Daniel Keiper-Knorr, Founding Partner at Speedinvest on Raising 500M€ through the tech reset | E299

0:00Welcome back to another episode of the European VC podcast. Today, I am talking to Daniel Kuyperkenor, founding partner of Speedinvest. Today, we're talking about Speedinvest's latest fundraise, which is Speedinvest for a 350 million euro pan-European seed stage tech fund and their first opportunity fund for pro-rata rights in historic portfolio companies in which they only do co-invest, and that is a 200 million euro fund. So in total, 550 million euro raised across to funds. That is just less than half of Speedinvest total AUM raised to date. So quite an achievement. They have 1.2 billion in AUM, in other words.

0:42Headquartered in Austria with companies like Bitpanda, Wefox, Coach Hub, Wavefire, Move, and many others in their portfolio. This episode dives deep on the fundraise, as I just said, and it does so in connection to our state of European VC fundraise report that we have written together with our good friends at ISM Capital and at flow.io. So in other words, a super focused episode only on fundraising, only on what allowed Daniel and the team at Speed and Bass to be so successful during the tech reset, how the tech reset changed the name of the game I was about to say as they raised that fund, because they were running that race through the tech reset.

1:27So that means they started before and closed after. So in other words, very interesting reflections here on what allowed them to be so successful, how the markets changed, how the conversations with LP changed, and thus also how the narrative had to be slightly adapted. I hope you'll enjoy this episode. If you do, make sure to go to eu.bc to subscribe and also make sure to pick up the report on flow.io slash raise and that's flow with two w's f-l-o-w-w dot i-o hope you enjoy it here's a few words from our beloved sponsor this episode is part of a series dedicated to raising venture funds across europe and come together with the launch of the state of the european vc fundraising report together with our friends at isma capital and Flow, we've spent the winter digging into our past nearly 300 episodes, as well as the latest market data and Isomer's vaulted data treasure, to uncover how the tech reset impacted the fundraising market in Europe, and how leading VCs across the continent have changed their strategies, tactics, and operational handbook.

2:32Filled with graphs, beautiful narratives, and video interviews, providing an entirely new and engaging experience you can enjoy for hours on end. Don't miss it. Pre-register to get it at flow.io forward slash raise. That's F-L-O-W-W-D-O-I-O forward slash raise. Your venture journey redefined.

2:57Tear down this wall. It's more than just an alliance. This is a union of values.

3:13The nature of a problem requires a European response. Europe is a story of new beginnings. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. So Daniel, welcome back on the podcast. We've spoken before about racing in MENA, but today we're going to talk all about, or at least a little bit about Speed Invest, but really dive very much into your latest race. But before we get there, Daniel, I'd love to just ask you to tell us a little bit about yourself, how you got into Venture to begin with, with Oliver and the team.

3:52And then, of course, we're at Speed Invest today, just so that we've set the context right. Great. So thanks for the invitation. Again, always a pleasure being here. I'm Daniel. I'm one of the five co-founding partners in Speedinvest. And actually, for three of us five, namely my co-founding partners, Oliver and Werner, this is our second joint venture. We had a tech startup before that in the early 2000s. So we did the full cycle. We launched that company directly into the bust of the dot-com bubble, late 1999, early 2000. and now here we are managing speed invest pan european europe seed stage venture fund total aum of one spot two billion euro we are in our fourth fund generation the largest we've raised so far my personal role within the company is actually since the fund generation before the current one.

4:54I pulled myself out of the investment business on the capital market side of venturing, meaning taking care of the investor base, preparing this, just make sure there's enough capital at hand for the business model that we've decided to pursue. What was your own reflections on that? Oftentimes you see funds having partners that invest and so on. And then, of course, you have oftentimes the founding partners or the managing partners also very much being the face of the fundraise, but then you have an RR that's really heading it all up. But you've done it, so you've said, okay, one of our key, key, key resources, this is what you're dedicating your time to.

