E430 | Claude Ritter and Stefan Walter, NAP & Rene Andres, EIF: Building Europe’s Future with Expert Founders

0:00With NAP, we basically sat down and thought about the thesis that we had relative to the investments that worked well for us. And it's basically every time we deviated, it wasn't that great. Every time we followed the thesis, it was better. And so the idea was really to build on the thesis and basically update it rather than change it too much. So if you think about in what we've looked at in the past, we obviously had the thesis around proprietary data. We had the thesis about the thing we call instant utility, which is something that other people call it differently. but effectively it's like how quickly does the customer get value from your product and then on top we added effectively one plus one layers in our thinking and one is a strong thesis around interoperability meaning if a company both from it's inherently the way it's it's sort of structured the way its business model works is not set up in a way to be highly connected with other companies in across value chains.

1:05We're not that interested. And similarly, if the founding team doesn't pitch us a vision of being interconnected and being part of a bigger value chain with their company, we're also not interested.

1:32Let's start acting. Acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Welcome back everyone to the European VC Podcast. Today I have three good friends with me. Two from one firm, one from another. Rene Andres from our good friends at the EIF. And Rene will say a few words in a second. And then we have Claude and Stefan from NAP or NAP, formerly Cavalry. We're going to talk a lot about this rebrand, why NAP is the right word. And we have Rene here as a good friend of the team. So maybe let's just run around the horn here.

2:14Let's start with Claude and Stefan. If you could just say a few words about yourself and NAP slash Cavalry and a bit why we're here, then we'll go from there into Rene. Sure. There were like three questions at once. So Stefan, I'm an expert at that. Sorry. Yeah, no, excellent. So yeah, Andreas, thanks for having us. As you know, I'm Claude. I'm one of the co-founders and managing partners at NAP, formerly Cavery, together with Stefan. My background is in entrepreneurship. I started a whole bunch of companies before then starting the firm together with Stefan. And since, you know, getting this off the ground together, there we've been investing in early stage startups always pre-seed seed and we've done almost 70 initial investments since we got started with regard to the firm you know we are berlin-based as i said we invest very early we're happy to join pre-revenue pre-product for us it's really relevant that it actually makes sense for the company to have an investor on board so we're not just like stuffing money down people's throats for the sake of it.

3:23But for us, it's really relevant that the time is right for a company to take on a VC. And then obviously we hope that that's us. Yes. Thanks, Claude. Hey, Andreas, good to see you again. Stefan, as Claude, one of the colleagues who started the firm back in 2015 or back in 2016 as S. Cavalry, background in business economics, previous very short stint in tax in corporate law as well. And yeah, happy to be here for the second time on the podcast. And then, Rene, tell us about yourself, EIF, and maybe also explain a bit why you chose to join us on this podcast. Yes, sure. My tagline is a bit, sounds like a French with a Spanish background, happened that I'm only German, like Stefan and Claude to a certain degree now, our guest.

4:13I have a business and a technical background in data science. mostly worked for larger management consulting firms, Presswaterhouse and some others in big IT projects. It was nice and beautiful, but pretty boring after a while, to be honest. And then via a private company I had got in touch with EIF around seven years ago. And since then, I pretty much worked for EIF and lead primary VC fund investments in Europe. Everything from fairly early stage to what you would consider growth VC strategies. Not too much life science or medical devices, but mostly tech, I would say. I probably invested more of 2 billion now over the seven years into that category.

4:58And also included in Stefan, a relationship I took over from a colleague of mine. EIF, I guess I spare you with details. I would hope most people would know, but in a nutshell, was founded to support innovation entrepreneurship in Europe and the tool chosen was money and the way it was channeled and is channeled is mostly indirectly via venture capital funds private equity funds infrastructure funds as a debt activity we're also doing but that's not so much interesting for the type of entrepreneurs stefan and claude for example back and yeah that's eif we source ourselves from various resource of funding, mostly public money, a bit of private money as well.

5:43Fund of funds, managed accounts, and probably are the largest by volume if you want limited partner and a lot of European venture funds. That's it. Why I joined? Claude just pinged me. Pretty simple. And I said, well, why not? I haven't spoken to Andreas for a long time, to be honest. I think I checked my emails. You pinged me two times. And I failed to respond. So sorry for that. So I said, this time I cannot skip a third time. So I said, then I chip in. I love it. And thank you for doing so, Rene. No, and I think today's conversation is actually super interesting. And I love that we have an LP and also the founding GP team here to discuss it.

