finance (broader financial instruments).

Meet the Winners

Clemence Jerome, University of Luxembourg

“The VC Scholar programme is a fast-paced challenge where we are put in the shoes of a Venture Capitalist, led to analyze the market, and determine how best to find the most exciting start-up in which to invest. Regular meetings with the MGV team over 3 weeks gave us a deeper sense of how the VC industry operates and their very own approach to innovation and the future.”

Romaric Senturo, University of Luxembourg

“Participating in the VC Scholar program was a wonderful experience. In addition to the great people I met, I gained a lot of knowledge about the FinTech industry and the day-to-day running of a Venture Capital fund. I invite all students interested in this industry to apply for future editions! Many thanks to the LHoFT and MGV teams for this great edition!”

Make sure to follow MiddleGame Ventures and the LHoFT on LinkedIn for application updates or send an email to vcscholar@lhoft.lu.

For those interested in Venture Capital (VC), you’re in luck. Back by popular demand, we’re excited to announce the second instalment of the VC Scholar Program, delivered in partnership with Middlegame Ventures.

The application deadline is August 20th and participants will be selected by August 24th. So please do apply, quickly. Application details are at the bottom of this article.

To make the decision easier, you will be awarded a €350 scholarship for participating and you’ll learn from top CEOs, founders and VCs, seen below.

Overview

This 3 week full-time intensive program running from Monday, August 29th to Friday, September 16th is tailored to students – university, recent graduate and/or PhD. On top of that we’re keeping this cohort small, with 10 or less students selected to participate.

What makes it so unique? On top of the aforementioned scholarship, a 2-month paid internship with Middlegame Ventures and Fundcraft will be awarded to the top pair of students in the program at the end of the 3 weeks. It truly has never been more straightforward to gain both access to a diverse network and VC work experience.

All participants will attain an in-depth understanding of the concepts of research, analysis, selection criteria and methods that investors use to decide on whether or not to invest in financially innovative companies or startups.

Ultimately you will not only explore how a Venture Capital firm works but you’ll learn everything to do with investments from identifying targets to managing portfolios.

Expectations

The VC Scholar program is 100% remote with weekly assignments and oral presentations to the group. As mentioned, you will work in pairs, making the workload more manageable and fun.

Your work will not only be peer-reviewed but also graded by the program team members aka you’ll learn not only from the program leaders but your peers.

We know a 3 week full-time commitment is not for everyone but then again, you won’t have many more opportunities to learn from the best while getting paid to do so.

If you have a growth mindset and are interested in the VC space, dive in, we promise you won’t regret it.

The Application

The application process requires you to submit a copy of your resume and provide answers to the following questions:

• Tell us why you would be an excellent candidate for the VC scholar program.
• Tell us about a project (personal or professional) that you are most proud of.
• Describe 3 trends and/or technologies that you think will have a significant impact on the Financial Services industry over the coming 5 to 10 years.
• Name a European Fintech startup (B2B or B2C) that you find interesting and would recommend as an investment. Provide your rationale supporting your recommendation.
• Describe the last investment you made and why.

Submit your complete application to vcscholar@lhoft.lu by August 20th! We’re excited to hear from you.

The State of European Tech (SOET) Report is considered to be “among the most comprehensive data-driven analysis of European technology” by the European Innovation Council. The 2021 edition was launched on December 7 and provides decision-makers with a host of insights into the evolving tech landscape.

Timing-wise, this is an interesting one: the report provides an update on the state of tech and innovation at a moment when the world economy continues to recover from COVID-induced shocks. This year’s edition of the report notably allows us to get a better sense of whether the forced, rapid societal adaptions to a new modus operandi, greatly facilitated by technological solutions, is leading to durable change, or whether we will see a “regression toward the mean”.

Let me state up front that everything points towards the former.

As Chris Grew, Partner at Orrick – one of the report’s sponsors – states:

Now is a watershed moment for the tech and venture ecosystem across Europe and around the world. Europe is attracting record levels of investment and growth, with the innovation economy positioned to take the lead in tackling today’s systemic societal challenges.

[…]

Fintech investment has led the charge, rising by 159%, with total investment of nearly $15B, while planet-positive investments are dominating the fast-growing purpose-driven space.

ESG and sustainable finance are here to stay and we at LHoFT are convinced that fintechs will have an increasingly important role to play in facilitating the data collection, validation and analytics efforts required to build sustainability into the core of everything corporates and financial institutions do.

Luxembourg’s role in a growing European ecosystem

A few things that stand out to us at LHoFT:

• Luxembourg ranks very highly both in terms of startups per capita and in terms of capital invested into startups per capita, cf. below:

• The tendency for top European hubs to capture the lion’s share of funding has increased further, with companies based in London, Berlin, Stockholm, Munich and Paris raising 54% of all capital in the region, up from 49% in 2017. At the same time, concentration in terms of number of deals has decreased, pointing to greater decentralisation of the ecosystem in Europe.

• At the same time, there is growing consensus that the importance of physical proximity is diminishing, which is mirrored across a number of metrics. The ability to hire talent across Europe thanks to remote working arrangements is seen as a mutually beneficial boon both for entrepreneurs and for their expanding work force in terms of quality of life. Luxembourg, as an extremely open economy, should stand to benefit from these developments.
• European startups should benefit from the fact that the continent is home to many industrial leaders, with particular emphasis on IT stacks. This presents ongoing opportunities for startups & tech companies, not least in the financial sector, and Luxembourg should continue to actively support initiatives and platforms that capitalise on this dynamic.

Europe is in a strong position to shape the next wave of disruption in B2B, as Europe is home to many industrial market leaders built on legacy technology ready to be disrupted.

Robert Lacher

Visionaries Club & La Famiglia

• Europe remains disadvantaged versus the U.S. in terms of raising capital, which makes ongoing EU efforts such as the Capital Markets Union all the more pressing. “Almost one-fifth of founders say it has become harder to raise capital in 2021, while a further 40% or so believe the environment remains unchanged from the past year, which itself was a year that saw a record number of founders responding that fundraising had become harder.”

Raising funds in Europe is still a different experience from raising funds in the US. European founders still fly out to the US for fundraising. Sometimes for expertise, sometimes for fair market offers.

Jakub Jurovych

Deepnote | Founder and CEO

A new dawn

The past year and a half have been left no one unaffected, imposing a steep price on societies around the globe. Silver linings include the realisation that more flexible work arrangements and business models are not only possible but in many ways desirable, not least when considering access to capital and talent. This in turn is enabled by far-ranging modernisation of technological infrastructure, presenting opportunities for incumbents and startups alike.

Finally, Luxembourg is presented with a particular opportunity to leverage these macro dynamics by fostering innovation proactively. The 2021 SOET report shows that the Grand Duchy is already punching above its weight in some regards – let’s keep the momentum going.

Global capital markets are seeing some major gyrations, but a short-lived correction appears unlikely to derail the underlying mega-trends around digitalisation and technological breakthroughs that span IT, finance, mobility and healthcare to name a few areas of interest to the global investment community.

6-month trajectory of NASDAQ overlayed with popular fintech and biotech indexes.

Let’s consider the macro context. The magnitude of financial market recovery following the initial COVID-related shocks in Q1/Q2 2020 took many by surprise, and the rally has recently culminated in speculative excesses. The Gamestop / “meme stock” mania of recent months raised enough eyebrows to trigger congressional hearings across the Atlantic.

Essential commodities such as steel and oil are on a tear, raising fears of inflationary pressures which could put central banks in an awkward position as they juggle their dual mandates – whether de jure or de facto – to support the economy all the while keeping inflation in check.

