E319 | EUVC Awards | Marc-Olivier Luecke, General Partner at Atlantic Labs, and Christian Siewek, co-founder and MD at Vimcar on Vimcar exit

37:50we understood very quickly where there were vibes with an investor and where we are aligned on so could potentially aligned on certain things and we're not so if you had conversations around what is it in 10 years um how can we build that into a 10 billion company and so on i think it's an interesting thought experiment but if that is if your conversation was only around that then this is not really how we work so i don't think it's way less ambitious but the way we work was more like okay there are 50 50 million vehicles commercial vehicles in europe we have like 50 60 000 now still a lot more air are than many of our peers that have like kind of started companies around the same time and there's a green field out there so whenever we're approaching customers it's a green field situation and we need to get our head around how can we basically get more market share on what is already there and it's no rocket signs that there is a need and it's rather a question of when are they adopting products and solutions and not if and even only with the products we had we're like okay we can turn this into a 100, 200, 300 million AR business at some point just following through.

39:16So we didn't need that magic around hypothetical things that were like really unproven and yeah, very fun future. Yeah, it's important. I think it's important what you say, Christ, right? It's not a small opportunity. Otherwise, Battery Ventures wouldn't be doing this buy and build case in that space right now, right? It's just the question of sequencing and framing and how you pitch to investors. And with Acton Capital, there was definitely exactly that fit, right? So it was like, yeah, we look identically on the opportunity, more or less. And we are going to talk more about battery ventures and what they're doing here.

39:56So I think that's going to be part of the conversation around the actual exit and timing and deliberations. So let's get into that. But it's obviously a very interesting point. Maybe let's say so just to rechart it, right? Then in 2018, you did this Series B. In the end of 2018, you did this USP,$12 million by action capital. That allowed you to consider additional products, fully take the free products to their full capacity. And then you had enough capital to also really scale and both focus on GTM and get that completely correct, but also internationalize to the UK and drive further growth.

40:36Let's maybe just ask you about what then happened in 2022 where, you know, this is of course the tech reset. April 2022 is where I typically date it. Tech reset. What would you say, Christian? What happened here? Yeah, so of course it would be very convenient to blame everything on the tech reset. no I think what happened after 18 we got a really great in 19 we had a really amazing growth here so really yeah almost 90 % which for us was good and then 2020 came where we weren't like really affected like COVID kicking in but it wasn't like all companies were running away and we didn't close any we had a few hot months and 2020 i think was a bummer for for for everyone um into a certain degree and then we kind of had like okay now we want to like re-accelerate since there's brexit we also want to go to the uk that makes sense and kind of had a few big bets in parallel which was uk which was a massive investment in outbound because we We were a business that was 95 % inbound driven, which is super cool.

42:08But also, it's not really in your hands to grow beyond a certain stage. So you need that outbound or outreach components at some point. And then, yeah, we really invested a lot. 2020 came with, of course, some external circumstances. And we kind of realized in particular 21 that throwing money in the growth channels does not necessarily or unfortunately does not result one by one into additional growth. So like a few percentage points, we were growing faster, were like super, super expensive. and that made us really end of 2021 think like okay is this really how we want to operate is that does that really make make sense and then beginning of 2022 we took like the strategic decision also with with investors to like hey let's turn that let's increase again optionality let's turn that into a cash positive business we knew that that it would only take us a few basically a few months to do so by being a bit more cautious on the on the on the marketing side and on the hiring side and that's kind of how we started out into 2022 but not having any scenarios for end of 2022 beginning of 2023 in mind right but just working on on on that piece and interestingly we increased growth again by spending less so there was I still can't get my head around that but that happens probably if you don't want it too badly Mark, what reflections do you have and similarly for you Christian reflections on this there's something up why pushing for more sales does not work.

