E343 | Francesco Perticarari: Announcing our investment into Silicon Roundabout Ventures

0:00Welcome, everyone, to another episode of the European VC podcast. Today, I'm super excited to announce that we are investing in Silicon Roundup Ventures, which is headed up by Francesco, our good friend. He is the hustler of hustlers in the deep tech space and venture space in Europe. So I will not spend more time here because he's going to introduce the whole fund and how he broke into venture and got it all started. So for that reason, I just want to say lean back, enjoy the episode. And I really do hope that you'll connect as well with Francesco as we have at UBC. Here's a few words from our beloved sponsor.

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2:00It's more than just an ally. 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. 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. Francesco, my friend, welcome to the European VC Podcast. Great, Andreas, great being here. So this has been a long time in the making. We have known each other for quite a while by now. We first got to talk when you started thinking about building SRV slash Silicon Roundabout Ventures.

2:51And now we're finally at the stage where we're investing into the funds. I'm super excited about that. Yeah, me too. Super excited. Thank you for having me here. Thank you for investing in the fund. And yeah, quite a journey, right? You've seen it all. Yes, yes, we have. And yeah, so you can all imagine context, obviously being that Francesco started out with a fund in the middle of the hype. And then he's battled through what has been a very tough time for any emerging manager. So definitely we're going to dive into that story here as well. But Francesco, let's start where everything starts with how did you get into venture?

3:32How did you get exposure to the tech scene? And what made you build Silicon Roundabout Ventures? Sure. So the story goes that I started out actually not even knowing what venture was. I am originally Italian. I moved to the UK because I come from this very tiny rural area where at best you sort of graduate and become a lawyer or a pharmacist type of thing. and so I went to London and I worked and my day job was computer science and you know engineer and I continued my studies there and I worked there but alongside that maybe I don't know because I was a lonely you know junior Italian engineer like in a foreign country I ended up joining and co-founding effectively as a co-founder of this tech meetup community that has grown into the largest deep tech meetup community in the UK probably in Europe and through that community around 2016-17 we started to organize demo days for engineers, scientists, founders to showcase their early products and I became passionate and captivated by the whole advanced technology field.

4:38Not just technology but actually you know companies that were building their product based on substantial advancements in engineering and science and I guess we can you know call them deep tech now because it's an easy label to put on that and And through that journey, over three, four years, that led me to start angel investing. And then, like you mentioned, around 2021, I started to think that I couldn't just be a full-time engineer slash tech lead and then run the community and then invest full-time into this wave that I felt could be. And I still believe it is the next wave of value creation in venture capital and startups, which is deep tech, and doing all well.

5:22So I ended up leaving everything I was doing as an engineer and focused purely on creating something that could unite all of these passions and these beliefs. And that resulted in launching Silicon Randabelle Ventures, which is, as you mentioned, my solo GP venture fund back in deep tech companies, which is what I love to do and what I believe is right to do. Maybe I can start by asking you a question. and I'm sure you've gotten from many potential LPs as well. How do you define deep tech? What is it for you? Where do you focus? Harsh it.

6:02If it's easy to make and to the point that any odd competitor could just sort of look at you when you announce on TechCrunch and copy the exact same thing you do using APIs or frameworks or whatever, then it's not. So the reality is that it's a little bit of a fuzzy definition, right so even the label it's something that i myself got accustomed to uh i remember you know pitching the first ideas of the fund and in the first decks and the first stories it didn't even necessarily feature the word deep tech it was something like you know i'm launching a fund to back advanced engineering and science companies whatever and then i remember you know this guy i think it was actually um at the rest of from a vc lab he might have told me no you're investing in deep tech, make it simple, stop, you know, do something, say something that people can understand.

6:52The reality is that then people ask back, what is deep tech? But the reality is that it does give you this sense that I'm not investing in B2B SaaS, marketplace, fintechs, or anything that might be easy to build. And even that is a slip-through definition, because it's not that I'm against any specific sector, you know, and I don't think that the reality is that I'm all about companies that are using some strong technology development at core to build the product and the product cannot really exist without a substantial technical risk associated with it. So this is kind of the long-winded definition of a deep tech company.