6:22Because one thing we, of course, always cover on this pod is the evolution of firms. And there's a special story here, both from the founding GP perspective, but also from the LP perspective, how you navigate through that and so on. But before we go into that, let me just ask you, because we're a bit of a special time in the ecosystem. A lot is happening. Background being Trump, everything happening in the US. We seem to be getting out of the slumps of the tech reset. AI is just tearing through everything. But at the same time, there's a lot of hesitation around Europe's role and a lot of people are saying bad things or less productive things, maybe.

7:09So I'd love to ask you, if you were to give one word to where the European venture ecosystem is today, what would be that word? I'd probably go with something like defiance. So as you mentioned, right, not only the economic, but definitely the economic odds seem to be kind of stacked against Europe right now. Whatever you read right now online or in any newspapers talks about kind of wake up calls for Europe and the kind of last opportunity. And whenever I talk to founders, I get a certain sense of challenge accepted, which is good, to be honest. It's funny. Mine is actually, and we didn't sink on this one, but like mine is pretty similar in a sense.

7:49mine is graduation i feel like you know it's it's time to get your shit together in so many sort of ways and i think it's kind of the same when you graduate and you kind of sort of enter you know actual life post post being a student and you have to sort of organize everything yourself your insurance where you live how your clothes get washed and all of that stuff and i feel like It's a bit the same here to the extent that we clearly are more on our own. So we have to graduate and get our stuff together and hopefully continue winning. In a Danish newspaper, there was a commentary that said that Yerba is like the 35-year-old that's finally been kicked out of their parents' basement.

8:39I don't read Danish newspapers regularly, but that's probably how I feel about it. Yeah, so it's not an 18-year-old graduating. It's actually a 35-year-old. Rene, your take? Nothing's set in stone. There's a certain level of pessimism you have, sometimes optimism from various areas, politically, serenity, entrepreneurship, innovation. You can see it from all ends. At the end of the day, I see it from this. There's a huge chunk of people in Europe, typically well-educated, and there will always be people in every domain, mathematics, computer science, arts, sports, who are curious and driven enough to do something.

9:20And that is just what you need to bet upon and foster a bit, and then things will play out. That's a bit my thing. so I think even though there might be moments in time where people say we have lost this game and we have lost that game and now we need to step up that game yes you just need to try continue try doing and then curiosity of people will will help itself if you foster that that's my belief at the end of the day I have two big questions on this note I'm hugely political being um and I think I find it so interesting to see what's happening right now. My first question is, and I'm doing a summit in London in May, only to further this agenda, which is get the European tech ecosystem more involved in politics and really state our ground and say what we think about things.

10:13I, of course, argue that because we as investors are heads down thinking about the future and And the most important force that's changing the future, which is tech. And for that reason, I really think it's important that we make our voice heard. And I think that looking over to the U.S., the most powerful people there are tech people now. Maybe, you know, Trump is maybe not born tech. But all the people around him that seem to be the things that they have been saying for multiple years are the things that Trump is now saying. And the government is now moving on. So I'd love to ask you, what do you think is the role of the European tech entrepreneurs and tech investors when it comes to politics?

10:59Do you think that this is a rallying cry for us to get in and start actually making our voices heard? Or do you think that, no, we should stay in our swim lane? No one gets anything good from a Musk 2.0 in Europe. I can start. It's wrong answers only, right? Yes, on this one, definitely. Okay, great. Just speaking for sort of the German ecosystem, you can clearly see that there is more development in terms of individuals and also firms becoming active. You can also see that there's a few people that started becoming politically very active. I don't know sort of whether there is a personal agenda or there is just a genuine, I would say, effort to try to change things for the better.

11:50But in any case, you can see that there is more political activity. I don't necessarily think we need a European version of Musk. I think the motives for many of these tech people involved in the US government are somewhat questionable, at least to me. I'm not 100 % sure whether this is all being done for the good of the people, so to say, or whether this is just to further their own specific agenda and sort of cement their position in whatever the future will look like. So I'm not exactly sure whether that's the right model. However, I think, you know, Americans tend to be more extreme in either direction.

12:38And I think Europe is a bit measured and sometimes probably too measured, particularly in light of like really massive change that requires us to sort of, you know, really steer the ship in a certain direction. So maybe we have to swing a bit more into that involved tech people in government direction than we are usually comfortable with. But I don't necessarily think we have to sort of go all the way and sort of come up with an equivalent of, you know, Musk. That would be my take. I don't know. I would heavily agree on the Musk take. And in general, as you said, there's more and more people from tech getting involved and at least making their voices heard.

13:20I think that's a good thing. And then again, just a couple of days from now, we have another chance of making our vote hurt in Germany at least as well. While you were kind of talking about Musk, I think we have a fairly large opportunity to not vote blue, which when it comes to maybe common goal of regaining relevance in terms of both economic as well as kind of political value internationally and globally, and that's probably a good idea. I generally also agree on that. I would probably put an emphasis to something different, which is that, I mean, as an entrepreneur, as an investor, I think I would encourage everybody to voice.