44:20It almost does the opposite. What are reflections there in terms of, is that just a trade of the business, meaning the sector and the product that you're selling and so on? Or do you see that this was company specific? We made some wrong calls. we hired maybe not the right people we made up we we we sunk our own boat um or or or was it external factors i let christian answer it very diplomatic i think the answer in the end is is yes and yes right so yeah it's it's really both i think there are markets that and probably the fleet management one is such a market where it and in particular if you're looking at smes and smaller where you need an openness to adopt and it may take some more time and you just need to sit there and work through it over a few more years but also i think we made there a couple of of things on the product side and on the GTM side.

45:32Probably we could have simply done a better, bring in maybe more experienced people as well or whatever. I'm not sure that's always the solution, but probably also something company specific for sure. I mean, we were all first-time and still first-time founders. So how can we get it right? A hundred percent. or even 80%. So definitely also. But that's the question then to an expert like Mark and also the rest of the, obviously the board and investors, like reflections from your side on both like this decision and that it didn't pan out and kind of what did you take, what have you taken with you onto other companies?

46:21Yeah, I mean, of course, I think everyone is a little bit disappointed that you're not growing more quickly at this stage. right and weren't able to do that but on the other hand everybody's also happy that you didn't waste much money trying to internationalize it costs at all costs and and and then not making it right which would be the other way and because we're thinking both about geographic expansion a product expansion switched you know a fleet and other options as well but and i think when we talk about the exit we get to it it's also okay to build a business which is very good in in a certain space and doesn't have ambition to grow by itself organically for global domination, right, but can be part of something bigger.

47:04And I think this is a template we'll see much more. And I think it's a healthy realization that you don't need to invest tremendous amount of money to grow that business on its own necessarily. Yeah, because you could have done it more cash effectively. and for that reason less dilution and then the outcome would actually, from a pure venture perspective, also have been better. Yeah. So let's maybe go directly into the exit and the strategy and the timing and deliberations made in connection to this. Or maybe, yeah, so you, of course, and go to 2024, you realize that it does make sense to have this SaaS company, which Frimcar was, grow capital efficiently.

47:53And then you end up with an acquisition by battery inside. Let's maybe just talk about how did that come to fruition and what did that do to both the founder mentality and master mentality and the conversations that were being had. Well, I just think as you alluded to, there was a little bit of a question already in the board around the time. And, you know, I was more on the outside with our partner Jens on the board. And then I got involved in the exit conversations. But around whether this business should be standalone in the long term, if there's really a competitive edge as a standalone business for forever, or if we shouldn't combine, right, in order to manage to get this global expansion in order to make it something bigger.

48:40So that conversation happened quite early. and you know Christian I think you and Andreas you engaged quite early also speaking with advisors and other strategic partners and players in the space to figure out what could be possible options for you. It all started out with like having the optionality and having like the financial structure in place that allows you to basically think about it more thoroughly and not like run for the next series, for a series C necessarily. I guess we agreed at some point that it probably doesn't make sense to raise another round if we're not seeing the proof for stronger organic growth.

49:23I think that was kind of the – which is not an easy call to make, right? So, of course, if you have Atlantic on board, But then there's the ambition and the growth voice. That's very important to say, like, why? Why? I don't get it. Why? And then you're kind of leveling that out with other perspectives as well. And then you at some point agree on there was very quickly a certain openness to alternatives, right? And if you think about alternatives, I guess, from a VC standpoint, just operating the business and being happy about profits for the next 10 years is not sure that's a desired outcome, but you quickly end up thinking, okay, is an exit, is that an option?

50:13Like, what is a good exit? Are we ready for that? And you start having these kind of conversations, which happened poorly. beginning to mid of the year and of course then also especially in dress and myself we kind of familiarize ourselves a lot and and for that purpose spoke then with a few i mean a advisors investment banks i mean you you get these documents very quickly where they propose you hey this is what you can do with your business and so on yeah i'd love to ask you about yeah go ahead more? No, I just want to point out that you engaged really early with battery. I think like 18 months before the close actually happened and when there's nothing concrete yet.

