E292 | NEUVC | Marie Brayer, Partner at Fly Ventures on technical founders and solving hard problems

0:07Welcome to the latest episode of the special series Neo VC, hosted by Freddie, an analyst at Isomer Capital and Linda, an associate at Karma Ventures. Delighted to welcome Marie Brer, a partner at Fly Ventures, an early-stage deep tech and tech-heavy B2B software specialist firm. Being in the French ecosystem for over 10 years, we asked her about the development of the local ecosystem, as well as the secret sauce behind a number of her portfolio companies that have gone on to raise hundreds of millions in following rounds. Is the VC value-wide a myth or a skill just few possess?

0:43Hello, Marie. Absolute delight to have you here on the show. As always, we'd love to firstly dive into who are you, what do you do, and what is your superpower? So, hi, guys. Thanks for having me on the podcast. So, I'm a partner at Fly Ventures. We invest at a pre-seed stage all over Europe in technical funders. and I would say if you want me to phrase it this way my superpower is to be really used to work with this specific type of equity stories and particularly help founders who really want to take on huge technical challenge to maximize the impact that they can have in this specific journey that comes through through, of course, fundraising, through raising the ambition that they are getting the means so that they can succeed in the challenge that they set for themselves.

1:49It's kind of deep tech and overall complex tech is increasingly now a topic across Europe and more and more fans are kind of branding themselves as deep tech. Do you need to be technical to help technical founders? And what have been your learnings? So I'm probably a bad example in this because I trained as a software engineer. So I have technical background. I did a little bit of machine learning and computer vision at the time where this wasn't cool yet. So, you know, before the deep learning era of all these things. but I wouldn't say you need to be technical to be a good deep tech investor but what you would need however is an ability to explain complex things to understand them and the patience to really go into but I would think that's the same for even on technical markets to be fair because even tech or marketplaces are deeply technical if you look at them and their business model and how it works and network effects and stuff like that.

3:01So I don't think you need to be technical. There might be a small cultural element, though, where maybe it's just not the same. Maybe social proof is a little bit less of importance in your relationship when you try to rule people who are technical. Maybe it's more of a values thing than of a background and knowledge, hard skills thing, to a degree, of course. And then, of course, because these things are a bit more specialized in a way, so the barrier to entry for a generalist to understand them, it's a bit higher. It helps to be at least in a specialist firm or be the specialist person at a firm about these technical topics because the barrier to entry is a bit higher.

3:54You touched on it slightly there, but could you give us a bit of a background as to you and how you ended up at Flux? That explains a lot of your technical expertise. I started as an eager software engineering student. I was truly passionate about early machine learning at the time and what you could do with it and the early products that you had. And I should remember, no, maybe you didn't, you probably don't. But at the time, a really, really cool product was the device that you would buy with your Xbox that was recognizing your hands. And there were a bunch of video games that were developed in 2011.

4:36So using the Kinect, it was called. And I actually bought one of those and then plugged it into my computer to do computer vision experiments and see, oh, OK, what products can we build with that? And it, of course, killed my computer because of the volume of data. It did not literally kill, but it was way too much memory usage for my poor MacBook at the time. So I bought a really big gaming PC and retried and did a bunch of stuff with that. So I was, I think, truly interested in that and all the internships I had done were in that space of applied ML. But so after uni, after engineering school, I did a year at HEC to learn a little bit more the business side of all of this because I was really not very aware of how the world really works on the trance.

5:37And after that, I went to Singapore to join two guys who were starting a data management company for the bio-research world, and that didn't last long. It wasn't a very successful experience for me. I mostly learned that you don't join people you don't like. In the character in Frozen, in Disney, you don't marry a man you've just met. It was a similar experience. You don't join two people you don't know to start a company. Oh, to be up. Exactly. But what's super interesting, we still did a bunch of stuff. But I went back from Singapore with no money, absolutely no network in France, and I had to start again.

6:23So I really networked my way into finding a job at a boutique, an M &A boutique which was specialized in helping founder and sell the company and raise money in the tech industry. And at the time, the French tech ecosystem was very small. Let's put it that way. Very small with just maybe five, six VC firms that were quite known. And that was pretty much it. So as a founder there, you were stuck with the international firms were not interested in investing in France. So this was a very interesting place to be on the founder side at the beginning and to help another founders raise their two million series A at the time was a cool thing.

