E383 | Mike Reiner & Joachim Laqueur, 432 Legacy: Investing in B2B innovation and scaling global impact

0:28Welcome back everyone to the European Easy Podcast. as well as how they're using AI to really do something truly unique that I don't think there's that many in Europe, nor even globally, that can do. I really hope you enjoyed this episode as much as I did making it.

0:54Let's stop acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. All right, gentlemen, Mike and Joachim, welcome to the European VC podcast. For the, not the first time, not the second time either, but probably the third time. That's right. Right about. Yeah, something like this. Something like that. All right. We're doing a ton together. But first, I just want to state the facts or the core stats on you and your firm, just so that we have everyone up to speed and you add a bit of context to that. Is that okay, guys? That's good.

1:33So you're both general partners of 432 Legacy or 432 Legacy. And the predecessor fund was Acrobat. And everyone, I hope, will know that we've invested in Acrobat and been warm and hearty supporters of you guys. Your fund size is around 50 million. You have 28 million in AUM currently. And you're headquartered in the Netherlands. The focus is seed, but you invest up to Series A. you're globally oriented with a focus on europe and the us you're focusing on b2b software and software enabled hardware and you've made some notable investments that include lemonade health idle fields step shut arkimoto ready player me tango caller promo republic easy demark my laboratories binali and step shut did i get that somewhat correct guys somewhat what did i not get correct.

2:29Tell me. What should we have said more? No, it's all good. I think we can go a bit deeper into later as well, the transition kind of, you know, and why the new name. But we will get there. Let's get that out of the way for 432 or 432? What do you prefer? 432. 432. We're not counting down. Yes, I know. Well, when you first When you first started playing around with the name, I've had good fun saying one, two, three, what? Yes. So that's the nice, courteous LP that will make fun of your name. You've got to love those guys. I think that's always great. I think people make a little bit of fun of your name means they'll remember something.

3:15It's like nicknames that people give you that have nothing to do with your name. It's fantastic. Yes, that's absolutely true. Okay, so just to add a bit of context, we invested in you guys back in 2022, and we invested because we really liked the team that you had put together. And of course, the combination of data and arbitrage focus on diaspora founders. Diaspora founders, of course, from the former Soviet Republic slash Eastern Europe slash post-Russia or pre-Russia is maybe the right way to say. And we've come to know you guys outside of the regular LPGP scope. And we're, of course, incredibly enthusiastic about the personal development journey we're embarking on together, but as well also the work that you're doing with the fund, because I absolutely think that what you're doing with the fund now is going to resonate incredibly well.

4:07And also why we're leaning into this. And of course, anyone might remember that we did an Austria retreat together. We organized that together with Fred Destin, and we're going to do much more in that space. We're going to talk a bit about that here as well. But it's clear that this is also part of the fund thesis, the firm thesis, and that's what we're going to talk a ton about. But let's jump into this personal development space and just talk a bit about what got you here and why you think it's so important. Look, I mean, personal development, it starts with a personal journey. I feel to go a little bit deeper into it because that gets to the point why we're doing this.

4:46For me personally, it was several milestones in my life. I feel the seeds were planted back at university when my roommate happened to have a Tibetan Buddhist teacher. So I learned meditation from him and really got more into mindfulness, which has been an amazing tool for me. I think the biggest teacher at the end are really difficult life events. So for me, that was the death of my mother, which happened soon after I broke up in a seven-year relationship. So essentially, within a very short amount of time, I lost two of the most important women in my life. and that that period was tough you know I I back then I I didn't really want to face it so I didn't really want to work with grief I instead um just you know focused on work and I think I pushed myself to the point where I I several times was very close to to burnout you know and in in that time the also the way of working I I had this period where I was quite anxious I remember remember still where I would wake up in the morning and the first thing I would say is fuck because I remember something to do, something you have to do, you know.

5:54So that already tells you something about the state of mind if that's how you wake up in the morning. I was doing a lot of multitasking, you know. So I was very much focused on quantity, doing more instead of focusing on quality and like really doing the things that are important and really move the needle. And there was a lot of numbness too, you know, because I pushed emotions away and was kind of focused on distraction in a way, right? Work is a distraction in that context as well. I didn't really go into the emotions I should have gone. So that really caught up with me later and there I got deeply into coaching.

