#175 Bruno Raillard, Frst

0:04Hi, and welcome back to the European VC, the go to podcast for everything European VC. If you love the show, share with your friends and join our newsletter at eu.vc. Today, we're happy to welcome Bruno, co-founder and managing partner at FIRST, a day one VC focused on founders building global scale companies out of the French ecosystem. Launched in 2015, FIRST now has over 200 million euros under management and has invested in the likes of Payfit, Alkin, Pigment, Electra and Shipio. Before launching first, Bruno has built his career in financial consulting and general management working with startups, SMBs and large enterprises across a broad spectrum of industries.

0:52If you enjoy our content, do support us by hitting the follow button, giving us a review and following the European VC on LinkedIn. Loving the podcast? Don't miss out on our meetups bringing the EU VC and Super Angel community together. Off of the high of the gargle blasters from our London event, kindly supported by SVB UK, Verban and Isom Capital and more events are coming. So make sure to subscribe on EU.VC to stay in the loop for future mind-blowing events.

1:34Bruno, welcome to the European VC podcast. It's great to have you here today. Bruno, let's start with the basics. Give us a quick rundown. Who is Bruno and how did you end up in this wonderful world of venture? David and Andres, thanks for having me. Excited to be here. My story with venture is actually really a story of being at the right place at the right time. I actually got started in my career in financial consulting quite a long time ago, working for large private equity firms in Europe, doing LBOs and capital development deals, mostly on very large companies. It was super interesting from an intellectual standpoint to get to know large companies and how they work and how companies and how money flows in a company.

2:14But it was also very repetitive and at the end of the day, ended up being quite disconnected from the underlying business. the tangibility of value creation through actual operations. It was more like financial engineering on and on and on. And so I didn't want to become a partner in financial consulting. So I was more keen to get closer to entrepreneurship, to the innovation world and to technology. And that's when I was lucky enough to meet someone that was running the team of a French family office that is called Autium Capital today. And that was a very tight-knit team of people. You could consider it as operating partners in a way.

2:49So we were working as helping hands for a bunch of startups, the family of these had invested in, on a very wide number of topics ranging from finance, marketing, management, fundraising, M &A. I mean, any problem the companies had, we would jump in and try and help and do whatever we could make things up. And so that's what I did for like four years from 2012 to 2015. And that's really when kind of the luck of being at the right place at the right time struck me, which is that in this team, I was lucky enough to work with very interesting people that went on to build legendary French startups today, namely Dr.

3:27Lib and Mano Mano. So I was there, you know, working alongside those people, seeing what was a true ambition and true ingenuity in terms of how can we get big companies on the ground in France. And seeing those guys get off and start their own companies with this level of world-class ambition got me thinking that on the other end, the French VC landscape was very far from realizing that those people were here. And they were very much predicated on the belief that a French company was doomed forever to exit at 100 million euros or below. And so there was a very clear mismatch between the entrepreneurial ambition and the ingenuity and optimism on the one end and the financial model that was built around the small exits on the other end.

4:15Anyone seeing a good opportunity, we decided to jump in and build a VC that was optimized for this new breed of founders. And that we got started. So we went on, we pitched the head of the family office to launch this new strategy. We were convincing enough or he was foolish enough or crazy enough to bankroll us. And that's really how we got started. I'm curious because we actually interviewed Al-Christine from Avni just the other day. And he has very much the same view as you do, right? That France is ready for a next generation of entrepreneurs. There are already a next generation of entrepreneurs that are building for the global domination, you might call it, from day one.

4:54And this is one of the topics that we also explored with him. How do you see the rest of the French VC ecosystem adapting to this change? Are they pursuing that opportunity as well? Or do you see that it's definitely two different schools? There are more and more emerging GPs in France as in Europe. And I think that's a great thing for founders because more money, more options, more modern takes, and more competition is better in general for entrepreneurs and as in the other markets. And I think that there is a lot of room for everyone to grow. There is this new breed of GPs. That's a great thing.