50:58And it felt to me like you were actually helping them to a degree, you know, at least understand the space better, but also formulate their thesis on, you know, what a buy and build strategy could look like in the space. I think that was very important. And also the other way around, I guess. Yeah. If we go to Battery after, I would just love to ask about the experience of shopping for M &A Advisory on both sides. Like, well, any, maybe first chart the experience and then also talk about learnings and what would you say to others that are in this position? Like, be hesitant to do X or be very aware of Y.

51:38A couple of days ago, I had a conversation with a friend that is currently thinking about an exit and thinking about timing. And then my number one advice was don't think about it alone, but reach out to a few maybe trusted M &A advisors or banks for just do some sparing around it. And of course, it will quickly turn into a pitch situation. But you get a sense really quickly with whom there is a vibe, who has done similar deals also in a certain space, who's really interested in your case, and who is just currently being not too busy and so on. I think you maybe don't want to share too many details yet yet about the business but i think it's always a good exercise to just casually talk early and just for yeah clearing up your mind also regarding what you want and if you start talking about specific scenarios very early you also realize very quickly whether you really want it or whether it feels odd and to talk about it and here was a bit unusual that in the end we decided then not to mandate an advisor, then not to run a competitive process, which normally would always recommend most founders to try to run a structured process and be as competitive as possible.

53:09Yeah, and I think that's the next topic, right? Maybe, Mark, before we go to it, in terms of engaging with M &A advisors, any recommendations from your own experiences there? Well, I mean, the normal recommendation would be to, yes an advisor helps because founders normally have no experience in doing an MA transaction it's the first time and maybe the only time they do it so it's good to have somebody who's got a lot of experience there and ideally your investors have experience but you know they may not have a time to to really dedicate on an operational basis you know every day so so I think it's good to have an advisor it's good to have the right one who doesn't over promise and is able to but you get this competitive dynamic going and frame the target in a way that the strategic benefit and synergies are clear to the buyer.

54:03So I think that's the main thing an advisor is doing and then getting this dynamic right. Then the truth is also in my experience, you know, nearly always the buyer ends up being a party where it's already some sort of relationship to its in the business so if it's a strategic buyer company that there's already some working relationship on them and they understand how it could fit well together or if it's a private equity buyer like in this case that it sort of fits into a thesis and they know how they can make more out of it and it's you know much more often than it just being a you know we look at the numbers we like it and and we buy it because at a minimum then you won't have the synergies which justify premium price.

54:46And it was reflected on the other day because, you know, your co-founder Andreas, he was part of a CEO coaching group we set up where there were six CEOs sort of doing peer coaching. We're not involved, but we helped set it up. And out of these six, four had their exits already, and two are on their way, hopefully. And these four exits, three were done without an advisor, exclusively to a strategic buyer, which clicked with the founders and the business liked it. And the fourth one was done with an advisor who was very helpful, but it was still with the, went to the strategic require, which had originally triggered the whole process and where there's a close relationship.

55:26So I think having the right advisor can make a huge difference in the outcome in terms of particular the price which is being paid, but you still need the strategic link and you should start establishing it as early as possible, also outside of the process. Yeah, incredibly interesting. But then let's go to the, well, special situation that's not so special if we think about the peer group that you just spoke about, Mark. But let's talk about then engaging directly with battery in 2021, taking that decision, how you manage through that process, why, you know, and maybe the learnings that you made when looking back.