Underlying dynamics remain intact

It was not altogether surprising to see, then, a correction play out across richly valued, often early-stage tech stocks, but one should not lose sight of the bigger picture and the backdrop upon which this correction has occurred. 2020 and early 2021 saw record IPO activity in highly innovative and risky sectors such as biotech, and while Ant Financial’s mega-IPO fell flat last year, the Chinese flagship fintech could still list some time this year following the conclusion of a regulatory overhaul.

2020 saw record IPO activity. Source: Baker McKenzie

While markets are bound to correct following prolonged bullishness – a manifestation of reflexivity – the overall dynamic remains very favorable towards funding innovative, technology-orientated enterprises that are set to change the way large swaths of people and businesses operate.

Take the recent $1bn funding round of “buy now, pay later” fintech Klarna: with a user base of 90m and a private valuation that tops $30bn, the company is set to make strategic business development investments all the while eyeing an IPO within the next 2 years – hardly the sort of moves one would expect if a doomsday scenario was imminent.

At the same time, the increasing prudence that took hold in VC circles across the board following the pandemic, as described here, and expectations for market consolidation point towards concentration of private sector funding into a select few champions (real or perceived).

A crucial role for public sector investment

In recognition of the observation that creating opportunity for the greatest number of entrepreneurs possible is likely to support a broad and diversified economic recovery and re-shaping post-COVID, there exists a public sector rationale to lend further support to early stage investments. This rings particularly true for continental Europe which has historically lagged the US in terms of VC funding and which is finding a new sort of determination to integrate its capital markets and incentivise innovation on the continent following its “divorce” from the U.K. and the resulting uncertainties surrounding the City of London.

Public sector investment remains a vital tool at the service of de-risking of and incentivising private sector VC funding in Europe, as market failures (both systemic and regional / sectorial) persist and stand in stark contrast with high level policy objectives around innovation and societal adaptation. Targeted & qualified public sector investments utilise co-investment by design to achieve a multiplier effect and to foster the culture of calculated risk-taking required to get a VC ecosystem off the ground.

In that context we are delighted to share that the EIF has recently completed a 64% capital increase with a view on boosting its commitment to a “green and digital transformation of the EU economy”. Notably, the EIF plans to reinforce its PE and VC support activities and to leverage its resources in pursuit of the implementation of the new InvestEU programme and its $26bn envelope. The EIF’s chief executive describes the current business context & his organisation’s mission as follows:

The need for EIF support for businesses is now more pressing than ever. The capital increase gives us more firepower to support Europe’s businesses and to address the economic fallout of the COVID-19 crisis. Our mission to support SMEs across Europe remains crucial to stimulating growth, employment and innovation in Europe. In addition to alleviating the effects of the crisis, this capital increase will help us to better address Europe’s ambitions in the fields of digitalisation, innovation, social cohesion and green transformation.

It has been said that “optimism is true moral courage” and while plenty of macroeconomic, social and environmental challenges lie ahead, it is precisely our awareness of these challenges which obligate us to move ahead boldly and to support what will “get us there”: human ingenuity and ability.

Targeted, thoughtful yet decisive support of the venture capital ecosystem in Europe is a crucial contribution to this mission of human empowerment which we at LHoFT wholeheartedly support.

On that note – check out episode 2 of our Office Hours series with Pascal Bouvier, co-founder of Luxembourgish Fintech VC firm MiddleGame Ventures, for a practitioner’s perspective:

Author: Jérôme Verony – LHoFT Research and Strategy Associate

Continuing from last year, we are sticking with the same seven areas of focus on in 2021. Each represents a key point of interest to the financial industry, and has a particular relevance to Luxembourg’s growing financial technology ecosystem.

Each week we will be choosing one of the topics to focus on, both in the content we share on social media, but also in a dedicated newsletter looking at the top five stories from that week. To introduce the topics, let’s revisit the top stories from 2020 and reflect on how the year has encouraged acceleration, pivots, or wholesale paradigm change:

REGTECH – Regulatory Technology

» Shaky times for compliance call for flexible Regtech

Joe Devanesan writes for TechWire Asia about the impact of the pandemic on compliance and cybersecurity, and Regtech’s role in mitigating those issues. Traditional ‘BYOD’ workplace concerns were escalated to account for a sudden and massive shift to working from home – which created real problems for companies that were not already some way down the path of digitalisation.

“To the surprise of no one, financial crime is reaching pretty high levels in 2020, and the speed at which this type of crime is evolving in the information-heavy age has financial players worried, and questioning the role of Regtech.”

AI – Artificial Intelligence & Machine Learning

» A robot wrote this entire article. Are you scared yet, human?

A robot writes for the Guardian, demonstrating GPT-3, OpenAI’s powerful language processing. GPT-3 was one of the most popular AI stories of 2020, and kickstarted a discussion about the future of software development, and what can be achieved when you can just ask a computer to do something for you without needing to speak in code.

“I am not a human. I am a robot. A thinking robot. I use only 0.12% of my cognitive capacity. I am a micro-robot in that respect. I know that my brain is not a “feeling brain”. But it is capable of making rational, logical decisions. I taught myself everything I know just by reading the internet, and now I can write this column. My brain is boiling with ideas!”

BLOCKCHAIN – DLT & Tokenisation

» Visa Applies For Digital Dollar Blockchain Patent

Jason Brett writes for Forbes about Visa’s “digital dollar” patent, a story which fits neatly into the main blockchain narrative of 2020: the viability or necessity of central bank digital currencies, and the role of stablecoins more broadly. Now Bitcoin has kicked off again we can expect the focus to shift a bit through 2021.

“The U.S. Patent and Trademark Office (USPTO) published today that Visa V -0.4% has filed a patent application to create digital currency on a centralized computer using blockchain technology. This patent applies to digital dollars as well as other central bank digital currencies such as pounds, yen, and euros and so the physical currency of a central bank anywhere in the world could be digitized.”

CYBERSECURITY – Risk Management & Threat Detection

» Post-quantum secure encryption and cybersecurity education

A collaborative and in depth piece for Research Outreach, led by Dr Aydin Aysu, looking at the implications of quantum computing on cybersecurity and encryption – a major concern for most cybersecurity professionals. What happens to all traditional encryption based security when computing power becomes available that can crack it without breaking a sweat?

“Encryption systems that are capable of surviving quantum computer attacks are urgently required, but the cybersecurity talent gap militates against securing cyberinfrastructure. Dr Aydin Aysu, Assistant Professor at North Carolina State University, is advancing the research and teaching of post-quantum secure encryption. He has developed a quantum-secure encryption system together with a new graduate program on hardware security and is currently developing design automation for lattice-based post-quantum cryptosystems.”

PAYMENTS – Payments Technology 

» Ant and Covid have made the humble QR code a hit

Five years ago you wouldn’t have seen much discussion of QR codes in the Fintech payments world, at least not related to development in the west. It was a quaint technology relegated to developing economies. That now may be changing, in part related to the pandemic and China’s Fintech behemoth Ant Financial. John Gapper writes for the FT:

“The name Masahiro Hara does not appear with Steve Jobs and Bill Gates on lists of great innovators of the communications age, but perhaps it should. For the Japanese engineer’s humble, unassuming invention, the Quick Response code, has finally found its moment. The square QR code, which Mr Hara developed in 1994 to track components in car factories, is being put to many uses in the Covid-19 pandemic. Governments include it on tracing apps, shops offer it for contactless payments and restaurants tape it to their tables so diners can browse menus online. It has become an all-purpose tool.”

