#183 Andreas Schwarzenbrunner, Speedinvest

0:04Hi, and welcome back to the European VC, the go to podcast for everything European VC. If you love the show, share it with your friends and join our newsletter at eu.vc. Today, we're happy to welcome Andreas, partner at Speedinvest, one of Europe's most active early stage investors with more than€1 billion AUM and 40 plus investors based in Berlin, London, Munich, Paris and Vienna. Andy found his way into venture via politics and is always up for a debate. This gave him an exceptionally good eye for promising ideas and trends. If you enjoy our content, do support us by hitting the follow button, giving us a review and following the European VC on LinkedIn.

0:52And now some words from our beloved sponsors. How are you currently reporting to your LPs? Is fund administration taking hours? Are you getting lost in spreadsheet version control? Well, Flow solves all of these issues and more. allowing you to unlock the power of your fund's data by consolidating your work streams onto Flow. Book a demo to learn about Flow's portfolio and fund management features and transaction infrastructure at flow.io forward slash VC. F-L-O-W-W dot I-O forward slash VC. For investors looking for capital, the UAE has become the hub of choice for VCs to connect with startups, sovereign wealth funds, family offices and funder funds.

1:39This October, join fund managers representing over$500 billion of assets under management from CVC, General Atlantic, Techstars, Sequoia, Speedinvest, MEVP and more, who join Expand Northstart to connect with hundreds of early stage to growth startups from all markets for a curated concierge style meetings program. Previous participating founders hail from Stripe, Binance, GoOne, Baiduze, InterSwitch, Caro, and more. Register now at expandnorthstar.com forward slash EUVC.

2:21Andy, welcome to the European VC Podcast. It's super nice to have you here with us today. I think I want to start with the basics. I love starting like this. Andy, give us a quick rundown of who the hell is Andy and how did you end up in this wonderful world of venture? And, you know, you have this funny story from politics into venture. So help us understand that. Yeah. Hey, David. Hey, Andreas. Thanks for having me on the podcast. Happened a bit by accident. I can give you the full story. I was always very interested in history and politics and actually got engaged in the politics very early on.

2:51And my plan was always first to either become president of the European Commission and then later on the European Central Bank. So I studied economics. I always wanted to work in politics. And I also did that for roughly two years as an economic policy advisor. I was also a district council in Vienna. And there are a few things I was engaged in in politics. I always liked it and I still very much love politics and I follow it closely. But then I realized when working in that ecosystem that it's probably not the right fit for me. It was very slow moving. It was very hierarchical. It was very bureaucratic.

3:29I mean, nothing that I think very surprising for everyone out there and the listeners. And then I saw all my friends who actually did different things. It was the first big wave of also startups in Berlin, 2011, 2012. and I heard so many stories about people having funny office parties. It was a very young crowd and they were move fast and break things, all those things that did not exist in my world. So politics and especially what I did was very different. And if you are an advisor like I was, you're never calling the shots. You're never making decisions. In the end, it's always elected officials who are taking decisions, even if they have no clue about a topic, right?

4:08I mean, you have to be, that's the reality. and that was always a bit frustrating because you in the end of the day you were sitting there and you realized what are you actually doing here? What are you really driving forward? And then I saw this other world, this tech world, which was so different. And then it was a friend of mine who made me aware of Speedinvest and he's actually now at Speedinvest, which is really funny. So he later on joined Speedinvest and he made me aware of Speedinvest. We had a lunch. I can really remember it. He told me about Speedinvest. He said, there's this small Austrian fund and you want to start a second fund.

4:38They want to increase the team. So Speedinvest back then was a 10 million, like more or less, we see Super Angel Fund. You all know the story probably. And he made me aware of it. And then I applied and they hired me as the first analyst. So I was the first analyst at Speedinvest. I also had no competition, to be honest. So my background was a very different one. So it was as politics, right? I was very lucky because nobody back then knew Speedinvest. So nobody really applied. right people weren't queuing up to join a 10 million euro fund with four partners at the time i believe it was uh yeah it was was already more than that so basically only partners and also most people back then were also not 100 aware of what venture is right so vc was not as cool as it is now and as it is now so i applied i got the job i had a very funny interview with olivert and he always later on said that the main reason he hired me was because he just had a lot of fun and then I joined as the first analyst, really not really having a lot of idea about venture.