56:08I'm always thinking in terms of learning and whether there's anything like that's really applicable to other because it seems like this process is so individual. But like one, I think, important learning that Mark already mentioned, very few things come totally as a surprise. So there's always kind of a connection that has been somehow established before. in in our case it wasn't for a very long time it wasn't a strong a strong connection but in in summer 2022 we kind of exchanged with battery quite a few times around how we see the market so whether like a roll-up game makes it made sense and why and and then also more specifically whether vim car could be like the platform or core to something bigger and by that is and and so on and we had really similar perspectives on that also on that that pure organic growth where you just throw money at it it's probably not the smartest way to generate value for everyone involved but but also at the same time of course the vim car team including investors they were like probably lost when it comes to n and a roll-up so there was not like much operational experience and in in in doing in doing that and that's kind of how it clicked and we continued to exchange and then um one of our competitors basically um went into a structured process which kind of triggered a really a sudden momentum within very few weeks so we were approached by many pe's at that time some are having a bit more serious interest wanted to really like meet up some just to learn vimka as probably reference as they've been in the other process and so on so you you learn that quite quickly if something is going on and then we also learned of course what was going on i mean it's a small it's a small industry or the players like the relevant players there are not many and then also of course m &a and advisors and banks there unfortunately they're talking a lot so you learn quite a quite a few quite a few things and then there was all of a sudden this momentum where we are also thinking like maybe it really makes sense that and of course that was mainly driven by battery, maybe it makes sense if we buy both companies in parallel and throw them together and basically form the nucleus of future European fleet management and really grow from there organically and then plus also roll up and that's basically what happened so and that was basically the reason because the perspective was so clear and what could happen that we kind of jumped opportunistically jumped in there saying like hey if we believe the price is right and we get kind of a quick process as well then let's do it and And those were probably the most horrible six weeks of my business life, maybe my life.

59:43Also having like a second child that was born like basically the week before D &D started, which I do not recommend. And then it was like, just go through, explore, have a check-in every week. Where do we stand? And every, of course, trusting battery, which probably also took some convincing to investors, to our investors that it was the right thing to do that we believe that we could trust Battery and looking at it now I think we did a great and also like Battery was really a great really an amazing partner that always delivered on promises and also allowed for that smooth process because during the day you can like be pragmatic or you need to be pragmatic if you want to assess a business that you're buying for a nine-digit amount, then you better look closely, but you only have five to six weeks.

1:00:44So I think it was also a bit of a gamble from there. Mark, trusting battery. You did not have the direct and very close contact as, of course, the founders did with battery. So what were the hurdles? What were the things that allowed you to feel comfortable with giving exclusivity to battery and trusting the founders in running this? Well, the founders we trust anyway. So that was not an issue. But not our experience. That's true. But running an exclusive process, that was quite unusual, I'd say, and also controversial, to be honest, as a decision. right because you know normally you don't end up with a maximized valuation if you only have one bidder and there's also a risk but if they change their mind you're left with nothing right but on the other hand we were concerned that if we started a process with an advisor and reaching out to potential new bidders it would just take a lot more time right until you prepare other materials set up process and these people get around to it we'd lose a lot of time and we might potentially both lose this opportunity where battery has several targets in mind and how to combine them and keeping them on track but also it was a very fragile market environment right you said right the tech down earlier in the year and you know the VC market outlook was very bleak we weren't sure we would be able to raise an external growth front again if we wanted to in this environment so we're all very laser focused on trying to get this transaction over the line before the year end and holidays, and who knows what would happen afterwards.

1:02:27You might have a bank blow up, as an example. Two months later, right? And that's what happened. So, I mean, we're really happy to have gone that route because we felt it was the quickest route. It was mainly about timing. That was the important thing. And we also saw the benefits to battery that it really helps them because they wanted to paralyze the acquisition of Arboros and Limcar. And knowing that they had exclusivity on Wimka allowed them to run in this other process, which was a structured competitive process in parallel and sync the timing so that they can't close both transactions at the same time, otherwise it wouldn't have worked.

1:03:05So there's a real benefit for them there. And we also made them pay for it, right? So we said, if you want to be exclusive, you have to sharpen up your offer, and then we're all in, and you have to close it by the end, at least got to sign it and then close the end of January. And I think with time, like from a company perspective, with time, you can manage risk, right? So if you set yourself like a six-week deadline, then what could possibly happen? Like after two or three weeks, you know, right? You have like much better visibility on how things are really going. and like worst case you're you're you're wasting five six weeks i mean that's that that's bad and that hurts a lot but also i think if if things had gone really really bad then you know after two or three weeks you see like are like how engaged are external lawyers for example how engaged are external auditors and you see when someone is going really all in and wants to make it happen if you feel like you're really transparently about potential issues.