6:27I worked with several coaches. I went to a lot of retreats and really worked with holistic coaches and mindfulness and several techniques that really got me deeper into the body and also the heart. And that's been incredible. We also here in the company. Yeah, we participated together to also be able to call out things on each other. 100%. Yeah, exactly. With the patterns we had. Yeah, work with a coach in the partnership, which has been really, really beneficial. And so it's always amazing to have that mirror, you know. And next to the things that you're currently doing for me was also mirroring my past, going a bit deeper into kind of like things like childhood, like when my parents got divorced, you know where you just realize certain coping mechanisms and patterns so for me this was really a journey going i would say deeper into connection with myself and others so it's it's the best thing i think i've ever done in my life to to work with those coaches and and do all the work and looking back at it now it's just something that we want to bring more to founders and do selected coaches and the things that work best to give this also to founders.

7:38So that's maybe a bit short intro from me and where I was coming from. Joachim, could you add in? Yeah, sure. So the funny thing is that I'll tell you how I got to that point, but the coach that you guys did the retreat with is actually the coach I used. And then, you know, Mike inspired me at one point, really into, you know, wanting to bring in more this development side of personal founders, but also ourselves into the business. So I thought, okay, maybe you should, you know, introduce them to group that. And then, you know, that sort of ball started rolling, which is great to see. but to me the experience I had with her was very powerful because before that I was in this vicious circle of self-doubt, lack of self-love, I couldn't accept any compliments and basically I was completely incapable and unaware of the patterns that shaped me.

8:45And to me, sort of adding this personal development into everything we do in the fund is very much about that continuous learning about who you are. So for me, going into this four day retreat, dealing with things from my past, whether it was Arduvus founder journey with company that we founded way too young. I mean, talk about fake it till you make it. I mean, that was definitely an everyday thing. And then, you know, going into a next adventure, but being screwed over by my business partners, yet fully laying the blame continuously on myself, what I should have done, what I, I, I, and not being able to acknowledge anger or deceit.

9:32And basically that pattern that lasted for, I think, seven, eight years, was broken within a four-day retreat. And that's amazing. So even though I did go through a divorce, that helped me as well. So rekindled that bond with my ex in a way that right now we still go on holidays together with the kids. Mike knows her. We've used her as well to use her experience on the HR side. And yeah, so for me, this is such a fundamental thing that I think needs to be included in everything we do. And also what you said, you have a divorce and a personal stuff. I feel in business, especially if you have more of a transactional relationship as an investor or the founder, all the personal stuff often just kind of like it's on the side.

10:34And I feel when you also just purely look at business results, if something fundamental is happening in your life, like a divorce, just saying it has a massive impact. So not knowing about it to begin with, let alone being able to talk about it, is already creating problems. And I feel like that's why the holistic approach of understanding what's happening in the life of a person, in this case of a founder, is massively important. It's really, really needed. So it's also what we did in this fund then with coaching as well. We tried a lot of different formats. So we involved coaches in the pre-deal phase where they were part of interviews and also kind of designed a bit of an old view of how to look at founders, which is helpful for both positive and negative character traits to look for some red flags or to really powerful characteristics.

11:28One-on-one coaching and the founder team coaching. So to just focus on better communication and help the founders, but also often when, especially if there's like, you know, problems between the founders, you know, to have a mediator, have a coach involved, massively powerful. So that's also some, you know, the stats show the biggest failure startups at the end of the day is often founder breakups, right? When it just doesn't work out. So doing a lot of the founder coaching and also like playing around with like group coaching and going into retreats. I mean, Andreas, as you mentioned, doing the Oster retreat at the end of the day is just another format now to bring the work to the wider ecosystem, which is amazing to have them experience the power of it.

12:10Could you hear a bit more? I think it's going to be interesting for people to hear. So when we started doing this and I started talking to more and more about it, there were two things that I found that surprised me a bit. First thing was people that I did not expect to care at all. cared a lot and were very interested. And the other part was people that I had no idea were deep into coaching work and almost spiritual practices turned out to actually be deep into that. So maybe love for you to talk a bit about like, how do you incorporate it into the firm? How do you work with founders? As you shared, I think it was an interesting finding that you said, well in the you would try to actually have coaches involved already in this in the deal screening phase kind of where have you found that this makes sense to implement and where are you kind of leaning in and where are you saying no it's not this step so maybe like first to react to what you said in your experience in the retreat so i mean there's different formats right so first i would say you have like one-on-one coaching group coaching then you have like a retreat setting which we did Andreas, which is multiple days.