5:41Can you tell me a bit about that thought process? So what allowed us to do this, which we know is different than until very recently, the whole industry understood itself and worked. What allowed us to do this is that from day one on, we had a lot of headcount. So just, you know, wind the calendar back 13 years to speed invest one. That was a 10 million AUM small boutique and we were six partners. So normally you would do this either. Nowadays, this would be a solo GP fund, even less. We were six. So if there was one thing of which we always had enough, it was manpower. And that allowed us to very quickly scale the whole operation.

6:28So going through the fund generations, 2011 was a$10 million fund. 2015 was a nine-something. 2019 was a 190-something. And now 2022 is a 350. So percentage wise, a flattening growth rate, but in absolute euro terms, still on the rise. We should talk about fund sizes and how to think about that, because many have strong opinions. But I'll let you continue. Sorry. You need to have a strong opinion in everything you do in this business. You just can't, you know, invest along and see how things pans out. Over those almost one and a half decades now that we are on the venture side of the business.

7:09Remember the first 10 years we've been on the other side of the table, on the entrepreneur side. So the total lifetime spent in tech and venture for me is 25 years now. Plus Oliver and Werner and the others makes a hundred many years of experience. And we've gone through several cycles. So we've gone through the dot-com bust. We've gone through what back then was called the digital winter. So 21, 2, 3, and 4. We kept our company afloat. We turned it around like two, three times a year, pivoted it left to right. We were in state of pervert pivot until we found our sweet spot and then very quickly experienced how if scale kicks in, how quick this can happen.

7:56So literally the company went from literally being bankrupt in Q1 to having a treasury issue in Q4. and one and a half years later we sold so if thing if wind turns you know in your favor you need to be able to move quickly and for this you need to have just you know spare manpower and um that that you know is very deeply engraved in in everything that we do um and and so as we managed to grow Speedinvest over the years and the various fund generations into that first really sizable fund, Speedinvest number three, 2019, 194 million. During that race, Oliver and me, we fully focused on the race, but we understood that from now onwards, if you want to keep that size and that, you know, cruising altitude of in terms of AUM, that needs a fully dedicated, not just one fully dedicated resource, but a fully dedicated team only focusing on the capital market side of the business model.

9:01Because in a way, you know, a fund is a marketplace. There's capital demand on one side and capital supply on the other. You need to work both constantly. Up until now, the industry understood, like we raise in, you know, campaigns and in cycles every three years. Nobody likes to do it. It's the ugly side of the business resulting in mediocre outcomes. But we decided to, who understood that this is an integral part of the business that also deserves to be constantly managed and not just only by an internal or even worse outsourced IR team that prints out the quarterly reports and keeps LP relations at the lowest possible level.

9:41We thought these are our clients. They pay us. They deserve good service. And this cannot be done, you know, on the side. So this requires a top-level resource simply because these guys give you their hard-earned, bitterly taxed money. They deserve C-level attention. Just as much as the founders do. Not more, not less. Just as much. Completely agree. And I think anyone listening to the podcast knows how much David and I are passionate around fundraising. This we understood probably a bit earlier than the mainstream of the industry. I mean, it's different, obviously, when you look into the whole private equity, behemoth,$100 billion assets and the management, they have like 50 people in IR, also in the front office.

10:29But for a, say, sub-500 million AUM seed stage VC fund, this was uncommon. And this actually, then when we went into the race for Speed Invest number four, this paid out because we were able to send the same people again to meet the same people, not different people without any touch point in the three years in between. I'm literally every other week I'm on a roadshow. I'm one big out of the office, one big desk work, one big out, one big desk work. That's impressive. Let me ask you, you described this, got to be ready for when the wind is in your back. And that's definitely what you have experienced.

11:11We experienced both. Exactly where you started with Fund 4. We definitely all had the wind in our backs and then everything fell off a cliff. Could you tell me a bit about that experience? Yeah, that was actually one of the most impressive experiences I had in all the fundraisers in the past was in actually in the course of the year 2022. So remember, fund is a vintage 22. We started raising in 21. First, obviously, you approach your existing LPs, say, guys, listen, we are three years in, approach in the end of the investment period. You know what that means. In nine months from now, there will be a new fund.