1:04:14So I always had the feeling that I was in control or we were in control of that. Just to sum it up, right? It was an all-cash deal, closed in January 2023. It was in parallel with the other acquisition. It was a great outcome for all parties, as you say yourself. It was a fund returner for Atlantic. the employees and founders of course got a payday and battery or hopefully quite happy about the acquisition today. Could you talk a bit about that the post exit situation that you're in now Christian? So I think the two management teams they didn't hesitate long so we are like already in January I mean we didn't close until end of January January and February were sitting together already knowing that Berlin would be our common new headquarters.

1:05:12And we decided on the future leadership team and basically operated in parallel, but started to move everything together, including like working very quickly on like, I think we set up a business case in like two weeks for that year. I had to go like really quickly and that kind of made us work together really, really early. So yeah, first, I think end of, or mid of February 1st board meeting with everyone. So we kind of operated as one, at least on a leadership level, as one company very, very quickly. and yeah so i heard that is that this is not not not common but like who am i uh to know and and to tell but to tell but it felt really really quick and uh but that that was i think possible because like everyone like avrios vimka and battery were so well aligned on what was happening with with the business and the outlook of the business that it was like very natural working together very quickly and rather seeing the companies as different products rather than different business models or teams.

1:06:34Of course, it takes time until today. It takes time to get the Wimka and the various piece out of people's heads. And then maybe let me shift to the VC side, Mark, and ask you about, But maybe you'd share a bit about where the fund is today. Like this was an investment in 2014 to begin with. Now it's 2024. The exit happened in 2023. We don't talk too often on the podcast, nor is it something we see too often, like the end of life cycle for funds. But, you know, very quick math, likely VC funds are 10 years life cycles. So it's pretty easy to say, well, okay, if this was done in 2014, that means that you're looking at a fund here that's about done.

1:07:24Could you tell us a bit about where the fund is, what you still have left and how you're managing it now? Yeah. And I mean, the timing obviously also played a little bit in the whole discussion around the exit, right? both our time in front of life cycle coming to the end and for our founders as well we'll be doing it 10 years and these considerations also also enter the discussion also for our core investors it was the same i mean a little bit of a special case because this first fund 2013 still under the label of atlantic internet was really micro fund single lp single gp a bit of a different different situation and the portfolios you know we had a number of excel this was a great one and we still we still have some legacy companies which are managing and given that is only one LP in where it's an easy discussion on you know how we want to manage the remaining companies.

1:08:17Generally if you invest pre-seed, it does take longer than 10 years to create a primary exit for our portfolio. Of course we all know that right and so you have to be able you know to of course early on trigger some conversations these strategic conversations i mentioned but also very grateful that there's a secondary ecosystem emerging in europe now where you know as this portfolio deals happening and then there's buyers ready ready to buy you out and for this fund as i said it's not so much for an issue but as in 2016 when we set up our first proper multi-lp fund of atlantic labs and as that is coming to the end of the life cycle i'm sure we're going to start engaging these conversations much more to manage that proactively.

1:09:04I promised you, no, I did not. But I told you, I forewarned you that I tend to spend all the time we have. And I have another 10 minutes on my clock before we have to round it up. And for that reason, I'd love to ask you if you'd be ready for going into a bit of reflexive introspection on what wealth does for a person when it enters your life. I think it's more to you, Christian. I cannot talk about wealth, but I mean, we are the business of delayed gratification, right? I mean, it just takes a very long time. And so it's incredibly satisfying and important that you also get to the end of a journey sometimes.