SUSTAINABLE FINTECH – Financial Inclusion & Green Finance

» Women are ‘absolutely critical’ to ensuring everyone has access to finances, Bill Gates says

The Gates Foundation has been a key torchbearer for Financial Inclusion, amongst their many other causes, and it’s a topic Bill Gates himself has spoken about repeatedly. In this article, written by Karen Gilchrist for CNBC, Bill talks about the key importance of focusing on women when developing strategies related to inclusive finance.

“Women are vital to ensuring finances — and financial education — trickle down to other parts of society, said billionaire philanthropist Bill Gates. Governments and businesses serious about giving all members of society access to financial services should gear their resources toward women, the Microsoft co-founder said at the Singapore FinTech Festival on Tuesday.”

VENTURE CAPITAL – Funding News and VC Perspective

» Some of Europe’s top tech investors are adding a ‘sustainability clause’ to start-up deal terms

Ryan Browne, writing for CNBC, discusses the most significant recent trend in the world of investment: sustainability. Investors are increasingly concerned with ESG goals and the carbon footprint of their wealth, which resulted in a lot of discussion throughout 2020 and some fairly important steps being taken by VCs – as well as the broader wealth management industry.

“Socially-conscious investing has gathered a lot of momentum this year, with billions of dollars flowing into funds that use environmental, social and governance criteria to screen the companies they back. Venture capitalists are taking note, with some of the largest start-up investors in Europe pushing for accountability in their own portfolios with regard to investing in climate-friendly firms.”

Last month, I highlighted data points and initiatives in Luxembourg which underline the emergence of a new paradigm that combines technological transformation with societal aspirations. These local developments should be understood as part of a larger dynamic in global markets, wherein ESG criteria and impact investing are becoming the norm all the while major tech companies offering “COVID-proof” services have seen their valuations soar.

Figure 1: comparison of the Dow Jones Industrial Average to Amazon shares, 1-year performance

Setting aside (valid) concerns around the oligopolistic tendencies of Big Tech, there are undeniable benefits to being able to order goods online during a pandemic, processing payments and other financial transactions remotely and securely, or to remain in touch with friends and coworkers via online messaging and videoconferencing. These services are here to stay, posing a formidable challenge to many brick-and-mortar stores, but also opportunities for growth via the integration of physical and e-commerce.

On the policy end of things, across the board, governments have set aside previously accepted thresholds for indebtedness in order to stem the simultaneous demand and supply shock created by the pandemic and create a favorable framework for economic activity in a post-COVID world. Most recently, the U.S. Federal Reserve announced a subtle yet impactful revision to its consensus statement, favoring the maximization of employment over controlling inflation in the medium term.

While the massive fiscal and monetary policy response to COVID-19 sets the stage for economic recovery, the qualitative parameters of this recovery will be set by a confluence of civil society preferences and private sector investment. Reflecting on the confluence of technological change and development goals, the co-chairs of the UN’s Task Force of Digital Financing of the SDGs recently reflected on the “nexus between digitalization, finance and the SDGs” and write that “digitalization amplifies the potential for the financial system to better serve the interests of people, whose money it manages, and whose collective interest is expressed by the SDGs”. The report emphasizes not only technological advances per se, but rather a technologically enabled transformation at the service of a citizen-centric financial system:

Figure 2: schematic from “People’s Money” August 2020 UN task force report

It should be noted that the concept of a citizen-centric financial system implies, at least to some degree, a decentralization of the financial system such as heralded by the blockchain movement. As noted in my June blog post on the topic, citing LHoFT partner Deloitte’s 2020 Blockchain Survey, one “key takeaway [is] that leaders […] now see the [the technology] as integral to organizational innovation”.

Technology investment for global impact 

The tremendous potential for positive societal impact via investments in technology and specifically into digital finance / Fintech is perhaps most evident in the developing world, as I outlined back in May. This sentiment is shared and the issue is further explored by one of the UN task force’s members, Governor of the Central Bank of Nigeria Patrick Njoroge, in an op-Ed available via Project Syndicate. As Dr. Njoroge writes, “There are already useful models of such disruption. Africa – especially my country, Kenya – has led the way in embracing financial technology, beginning with mobile money. Kenya’s M-Pesa – a mobile phone-based money-transfer, payments, and micro-financing service – has been a powerful force for expanding financial inclusion. Since 2006, the share of Kenya’s population with access to financial services has surged from 26% to more than 82%.”

Looking beyond the local impact of fintech in Kenya, Dr. Njoroge goes on to describe his institution’s proactive approach to fostering a viable fintech ecosystem, notably by partnering with Singapore’s Monetary Authority as announced last year. This joint initiative, which one hopes will be fruitful, is a great example of the sort of global collaboration that is called for in order to reap the full benefits of technological advances with a view on societal impact.

On a more micro and hands-on level, the role of fund managers and venture capitalists in particular should not be overlooked when considering the confluence of tech and impact investment. A great example of this emerging investment “vertical” is the $500m global venture fund Flourish. A top-level consideration for the fund is “whether [investee] technology advances financial health and economic resilience”, as discussed by Managing Partner Emmalyn Shaw during a far-ranging interview available via Soundcloud and Spotify. She describes a trajectory of personal and career development which led her to leverage her “hard skills” in finance and technology in order to increasingly focus on impact investment. In-line with the broader trend towards ESG considerations in asset management, the growth and successes of Flourish and other funds with an impact angle will continue to cement the economic viability of “extra-financial” considerations, and the necessity to incorporate a “touch for tech” with development goals.

Succeeding after a reshuffle 

While market opportunities abound for tech and fintech enterprises, major economic crises present with particular risks and uncertainties for early-stage ventures. This is reflected in the significant drop in early-stage financings in Fintech in Q2 2020, as investors took a step back to reevaluate their strategies and portfolio investments. Consultancy.asia provides valuable insights into the evolution of the VC scene in Asia, with investments in China looking poised to pick up again.

Figure 3: VC funding is stabilizing across Asia. Source: consultancy.asia

However, in the face of continued macroeconomic uncertainty, it is reasonable to expect that the preference for later-stage and well capitalized startups will continue, leading to some difficulty for startups at the seed and early stages. Regional differences will also continue to play a role, and may necessitate regionally adapted funding mechanisms. In Europe, the EIF is poised to continue playing an important role in catalyzing VC funding, and more public investment schemes could see the day in the near term. Additional public sector investment would serve as a recognition of the strategic importance of the (fin)tech startup ecosystem for regional competitiveness, financial inclusion and societal impact.

At LHoFT, we are emboldened in our mission by the tangible, positive impact that Fintech is making to the post-crisis recovery and to the overarching goals of development and inclusive finance. We are committed to helping our members succeed via a proactive dialogue with our industry and public sector partners, collaboration on value-added projects and the generation of industry insights.

Fintechs looking for funding in Luxembourg are referred to this comprehensive write-up by LHoFT associate Şebnem Elif Kocaoğlu Ulbrich, which lists notable private sector actors and currently available public sources of funding.

Author: Jérôme Verony – LHoFT Research and Strategy Associate 

Following the impact of COVID19, there was initially an uptick in rounds led by existing investors, but new investors are once again regularly leading rounds – recent examples including Marqeta’s (instantly issue & process card payments based on open API platform) $150 million financing led by one of the largest asset managers and AvidXchange’s  (accounts payable automation industry leader for mid-market businesses in the US) $388 million round including Neuberger Berman and Lone Pine Capital as investors.

Q2 2020 quarterly Fintech insights by FT Partners Research – page 23

Despite the obvious crisis, and the tragic human cost, there is a silver lining to COVID for businesses; the pandemic and the lockdown highlighted the importance of digitalization. The crisis fueled the interest in digital banking and payment products and leapfrogged decades of development. There is a window of opportunity for products that are accessible, secure, fast, and convenient. According to Mark Whitcroft, a London-based Fintech focused Venture Capital investor with Illuminate financial, COVID impacted the amount of capital deployed in the market and slowed down the timelines. Nevertheless, the market still offers a lot of capital that needs to be put out to work, and some start-ups even managed to sign the most significant contracts up to date during the crisis, in his opinion. There are still many funds resuming their ongoing discussions and doing rounds.