7:14So that's stuff we did. And after a few years, I started to realize I somewhat had a pattern of clients which were always the more technical founders, the polytechnic guy in France, the people who usually were doing complex enterprise software or developer tools or things that were still a little bit more on the technical side. I also felt that my time there was over because the market was changing. France was opening up a lot more talent. And Criteo had IPO'd on the Nasdaq. So foreign firms were starting to take an interest in France. One of my clients, we had managed to get them funded by Index.

8:01Another one by GFC. at the time it was almost first in France because so few foreign investors were looking at our market. But what do you think that is? Just to kind of intercept a little. Because in France it's been huge, you know, a lot of talent. No, no, it's not. So I'm talking about 2014. So it's still like 10 years ago now, I'm realizing. So I feel very old. Thank you. But at the time it was, so just to give you an idea of volume, the volume that was invested in France was maybe less than a billion per year, if you must imagine. So super small. And everything changed after 2015, 16 or so, with a lot of help from VPI.

8:46So I'm going to switch from talking just about France. So that's when I realized I needed to switch to somewhere else, and especially to VC firms. So I was lucky to to meet Bertrand Dar, the founder of Thailand and people of Syri now who had decided they wanted to capitalize on a new way of technical French founders and wanted to to and I had raised a specialist fund called Data Ventures, the second one of the new vintage of this fund active today still, still led by Bertrand, whose thesis was to say okay we're going to back technical French founders doing data science, big data infrastructure, developer tools, etc., as only as possible because there is an interesting talent pool here, and we're going to see what this comes up to.

9:38So I went there to deploy the fund and ended up also doing a few deals on the vanilla fund. Maybe some people would know Malt or Descartes on the right, who both went on to raise hundreds of millions from European investors. Yeah, but after five years there, I reached the point that a lot of people reach, which is, ooh, I no longer want to work for someone. I actually want to be my own boss or just a version of that. I'll be part of a team that would see me as an equal. It's just not a thing that happens in most VC firms. So I left to start my own MonoGP firm, like a version of Sitcom or something like that, which I would gladly do.

10:29When I was asking the people that had raised funds in the last two, three years, I talked to a person I really, really appreciated and respected, Gabriel, the founder of Fly. and he told me, oh, you know what, actually, we were missing a partner in the team, so you should actually join here instead of starting your own thing and let's build the next steps of fly together. So it was hard to say no. The TELIS was really close to that adventure, so technical founders, but out of Europe this time. no fear of taking the strongest technical risk, which we still had an issue with at Serena, which was more conservative.

11:22Gabriel had backed really crazy, technically crazy projects with a lot of success. I love that. And of course, that came with a great set of NPs, which has never been my strong inclination or skill. and that came with working with Gabriel and the rest of the team at Flyer who are all really awesome humans so it was really hard to say no. And working with technical founders now for a long time how do you think that the landscape on that side has changed? Because I guess you kind of have the same problems I think everywhere across Europe or even broader where you know there's a technical festival build a great technology or innovation, has that changed or is that fundamentally the same and the problems remain similar during your time investing in early stages of technical families?

12:16So I've had a lot of time to reflect on that and it's a super interesting question. I would say it's not a problem that is shared in the same way all over Europe, but the best example of a successful ecosystem, I would say it's Oxford and Cambridge, So we call that Oxbridge now, which is truly the only mature technical ecosystem that we have and overall in Europe. And to get that level of success, you need to have the combination, which is pretty difficult. First, you need elite teachers and students, really people with the a lot of IQ that's necessary to just great minds and great talents. But it's not just Augsbridge that has that, right?

13:04You have that in urban places all over Europe. So that's the first component. You need the really elite people. The second thing that you need, and that's very unique to them, is three, four generations of PhD or, you know, expert people who started companies and were VC-backed. And that's really the hardest, because this creates a culture of success, because after, like, the second or third generation after a deep mine, for instance, you have friends, as a new PhD candidate, you have friends who work for DeepMind on our page, Theron.K, per year, You have people from your school who started companies and were backed by angels who work at DeepMind.

13:55I'm just going to say DeepMind, but there are way more companies than this. Of course, it's just one to use, to say. You have a bunch of friends working in the same lab that are thinking about starting a company because, you know, they want that experience for them, and they know that's probably one of the only ways that they're going to see their work transformed into a company, else they're going to have to just follow the roadmap of OpenAI or DeepMind or wherever they're going to go, if you're in AI, for instance. And so everyone is doing something around you or is benefiting from this ecosystem.