5:31There are also pre-existing kind of, wouldn't say legacy, but historical GPs across Europe and in France in particular that have most of them modernized their approach in a way. But there is still a strong DNA gap because it's very difficult to change your culture once you're accustomed to a certain way of thinking about valuation, about exit potential, and so on. It's difficult to chase the two types of companies and the two types of opportunities at the same time. Bruno, could you reflect a bit on the difference between being part of the EFO and now having launched your own VC firm? It's always curious to hear how people who have been on both sides experienced the two.

6:16I would actually say that the main difference is essentially going from being an employee to being your own boss. So in a way, we see ourselves as entrepreneurs having built our own company. We started, again, thanks to the family office in a more entrepreneurial fashion, if you will, because we had a lot of leeway within the family office. And so from the get-go, we had lots of flexibility to build the product we wanted to build without too many constraints. But there were still constraints, frankly. Those are the reasons also why at some point we had to fend for ourselves and, you know, kind of graduate out of the family office so that we could set a company for success for the long term.

6:55So it's really more a matter of going from employee to being your own boss. if you think about family offices in the standard way, which is really not what the jump capital was about. When you think about it as a standard way, many times you have people that are kind of risk averse and that don't really want to jump in very ambitious and bullish opportunities because they don't want to lose their money. And that is something that you can do when you are the steward of the money you have. That's one of the big features of GP managing funds. And I think that's great. But the truth is, in our specific case, which I realize is really not the standard family office type, we also had a very strong bias towards risk appetite.

7:41We've been able to do investments with our first vehicle that was a single LP fund that are really as ambitious and as daring as we do today. and sometimes even more in terms of the capability to invest very big checks in one go. There seems to be a very good relationship, right? After all these years still between you individually, but also First and Otium. And I want to ask you something because you have this relationship with origination LP, whatever you want to call them, right? In the beginning, but they're still doing venture, right? They're still investing themselves, but you're also investing.

8:16So how do you manage those relationships? Obviously, because now you have other LPs and you want to service them all and you want to avoid any conflict of interest, blah, blah, blah. But also, you know, the pros and cons of having Otium with you and how you manage that and how you make sure the relationship is always a win-win and not potentially some kind of funky business happening there. And I'm asking because many aspiring and emerging GPs that have conversations of having a single LP structure. We know some stories where the setups aren't really well thought through. So I'm hoping to get some insights out of your experience there.

8:44It's very simple in our case because we invested the first vehicle that is now closed on behalf of the family office. And we are still advising the family office on this vehicle. We still have a handful of companies. And then in 2019, we raised our second fund, which is very classic multi-LP fund in which the family office is not in the store. And also we just raised our new fund and they are not an investor in it too. So our relationship is very limited to the advisory around our first vehicle. That's really simplifying everything, frankly. And I know they are doing investment also on their end across very, very many areas and verticals and themes and teams.

9:29So that was their strategy for all along. And I guess on that fund one, you came as having kind of a subset or a more focused approach than what they were kind of doing on their side. And that's kind of how the relationship made sense at that time. Yeah, from the get go, there was the family office with very broad strategies and ambitions across lots of topics. And then that's why I pitched the idea of being super focused on what we were doing, which allowed us to, you know, have our own leeway in our field. In my mind, I see you a bit as a spokesperson for the French ecosystem, right? And I told you this before we started recording.

10:02I had a really fun time reading an article you, well, not that recently, but you wrote late last year, let's put it like that. And I don't know if that's the correct translation, but the way I hear it in my own mind is like a call to arms to the French genius. You know, it's really interesting because you do kind of highlight a couple of priorities there. But I also think it's very interesting to see how you think about where those priorities stem from. I'd love to kind of just open the mic here for you to give us a quick rundown of what is described there and also how you think, right? Why do we need this, let's call it the French genius to come to the rescue?