13:26And if we just go into a setting like this when multi-day format, I think people who haven't experienced this don't understand what a container like this does. And also what you said afterwards and to your point of how much love you feel for everybody there because, and this is about vulnerability. You feel the love because everybody's so real. There's no bullshit, you know? It's really like just, this is what it is with all the shit that's included. And that's just an incredibly like, yeah, heart opening space. And then the other thing that it really takes, I feel is like an amazing coach, because there's so much like mediocre stuff out there.

14:02There's so many like early stage coaches there that that are frankly, not that good. So to really have like a world class, like amazing coach and experiencing this firsthand is something different entirely. And with Rupda, also how you experienced it, she just in this specific format, what she does, she's done this for more than 30 years. It's a really unique blend of work she's doing there. And I think that experience is also truly special. And to answer your question on how we bring it is really the combination of first, and especially in the pre-deal phase, not only do you want to look into who the founders are, but you also already want to understand what type of coach would be the right fit for a founder because every person is different.

14:42You will have people that are highly resistant to coaching, maybe don't see the benefit of it. And then you can just do a very light touch and someone who is great at this, just working with a founder on the business level to show the value as an entry point. And then if other founders like, you know, who are already way, way more open to it and that need a way more holistic approach. So it's really about the matchmaking and matching the right person to the founder. That's absolutely critical. It's also then about like getting the portfolio companies and founders together, like doing this in a format where they can share with each other.

15:17in a very vulnerable way. Because then there's one thing that they can just share, which is massively powerful, but also, of course, asking each other advice, feedback, all of this stuff, which is massively powerful. And then going to retreats as well, which you then do, let's say, once a year, where you go all together and off-site, you go on a retreat together. And there, the bonding experience is completely on another level, right? You're in nature, you're out of your work zone, you're in a different setting in a format that really encourages like the highly personal sharing and everything.

15:48So it's a blend of these things that we approach. One question I got from a lot of people was, did you do this with other people from tech? I don't think I'd want to do that with other VCs or other founders that are in the same ecosystem as me. Am I going to talk about my troubled childhood or my troubles in my private life with that group? no fuck no well i i can definitely you know chime in with my perspective on this and my experience but i'd love to hear what you're thinking oh isn't it all about maybe removing a bit of your ego in the equation and in that process then understanding like we're all dealing with the same little cliches that pull us back and when that's out of the way it's like i can actually talk about this, like the time it takes to get to a point where you're truly communicating without the ego and just with compassion, but also pure interest and inspiration.

16:50Like that is the objective we're trying to achieve here as well, right? So because as investors, we're investing in companies that are under a high pressure environments and to get to a point where you have a relationship where, you know, you've peeled all the layers away so you can actually communicate on what matters and what worries the app. And they can be personal, they can be business, they can be a mix of both. That's the state we want to get to. Yeah. And Andreas, I think what I would say to the people highly skeptical, you know, is imagine all the different layers and how you can meet people.

17:25You can go to a conference where you're very short, you have a transactional conversation. Hey, what do you do? What do I do? you know and that's it then after conference and maybe dinner where you can go a little bit deeper and you actually hear something personal of the person some some people do this more of a trip you know where they take investors and founders and they go whatever two days somewhere to italy and they do some hikes or whatever right and there you already go way deeper into personal conversations because you're out of a context i think what and what this is is taking this like so much further.

17:56So I think the choice really, for people in general is, do you want to one, go deeper within yourself and discover things that like, you may have never discovered before, which takes courage, it really takes courage. And the other element is the connection that you will feel to others is really next level. And then the question is, do you want to get to know the people like this? Right? Because this is an I mean, it's a beautiful opportunity to really get to know the person. And there's no way that within four days, in this example, you build up such a deep connection with someone, right? And I think that is beautiful and that's unique.

18:33What I've thought since was that there were two things that were absolutely both important in terms of the value that you take away from it, but also that enables it or allows this to be a magical place. I think one is that you have people that you actually look up to or that you think are incredible. I think at our retreat specifically, we had Fred Destin there, and he was one of our co-organizers. And I don't think there's anyone in the ecosystem almost that do not look up to Fred in some way. because we all whether you like him or not or you think that he says what is right or or not you recognize that this is really a man that knows his shit and being in a place with other people that you feel like that about and they then open up and they are honest can mean the world to you because you can see well if he can then i you know or if he deals with that shit i it's okay that I deal with that.

19:36So I think that one thing is super important that you see other people that you actually look up to open up. And I think that given we're all in tech, we have many of the same idols, right? And if you do a retreat like this, you're automatically going to have your investors there or founders, exited founders from your own ecosystem there. So for that reason, that dynamic is going to be there when we do our retreats. And then the second thing is also there's something truly magical about the long-term bond that you build with this group. And I think it's for that reason, you might think it's actually the same reason that you think I don't want to do this.