14:35If we take AI, it's benefiting of this ecosystem. When you're, it's starting slowly to appear in other places. This also comes often from GAFA investments or GAFA, Google, Facebook, acquisitions. In Paris, you start to have that with a few startups that were acquired to become the AI labs of Google or Meta or their research team. You have this. Maybe the second best example in Europe is what's happening with ETH in Zurich with the huge R &D lab of Google that used to be very much nearby and all the dynamics this created for the master's students and the PhD students of ETH and the opportunities.

15:31And I think the link to all these two bricks so they're really smart people, and the, let's say, economic interest or the startup energy that you get from these people, it's the fact that ETH and the really good schools of August Bridge, they have teachers who are not just, you're not just like professor at Oxford and blah, blah, blah. You're also VP of AI at Microsoft. or your professors have a foot both in the economic world and in the science teaching world. And that makes all the difference because they truly see the application, especially for applied sciences, I wouldn't say for pure mathematics or things like that, but for all the applied sciences and engineering sciences, it just makes all the difference to have an unlimited budget or directly a company that is willing to try whatever you are thinking about or just to get the sounding board of the real world to check whatever you're thinking about.

16:40Just to kind of summarize your thought, it's kind of firstly mindset difference, right? Like you can commercialize IP and then you've seen it happen. If you take another cluster who has been successful in a different way, like the Grenoble region in France, you wouldn't know that this is a good place for engineering. I don't think you've heard of Grenoble ever, probably. It's just that success takes a different path there because this culture of being VC-backed never materialized. People have tried to raise, to them it's, oh, that's something that is unlikely to happen. So they're really big on European subsidies because 3 million from the EIC is a real thing to do.

17:29They get that. They get French subsidies. They get industrial strategic partnerships. And then they quietly are acquired by Siemens or, you know, the industrial. It's more industrial tech. Whatever industrial companies are interested in what they build. So this is something that's completely, that's also true in Germany for some of the tech clusters that are there, where the path of success is not through venture capital because these people don't have the culture that this exists and this is a path for them. But what is interesting is that it's starting to evolve in some of the geos. I would say Germany and Paris are particularly interesting that front, the Netherlands with a lot of the big tech companies and their headquarters there.

18:19It's also interesting because some of them have their labs there, and it creates a lot of ambition for the people working at the labs at some point to start their own thing. And I would say, in my opinion, the most interesting region is CEE at the moment. Because it's funny, it was the Francis' treatment was very similar 10 years ago. it was a great place for the US tech company to hire their, let's call that, offshore. France used to be that for them, but now it's too expensive. So where do I hire my super good experienced engineers in Java or just my gaming studios who will just, you know, they won't think of the game, but they'll just make the game for me if I'm a big publisher.

19:16And all these people, you know what, after being the Eastern Europe department of Sumo Logic or the R &D of whatever gaming studio, the R &D department of this gaming studio, they have their achievement that have made billions of dollars to the US tech companies. And at some point, and this point is now, they're starting to think, hey, you know what? I could do that too. I've done that for you, so I could probably also do it myself and keep a better part of the value created for me this time and for my country. So we see a lot of really cool things happening in CEE for that reason now that we've sort of reached the time where people now get the access to funding to materialize their own ideas after being the tech offshore department of someone else.

20:14The goal when you joined Fly was to build up the French side of their investment practice. But now looking more broadly at the pan-European approach, how are you winning deals? How are you sourcing deals? It's a big geography to cover. We are probably a bit weird in that. So I did not join to build a French geo because Fly was already fairly present in France before, like with 25 % of the money invested in France, we calculated that for an ask from French LPs. So no, actually, Fly is not a brown place. So I think there are very little places where people know about us and know of us. So it's really not something that is very classical.

21:03If there is one firm that we sort of revere in Europe and that would be more of a model for us on inspiration because not yet a model, it would be probably more hummingbirds. It's also not a brand play. It's just very opinionated play on a type of founder and a type of thing where the mode that we build, it's not brand for us. And it's also weird operations on our side because we don't have geographic restrictions. We don't, and I would tell you it's even funny because we're, so I'm based in Paris, but I don't think it's actually an advantage to win a fly type Paris deal because our founder also liked the fact that we're the foreign perspective on something.