10:35Yes, of course. And thanks for putting it out because it's not our overarching thesis for the fund. Not to be conflated with that, but on the other end, it's part of an important worldview that we have within the team and that I have myself as to what's the state of the geopolitical situation in Europe and what does it mean in terms of opportunities to build and priorities on what to build. So this positioning paper, in a way, is tentative to summarize where we see the world going and where we see great opportunities to build companies. And arguably, those are topics that are harder to build into than what was the preferred themes and areas that prevailed over the past few years.

11:20I would summarize it that way. I think that for a long time, I've been believing that there's this need to take care of some things that we took for granted for a long time, which is like freedom and democracy. we kind of across all the developed world believed that it was something we could take for granted and that everyone would converge to this enlightened situation where freedom and where more freedom and more development and so on would be kind of obvious for everyone and now we realize that it's not true on two accounts first of all there is actually a very strong rise of autocracies that are violent and genocidary and that are like constant threats to our way of life.

12:04And that actually there is a big priority to make sure that we can defend our way of life so that we can, you know, keep thriving, keep getting in better shape, in better health, with a better social fabric. That's really the underpinning of this thesis is we need to build stuff that defends democracy, that defends our way of life, and that expands our way of life. I have to ask you, because you're saying this is not your overarching thesis for the fund, but it is a worldview held by USGPs. And we are going to dive much more into it. And together with the podcast episode, we're also going to republish this either in French for people to translate themselves as I have here, or actually go and get it translated for everyone so that they can read it.

12:49Because I think it's incredibly interesting. There's nothing I love more than what I might call political animals, political individuals that really have an ideology that they believe and drives them forward and gives them purpose in their life. How does this tie in together with the thesis of FIRST? And given that it's not just your view, but it's something that you say you and the GP, you're in your general partnership team, believes, how has it played into your fundraise and the conversations you've had with LPs and so on and so forth? The reason why I'm not conflating it with the overarching thesis is I think what is the number one feature of us as investors is we are ultra-founder centric.

13:36And so we really want to be focused on what the best and brightest minds from the French ecosystem decide to do with their time at any point in time in the century. And so we want to be very open-minded when we talk to founders and to the best and brightest again, what makes them get up in the morning, what do they want to spend 150 % of their awake time, and what makes them vibrate, and what's the future they want to make happen. And so that's really what we're about. And of course, we come into the discussions with a way to see the current state of the world, the current state of the geopolitical relationship between European countries, between Europe and the US, between Europe and Russia, China, between Europe and the emerging countries and so on.

14:20And so there are lots of opportunities to build great companies leveraging this dynamic. But we, of course, have questions on what does it mean in terms of delivering on your vision in the context of what's happening in the world, what's happening with the planet, what's happening with the ecosystems, what's happening with emerging countries. So, you know, it's more like an opinionated worldview in the discussion to have a more colorful and rich discussion with funders. The reason why I ask the question as I do is because obviously Isomer Capital and EIF and I don't know who on the institutional side will not in their process to build conviction with you as a potential be focusing too much on your worldviews.

15:04That's probably not what's going to attract them to you. But it definitely can be with family offices and high net worth individuals. So I'm curious to hear, did you leverage it as such when working on the fundraise with the individuals that are allowed to have their own worldviews and let that color their investment decisions? we've been having the discussion with frankly a large number of our investors over the course of the past month because similarly to what i said about discussing with thunder i think the topics that shown in this paper are very current very rich and very interesting if not concerning for some of them and so i think it's a very interesting icebreaker with many people frankly and i would also maybe look at it from another lens which is that there is a big clarity on the topic of impact investing and what is true is that we've heard countless in particular family offices across europe that you know we want to do impact we want to do impact we want to do impact but on the other end they don't really know what is impact besides a mashup of degrowth, future positive worldview that is very fuzzy, frankly.

16:20And so I think that this paper around French ingenuity and the main problems, intractable problems we need to solve through technology is also another lens through which you can see the concept of impact. And since we got started, frankly, thinking about the concept of impact, we've always been big believers in the fact that in a way you could do well by do good. And the biggest companies we are going to be created at the intersection of a strong, defensible technology, a clear, profitable, and scalable business model, and a truly world-positive mission that actually benefits the entire society over and above shareholders.