7:29I would say, you know, if in that gradient of tech, if it's substantially towards the side of it's fairly easy to understand that there is a market demand, say, you know, you build a quantum computer that actually works and produces, I mean, not works, there are those that work, but that it actually delivers commercial results. The demand is there. You know, governments are already investing billions in effectively prototypes of the industry, and so are large corporates. So the demand is clearly there. Nobody's cracked the whole picture yet because there is a technical race. So if you are more towards that end of the gradient, then I would categorize your deep tech if you can build your app or whatever with you know as a solo coder you know in your bedroom or maybe a bunch of people and then it's all about marketing and growth and the you know customer acquisition then it's probably not and then maybe let me ask you the obvious question of so you're a solo gp you can't do everything or and you can't be a specialist and everything.

8:33And deep tech is so difficult. So how does it work when you're a solo GP in the broad space of deep tech and big data startups? Right. Well, I mean, on the difficult side, to me, it's actually probably more difficult not to do this in the sense that I really respect all of the DCs and angels that don't do deep tech Because to me, to understand whether a social media app or a, you know, B2B SaaS applied to fintech or a marketplace of any kind and figure out which one of the, you know, thousands of copycats that might pop up around the world and figure out which one is going to win is almost an impossible task.

9:19whereas to me it's a lot easier to look at four or five potentially fusion-related companies, let's say, and decide that I got convictions towards one team that does one part of the supply chain. So on the difficult side, actually, maybe because of my technical background, maybe because of just, I don't know, how my brain works when I look at companies as an investor, I actually find it a lot easier to focus on deep tech because I don't need, again, an army maybe of people looking at every possible marketplace solution that exists. Again, my competitive analysis tends to be quite small. But it is challenging, I would say, like every other solo GP.

10:00It is challenging because, one, you are, I'm a European, like you are, so you know that the LP environment here is only now started to get accustomed to solo GPs. It's quite the novelty. And a lot of them still have restrictions. So, for example, I knew when I went solo GP, and I did consider not going solo GP. And you probably met me when I still had the idea of at least considering having partners in the first, let's say, MVP idea of the fund. And then, of course, I went solo. But that already means that you cannot get certain types of LPs immediately. Like, that's it. It's just not even worth it to talk about it.

10:39So I would say that's a challenge that everybody has. And then I have another challenge, which is how do you build a firm rather than just you? And I know that some solo GPs don't even want to do that. You know, they just actually maybe don't want to do a firm. They just want to be them and raise a, you know, boutique fund that they can just manage because that's what they do, almost like an angel plus plus. We are a super angel fund in that we are effectively at the level of an angel, you know super angel like investing you know writing our 150 250k checks super early or you know joining seed rounds at the latest but in terms of how i'm thinking of the firm i'm definitely thinking of building a leading deep tech fund and so i need to start to decide what steps to take so that it's not just me even if i'm the only gp and so this is still a conversation that i'm having with LPs, I'm drawing on their expertise, I'm looking at others and I'm still learning.

11:38Because the way I see it, and I guess that's kind of my final answer on what you just asked, is that the way I see it, launching a solo GP fund, if you're looking to build the firm, is exactly the same as having a fund on the investment side. And then having a bootstrap company that gets you to 60, 80, 100, 200K ARR, because that's what effectively the management fee gives you, depending if you're raising a 5 million, whatever, like I have, or a 10 million or so. And then you need to figure out how you manage that to do maybe some outsourcing, maybe using some tech, we're building some tech, and then maybe venture partners and things like that.

12:18So that's kind of the way I'm taking it. For the people in the audience that are thinking about launching their own firm, or maybe have even taken steps towards it, and are trying to figure out Should I do this alone or should I do it with someone else on the GP level? Kind of what would be the things you'd say to them? This is almost like a Star Wars Yoda type of answer. The answer will reveal itself if you pursue it long enough. And what I mean is that I didn't have a preconcept of what I wanted to be. And in a way, for what I said before, you know, the fact that many LPs you speak to almost push you the other way.

13:02Now it's a bit different, but not everyone. So in my case, some LPs actually mentioned the idea of a solo GP when I didn't even have it myself. And I realized that over time, those were the customers, because LPs are kind of the customers of your fund that I wanted to serve. And they were most aligned with my original core vision. And also, like I tell founders, you know, I'm one of those that I am absolutely pro solo founders. If that is kind of the starting point and the best sort of setup, I am not one of those that says you should get a co-founder. That's why I hate incubators and accelerators that force you together in six months just because.