21:54And so I would say we found, it's not because I'm in Paris that I'm necessarily looking at the French deal either. It's just we try to match with founders who we vibe with wherever they are, if I may say it like that. So my latest deal, for instance, is a founder from, one of them is from the US but moved to the UK. and the other is from Bulgaria, who used to be at ETH. So that's the connection we got to them. And so our sourcing, as you can imagine, Sales Navigator is not really great for us. So it's a lot through very particular, I would say, points of network that we get to meet these interesting founders.

22:46A little bit of a different angle, but in my previous life, I work a lot with deep tech founders in kind of pre-seed companies and pre-revenue companies. And from my perspective, it's a risky bet that you're taking, right? Oftentimes, you're going in early and these are highly technical solutions. You know, hard to find talent for, you know, there's a lot of risk in working with technical founders overall. So my first question is, how can an investor support that? and where can you add value? And secondly, are there any kind of key things that work across your portfolio that you've seen that kind of really help them, especially in the beginning, to kind of get going?

23:29Because I would imagine some things are fairly universal and some things are very case-by-case specific. So some thoughts maybe on that. So the first answer that I immediately feel obligated to do is that I don't really believe that we have an impact in the grand scheme. So just, or at least that doesn't drive, I think we do have an impact on a lot of founders, not mainly, but the ones that return your fund, you don't have an impact on. Or the impact that you have is that you've helped them feel better and less lonely by being their companion throughout this process. But on one small occasion, you have maybe added a little thing, but the fund-returning people, you're not helping them.

24:14And that's, you do impact, I think, the cohort of people who are just next to that. And sometimes in a very good way. At least I hope, I hope that we did. And the way, I think the biggest way we do that is through the only advantage we have really as a VC, which is our edge of experience over fundraising. The problem with Europe is that, except for a few people in the bigger fronts, and even so not all of them, there are very, very few people who really understand the industries where we invest. And for us, I mean, it's at pre-seed stage, so it's really fine. It's about knowing, OK, is this possible?

25:03Are there the right people to do this? Do they have the right to win? are they intense and awesome founders we want to back? So that doesn't require an army of people to understand because it's really most of the humans, right? But when you reach the later stages, it becomes a little bit more analytical. And then you need someone who has done the work before they meet your founders because all this just turns into... I'm just going to give you an example. It's simpler. We have a portfolio company called Orbital Materials It's former deep mine people, really, really strong team, and they're applying, you know, the latest advanced transformer models to the sense of finding new materials and synthesizing new materials to achieve what the chemical industry is struggling to do.

25:53So it innovates way faster on the key things like carbon capture or really big problems, you know, that humanity face. So the question he was asked by Tiawan Firms at the Series A was, oh, but this doesn't look very much like a SaaS business model. So I'm not sure I'm in. When are you going to monetize? How are you going to monetize? Clearly, this is not what this is about. It's about a long-term science play where you do, it's a different model of company where you do IP sharing with people who can actually manufacture your company. compounds. And there has been a few examples of that in the..

26:37I'm not going to go further. If you don't know about this business model and this type of company, of course you're going to ask, oh, is this SaaS? No, it's not SaaS. It's something else. And the problem is that in Europe, people who don't ask the question, oh, how is it SaaS, are zero. and in the end it requires an extraordinary effort to identify who this person are in the US who have done this before who are going to ask you the right question are going to love the awesome things that because they are truly awesome if you know this thing and yeah they found they're awesome there is eight people in the US because that's where the market VC market is mature enough to have someone who took the time to specialize into the more unusual deep tech go-to-market and more unusual industries to apply this in.

27:37And it's not just on the purely deep tech stuff, because we do a lot of things that you would not call deep tech. And we could have complex things just before deep tech, if you want, in the grand scheme of things. We have this other portfolio company who is, bear with me, a Salesforce OEM for the hospitality industry. So it's a weird license of Salesforce that you can use to use the bricks that make Salesforce. It's not just a Salesforce integrator. It's actually a pure software play. And that's the model of one of the most expensive technology companies in the NASDAQ, Viva. When we raised Series A for this company, do you know how many people in Europe knew of the Salesforce OEM model?