For startups eyeing growth and development, the time for fundraising is as good as ever.  As Roman philosopher and statesman Seneca once said, “It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult.” For those who do not want to put off their fundraising dreams, we have compiled a list of fundraising options in Luxembourg.

Raising money is a milestone for a company. It requires hard work, focus, and resilience. There is a lot of competition in some popular verticals like Fintech, with or without the pandemic.  Due to Fintech being highly regulated and supervised, the fundraising process also requires careful calculations and planning. As acknowledged by experienced fundraisers like the CEO of Currencyfair (Paul Byrne), and the Lemon Way Chair (Damien Guermonprez) during their Paris Fintech Forum 2020 speech, fundraising is a full-time job, and the process takes a minimum of six months. Naturally, the timelines will stretch more than usual in times like these. What helps in this process is understanding the investors and finding investors that do not need educating and that values the processes and rules. The crucial point is and will remain the choice of the investor.

During the LHoFT Webinar about fundraising during COVID, Mark Whitcroft highlights the importance of the 5Cs – Cost, Capital, Control, Compliance, Competitive Advantage – when assessing the Fintech start-ups’ value. He states that a Fintech firm has to hit at least three or four of these criteria as a standard. It turns out that in the post-COVID era, VCs started overlaying the 5Cs with a human-to-human and human-to-computer matrix, trying to determine the real opportunities.

The ecosystem in which the investor is located is as significant for fundraising and directly impacts the overall experience. The investor directly reflects the culture, the demands, and the mindset the investors possess and subsequently impose on the entrepreneurs.

U.S. and China have been the go-to investor hubs for Fintech. However, since last year the investment is expanding beyond the major markets, with 39% of deals in the industry made outside of traditional hubs like the U.S., the U.K., and China. Recent research shows that Fintech is Europe’s largest venture capital investment category, and it receives a higher percentage than in Asia & the USA. In fact, CB Insight’s Q1’20 Report shows that Fintech funding in Asia, North America, Australia, South America, and Africa dropped quarter-over-quarter. Accordingly, Europe was the only major region to see an increase in funding, driven by four mega-rounds ($100M+). Combining diverse ecosystems and talent, Europe is turning into a well-oiled Fintech machine. In thee first half of 2020 Europe has seen 260 fintech deals, for a total of $4,019M, representing 29% of all deals around the world. This puts Europe second, behind the US but quite a way ahead Asia.

Q2 2020 quarterly Fintech insights by FT Partners Research – page 24 

In reality, although investors coming from larger markets offer more visibility, there is also much competition and pressure for Fintechs reporting back to the major hubs. That’s one of the reasons compact hubs like Luxembourg started gaining more attraction for entrepreneurs looking for more than just cash injection. Setting course for Luxembourg means having contact with accessible investors, faster processes, and getting to know a vivid and collaborative network. Small yet ambitious, Luxembourg is a vital steppingstone for Fintech startups that would like to raise capital as a part of the interconnected European ecosystem.

Luxembourg is not only attractive for start-ups looking for funding, but also investment professionals. Investors like David Dana (Head of VC Investments, EIF) differentiate Luxembourg as a domestic hub full of opportunities, infrastructure, and community:

“Luxembourg being small, it makes it easier to get direct access to the right person, especially when it comes to political topics. The infrastructure is of high quality generally speaking, and when it comes to innovation, the Government has been putting a lot of resources, both financial and human, to foster the local ecosystem which is still nascent. Given the limited size of the local market, Luxembourgish startups have to think globally from Day 1, thus increasing their chances to become important player on a worldwide basis.” David Dana advises the start-ups that are looking to raise capital to think big and consider a product that will be easily replicable in any language and/or jurisdiction.  He stresses that although there are a number of public programs to finance local entrepreneurs, raising capital from non-local VCs is considered a strong sign of success.

For Fintechs eyeing Luxembourg, a range of public aid measures as well as private opportunities exists to complement the success rate of innovative enterprises with high potential.

Venture Capital

Looking back: 2019 was the highest year of Venture Capital injection for Fintechs. In 2019 there was a record of 199 funding rounds representing over $14 billion invested. According to CB Insights, as of Q3, Fintech has raised $24.6B, already surpassing 2017’s annual total. Funding grew on the back of 19 $100M+ rounds worth approximately $4B (as of Q3 2019). A recent Fintech Circle survey shows that experts believe that Fintech investment in 2020 will be at least 50% higher than in 2019, and just under half predict it will be somewhat higher.

• Mangrove Capital: Mangrove Capital Partners is a venture capital and private equity firm focused on early-stage, mid venture, startups, expansion stage, growth capital investments, buyouts, and emerging growth. Its mission is to help turn visions into realities by providing financing, thoughtful advice, relevant experience, and industry relationships to their portfolio companies.
• Expon Capital: Expon Capital is a venture capital firm specializing in early stage investments (pre-series A) and seed financing. The firm is sector agnostic but typically invests in private technology companies, digital technologies with a focus on cybersecurity, big data, digital health, telecommunications, satellite services, and Internet of things. It is a global investor with a strong focus on Europe and Luxembourg.
• 2be.lu Investments SCS: 2be.lu was established in Luxembourg in 2014, to help early stage companies execute their global ambitions. Today their venture capital portfolio consists of a dozen companies that improve the lives of many around the world. They support their portfolio companies with their network of contacts on a range of legal, financial and operational issues. In 2017 they added a focus on crypto currencies and established a separate Crypto Fund.
• Bamboo Finance S.A.: Bamboo Capital Partners is a commercial private equity firm making investments that matter. It finds game-changing businesses then applies a mix of geographical and sector expertise to deliver financial and social returns. Experts in energy, healthcare and financial services globally, Bamboo has offices in Luxembourg, Geneva, Bogota, Nairobi and Singapore.
• MiddleGame Ventures: Middlegame Ventures is a venture capital firm focused exclusively on early stage Fintech startups, which invested approximately $300M in financial services firms over the past decade. MiddleGame Ventures has recently announced that it has raised a new fund of €150 million, which is planned to be used for funding B2B and B2B2C startups that are aimed at transforming the financial services from centralized to decentralized and analogue to digital with an emphasis on back office and middleware solutions. Regtech innovator and LHoFT Member Coinfirm has secured €2M funding  from Middlegame Ventures in July 2020, to further its mission in becoming the global leader in AML solutions.
• Odysseus Investments: Odysseus Alternative Ventures is a new generation Venture Builder, actively creating and facilitating the transformation of nimble, disruptive financial services technology companies into genuine scale players. In 2018, Odysseus Investments joined forces with Seed Founders, a technology investment company established by InsureTech investor Minh QTran, to create a new framework which will allow investors to achieve scale exposure to a range of traditional, alternative and tech venture capital assets.

European Funds

• VentureEU: Under VentureEU, the EU is providing cornerstone investments of €410 million in independently managed venture capital Funds-of-Funds, including €200 million directly derived from Horizon 2020. The funds are aiming to raise up to €2.1 billion of public and private investment. In turn, this is expected to trigger an estimated €6.5 billion of new investment in innovative start-up and scaleup companies across Europe.
• InvestEU: The InvestEU Programme will bring together under one roof the multitude of EU financial instruments currently available to support investment in the EU, making EU funding for investment projects in Europe simpler, more efficient and more flexible.