5:41And I had to Google due diligence my first week at Spinvest. But then you realized that that's what you did before you could even make a coffee in politics. Yeah, yeah. And then it was a very interesting journey. So I was doing a lot of fintech in the beginning. Then SaaS Enterprise Software helped to build our industrial team. I was leading our climate investments, which I mostly do now. I was helping to build up our different offices back then. We only had Vienna. Now we have Vienna, Munich, Berlin, London, Paris. I was in San Francisco for a while. I worked for a portfolio company in London for a while.

6:13I did all different kinds of things. And I would say I did my whole startup journey and also within Speedinvest. And I really loved the ecosystem. Maybe it's worth saying to our listeners, if you haven't listened to our episode with all over Hollywood. We talk about the story of Speedinvest. I think it's a great story. It connects to many things that Andy just said. We're not going to repeat it, right? We don't want to bore anyone, but just an invitation to any listener out there interested. Super cool episode. I really recommend it. We've got one, which is, I guess, about eight months old or so.

6:41And then we've got one that's only three months or so that we did together with the announcement of your 500 million euro fund, which I think, you know, if you put those two together, then you've definitely got a good understanding of what Speedinvest is and what Speedinvest is going to be as well. So definitely go on and listen to that. Andy, I would love to ask you the question. You're coming from politics. Now we got the journey. But what did you bring with you that you think has allowed you to be a different VC than your peers? The politics part comes in one hand in a lot of different sectors.

7:13If you look at fintech, if you look at health, if you look at climate tech, I think people underestimate how much of those industries are driven by regulation and are driven by government intervention in the form of subsidies or whatever kind of form. I think we've all seen it during COVID. We have seen it with the Inflation Reduction Act in the U.S., right? So there are a lot of things in a lot of sectors that are driven by policies and politics. And this is, I think, one perspective that I can bring to the table. That's also why I love to work with a lot of climate tech companies because there this perspective is, I think, very valuable.

7:47I think that's one difference. I don't see government and politics per se as the evil, as a lot of my peers in VC do. That's a different perspective. And the second is, I think, due to the fact that I had no background in, let's say, startup or tech, always had to be, so to say, and try to be humble in learning that, learning from founders, learning about technology, learning about different business models, and try to be as curious as possible. because I really had to dig my way into that ecosystem and that still sticks with me today. So I know that I have no clue about a lot of things and I also know that I don't know how to code and a lot of things about technology that I don't understand.

8:30And I think it can also be a positive aspect because it gives you, let's say, the humbleness to say that you have not figured it out all and explain founders how hard it should work. And I think those are two aspects that are a bit different. Now you being part of a bigger firm like Speedinvest, I'd also assume that you guys have deliberately also built a partnership with more what you might call investors with different backgrounds and different perspectives. Because it's okay that you're blindsided on some points because you've then got the strength in the policy side. Am I right in saying that you're very much leveraged as the regulators guy inside Speedinvest or not as much?

9:09Probably yes. There's still a lot of people in the firm who talk about politics with me. So whenever something happens in politics, they feel the urge to talk with me about it. And probably I am, yes, still the politics. I was just about to say, Andy, that I think it makes a lot of sense because that is kind of, you know, the expertise that you want around your table and your cap table. If you're asking, as you said, an impact startup, you're going to have a lot driven by regulation. So from a Speedinvest ticket, know that you also get the regulatory side at the same time as you get the industry 4.0 team.

9:43When Speedinvest comes in as an investor, I think it's just incredibly valuable, right? Yeah, and we had one colleague, actually. He used to work in politics as well, and he was also working in the government. And we always had heated debates, but he left. He founded his own startup. So there were usually two politics guys, but now I'm the only one left. And obviously, you were the one who won the discussion in the end. He is very sharp. Can I ask an extremely off script question and Andy, feel free to ignore it and we can move on. But we saw in the last couple of weeks, you know, really interesting, let's call it phenomenon in our industry, right?