1:09:50There's this intermediate success that you share as a VC with founders. and obviously you know external validation like having around is nice and other milestones it's nice and but as a preceded investor you're very much aligned with founders that you know we don't pay ourselves a high salary and we're very much waiting for that big payday to come it eventually or maybe not because you know it's it's all incredibly uh risky and it does take a long it does take a long time but I think the great thing to see if you have an exit like this is also that you know then the relationship with the founders also changes because they can become angel investors themselves and I'm super happy to see that then founders of exit then they co-invest with us and help back and mentor young founders in our portfolio and we've done one co-investment with with you guys and your co-founder and you know this is the sort of thing that i want to see more so that things come back into the ecosystem of money and advice not just by having vcs but also the founders yeah and then from from my perspectives yeah so definitely it changes something but i was surprised how little so so i mean i mean it makes you of course personally it makes you a bit less scared of things a bit more relaxed so to say and I think it's always good to come from a place where you're a bit more relaxed and you can think more clearly and so on and and I guess that's that is really something I think is the biggest change that I'm not able to kind of think more clearly also about what I want what I like what I would like to do in the next years and so on and my my decision was for example to stay with the business because I see so much potential I see the current role and I'm I'm in as something I can really learn a lot and I know that I'm doing it from not from a place of desperation but from a place of curiosity and doing only things from a place of curiosity is a core position to yeah to be in yeah so that's really what i'm probably taking the most of course like the first weeks and months it's it's all a bit weird after after after after a transaction but um unfortunately you you get used to to anything very very quickly so um yeah it does not guarantee any satisfaction or happiness or whatever you'd be looking for at all.

1:12:42But it's more like baseline contentment and being in a comfortable headspace more often. I think what's helping and what's really cool. And I'm really thankful for. I'd love to ask both of you the motivation. How much money has been a motivation in life in general? Like, but not necessarily. therapy. So for me, money is a huge motivator, but it's not about getting rich as fuck and driving a Lamborghini, but it's about ensuring, as you say, contentment or a safe place, but also a secure future for my family and children. I'd love to ask for you to just reflect a bit on what money means to you and what it meant in the beginning.

1:13:31For me, money was never a goal in order to have to spend it but but very much a a measure of whether something is working i was always interested in investing and and you know seeing how how you could turn something small and something big and that motivates me a lot but our ethos also this firm is really and we don't want to be too rich or to have too much money paying us a lot because we want to stay hungry and we'll stay you know grounded in the same level as young founders who want to build something new. So, you know, also personally me and Christoph, we reinvest all of the money we have into the fund, into the startups, because we want to keep that mentality of building for our future.

1:14:15Does your wife agree with that decision? It's a different question.

1:14:25But I can totally relate to what you said, Andreas. So if that is your definition of whether you're motivated by money, then I would say yes, then I'm also to that degree. But probably it was a bit more so 10 years ago than it is now. And I think you only find out how much that motivates you once you are at that point, because you have some weird conception in your head what it does to you. and actually like ideally you're not hanging around with like other friends or like you're doing something differently but maybe you can balance a few things better. So if you have like a balanced lifestyle of having some hobbies and sports and I have the opportunity at one point to take maybe a year or two off to spend more time with the family and so on.

1:15:25Like those are the things that really matter. And yes, they're fueled by money. But if you have no clue what you're doing all day long, then it doesn't really help. I think you're absolutely right there that as long as you're in a position where you continue doing what you've always done, even when you don't have to. I think the important part is that you get the privilege of, we always talk about setting boundaries when we talk about being able to do a high-performing job, but at the same time also having a family that you're there for as a parent and a husband or wife. And that's where maybe money allows you to be a bit more clearer and the boundaries clear.

1:16:09And I think that that, Margie, you're also nodding here. And I think that that's really what we all strive for, right? And I do think that money is incredibly important there in terms of giving you that freedom. Guys, thank you so much for joining in this conversation, both about the exit and the investment and the journey, but also in the end, a bit about wealth and what it does to you and how it motivates us. You are both amazing and incredible people really doing something for the ecosystem now. Christian also giving back as an angel investor. Thanks so much. are incredibly fortunate to have you with us both in the ecosystem and on the podcast and congratulations on both the exit and on being a finalist in the category of exit of the year cool thanks so much andres was a was a pleasure thanks for having us Bis dann.

1:17:27Acting, acting, acting, acting, acting, acting.