11:52who is up for it we had a very good comeback quota from from existing lps by headcount our lp base until then was very you know private individual family office structured it only with the 19 fund and 22 fund in particular that we managed to break into the institutional asset manager market. So first we approached the existing LP. So we got initially positive, encouraging feedback. Then we went out on the road. And that was in late 21, early 22, when notably the macroeconomic backdrop has already turned that, you know, interest rates actually in the US, the interest rate cycle was already over in 2019.

12:42We had like two, three quarters of Fed rate in Q3 2019, only for the COVID pandemic measures to hit and send the interest rate back down to zero. So the cycle that actually was already over. And in Europe, interest rate was on just about to pick up when COVID hit. So that cycle got artificially prolonged by about two years, only to hit harder once that stimulus is over. And that was exactly what happened in 22. In interest rates, inflation came in late 21, public markets flattened. The sentiment started to turn, but in private markets and in conversations with LPs, that was not a topic yet. So I remember fairly well those road shows that I did in, say, end of Q1 into Q2 of 22.

13:37do most LPs were interested in how portfolio is doing how single companies in the portfolio are doing when they're going to raise the next round and we already sensed back then that this is going to be difficult now so basically the the era of of free money and ZIRP was definitely over interests have come up very steeply very quickly and when I went on the next road after summer so in late Q3, like-ish, meeting the same people. They asked about macroeconomics, inflation, interest rates, and competition of asset classes. You know, the same people. Three months later, totally like as if, I don't know what happened, but that was a very impressive experience to see actually how long that lag until, you know, people actually internalize what's happening out there until it makes, finds a way to the conversation, the meeting.

14:41Now, when you look forward, we could just as well expect when, you know, real economy has already picked up again, but sentiment is still, you know, is still very low. While we see a very strange situation now, we see literally a recession in Europe and skyrocketing public stock markets. Yes. Yeah. Yeah. It's very interesting. But that's also, we have a bit of an anomaly going on, right? With how any stock market is very much driven by the magnificent seven, right? True in the US, but look at the European markets. I mean, there's not that much tech on the Frankfurt Stock Exchange. And still, DAX is marking new record highs like every day.

15:38Human psychology is an interesting thing. Indeed. So, Daniel, I'd love to ask you, you experienced the potential LPs or existing LPs going from first asking qualified questions about the portfolio, individual companies really acting as a normal LP or whatever you might call that. Like that would be specifically focusing on the Speedmaster opportunity to then when you came to market after the summer, you very much saw them asking you questions about the market and interest rates and how everything interconnected and so on. How did it end up pivoting the whole narrative around the fuck? Because that conversation, all of a sudden, you have to talk about speed and match in a different language, right?

16:30Exactly. And that is indeed pretty challenging. Because on one hand, you cannot completely exchange the deck you're working with, right? The basic underlying story must be very consistent. Obviously, the voiceover in the meetings was a completely different one. It helped that, well, basically, you know, I always struggled with aging. But since about three years, I'm fairly happy the age I am. I can credibly tell that this is the fourth cycle I'm going through. And prior to entering the tech industry, I was an institutional asset manager on the stock exchange. So that knowledge from back then also helps a bit.

17:16but to be able to give the lp the impression that the guy or the guys they give their money to know what's happening out there and what influences a portfolio performance or portfolio development is subject to other than you know um getting uh arr up and cic down and and and CAC recovery period from nine and a half months to eight spot nine months. It's the bigger picture in the background. If that is against you, it's super hard to perform. And those who know that investing in ventures, we are in for the long term. So normally a fund is 10 plus 1 plus 1, that is 12 years. You know, portfolio holdings tend to be even longer than that.

18:11see all the continuation vehicles and similar and all the secondary activity going on is nothing else but expression that holding periods in private companies are being even more extended. So that can easily go to 14, 15, 16 years until the big eventual liquidity event is happening. And that actually that goes beyond the normal fund life. And it also goes through minimum two economic cycles. For the LP to have the trust that the GP they chose to work with knows about these, you know, elementary forces in the economy that can work for or against you is, I think, an important argument or a selling argument for a successful fundraiser or not.