10:20And we actually did see an interesting development from this regulatory or policy standpoint where we saw the venture industry coming together and kind of really playing a role. Whether we agree or disagree is not the point. The point is that we saw it playing a role with the regulator, right? And I wonder, you know, any reflections from her side? I'm not referring specifically to the SVB UK story. That's not the point. The point is it as an example of what the industry can and should be doing or should not be doing on the regulatory side. Any reflections from her side? I think it shows that a lot of options that we have as an industry, if you work together towards the same goals.

10:56The thing in Europe is that makes it very difficult, I would say, is you have a very fragmented market. Plus, you have different stakeholders involved. So you have, on the one hand, local governments. On the other hand, you also have European-wide legislation. But I think we do too little in that sense. And I think there are a few people in the ecosystem. I don't know, Klaus Hommels from Lakeside, I think one example is like, his main task is now being a lobbyist for a venture capital, right? But I think what we have to do as an ecosystem is very well known. There are a lot of things that work in other countries.

11:28There are a lot of things that work in the US or they work in other Asian economies. is there's really a full list of policy recommendations that we could do in Europe, but we're not really strong enough as an ecosystem to basically lobby for that. Also because in the public sentiment in most European economies, startup and tech is still perceived as something irrelevant. It's a small ecosystem. There are a few dudes who are rich. Why should we do politics for them? So nobody really understands the macroeconomic implications of thriving innovation and thriving technology, I think, well enough.

12:05I mean, there are a few people who try to do this for the ecosystem. I said Klaus Hormes is one, but there's also Christian Miller in Germany, for example. He now took over in the board of the German Startup Association, and he's trying to push a lot of things. But I think one thing is that we are not aligned as an industry, and I think in a lot of cases. And the second is that most politicians and local governments do not see the real value of VC and tech. And I think the third aspect is a tiny one. It's also been our own fault because it doesn't really help as an ecosystem if a lot of VCs always say that politicians suck and government and regulation is stupid, right?

12:42It's not a good way to make friends, that's for sure. It's not a good way to push your own agenda. Yeah, we could talk for hours on that. But we've got so many initiatives from every single government set up to improve innovation and improve deep tech research and commercialization of these technologies. And in the end, it's not going to fly unless we've got VC funding. And also maybe one last thing on that. In Europe, we are really, really good at making big promises. We are usually very bad at execution. And I think what we're also very good at is to try to do a lot of things at the same time.

13:18But I think what we should do is do a few measures, but execute them very well and really double down on those things that work in Europe. It depends on specific sectors or specific regions or specific policy measures. but really work and double down on those and not try to do everything at once with a little bit of money because that is, I think, in my perspective, doomed to fail. You're absolutely right. All right. Sorry, this is why you're the center of attention inside Speed Invest for everyone to come and talk about politics because no one, you know, once you get into those discussions, it's very hard to get out of it.

13:55But let us see if we can nonetheless. Andy, you're about or at the time of publishing of this episode, you have just published your great new study, the largest that's ever been made in Europe on the state of VC and what VC really looks like and how we make decisions. So Andy, I'd love to just ask you to give us the overall take on that report. Why did you set up to do the research? How many did you interview slash survey? Then afterwards, we'll dive into the core findings from it. I think it goes very much hand in hand with what we just discussed. I think we should bring more visibility to the European ecosystem, to the European VC ecosystem, but also to the European tech ecosystem.

14:42And I think that there are a few initiatives in the past few years, like the report by Atomico and others, that already helped a lot to actually shine a bit light on the ecosystem in Europe. But I think it's still too little. And especially if you look in academic research, then most of the research about venture capital is focused on the U.S. The data is U.S.-based. The research is U.S.-based. The professors are U.S.-based. So it's very much still a U.S. business. And I think everyone who is in venture knows that, I mean, our industry is driven by the U.S., right? And I wanted to change that and collect more data about how European VC investors decide, operate, and tick in general, and also about their firm structures, about their focus areas, and how they see the European ecosystem and its strengths and weaknesses.