13:40And so I would say the same to all of those that want to launch a fund. Don't force yourself with someone just because. if that is what pulls you to your goal and you really feel that that's kind of the best way and the type of LPs you want are the ones that would fit that and everything is a fit, great. But just like a marriage, you're going to have to be, I believe if you want to have a partner, you're going to have to date and then you're going to have to be engaged and then you're going to have to marry. And even then, you know, there are risks, right? So take it, take it, take it very, very slowly.

14:17And if the other party is not feeling the same way, just be honest with yourselves and maybe you should consider solo. Yeah, I would definitely say that I've seen many partnerships being formed and, you know, from the very early days. And then we've also diligenced partnerships that have been formed basically to incept slash create the fund that they're raising. And I definitely think that there are instances where a solo GP would have been, it would definitely come with lower risk. Like you might say, okay, they're complimentary and all these things. But the fact of the matter is that oftentimes one of the very big dunks on a solo GP is that, well, there's only one person.

15:09So there's a lot of key man risk. And that to me is just like when I've seen the partnership risk that I think is inherent in many, many emerging managers. I really don't think that that argument is too solid. I do think, however, that you can say many, many people that they're not necessarily stand alone, powerful enough to be able to build a meaningful firm within their space. So I think that there are many other reasons that you might say, okay, a bigger partnership is better than a solo GP. But I think that the part around you need to just be two to both have a diversified risk on the key men or key persons, that argument is not a very good one, I find.

15:58Okay, so tell me a bit about... So we know it's a solo GP, but tell us a bit about... Because it's not just you, you do have some people with you. So could you tell us a bit about the, I was going to put it, both the firm, but also the infrastructure you're embedded in? Yes. So the community I mentioned before is still live and kicking and we still do events. And that's how we bring people together. and I'm constantly, especially now that I've closed or closing up the fundraise of the fund, effectively the idea is how can I bring more value through the community to the startups I already invested in and the ones that will invest in the future, but also how I can reinforce that aspect.

16:39So there is definitely an aspect of people that are not formally engaged with the fund, but are engaged to a certain degree with the fund. For instance, the last investment I have done, And I was able to quickly through WhatsApp, LinkedIn, you know, re-warm up some connections I have in the community in that specific space, which was part of the broader computing space. Not to go into details about that deal because we haven't announced it yet. But through those, I got extra referencing, not only the ones that the founders provided, but people that had links to the word, even links to that particular company, but from a impartial perspective.

17:18And so that's always part of it. Then closer to my actual investment activity, I have three venture partners. Two are more like DD support. And so they're like engaged on an ad hoc basis. And, you know, I rely more on their PhDs and knowledge when a particular deal pushes me to require that. But one thing I always do is I've learned to do is to leave the technical property at the very, very end. because there are so many reasons to say no to a company or founders that before you even look deeper, obviously you would look somewhat, but look deeper into the technology. And so actually, you know, I only diligence at that level very, very few companies.

18:03And when I get to that stage, it's almost very unlikely I wouldn't invest because so far I have never seen a Theranos type of company in Europe. I hope I never do, but, you know, I believe in Europe we have almost the opposite problem. we undersell ourselves so if i get conviction enough to go and spend so much time and pulling people to reference the technology rather than the people and the company in the market that that's what it that you know it's always a normally a good site and then i have a venture partner who is more um actually is an engineer like me and the fact of having someone that can spend time and you know that's actually quite regular you know ralph uh has been spending time with me on a weekly basis and we're building our own tech and we're trying to automate more and more and at the the moment it's mostly geared towards saving my time effectively you know and automating things away but we can already see the beginning of the infrastructure that will help if we are able to scale this firm because you know we're super believer that uh whilst we don't I don't believe AI will replace humans anytime soon in terms of you know investment at all because I think there is an element of consciousness that is completely missing from LLM completely but you know might be We're wrong, but that's my view at the moment, even as an engineer.

19:19Having said that, there is a lot of the process that can be dealt away with machines and that you don't need to hire minions to do. And that's the direction we're taking. Can we have an automated analyst or two in the background that supports us without, and they grow with us. So the more we need an extra deal flow because the firm gets bigger, the more we have that tech infrastructure to support it. You've mentioned quite a few times community and community is obviously central. The whole Silicon Roundabout community is what really incepted or allowed you to build this. Just a side note to that.