20:17Well, the fact of the matter is that when you do it, you realize it's all the more powerful and the effect of it is all the more long-lasting because you did it in this group. I think, Andres, you're very right. Because I did this in a setting, well, how long ago now? Six years almost. Where the setting was people from all over the place, and different life and different industries and everything. And the experience is what it is. It's truly life changing for some. But to have this other layer of connection, because you're all somewhat connected to the same ecosystem, is a lot more powerful to give you also the incentives in a way to continue those relationships.

21:04Because what I experienced in that initial sort of deep dive I did is that most of the people I lose touch with because they're nowhere connected to me on other levels. So I think, yeah, the way we're approaching it this way is it can really create much more long-term bonds. and an absolutely core learning from something like this is we're all just people and we are all miserable and we're all struggling um and that is that learning is all the more powerful because it's people from your own industry because the next time you're at a tech conference and feel like you can't talk to someone because you're not a cool founder yet you're just doing this small thing well actually you can right you remember wait a second all of these people could have been at the retreat and they would have shared the same shit as all the rest of us and then all of a sudden you can deal with life much better i think the crazy thing is like you mentioned already we all deal with the same shit you know just different chapters but the core principles are all the same then with different stories and it's crazy even how similar those stories are And you find yourself in a group and you're like, holy fucking shit, right?

22:16Which is also completely kind of like the problem you thought you have also is like evaporates in that group because you realize, wow, you know, listen to some of the other problems. And you're thinking, holy shit, how does that person cope? It's such a beautiful experience for you also to just detach a bit from your own problems and to feel you're all in it together. And it seems so obvious, but when you're in it, it's truly every single time. Again, it's an incredible experience. Mike, what you said about hearing other people with the patterns they have, my initial reaction would have been like, oh, what they're sharing is so much more intense than what I'm experiencing.

22:59So the tendency was first, I shouldn't complain. But then you learn and it doesn't really matter. right it's what you have it's your pattern it's your thing whether that's because you got one cookie instead of two cookies from your mother when you were growing up or because you have some really painful experiences it doesn't matter it's your path but also also to to add one thing which is i mean this is saying some people die when they're 25 and don't get buried until they're 75 yeah and it's incredible how many of us me included walked around like for for some time numb it doesn't matter what caused the numbness and and why we're doing it but just the this feeling of like you know that you're pushing some emotions away that like everything seems okay seems good but not extremely vivid you know and then having the experience and it could be i mean there's many many different ways in but having these experiences where you get really in touch with that aliveness again you know which can be also by practicing anger you know going into grief whatever whatever it is there's so many different ways in and you feel this fucking aliveness inside like holy fucking shit where has this been you know and share this then with your partner share this then with your friends and family then the realness that comes with that connection because people finally see you there you are you know and and it just it changes everything it changes every single relationship and this is an experience I truly wish for everyone.

24:34And this is also the reason we're doing this. And it's so hard to put in words because you really have to experience it. And of course, I understand you're really skeptical listening to it, but then I would really encourage you to just try it out. And what we're going to do now also with Rupda, next weekend, I'm going to do this entry format with her trying to one and a half hour session. So I want to do shorter sessions to just get people in, just for them to have a taster and an experience for what it is. You dipped your toe. Let's do a commercial break.

25:04As we've said along the way, we've said that we are doing these trips and we do have the next one already planned. By the time this episode goes out, it'll be out and live. You can go on EUVC.events and then you'll be able to find it there. In April, we're going to be doing another retreat similar to the one we did last time with RUPTA. So everything we're talking about here applies to that trip. And if anyone is excited from hearing about this, they can definitely go there and then reach out and say they're interested. It is an incredible experience. And Mike came over almost when I was standing there crying almost.

25:46And then he said, now, Andres, do you understand why I think this work is important and I want to spread it? And I was like, yeah, I get that. So, yeah, absolutely important work. And I can only wholeheartedly recommend to anyone that they embark on this journey somehow. Now let's shift gears because while self-work is important to you at 432 Legacy, it's not the only thing. Data and AI is very central to you. And it's something that has both been important to your whole investor journey so far. But then in terms of where you invest and what you focus on, but then these last years in Mentor, ChatGBT and all the enormous strides we've made in terms of data processing and sourcing tools that can be developed with the help of LLMs and other AI tools, there's suddenly come a plethora of new things we can do.