15:32And my role model was a U.S. paper that was done in 2015 and 2016 and got published in 2020. It was a combined research paper by Stanford, Harvard, and a few other professors that were basically doing the largest VC survey with a strong focus, again, on U.S. investors. And I looked at that paper and I really liked it. I found it super interesting because it gave really good insights on how investors decide on investments and how they take and what is important for them when they negotiate a term sheet. So it was very comprehensive. And I thought, wouldn't it be cool if we have the same data for Europe?

16:07So I tried to use the same questionnaire, the same survey for the majority of their survey, plus adapted it a bit to Europe and added a few questions also in Europe. So this was basically the foundation for the research. I'm curious to hear your reflections. You know, it's a bit of a stupid question. Well, it's also an interesting question because now you've done the study, right? So you see the results. But on the onset of this project, what were you thinking would be the usefulness of the outputs, right? Is it more of an intellectual curiosity for any VC out there? Is it more of a comparison?

16:41Are there policy outputs that can be taken out of this? I don't know, right? I'd love to hear your thoughts. So my original thought was actually nothing will come out of that. We used to have time. I originally thought that probably that won't be super interesting, but my intellectual curiosity to drive this. And then I thought maybe it's already interesting if we have data for all the things that people always talk about because there's a lot of, you know, VC is really good at anecdotal evidence and like pseudo academic blog posts. And I thought it would also maybe be super interesting to have the data to also can say, maybe we just operate the same as U.S.

17:25investors. Or maybe this is how European investors decide. Maybe the outcome is not something that people are eye-opening and people are like, wow, I've never expected that. But at least we have the data to back that. And there are a few things in the research actually that were quite interesting and that came out afterwards that maybe I did not expect. I mean, so we identified around 780 firms in Europe, VC firms that are operating and headquartered in Europe, and around 6 ,500 individual VC investors that we serve with. And this database alone, I think, is the most comprehensive database on European investors.

18:01I also want to say in this podcast, sorry for everyone that I bought out with my emails. But only a few complained, actually, so not many complained. And around 500 are answered, which is actually quite a lot. A bit less, but a lot. Just because we came off of the policy note before, I want to ask you a question, which is one of the questions in the questionnaire was, does your operational headquarter differ from the fund domicile? Which is such an innocent little question. But from a VC policy side, that is probably one of the questions that our regulators should care a little more about. Yeah, the reason why I asked it, because I already had in mind that a lot of funds are not headquartered where they're really operationally headquartered, right?

18:49I mean, maybe they run with a third-party license or maybe they are licensed somewhere else. And I think also the result shows that there are a lot of funds who are headquartered in Luxembourg, but are not really headquartered in Luxembourg. I think this is the most interesting result. We know this quite well because you're also going through the licensing process and so on. And we looked at a lot of different setups across Europe. And everyone who ever set up a fund knows that there are big differences between Germany, France, UK, Luxembourg. There are big differences. And if you look at the details, there's still a clear tendency that Luxembourg and Switzerland are just way favorable.

19:32Also the UK are way favorable to set up a fund. Could you share the number? Do you have the number with you? Almost 20 % of the people that answered said that they are domiciled in Luxembourg, but only 2 % of all the answers said they're really headquartered in Luxembourg, just to give you a perspective. And there are also a lot of funds who are legally headquartered in Switzerland from the people that answered over 20 % as well, but way less are actually operationally headquartered in Switzerland. So it's either Switzerland and Luxembourg. I would say the clear regulatory winners, if you want to call it that way.

20:10I think it has a lot to do with tax and local know-how. So, I mean, if you've gone deeper on that, there are a few things why this is the case. And I think the number one reason is for sure that there's an ecosystem that knows how to deal with funds. And we see that the regulators know about it. the whole ecosystem of service industry around funds, the tax ecosystem is beneficial. So I think there are a few reasons. A week or so ago, I was in a bar with a Danish member of parliament that when I told her what we did, she said, well, why don't you do it in Denmark? And she was super, you know, acquisitive with that question.