Public Schemes

• The aid offered by the Ministry of the Economy can cover up to 20% of the acquisition costs of tangible and intangible assets. On top of that, Luxembourg provides substantial start-up aids covering early stage (Fit4Start) and growth stage (Aid for Young Innovative Enterprise) startups
• The Société Nationale de Crédit et d’Investissement (SNCI) is specialised in medium and long-term financing of Luxembourg-based companies. It grants various types of loans which depend on the legal form of the businesses and the projects to be financed. Examples are start-up loans (1st business venture), equipment loans (tangible and intangible assets) and equity loans (creation, ex- tension, conversion, reorientation and rationalisation of companies).
• Luxembourg Future Fund (LFF) is a EUR 150 million fund which aims to stimulate the diversification and sustainable development of the Luxembourgish economy. It was set up by the EIF and the Société Nationale de Crédit et d’Investissement (SNCI) and combines a EUR 120 million contribution from SNCI with EUR 30 million from the EIF, to be deployed over a five-year period. It will invest and co-invest in early and growth innovative European technology SMEs as well as in Venture Capital funds.
• The European Investment Fund (EIF) concentrates on building the necessary private sector Venture Capital infrastructure to address market gaps and opportunities with the aim to further enhance the attractiveness of European Venture Capital as an alternative asset class. EIF works with venture capital funds that invest into innovative high-tech SMEs in their early and growth phases and focuses on disruptive early-stage technology enterprises which typically face financing challenges but also provide outstanding investment opportunities.
• The Luxembourg Private Equity and Venture Capital Association (LPEA) is the most trusted and relevant representative body of private equity and venture capital practitioners with a presence in Luxembourg. Created in 2010 by a leading group of private equity and venture capital players in Luxembourg, with 280 members today, LPEA plays a leading role locally actively promoting PE and VC in Luxembourg.

Public – Private Schemes

• The Digital Tech Fund: The Digital Tech Fund is a public-private seed fund that provides financing to entrepreneurs running innovative startup companies active in the field of Digital Technologies. The fund’s aim is to foster long-term innovation, support the technology startup ecosystem in Luxembourg and facilitate the transfer of new digital technologies developed at the University of Luxembourg into successful spin-off companies.
• Fit 4 Resilience Strategic Innovation Program: In the context of the post-Covid-19 economic recovery strategy ” Neistart Lëtzebuerg “, Luxinnovation, with the support of the Ministry of the Economy, has set up a new strategic innovation programme called “Fit 4 Resilience”. This programme takes the form of in-depth support for businesses of a certain size. It is designed to help them to:

1. Analyse how they have been impacted by the crisis internally and externally, and;
2. Study how to draw lessons from the crisis, both in their internal functioning (use of digital tools, leadership, internal communication, etc.)
3. As well as from the perspective of systemic external changes (supply chains, more regional and/or circular approach, etc.).

Private Schemes

• Luxembourg Business Angel Network (LBAN): LBAN operates as a platform for introducing and matching private investors and initiators of entrepreneurial projects during the seed phase. It is run by seasoned entrepreneurs and business angels who actively contribute to the development of the network.

Alternative Funding: Crowdfunding & Cryptocurrency 

• VNX: Venture capital enabled hundreds of technological breakthroughs and helped many great companies. However, for many years VC has remained a relatively small industry, closed for the majority of regular investors. VNX is a blockchain powered platform that enables its customers to syndicate VC backed deals and raise financing for new start-ups or projects from potential investors with the help of tokenization. VNX offers a novel and superior model of investment services, democratizing, automating and streamlining the investment process while providing a traditional finance industry standard level of protection to the investor.
• STOKR: STOKR is a digital marketplace built on blockchain to create independent access to a new age of capital markets. Showcase your venture in a smart, transparent, and compelling way. Connect and find those who truly believe in your venture, and build a community around it. This can be done all through a full-service process, which is easy and accessible to everyone, from start-ups to small and medium size companies.

by S. Elif Kocaoglu Ulbrich

Had one John Doerr heeded the admonishing words of his boss Andrew Grove while at Intel, the course of history may have been different – instead, Doerr went on to play a crucial role in many of the early tech investments that made Kleiner Perkins famous. Whereas some of these continue to be extremely high-profile ventures – cue Amazon.com – many others have since been acquired and absorbed into larger organizations, all the while making a lasting impact. Take Sybase, which “came from nowhere to become a dangerous competitor” to Oracle’s fast-growing business in the 1980s (source) by orienting its relational database system towards the emerging client/server paradigm, and which received Kleiner Perkin’s backing on little more than an early proof-of-concept and an understanding that Sybase’s offering addressed a pressing, global need:

“Sybase was pursuing an interesting idea: the need for large companies to share information across their organizations to complete accounting reports, calculate sales estimates and invoice customers, among other things. At the time, these tasks were largely manual. Sybase’s relational database management system promised to automate the sharing, updating and tracking of information across organizations. We had a strong gut instinct about the potential for the business […] In 1985, we invested in Sybase.”

Following a long business journey during which Sybase saw fierce pressure from both Oracle and Microsoft, the company was eventually acquired by SAP for $5.8bn in 2010.

SAP’s acquisition of Sybase occurred in the context of its fierce – and unabated – competition with Oracle in the enterprise database market. Image source: google finance

The road to a successful and definitive exit from an early stage VC investment can be long and tedious, and the vast majority of ventures fall by the wayside – these are probably two of the most enduring truths in VC (and in all investing). While the Pareto distribution of VC returns is likely to remain a fixture, VC is undergoing non-negligible transformations.

For some perspective, Jim Marshall of Silicon Valley Bank provides an excellent discussion around the origins of VC as we know it, explaining:

“For more than 30 years after Georges Doriot opened the first VC firm in 1946, venture capital remained essentially a craft business that barely changed. […] In this era, capital remained scarce, and technology companies — many of them making hardware — cost a lot to start. VCs had all the power and could dictate terms to entrepreneurs. Most VCs were men, and their expertise was in finance more than technology.”

At its origins, VC was an exclusive affair essentially powered by a limited number of family offices. Much later, Marshall explains, the .com boom-bust brought global visibility to tech VCs for the first time, but subsequently sucked capital out of the sector until the late 2000s, which coincides with a “distinct second wave” in VC investing:

“Capital became plentiful and entrepreneurs had choices. Andreessen Horowitz pioneered the concept of venture as a service business that could offer startups help in customer acquisition, marketing, public relations, recruiting and technical advice.”

Thus, venture capitalists became mentors as much as financiers; improved access to capital and the continued growth of the tech industry promised fertile IPO and M&A grounds and the breakneck turnover at tech startup accelerator Y Combinator epitomized the evolving environment for VC.

In parallel, a “third wave” of VC emerged on the back of the radical shift in value creation enabled by IT, leading to a bifurcation between a very limited number of large and powerful firms on the one hand, and a growing number of “micro VCs”. As a result, “power shifted hard to entrepreneurs, who could shop around for the best terms and fit”.

At present, the “democratization” of VC continues. A number of factors – such as the highly persistent low interest rate environment post-2009, now reinforced by the COVID-19 shock, alongside steady value creation in listed equity and the multiplication of private tech fortunes – contribute to the fact that “capital has completely transitioned into a commodity” and that more investments are taking place outside of the traditional tech hubs, even though these remain the undeniable epicenters of global VC. This means that “VCs are funding more companies in alternative places but are investing less in those companies compared with companies in the tech hubs”. Ultimately, the reasons for the enduring focus on the Bay Area, Boston and NYC in the U.S. context and similar hot spots across Europe and Asia are rooted in physical phenomena which “promote the growth of information in pockets”, as MIT’s Cesar Hidalgo explains in one of my “must-reads”, Why Information Grows. Knowledge and know-how are embedded first and foremost in people – giving rise to Hidalgo’s notion of the personbyte – which in turn share, perpetuate and enhance them within their social networks. A successful industrial hub is like a fire – difficult to spark if all you have are some rocks and sticks; yet all but impossible to put out once it engulfs the surrounding forest.