28:26Three. We loved the three meetings. One of them actually, you know, sent a term sheet, Rafi at Singular. And the other two were also really cool conversation. And the rest asked us if we were a Salesforce integrator. Not everyone, but a lot of the questions were phrased that way. we talk then to battery, to I'm not going to name drop, but to a bunch of the really big enterprise to our VC platforms in the US and all of them are like, oh sure, you're doing Viva for hotels, okay, then question, question, question, question. It's just different. So the edge that we have as VC to these people is just know who to talk to for your next round, just shorten that cycle into to something that just respects the founder's time and have already a connection built with a lot of these people so that the round is not painful, but actually enjoyable and intellectually nice experience for them.

29:27Do you think it comes from the immaturity of the European VC landscape that we've just seen more of one type of deal and we just haven't seen kind of a lot of alternatives and the US has kind of been around for longer or is it just that there's more capital there, more specialists and it's an inevitability. To me, it doesn't speak to the quality of the people in Europe by no means. It's just there is more in the US. They've been there longer. They've had to differentiate. I don't know how many hundreds of firms they are. So they all have to be better, you know. And in the end, it's not about how intensely people work or how smart they are, because I would think that we're just as smart and as intense in Europe as what they are in the valley.

30:11but they've had 30, 50 years of experience over us and on some of the stuff this just makes all the difference unfortunately because these are more complicated and again I would say that we do get all these things when we meet them but since our angle is slightly different we try to look for the more convoluted things and so it's just like a very unique approach that we have on our market Europe just loves B2P SaaS. We love recurring companies. But you know what's funny about that, sir? It's just, I think all the big platforms who are people in Europe now, they have hit this calendrum. We're like, okay, SaaS is dead.

30:52Everything's been done. Oh, the margin is smaller than it used to be. Okay, let's phrase that correctly. Fintech, same thing. Oh, marketplaces. I'm bored already. Kill me. And then they're going to have to do, and that's why they all went really heavy into AI because this looks like something with, honestly, a lot of good hires, a lot of really cool deals. And of course, it's just painful for us because we've built this knowledge in the past seven years and you guys just realize it's cool, so thanks a lot for the 20 million pre-sip tickets you're giving to people now. But okay, it just means that we need to go a bit more frontier on these things, of course.

31:34But it's really cool, I think, that complex shit is becoming mainstream, because just the value and the margin is becoming much smaller in the more mainstream markets. So that's interesting. I'm acutely aware I'm on a call with two deep tech investors. But we don't call ourselves deep tech, right? We do some deep tech stuff, yeah. I just think, you know, this podcast is sort of, the premise was around, you know, how to help the new VC and sort of people entering the industry and on their journey to sort of principal and partner. And I was thinking a lot about, you know, that fundraising support and I think value add, whatever that means, and people seem to come up with different versions of it.

32:21The fundamentals seem to be helping the fundraiser. good fundraisers now being seen as looking at the more established markets raising from the US or for some places in Europe raising from the UK. What would you recommend is the best way to develop those later stage relationships to help founders raise being a younger employee Yeah I think you're doing that well with the podcast because it's just a great way to reach out to random people So that's actually a very classical pattern of network expansion. So the first thing is to just source good deals, because you're just the investment banker of the next guy.

33:07So as an early stage VC, you should know your data, because after two rounds, you're aligned with the founder anywhere on the cost. So you're just that. That's what you are. So the first thing is just to really pick good deals and have the rest of your team pick good deals because that's your, everything in network is, especially in the US, it's super transactional. So it's like, oh, are you adding value to my work or are you just draining my time and resources? So the first thing is just that, bring your good deals. Okay, that's obvious. but how can you expand beyond because as a firm for instance we do 28 deals per fund that's not a lot not all of them are also worthy of being shared to tier 1 network connection and that's sad but that's just a fact so how do you increase your volume or your footprint to just be more efficient at network two ideas that I've implemented successfully the first one is if you're local to somewhere just use that to the maximum degree what I used to do in my San Francisco trip I worked with an associate on the list of all the French deals of the year all of them, it was possible it's 400 at the time in 2019 or so it was really doable and for all my meetings there because they all take the first meeting with you if you have a good cold email it's the first meeting if you don't manage to get it you just need to do better and then it's all about what you do in the meeting And so for all these people that I met at these US firms, I just went with my list of the 400 French deal, and I had flagged, okay, these three ones you should talk to.