20:50I was like, well, it's not for tax reasons. It's just because there's no ecosystem here. If I were to reach out to a Danish lawyer, can we do it like this? He'd say, fuck no, you can't. And I'd say, well, I know that you can. He just doesn't know, right? The Danish ecosystem isn't up to the level that it needs to be for us to be able to do what we're doing here. And even if it was, then we wouldn't have the infrastructure, as you just said. Where's the startups domicile? They do this all the time. Well, their headquarters is working out of the UK. I think that's the big difference, right? But in markets where you have a strong financial service industry, London, Luxembourg, or maybe Zurich, if you stick to those three examples and you ask people, can we do it that way?

21:31They would look at you and say, depends how much you pay, right? So we can find a way to make it happen. But if you do this in France or Germany, the answer is probably no, you can't. So to everyone who's listening in, it's not because David and Andreas are paying a lot that we managed to make what we're doing work. Because everyone would know that we are hustlers. Also a disclaimer here, the podcast, I'm not talking about bribery. No, and neither is it evasion or anything. It's just about knowing how to do things. Let's just make everything different. Yes, you have lawyers, you have tax accountants, you have a whole service industry that just knows how to work with funds and financial services.

22:15That's it. It's complex, right? At the end of the day, it is complex. We oversimplify it. It is complex and it takes specialized service providers. That's the message, right? And less developed ecosystems just unfortunately don't have it yet, right? I come from Portugal, right? Really up and coming ecosystem, Lisbon, super exciting. I don't know if there's any kind of player that has really seen distributions being done yet to be able to advise a fund on how to set that up, right? That's just, it's a shame, but it is what it is, right? It's not evasion. It's nothing illegal, right? It's just experience, that's all.

22:43I have so many stories about that, but we probably stopped here. Yes, we better do those when we are together for beer in the Bahamas or wherever we'll meet. So, Andy, I'll ask you now, because it's incredibly interesting that you had the intellectual record and scientific record to almost copy the U.S. survey, because that allows us, of course, to have a comparison between what the U.S. survey showed and what your survey results show. So I'd maybe ask you if you should draw out the first point for us, a market difference between Europe and the US. What should we be talking about? I think the biggest difference what we see in the firm categorization is definitely that the US market is just way ahead.

23:28If you look at the age of the funds, I think this already shows that they are 20 years ahead and the ecosystem is just way more mature. I think this is one of the biggest highlights in terms of firm categorization. In terms of decision making and what they look at and how they operate, there are also a few differences. U.S. investors, for example, are way picky on ownership. U.S. investors are interestingly, apparently way picky on valuation, which every European investor would say is not true. So this is an interesting result. And there are a few things also when they negotiate term sheets or when they look at investments where U.S.

24:08investors are different. I think one big highlight definitely is they pay way more attention to exit markets and capital markets when they evaluate an investment way more than European counterparts could also be because there's just a lack of exit and capital markets expertise also in Europe. But besides that, I think what we also see in the data is that the overall results are very similar. So what is important when you do an investment decision, how they come up with investment decisions in the partner group, what are the things they are flexible at or not flexible at when they look at term sheets.

24:42Those things are very, very similar in Europe and in the US. And I also think that this is true to the fact that, I mean, European VC is very much influenced also by US VC and learned, I think, a lot from US VC. It's not surprising that there are a lot of similarities. Just a clarifying question there, Andy, when you talk about, So the first topic you raised before going into decision-making, you talked about the maturity level, so to speak, of the firms. And by that, I'm assuming you're talking about vintages or fund number. Just unpack that. What do you mean? How did you come to that conclusion?

25:17So, for example, in the data set, on average, the first fund was raised in 2012 of a European firm and the median was 2015. So basically, you see that most investors in Europe or most firms started during this cycle, so to say, and this upmarket versus if you look at the U.S. data, the average founding year was 1998 and the median was 2000. So a lot of it were also started during the cycle in the U.S. back then, right? Because 1998, 2000 was the hype in the U.S., but this is where most of them started. So that also shows that they're almost 20 years ahead. Do you have any, I guess, no, but I have to ask, any data insights or thoughts around DPIs as well?