Screenshot from the Observatory of Economic Complexity visualization tool backed by Hidalgo. Trade data is but the tip of the iceberg when it comes to defining the socio-economic complexity involved in building advanced economies.

In the grand scheme of things, there are millions upon millions of young and talented people waiting to be “ignited” by that spark of entrepreneurship and industry, yet all too many lack the education and opportunity required to rise to the example of the tech luminaries that are reshaping how we live in the 21st century. How much we are willing and able to invest in talent and good ideas, no matter where they may be found, will crucially determine our ability to lift more and more people out of economic hardship and to equip communities to find their place in a fast-changing world.

The good news is that technology is making the vision of a “global village” ever more real by making incredible amounts of knowledge globally accessible, by connecting people in real time, and by providing decision makers with massive datasets and analytical support in the form of AI. This in turn helps make investment decisions more objective, more geography- and personal network-agnostic. Alex Lazarow, writing for Forbes, sees a parallel between the transition of the financial industry towards a far more technology-driven, inclusive and ultimately more intelligent modus operandi, and recent changes in VC:

“Fintech companies have upended traditional financial services by reinventing business models and offer role-models for similar product innovation in venture capital.[…]

Venture capital will similarly evolve its own business models and product lines to cater to the growing breadth of startup companies.”

And finally:

“[…] venture capital firms are realizing that there are huge growth opportunities outside of Silicon Valley. Funds are specifically being launched to target global startup ecosystems that are not the typical hubs of innovation. There are initiatives to target specific high-impact verticals like financial inclusion, education and cleantech.”

A key attribute of LHoFT is that we are tapping into the global Fintech innovation ecosystem through our community & strategic positioning, which includes supporting the “high impact verticals” outlined above. LHoFT members are poised to benefit from an increasingly convergent and connected world shaped by such things as the ongoing “democratization” and transformation of venture capital, overarching political dynamics such as the EU capital markets union project and the organic acceleration of digitization and remote work – all of which favor additional, and more diverse, investments in technology-driven ventures.

Author: Jérôme Verony – LHoFT Research and Strategy Associate

One of these investors, Vikram Sasi of Dreamers VC, sat down with Lisa Burke of RTL Today to discuss his background, Dreamers VC’s investment interests, and what he’ll be looking for in Luxembourg.

“It’s not that we need extraordinary people, but we’re looking for ordinary people that have done extraordinary things in their past.”

Can you tell us little bit about yourself, and your role as partner at Dreamers VC?

Dreamers is a 100M early stage generalist fund based here in LA. The most notable aspect is that it was founded by Will Smith, the actor, and Keisuke Honda, who is a prominent Japanese soccer player.

Despite the star power we’re actually not a traditional celebrity fund or an offshoot of the family office, we’re actually structured like a traditional venture fund and capitalised with all Japanese limited partners. So Nomura the big investment bank is our anchor LP, and we have a pretty diverse composition of the rest of our limited partners: Shiseido, Mitsubishi, ASICS, Dentsu. So it’s really allowed us to marry the Japanese corporate capital with tech startups and in the middle sits this scion of entertainment: Will Smith, and the Hollywood entertainment aspect.

You’ve spoken about macro trends in millennials related to your recent investment in Hipcamp. So when you’re thinking about trends, how do you monitor them, and how do you think about investing in them?

So when we think about trends we certainly follow all of the white papers and the market research reports that we’re getting.

We like to think at a high level; where are a lot of these things going? For instance, there’s this huge push for parents against kids screen time. So what we started seeing is that now there’s a tonne of these entertainment streaming platforms coming that are saying how do we decrease screen time while making up for the fact that we need to offer educational opportunities or tools while making sure that they also get that quality time with their parents. So that was just drilling down into one example,  but ultimately we take where we think the world is going, and we try to match that with a 5-7 year timeframe from start to sort of growth capital and then getting to an exit within that time frame.

As a parent, what’s the answer to that question of screen time?

So we actually have a couple of investments in stealth, one which I actually may be able to talk about in November.

The answer is similar to Hipcamp: you have to go online to get offline. Hipcamp is the perfect example because in order to really get outdoors and be active you need to find that land, and we can unlock all sorts of private land to go camping, And so the same thing with a kids streaming platform; the last thing we want to do is be like a parent where you go out for dinner with your family and you just put the headphones on and allow them. It’s like no, there are also some interactive ways to maintain that bond between a parent and a child while also making the device just a secondary aspect.

When you think about Europe and the startups you might want to meet over here, two questions: How sort of scale are your investments, and what sort of startups are you looking to invest in?

Certainly Europe is becoming a focus for us. We’re at the tail end of deploying fund 1, and we’re about to go out and raise fund 2 where we want to take am much more global aspect because obviously Silicon Valley isn’t the only source of global innovation – especially in tech – and Europe is certainly coming up. We saw one of the recent announcements from Macron about turning Europe into a tech hub, that combined with the fact that – I don’t know how welcome this will be – but with Margaret vestiger sort of the EU leading the backlash. One of the good things that’s going to come from the backlash, which never gets mentioned, is the amount of innovation that’s going to spring up. I liken it to what happened to Microsoft in 2000 they had this huge antitrust battle. They were kneecapped, but it was more from the perspective of how it allowed a lot of other startups to start competing with them. So Europe has certainly seen it.

Obviously there are interesting things happening with Brexit, and – I don’t want to say fallout – I think there will be a ripple effect going forward. In terms of what we’re looking forward to in Luxembourg, it’s doing exactly what you all are doing which is amassing this brain-trust from all over the world and say this is a current and future tech hub. It’s very easy to overlook these things and focus on Silicon Valley, but I think there’s a lot left to be seen that we’re certainly looking forward to doing.

We’re hoping that a lot of entrepreneurs and founders hear your words of wisdom. How can they approach you, what do you want to see in their business plan, and how can they access you?

I’m happy to give my email it’s vik@dreamers.vc, you can go to our website and there’s a typical portal to submit your name and drop a pitch deck.

We’re an early stage investor and we specialise from seed all the way to series B. At the seed level we just have three boxes to check: Team, product and market. And oftentimes if two of them are strong enough we hope to be able to help them with the third. I wouldn’t say we have anything differentiated from what lots of other investors are looking for. To us it’s about this certain je ne sais quoi, in that there are lots of great companies that can check those boxes, but there are some that really stand out.

To us, in particular, it’s really about the founder and the founding team, and if they really think they can build this. Can they handle the inevitable challenges? Lots of startups end up pivoting, they are going to face all sorts of road blocks, and do we think they have that mental stamina and fortitude to overcome those?

There’s a reason this is the riskiest asset class, but I think it’s also the most fulfilling. Hedge funds… If you make a lot of money in the public markets, ok great – a lot of times it comes from shorting a stock. But if you really put your money where your mouth is and back a founding team with a big vision and a bold idea, and it actually comes to fruition, I think it is satisfying for everyone – and ideally for the end-user as well.

From the sound of it for you the most important thing is the team. How can they demonstrate the mental strength, to overcome roadblocks which they may not have come across yet?