26:50I'd love to ask you, maybe give us first an overview of how data and AI works into the new fund or in the new iteration of your thesis and work. Pretty much in short, the question why integrate data into basically investing is we want to remove bias as much as possible. And at the same time, identify startups with artistic growth. and it's while avoiding the hype valuations. Those are the things we're trying to combine. To get there, it starts with very data-driven sourcing, ranking, shortlisting, but also after investment, helping us, helping data support, whether we should follow, stay, look for an exit.

27:40Yeah, but all in all, we try to stay away from meaningless buzzwords on how we use AI. That's the short answer of it. Yeah, I mean, maybe I'd just go a bit into it because I think the whole hype part is a bit of a problem. And let me also go maybe into how we actually got to the system, which gives a bit of context. So first, on the AI hype part, there have been a bunch of hype cycles, right? This goes decades back. I still remember 2014, when I was investing pre-seed, where suddenly all the decks had AI on them, right? So, I mean, that's similar to what happened after ChatGPT back in the days.

28:22Also, there was a lot of companies that suddenly talked about AI and said that did something with machine learning. And many of them didn't or it was very superficial. But back in the days, I also co-founded an AI community called City AI, where we're in 80 cities and also a conference called World Summit AI. For me, I did it together with Christoph, our Velsbach, and we just wanted better access to deal flow and talent, you know, back in the days. And we also had already then discussion, like, how long is it going to take for AI to actually be better at finding deals than humans? And to me, it's crazy that we're still having this discussion right now.

28:59So I feel it's not a question if, it's the only question when, and the when indeed is uncertain, we don't know. But it's definitely going to happen. The problem is that it's extremely tough to build it. Just to clarify, both sourcing and picking. Yeah, yeah, 100%. 100%, right? I think the problem is that it's just extremely tough to build a comprehensive system and extremely expensive. So the tough part is that for early stage funds, SEEDS funds, this is nearly impossible, right? And then in the future, you're likely going to see that it's more going to be service providers, like, you know, SaaS platforms are going to offer this functionality to early stage funds because they don't have the resources to do it themselves.

29:39And then the later stage funds, some of them are going to have really good proprietary systems because they have data science teams, you know, 10, 20 people and all the money to spend on data and compute to actually build this. So that's a crucial one. And in our case, I think the story involves quite a bit of serendipity as well, you know, how we found Quantix. Because in 2008... Serendipity was the definition of VC pre-AI sourcing. That's true. That too. And also, but also often in general, how things go in life, which I find beautiful if you look and connect the dots backwards. And in our case, I mean, this was in 2019.

30:23I worked for OpenOcean, early Series A fund. And I was also doing this experiment then. And I basically with a data scientist tried to basically rank deals based on signals of LinkedIn, where we basically made all kinds of formulas to figure out seniority of a team and a person. We looked into data signals from like Crunchbase, like GitHub stories, a whole bunch of things, try to combine them with formulas to give like an indication of a score for a startup that you could apply in any list. So it was very basic, no AI to it, but just experimenting to understand this better. and back in the days we also did research on what are the best ai systems out there you know so i would talk to the cto like signal fire or the eqt guys maybe not mother brain and obviously you only see kind of the tip of the iceberg with whatever they're willing to share but you get a better and better idea of roughly what's out there and back in the days the the best system we could find was a system from a billionaire fund in the us the wr hambrick that seemed to be the only fund that had a comprehensive AI system to really give a macro view of the markets, to essentially give an overview of all the private companies in the world that are benchmarked to public companies.

31:33And back in the days, we looked at it and were impressed, but we didn't know or built the system and we didn't talk to the W.R. Humbrith guys. But do you want to say something? Yeah, I was going to say, because I think for many, maybe W.R. Humbrith is not a really recognizable name, but to think about that they did seed in most of the fine companies, listed Google. These guys have been around for 50 years. They've done over 600 investments in that period of time, but also being a boutique investment bank as well as a fund at the same time. They're one of the old school VCs that developed Silicon Valley.

32:13And just to go back to the serendipity factor, so to keep it very short. And just many years later, I sat down together with Sarah Fisher, executive Johnson Johnson, who I've known also since 2018, and Joachim, and we talk about this very topic. And she looks at us and says, you need to talk to Thomas. Makes introduction, we jump on a call with Thomas. And then midway somewhere in the call, I'm like, wait, this is the guy that built the system for WR Hembrift. That's the guy. He owns all the IP. He has a select data science team of 10 data scientists. He has been doing this for close to 20 years, just iterating and developing the system.