16:59And the reason why the biggest companies can be created there is because you get so many tailwinds that are pushing you forward in those areas, that you get the best talent, the best support, the best non-DOT financing, the best investors in the world, because everyone wants to build great companies that are also solving great problems for humanity. So we were at Villar with the World Economic Forum and Uplink and so on earlier this month. So we are obviously not 100 % climate, David and I. And everyone said, so why are you guys here? Why are you involved in the Uplink initiative? And I always say that, well, to me, VC is 99 or 90 % of the cases we end up investing in is really companies that bring the world, at least in my worldview, sufficiently forward for us to really, really be able to argue that it's impact, even though I definitely get that they're not all regulated as such and blah, blah, blah.

17:56But the people I'm backing are all in this because we're trying to build a better world. So I can't help But I think that it's an overstatement of the importance that you are focusing specifically on projects that help trees grow better or whatever. Because I do think that all of or the majority of the venture capital ecosystem is directed in that direction. It's a matter of what you want to do with your time. And at the end of the day, there are only, you know, 10 hours of relevant awake time. And so you need to make the best of it. I want to shift topic here, Bruno. I was just kind of listening in there because I really enjoyed reading the article.

18:31And I think, you know, you guys nailed it like just in the end, right? It's a worldview of what the world needs and you're investing. And obviously you bring that into whatever investment decision you make. Because if the world needs that, there's also the potential for someone to lead that change, right? The founder. But you also have an interesting project called the Crypto Fellowship, which we haven't touched on at all. I'd love to ask you a bit about what is it? So give us a quick rundown of what is the fellowship, but also why does it make sense for you first? to be involved and how does it connect to your thesis?

19:01First of all, and back to our founder centric approach, we always felt that crypto related investments was a part of our standard investment because it's technology. And founders that decide to build something leveraging blockchain technology and crypto are people that are not applying their knowledge to other fields. And so if they go in one way or the other, you don't need to change fund vehicles. If you set aside technical topics around holding tokens and so on, which is another reason, more regulatory than anything. And so we've been involved in crypto ever since we got started. And my partner, Pierre, in particular, was bear-heading our effort in the fellowship.

19:41I'd even started investing in Bitcoin and Ethereum even before we met in 2011 and 2012. And so we've always invested in tokens, blockchain technology and so on for the past years, trying to understand, see how it works, see build a network, identify use cases and so on. And so we had invested the first vehicle alongside our first fund with the family office, participating in ICOs, buying tokens, Bitcoin, Ethereum and so on. So we did a bit of performance on that. And then the crypto winter came and then we became a regulated company. So it was also lots of complex discussion. And so we put it to bed temporarily.

20:21And so when the new wave of Web3 started to appear, we thought about how can we best interact with this new ecosystem and find the signals through the noise of all the craziness that was happening. And our thesis at the time, which is pretty much the same today, and that was actually the same six years ago, is lots of interesting things in the technology itself, the underlying technologies, the underlying networks that are built, lots of craziness built by people that are not necessarily super long-term thinkers and that are more kind of driven by short-term greed. And so all this you need to not be involved in because that's not our job.

21:03But on the other end, we should not dismiss the entire field just because of a few excesses. And so that's really his idea that he brought to fruition. Then we teamed up with Fabric Ventures, which is crypto specialist funds that brought also some more crypto muscle and crypto network alongside our general company building network. And we devised a program which real goal was, let's bring people that are not crypto native and crypto experts into the crypto world by providing them money, network and some social acceptability. acceptability. Because sometimes, you know, when you're an executive in a normal company, go see your mom and say, hey, mom, I'm going to do crypto.

21:45She'll probably believe that you're going to be a drug dealer and whatnot. And so having this kind of layer of acceptability as a gateway towards the crypto ecosystem, we felt it was a way to create a differentiated deal flow in that space and hopefully create a relationship with more long-term-minded entrepreneurs. So that's the origin story of this program that we run through as an experiment from within our main fund. We allocated a few million euros to back a handful of projects, close to 20 in total. And there were two phases of the funding we brought them. There was one phase that was very pure solo R &D.