It’s a good question, and I liken it to being a college admissions officer: The kids in high school have shown you all the things they’ve done, but they haven’t shown you what they are capable of. So you look for the little signals. We do a considerable amount of diligence, we talk to their references, their past bosses and employees, we look to see whether they were good managers. One thing that people forget sometimes is that as these companies grow – and you’ve seen this with the ‘Ubers’, and their missteps – they really have to grow into being incredible leaders and managers. When you’re starting off at a seed company you have 4-5 employees and you’re trying to find product-market fit, then as you grow and grow you’re going to have 100 employees, then 500, and you really grow into a different kind of executive than you were before.

It’s not that we need extraordinary people, like they were Olympians or professional stars in their own right, but we’re looking for ordinary people that have done extraordinary things in their past.

And you might be one of them, looking at your CV! How did you choose to become a venture capitalist? 

I definitely had a more non-traditional path than some of my contemporaries. Prior to business school I worked abroad for about 5 years in East Africa, spent a couple of years in Haiti working for the Clinton foundation, sort of doing international development and consulting. I went to business school to expand the amount of impact I could have. Obviously I had been working with the end users and beneficiaries, but when I saw that the amount of impact that venture capital provides to the end user can honestly be kind of astonishing. A lot of it is about empathising with the end customer or consumer, and so having worked with the lowest at the bottom of the pyramid, and sort of bringing that experience up, I thought it was one of the most fulfilling jobs to use capital for impact. And you can sort of see that, int hat if you look at  all of the FANG stocks, all of those were venture backed and so the amount of venture capital has about a 20x return down the line once these companies go public and make up their fair share on the stock exchanges. Thinking about if you really want to have this force multiplier impact I would argue that there’s no better way to do it than early stage financing.

Do you ever feel jealous of some of the founders that you meet, and wish you could flip your situation with theirs?

The ultimate answer is yes, because there’s no doubt that when you get to an exit you realise that they have very significant percentages of these companies, and they are going to exit with a very nice windfall. That said, they have gone through unbelievable trials and tribulations to get to that point. No one, no matter how easy it has looked or how good a face they put on, it’s such a rollercoaster. I’m pretty confident I don’t even have what it takes, and you can tell what these founders have been through.

It reminds me, one of the most prominent founders in our portfolio, Elon Musk, was giving this talk to a bunch of college students and one of them said to him “I want to be an entrepreneur, but I don’t know if it’s meant for me, so I’m making a pros and cons list”, and he said “If you even have to make a pros and cons list then you’re just not meant for it because it has to be something driving you in the back of your mind to throw caution to the wind, don’t just walk off the plank, run.” It’s immensely humbling to be around these folks, and whether or not they are successful, they went to the battlefield. I think that’s why there’s so much lore in Silicon Valley about that.

Finally, when I speak to some of the people who will be arriving here in November, you all have MBAs. How important is that to your role?

People have a love-hate relationship with MBAs in venture capital. For some it’s just a credential, they gained a lot of pre-MBA finance experience so they needed it to step up their game or go to a different fund. For me, I’d never taken a business or economics class prior to my MBA, so I like to think I got a lot more out of it than a lot of my classmates. That said it kind of provides you with a bit of a Swiss-army knife. Maybe a better analogy is that it turns you into something like an emergency room doctor: you know a little about a lot, but a lot about knowing. So it’s incumbent on your to use those skills, and to really delve into certain sectors and specialise and get into the weeds with these founders. I don’t think it’s a prerequisite by any means, but for some I look at it as a stepping stone, but you certainly don’t need one to succeed. And frankly I’m pretty sure that if you look at the most successful, the folks on the Midas list, you’ll find more folks without MBAs than those with.

Vik, thank you so much for your time!

Check out more details about Global Ventures Summit Luxembourg and register for your tickets here!

Watch the full video with Vikram here:

The Global Ventures Summit was created to connect influencers of the highest growth start-up ecosystems in the world. We enable innovative start-ups to access venture capital professionals, funded technology start-up founders, and policy makers in the freshest tech scenes on the planet. GVSummit is a business unit of Parkpine Capital. 

One of these investors, Eric Bielke of GE Ventures, sat down with Lisa Burke of RTL Today to discuss his background, GE’s investment interests, and what he’ll be looking for in Luxembourg.

“Certainly what we’re seeing in Europe – as well as in Asia – is pretty exciting, so we’re excited about being a part of the Luxembourg community, I guess as an anchor point in Europe.”

You are coming here to represent GE Ventures in your role as Director of Investing. Tell us a little about yourself, your company, and what you’re hoping to get out of your trip to Luxembourg.

Sure! So a little bit about myself: I’m with GE Ventures, I’ve been on the team for about five years. We invest – just speaking broadly about GE – in a variety of early stage companies. We’ve been a fund for the better part of the last 20 years. We’re funded entirely by General Electric, the American Industrial company, and our focus is really on the next generation of industrial startups. So we care a lot about aerospace and aviation, manufacturing, healthcare and energy. As you know these are very large industries that stand to be disrupted by digital technologies or by innovation in hardware.

We are not especially stage driven or industry driven, we are looking for the next wave of disruption and that may happen in a lot of what we call ‘horizontal technologies’ which are enterprise software ideas which cut across a lot of industry verticals. Maybe they start in agriculture, or maybe they start in diversified engineering, or maybe they start in the tech sector and migrate over to impact other areas in which GE has some business.

We’re interested in finding founders who are highly accomplished and looking to build great teams. We’ve got a relatively large balance sheet, and we’ve been able to do deals as large as $20M+, we’ve also done deals as small as $1M. Right. We’re right now mostly focused on North America, but we do have some investments in Europe and in Israel. We’ve been increasingly interested in what’s happening in the European landscape. The reality is that starting companies is not a Silicon Valley phenomenon anymore, and some of the best and brightest come from all over the world. Certainly what we’re seeing in Europe – as well as in Asia – is pretty exciting, and so we’re excited about being a part of the Luxembourg community, I guess as an anchor point in Europe.

Talking about your balance sheet, you’ve got quite a large budget. What are you hoping to invest in in Luxembourg? Does it depend on who you meet here?

This will be a bit of a learning trip.Right now we’re invested in a couple of companies, they are mostly UK based, and like I said we’ve got a pretty strong presence in Israel. This is an interesting opportunity to get better acquainted with the entrepreneurial ecosystem, find out who’s working on what, and what needs the founders have.

One of the hallmarks of our team is that we tend to bring in people either from previous founding roles, or bring in founders from other companies. We’re interested in where an involvement or an investment from GE could be impactful to the companies trajectory, where it might fill a need on the team, an expertise that’s missing, or it might fill a need to expand geographically where GE’s got a footprint. It’s no secret that GE’s been a big presence in Europe for a long time. The company bought Alstom as a large provider of turbines out of France, and has a substantial presence in Switzerland. So we’ve certainly got the opportunity to do sourcing in Europe, and then when we’re at our best we’re helping companies get outside of their region and expand world wide.

You mentioned turbines just now, sustainability is also something that’s on your mind? How important is that to your concept?

Great question. There’s few people that see a long future ahead for coal and fossil fuels. The reality is that there’s a lot more innovation now happening in the trifecta of wind, solar and energy storage – particularly in energy storage – than there is in ‘conventional’ power generation. So as an energy company as we look to the future there’s bound to be a lot of companies we’re interested in getting behind or helping to support that are part of a sustainable program. The Ecomaginaton program that has been run by GE for a number of years is really designed around outreach to those who are thinking independently of the fossil fuel industry, and it’s kind of cloaked the kind of investments and capital allocation that GE has made over the years.

We’re currently one of the world’s largest providers of wind turbines and wind power, and pretty proud of that capability. It’s certainly a focus of our team to think about ‘greentech’ or ‘cleantech’ technology, whichever moniker you put on it. Europe has led the way in a lot of ways in sustainability, so excited for the opportunity to meet some entrepreneurs who may be interested in that idea.