19:08Yeah. And especially in the current time when it's so present in everyone's mind that if you don't know how to navigate this, you're going to have a difficult time. I'd love to ask you, because you raised, like not many have done, a seed fund at the same time as you were also raising an opportunity fund. I'd love to ask you kind of what was the reception of those two? How was it different to add context to that? How often did you talk to one LP about both? Or was it more, no, no, we have one profile for one and one for the other? There's one thing that LPs don't like, that surprises. They don't like good surprises because then you're not able to foresee what all can happen.

19:54But even more, they like bad surprises. Surprise can also be that a GP they chose to work with all of a sudden comes around the corner with a completely new idea. Yeah. I want to do another fun. transparency and openness when speaking to a designer specifically when establishing new relationships they want to know who you are what what all do you do where do you come from how have you built up the investment strategy what performance goals are you aiming to achieve how does this transfer into portfolio construction and what do you do to make this happen and and And what do you do left and right of this?

20:32So we have always from day one on been very open that we have these two funds out now. The Opportunity Fund, it's true, was a premier for us. It was the first time that we raised this in a fund. It's not the first time that we did investments by picking up our existing prorata rights in joint Series B investments. In the years prior to the launch of this fund, we did this through SPVs. that once got beyond a certain point in volume, then obviously the quantity and quality coming from our own portfolio deal flow is good and large enough that it could support a fund for its own. So what do they need to do?

21:10Yes, you are totally right. It is a very different product and we are perceived as a pre-seed and seed stage investor. So Speed Invest 1, 2, 3, and 4 have been a tiny exception of the first one, but 2, 3, and 4 are pretty much built by the same model. Spinless opportunity is something different now. And you need to be able to show to the existing and the prospect LPs that you know that this is different. And this can't be done by the same way you did your previous 400 investments. So that means a dedicated own team for this with a different skill set, a different professional experience, a very very strict and transparently communicated rule book by which they can invest or not to make perfect and not the same investment committee make perfectly clear these are two governing bodies yes true under the same brand but that alone is not it it needs to be very clear that this is a different product and yes the the sale was more difficult than the than the seed stage sale because simply for one reason, we are not perceived as a growth stage investor.

22:25We do provide the market with good growth stage material. We have a long list of AAA growth series B, C, D investors on our follow-on investors list, but we have not done it our own. So it was very clear right from the beginning that we will never lead rounds from this fund. We can only co-invest. We need those AAA outside new GPs or VCs come in, lead the round and if the valuation they pay by our own calculation still leaves enough upside, then we can join or else we won't. I want to ask you a couple of maybe potentially quicker questions here, but feel free to go as deep as you want. I try to be short.

23:08that first question what were the three things that you think allowed you to be so massively successful as you were with your two firms so one is i think for sure consistency you know always bring out the same people the same names with a consistent narrative building up over several fund generations every new investment topic that we bought was grew from the past or from our own experience so that was for sure one specifically helpful in the turning market then for sure being out there in the market for 12 years um and having done nearly 400 investments just gave us the credibility um and the brand name that we can build successful seed stage portfolios So credibility, consistency.

24:03A third thing you would ask me, you know, just have the capacity to service the LPs and the capital market. Now, I want to ask you, Daniel, what were your core learnings from the race then? That the economy does matter. That was in large parts of the industry forgotten in 2020 and 21. Tech and VC is not an isolated thing for its own. It is an integral part of the wider society and the economy. And it only makes sense in the context of the wider economy to create value through innovation and technology, not for its own sake. Nobody needs tech for its own sake. We need innovation and technology to improve the business models and the processes we are living by now because they got us to where we are and we have serious problems to solve.

24:56Okay, so finally, now I want to ask you what your core advice would be for managers racing across Europe. Advice one, don't forget your home market. In our case, almost half of, more than half of the money still is domestic Austrian money. So out of the one spot, 2 billion euro, we raised 600 million in Austria. Not even us would have thought that. The flip side of this is foreign markets are a bit harder to penetrate. Don't try to do everything at once. If one market or a particular market is constantly letting you down, just deprioritize it and go elsewhere. So interesting. I spoke to an emerging manager the other day investing in defense tech, and we had both expected that there'd be great interest from European-based family offices and iNetwork.