22:24So we gave them kind of essentially a stipend for them to get a salary while exploring for 12 months max. And then once they had a clear idea of what they wanted to build, they came in, pitched us, and we felt it was like a meaningful opportunity. We provided them with the seed funding, pre-seed funding, mostly to go from idea to execution and proof of concept. And so that's what we did with a handful of those companies. Only four so far, but we have more projects that are still in the R &D exploration phase. Since you've not yet at least created a fund where you're allowed to invest in tokens, how are you thinking about that?

23:04Because I'm sure it's something that you're discussing internally. Should we, should we not? And if you do, how should we do it? I'd love to hear how you're thinking about that these days. First thing is, being a pre-seal investor, as it happens, most of our investments and most of the need founders have, even in the crypto space, are better served through traditional liquidity. And so we always invest in equity in crypto related companies. And that's the essential vast majority of what we do. And so it's really easy to do. Then there is a risk of sometimes they launch a network with a token and so on.

23:42And so today, I think it's less a matter of our own solution, but more a matter of what the French ecosystem and the French regulatory bodies accept to do. And so we are really at the very early innings of it. So we have found at least a depository, a custodian that is okay to hold tokens maybe one day, if and when they come. And the French regulatory body has kind of some sandbox programs where they are open-minded to exploration there. But it's really preliminary and not dry at all. But there are some walk-arounds also where you can ask the company to keep custody of your tokens on your behalf.

24:26So very, very much artisan and not scalable yet. I just have one question before we go to the quickfire. That's because I have to just scratch on it a little bit. You're only thinking within the French regulatory framework here. Yeah. Why is that? Because what many would do is they would then set up an entity in the Caymans or the like that would then allow you to do what you would want. Just curious to hear why that is not one of the solution parameters that you list. Well, one thing about us is we want to keep things simple and stay ultra focused on the beginning of the discussion we had, which is bankrolling the most ambitious French handles and build generational companies.

25:09We don't necessarily want to launch various strategies across various topics and then go to the Cayman and have difficult discussions with our LPs around, hey, I've got this Cayman, Stroman, what do you think? It's too exotic for us. We like to be super dull on those topics to spend more time with founders rather than financial engineering and lawyers. I just wanted to touch on this to see how much was ideology, how much was driven by thesis, how much was driven by where you want to focus your time. But you gave a clear answer. So thanks, Bruno. We are now getting ready to end the episode. And we do that with the quickfire round.

25:47The quickfire round is when I'll ask you a couple of quick answer questions, 30 to 60 seconds each. Let's start with the first question, which is what areas, technologies or sectors excite you the most that other people around you don't really feel that excited about? Well, I think that technology no one talks about those days is generative AI. What is that? I've never heard of that. I haven't seen that written 15 times on LinkedIn. What is that? It could have written our script today. Joke aside, one area I'm very excited about today, going back to our initial thesis we discussed, initial worldview.

26:28And it's something that spooks many investors today. But the question is, how can we apply state-of-the-art technology, which can be software, hardware, AI, quantum and whatnot, to the defense and security sector? As I said earlier, I deeply love freedom and democracy. I think that's generally good. And I think that we have taken it for granted, but it's not that true. We really need to do more to actively protect our way of life. So that's one area I think things are going to get easier and easier to fund over time because more and more people are taking conscience of this fact. Second question.

27:08What are your top tips for emerging VCs who are now fundraising for their own funds? First thing is patience. Second thing is always go to the know. So you can just send emails and emails and emails until you get a know because otherwise it's not clear it's a know. But the main thing is, I know it's not necessarily possible for everyone, but I would advise everyone to stay in the market as much as they can by getting involved with founders, by participating in rounds, by helping in any capacity they can. Then it can help you showcase your access, it can showcase your reputation, and it can give you a steady source of news flow to nurture your LPs.