19:56I always want to talk to emerging managers or people that are thinking about it. I always say that being a VC, kind of as you said with the Yoda quote almost before, that the truth will reveal itself. It's not something you can think yourself into. It's not something you can ambition yourself into, something you have to build yourself into. And then over time, there will come a point where you will then be able to be a good GP yourself. And some people do that by being in firms and growing their way as investors. Others do that by building a big tech conference like Bogdan has down in Romania with HowToWeb and the community that's around that.

20:39or like you have done with the Silicon Roundabout community in London. So let's talk a bit more about this community that you've built. When did it start? What is it like? Who are the core partners and ecosystem players around it? And this is, of course, what's super interesting, that when you built your firm in the beginning, got started, you had one part was your angel track, but another part was what had come out of this community that you're tabbing into part, which is kind of like people call it, what are the words for it? Shadow portfolio or someone call it magical football or whatever. Football league portfolio that this is what I could have invested in.

21:25In other words, I'd love to ask you, Francesco, to deep dive a bit on that community and then on what it has created and spawned as a tech ecosystem in its own, right? Yeah. So the story goes that actually I was this, well, I guess now a friend of mine, Luis, who initiated the original meetup on meetup.com. And as a young engineer, I joined in and eventually in the early phases, it was three of us, Luis, Paul and myself. Then Luis went on to pursue his entrepreneurial different ambitions and actually did quite well in the event space. That was almost like, in hindsight, also a warning for me in the sense that when I wanted to do something entrepreneurial with this community, I was eventually left alone to manage, you know, over time, different, took different roads.

22:14I knew I didn't want to be an event business. I wanted to really focus on the working with the startups as an investment type of thing. And one of the things I tried out was to do almost like a syndicate. And I realized that maybe now it would be different because news say different stories. But at the time it was almost like, hey, I have this big tech company I want to put together on SPV. And people would be on the angel side. It was more like, bring me a B2B SaaS. And then the deal would close. And I think we did four with different people, but very small. And that was one of the real pushers towards, no, you've got to have a fund or you've got to have something where you can control if you want to do this deep tech thing.

22:57And so, you know, fast forward to what I mentioned before, you know, the sort of middle of the last decade, we started to organize these demo days and then those demo days were eventually giving me this shadow portfolio. And one, maybe, I mean, there were different people that sort of made me focus a little bit more that way, but one that I remember in the early days became then an investor in the fund, uh jonathan from molten ventures and at the time you know it wasn't obviously thinking you know investing or anything but we were just he was giving me feedback on my early very ugly pitch decks you know we even did an article i put it out there now i'm completely ashamed about that day but you know hey look it helped other it helped others it helped me mature and in and in that process i realized that one let's say the greedy reason you know you've got the bigger reasons you know you believe that i believe in deep tech i believe there's more to be done i I believe that computing, defense, climate, you know, healthcare needs substantial technology advancements, not just another app to, you know, a marketplace.

23:58But then there is also a greedy reason, you know, like I, you know that the stats are against you if you launch a fund in ventures. Most likely you're going to lose money, maybe make some money, but you would much better off just investing in the stock market. So why would I personally put my own money and, you know, like into this fund? I would go all in. I would burn my career as an engineer. I would now I'm basically I managed to work up with this final closing to the salary of a junior engineer, you know, from unpaid intern, which was the status quo for the last few years, three nearly, you know, and so it's a big decision also for my family.

24:37I just had a kid. Why would I do it? It's because of that virtual portfolio. I looked at these companies that we had early access to. I still had some connections with some of the founders and I asked them, would you have taken money from us? What could we have done as a community? And most of them would have been like, yes, we would have loved to have you as an early partner. And some of them have become unicorn, some other exit, some failed. But you start to plot this sort of 20 odd, 30 companies, I think. We had the graduates, winners of this demo day. They didn't win anything, by the way, it was just for the glory of pitching in front of engineers and whatever.

25:10I realized that actually had I invested as a fund then, he would have been you know a 5x plus fund so actually he would have made a lot of money considering ventures and then I started angel investing with your money and because I started in the sort of 2020 period there was a little bit of that hype cycle and then coming down so I felt and deep tech takes a bit longer to get to say series a so I guess I it's been stretched out somewhat in terms of numbers but now I start to see the outliers you know we've got a few companies that have done that 3x jump we've got some other com one company in particular that's past 40 million in revenue is skyrocketing and you know i was one of the early angels but my check size would have not normally have allowed me to get in even if you know precede seed the only reason i'm on that cap table is because of that community that relationship that i managed to build with the founders and so this fund is just basically that continuation of my mental story that i could see there and that I managed to, that some LPs managed to see, which is, well, if early companies you didn't invest in but selected, at least some of them were able to testify that they would have taken money from you, would have loved to have money from you.