25:52No. None at all. None at all. He ended up raising all his money, we're talking 20 million here, from the US. So our money is still 50 % plus domestic Austrian. We gradually started to open other European markets. We have literally very little success in the US, let alone East Asia. We started working the MENA market. Also, the last time I was guest on your podcast together with Omar, that we've been doing since eight years now. We have our first GCC LP from 2015. And this is also a main learning. Don't forget your home market or advice and be prepared. It does take time. And this is probably the thing that people working on the investment side, specifically in seed stage range, when companies raise rounds every 6, 9, 12, 18, latest 24 months, On the LP side, you raise in three year cycles, right?

26:57Plus, the LP is under no pressure to invest. The IM sees the startup only once in the phase that he's allowed to invest. And the false negatives can be so much more expensive than the false positives. On the LP side, it's completely different. If the LP does not invest or passes, he knows if you do well, You'll be knocking on his door in three years again. And if you're not doing well, you'll be not knocking on his door. And either way, he took the right decision. Yes, that is so true. One final question on that note, Dan. How do you think about building any, if any, urgency in LPs? FOMO is much less present among LPs than among GPs.

27:47Urgency you can create by, again, consistent communication. You know, set out a sketch of the fund you're going to raise. Keep them updated in regular instances. If you have no relationship with them, once a quarter is enough. Because then you have new numbers to tell. They need to fit the picture that you've told in the calls and the meetings before. Give good guidance in how the upcoming quarters might most likely look like. If anything goes not as announced, then have a good explanation for this. be prepared that an LP might only invest in your next fund. I was about to say exactly that we all only have as much capacity and energy.

28:30That's the point. And if you need to decide on whether I should spend my energy on engineering urgency versus engineering a long-term healthy relationship, it's definitely better invested in engineering the latter. Absolutely. And honestly, most urgency vectors are not very good for creating long-term relations. And the important thing is because the most difficult fund to raise is probably not the first. Yeah, just the second. The second or third. So the first one you can raise on story, your face, your background, your experience. You've been a fund manager with a AAA firm. You branch off, do your own thing.

29:12You're a successful exit founder. you can raise on the on the back of that story fund number two depending on how long the fund cycle is that you're working against if it's on the longer end fund number one better show some life signs and then it's different between seed stage early growth so a and b later growth c and and beyond and pre-IPO. Patience is the biggest with the seed stages, but latest by fund three, the old funds better deliver some numbers. So first fund you raise on story. Second, maybe still. Third fund. This is very tips between story and numbers or qualitative raise or qualitative equity story and quantitative equity story.

30:08Daniel, thank you so much for joining us for this. It was invaluable. Huge congrats, of course, on the massive raise and success that you have with the Speedmas team. Thank you. Everyone listening in, I hope you enjoyed this episode. If you did, do drop us a review. Make sure to follow the pod and subscribe at u.vc. Here's a few words from our beloved sponsor. This episode is part of a series dedicated to raising venture funds across Europe and come together with the launch of the State of the European VC Fundraising Report. Together with our friends at Isomer Capital and Flow, we've spent the winter digging into our past nearly 300 episodes, as well as the latest market data and Isomer's vaulted data treasure to uncover how the tech reset impacted the fundraising market in Europe and how leading VCs across the continent have changed their strategies, tactics and operational handbook.

30:57Filled with graphs, beautiful narratives and video interviews, providing an entirely new and engaging experience you can enjoy for hours on end. Don't miss it. Pre-register to get it at flow.io forward slash race. That's F-L-O-W-W dot I-O forward slash race. Your venture journey, redefined.

31:22Tear down this wall. It's more than just an alliance. This is a union of values. United and determined, we can serve as a model for other regions of the world. The nature of a problem requires a European response. Europe is a story of new beginnings. New beginnings. Let's start acting.