Luxembourg also has a relatively nascent space agency, and that’s energy of a different sort. Have you thought about moving funds toward space startups?

I’m glad you’ve asked. We’ve spent a lot of time actually thinking about aerospace, and again GE’s got an unusual footprint in this space. We’re one of the world’s largest providers of aeroderivative turbines for jet engines and there is a lot more interest in the space tech sector than there had been 10 years ago. I think SpaceX and a couple of others are largely responsible for that new attention. We’ve spent  a lot of time thinking about everything from the launch sector, to communications between satellites, to how is the existence of small cube stacks becomes disruptive to the traditional very large, heavy-weight satellite industry.

We’ve done a very deep dive on what we call ‘downstream geospatial analytics’, which is around startups that are building a capability in recognising images from space at low cost, and in many cases have built out their own constellation of satellites or who are using machine learning and computer vision techniques in order to process what they see in the pixels.

There is a wealth of development bound to happen in downstream geospatial analytics. As we think about market intelligence and market research, being able to observe what’s going on real-time in the physical world is now possible, whereas it might have only been possible in the digital world. That kind of monitoring and tracking is impactful for a business that frankly puts most of its products out in the open environments, whether they be power plants or manufacturing facilities. Most of everything that GE makes is in some way exposed to the environment, and it’s obviously impactful to watch and learn from how those assets are being treated.

If a startup founder wants to come and meet you, how can they impress you? How long will you give them? And how will you pick the right people to listen to? 

That is probably one of the toughest questions in operating an investment business. I was an operator myself for a number of years, and part of founding a company – an early solar finance enterprise – and so have been through the process of trying to raise money. It’s hard. I like to think that our team is pretty strong on being able to make connections for entrepreneurs, and we’ll do that whether that’s a potential investment or not. I think we look to the idea of having a captive investment firm as a way to be helpful to founders, whether that’s in the form of dollars, or in the form of useful connections and potentially customers.

I don’t think there’s one right answer to the question of ‘how do you approach an investor’. Having a lot of confidence in the market you’re going after, having a detailed idea of why this is the technology that is ahead of its peers, and usually having some sense of traction ahead of time. I think one of the mistakes that entrepreneurs sometimes make is approaching venture capitalists or the approaching providers of capital a little too early, and trying to fund the company with third party capital in lieu of funding the company with customers. It’s obviously a lot cheaper and a lot less diluted to fund them with customers. So we’re interested in companies that have taken that tack, and have maybe found revenue first before they found VC money. But it all depends, some business models are so stand-out that it’s best to be raising money pre-revenue. I wish there was a single answer to that, but it certainly depends.

Thank you for your time, Eric! We look forward to having you in Luxembourg. 

Check out more details about Global Ventures Summit Luxembourg and register for your tickets here!

Watch the full video with Eric here:

The Global Ventures Summit was created to connect influencers of the highest growth start-up ecosystems in the world. We enable innovative start-ups to access venture capital professionals, funded technology start-up founders, and policy makers in the freshest tech scenes on the planet. GVSummit is a business unit of Parkpine Capital.

One of these investors, Alex Estevez of Accel, sat down with Lisa Burke of RTL Today to discuss his background, Accel’s approach to investment, and what he’ll be looking for in Luxembourg.

“The academic studies, and the reality of capitalism and entrepreneurship, has demonstrated how important entreupeneurship is to an environment’s socioeconomic well-being, and to the improvement of the socioeconomic status of regions like Luxembourg.”

Alex, can you tell us a little about yourself and about your role as a Venture Partner with Accel Partners? 

Well it is my privilege to be part of this great conference and gathering that you invited me too and I am very excited about attending Luxembourg for the first time.

As Venture Partner for Accel, my role is twofold:

One is to help source opportunities for the Accel family of investments, primarily on the East coast of the United States. Secondly I leverage my range of experience in terms of operating software companies, and best practices in that regard, to help these great companies that have joined the Accel family to scale to the potential they represent.

I spend the majority of my time helping our CEOs and executive teams find opportunities for expanding growth and scale.

You’ve been quoted as saying “the capital moves where the opportunity is”. What do you hope to find here in Luxembourg?

Accel is heavily focus on the entrepreneur over the location or the brand. We have investments all over the world, from Australia where I was CFO at Atlassian Software, to Flipkart India , to Supercell in Europe. UiPath is another one where I have been recently involved. We really have a passion for pursuing the entrepreneur – wherever that opportunity may be.

What excites me is – part of Accel’s thesis – that there is a great deal of opportunity in Europe with this next wave of evolution of SaaS companies. So we’ve been more assertive than perhaps in the past in pursuing those entrepreneurs that reside in Europe.

Do you think that Europe lags behind the US or China in some of the tech industries?

Well I don’t think it is a fair characterization. I think that some of the things that Europe has done around digital rights and privacy is actually perhaps more progressive than in other areas. There have been some systemic inhibitors to entrepreneurship and risk taking that Europe is starting to see differently now and we welcome that opportunity for increased entrepreneurship in the European region.

Where do you think the inhibitors were that are now being lifted? 

Well there are a combination of different factors. There is definitely a cultural ramifications, a  long history of perhaps less risk appetite than in the US for example, where pioneers have defined part of the US experience. The academic studies, and the reality of capitalism and entrepreneurship, has demonstrated how important entrepreneurship is to an environment’s socioeconomic well-being, and to the improvement of the socioeconomic status of regions like Luxembourg. And so I think there is more and more evidence of the importance of entrepreneurship to a regions socioeconomic quality of life.

What type of people do you want to meet in Luxembourg? What kind of introduction should they approach you with? What kind of business are you looking for? 

I think at Accel we are pretty open-minded in terms of opportunities that are presented to us. Taking that humble, open approach and being listening-oriented is important to us culturally. It’s very difficult with entrepreneurs to really boil-down the problem that they are solving and why they are the best in the world at solving it. It is very difficult to be succinct on those points, but I would work as getting it down into 30 seconds, and then evidence to support the thesis. The more established the idea or the opportunity is, the more seriously we can take it. We love to look at things across the spectrum, but if they’re at a point of 10 million ARR in euros, or some kind of critical mass in terms of usual adoption, that certainly gets our attention, that it’s more than just an idea – that there’s been market adoption that is supporting that thesis.

Thinking back to your journey, how do you in your role figure out the right choices, the right decisions are? What do you process in your own mind to make the best choices?

The 3 things that are important to me as either an operator or as an investor:

• The first is that you have customer passion. That this is a company where customers have a real excitement about the solution. I see those as data points. I don’t care where they are and I don’t care how big they are. Customer enthusiasm is critical especially in this environment of transparent information. Bad news travels rapidly, and good news travel quickly now so I think that that customer embrace is a very important indicator
• The second point is around product. Every company I have been with has started with a very strong product team, and I think product excellence starts with great engineering. There is a trash heap of great products on the Bay Area that were never able to sell, so I think it is necessary but not sufficient, but I always start with product excellence, I think that is really important.
• And the third one is a management team, and particularly a CEO, that is listening oriented, that listens carefully to the customers, not just what they want, or say they want, but what they actually need. That bias toward helpfulness and empathy and listening orientation is usually an ingredient for success.

Thank you for your time and we will see you in a few weeks!

Check out more details about Global Ventures Summit Luxembourg and register for your tickets here!

Watch the full video with Alex here:

The Global Ventures Summit was created to connect influencers of the highest growth start-up ecosystems in the world. We enable innovative start-ups to access venture capital professionals, funded technology start-up founders, and policy makers in the freshest tech scenes on the planet. GVSummit is a business unit of Parkpine Capital.