26:17And, you know, assuming some rationale in terms of dilution, growth, whatever, you would have done well as a fund. Then you invested as an angel, people still took money from you despite the small checks and some companies are showing at least early signs of our performance. Now you're doing it as a fund, let's see what happens and you know this fund is small theoretically it's easier to return a small fund also don't have to worry too much in fact almost not in fact nothing about follow on but you know the idea is to sort of be in there start to win deals my next fund ideally i'd like this i'd like a size where i can start to lead but not having to lead so that i can start to see whether it can actually make sense for us to do it and start you know building from there you know taking it easy taking it passionately but have this long-term big ambition of we'll do the full stack eventually, just one step at a time.

27:06Francesco just gave us the whole story behind it, but it did not give us the numbers. So now I'll just put them out there so that the ones that are thinking, okay, so this story that Francesco just told, what are the numbers then? So you've done since 2011, which is the inception time, you've done more than 600 future of tech meetup events. So that means, okay, very vibrant community. You've got 14 university partners of which University of Oxford, Imperial College, London are two. And so you can very much see that there are important research universities that are closely connected to this community.

27:46And then you've got 67 ecosystem partners where you have London Metropolitan University, Excellerator, the TechWorks community, so on and so forth. So this is a bit about the community, right? If you then look at the number of members that you have, and you can always talk about how to measure these things. But here we're talking 15 ,000 plus. And it's a mix of entrepreneurs, engineers, startups, or leaders, definitely also investors in there. So that's just to say that these are some of the numbers on the community. And then in addition to that, you've then within this run 26 pitch competitions, all in deep tech and big data.

28:23This happened from 2016 to 2020. And then if you could tell us a bit about them, you know, you've screened 5 ,000 startups. You've done 12 deep tech angel investments yourself in that period, 2020 to 2022, as you said. And you've run 26 pitch competitions in the period. And then you've ended up at it. Like what you then did when you did the whole calculation here was you said all this. Correct me if I get this incorrectly. But if you calculate the startups that you could have had access to and add that together with the ones that you have actually invested in, you're reaching$6.3 billion in enterprise value.

29:03This is in pounds. So what I'm trying to explain with this monologue here is that this is the type of network that you have or community that you have around you as the fund. and I'm bringing it out there as a KPI or benchmark for all those that think that they have a community around them that they can raise a fund on the back of. And Francesco, and I mean this in the best way, but let's also highlight that your fund is not a large one, right? Many think that, okay, I'm going to do a 20 million euro fund or whatever as the first one, or I'm a solo GP, there's only going to be 10 million or something like that.

29:49This is not only, it's not only, unless you're a breakout investor from Balditz and or Index or whatever, getting 10 million or 20 million off the ground is not an easy thing. Francesco, maybe you can add a bit there. Yeah, no, you were spot on. And that was exactly the flow in terms of the numbers that happened both in my head and how eventually also like it translated into the fund that, you know, we had these 26 competitions all the way until 2020 obviously i'm stopping there not because we stopped doing them but because i started angel investing and so at that point i cannot say oh my virtual portfolio extends beyond because you know i could have invested as an angel so i should have um there was obviously there were some opportunities in the sort of end of 21 22 when i did invest in a couple but um i was already committing the gp commit so you know there are a couple of anti-portfolio companies they missed in that area and you know let's see but I feel they were good companies and it's the life of a fundraising fund you know I you've got a raise you've got a deploy and you know you can you do what you can but in general yeah you're right and the idea is look some of the companies obviously more towards the 2016-2017 area there are some clear out performers there you know their values whatever then later you know some companies are starting to show signs then in my angel portfolios like some earlier signs and then now with the funds again we look always it's it's time does matter right so you know if you started your company you were pitching a preceding 2016 17 today you're either dead or probably you've got somewhere you know if you're if i'm investing now in a company today or i invested as an angel three four years ago you know two years ago you know obviously that the time is different and what I'm trying to track is would the signs of today look similar to what happened to those companies back then and I think this exposure to companies is one of the reasons why I know everybody talks about the power law but I think it's so difficult like it's so inhuman to do it's literally and I might be still not doing it right but I feel that having looked at some of the early winners one thing I noticed is that they were really looking not just to build a tool or something.