14:01They think it's sensible to voice if they have a concern, if they have a need to the political direction. On the other side, you probably also need to balance out yourself, you know, where you want to put your efforts. You can do this 24-7 if you want and make this your main job and become a kind of political relationship person or you focus on where you think you are the best in or you are very good in. But I think it helps to contribute to signal issues, concerns you have, things you want to see change. And then the political machinery should hopefully be able to continuously deliver. I mean, there's votes coming up and try to tackle these issues if there are more entrepreneurs here and there, Wolf, can be.

14:47Make things more efficient here and there. If you really need a Trump here and there, I don't really know. I don't really think so. That is, there's also, as Claude mentioned, maybe also personal agendas behind some of the very big tech CEOs in the US, why you want to be acquainted so close to politics. But I think in Europe, voice it, at least, like a lot of German entrepreneurs take the German case and also other states many years ago. That's one of the originators of one of the largest fund of funds we are managing. We're continuously managing to invest in venture, but I'm not sure if it needs that crazy more interference of entrepreneurs.

15:28I just want to add one thing. I think, again, that's maybe the German view, but I feel like it's kind of similar across Europe. The political agenda of many countries, in my view, doesn't seem to trend in the right direction. at the same time you have massive technological change so it's clearly not a business as usual moment right so it's not like oh you know we just continue doing what we've been doing slash not doing in the last 10 years so you know getting a push from the us and stefan knows that uh that's like you know that this is my view is probably a good thing for us like getting our asses handed to us by JD Vance in Munich, it's probably a good thing for us, you know, because we need someone to wake us up because we can't just do what we've been doing the last 10 years because we know where that's going or we have a feeling where that's going.

16:22And so there needs to be changed. So I think being more involved and really starting to push as opposed to just being like, you know, coasting along, I think is a good thing. But again, like on the, should we go total tech oligarchy mode is probably, yeah, I don't think we should do that. Yeah, it's a big discussion and we should continue this on the air, off the air, without anyone that wants to take it. I think it's hugely important and I am probably leaning towards saying, like, I've always been inclined to burn the thing to the ground mindset. And I I do think that when we look at what has been happening in the U.S.

17:04over the last three weeks since Trump took office, definitely I can see so many things here in Europe that would definitely benefit from a similar movement. But I can also see that we have institutional forces in place that make it almost impossible to do anything of the like, which is actually what scares me the most. I am very unsure whether our institutions have been built up so strong because they've been built to create stability that we won't really be able to move in a cohesive action quickly in any way, just because that's what the system is designed to avoid. Yeah, but that's a big discussion.

17:44Let's leave it for the UVC Summit in May. Let's rather now focus on NAP, NERTS and Pioneers is what it stands for. First, let me ask you, why did you rebrand from Cavalry to NAP? And what does Nerds and Pioneers stand for? We got started with Cavalry in 2016, and we think we had a pretty good run. Our value proposition worked. You know, we're all former entrepreneurs. Stefan and I both have a founding background. going into the markets with a entrepreneurial approach, you know, really focusing on having sort of eye-level discussion with founders was really something that resonated well with the market.

18:27And then we added a fairly strong sort of platform function where we had operational support for companies. And that worked really well throughout the sort of 2016 to 2020, where you had quite a different founder type, I would say, as opposed to today, where, you know, business school graduates would come out and they would ideate something on a whiteboard and then basically pick the best business case. Then obviously everything became a bit crazy with SERP and free money and multi-stage funds like running around in Europe and all of that. So, you know, the 2021 period is probably something a bit of extraordinary.

19:06And then with the rise of AI and the post-SERB era, we just felt that our positioning, to be honest, wasn't the best anymore. It felt like we needed to adapt the firm to sort of reflect the way we see the market and the way we think things are going to develop in the next 10 years. I mean, we talked about uncertainty, right, for the future. And generally, we felt that we needed to have a more agile structure to cater for the uncertainty that will sort of be inevitably part of our next 10 or so years. And then also from a founder perspective, the founders we've backed in the last 18, 24 months, they're kind of different in terms of founder profiles compared to before, where the founders we back now are a founder type that we call expert founders.

19:58So generally people that have very strong domain expertise in a particular area, either from sort of their previous profession or from an academic background. And that's very different to the founder persona that we tended to back in our first few years. And so there's just a few things that came together where we're like, okay, look, we need to sort of change the way we operate, change our investment strategy. and with that also change the brand. Because it's also one thing, look, we sell money. It's super commoditized, right? And so the question is like, why do the best teams take money from us?

20:38And they will not take money from us because we have the fanciest brand, but having something memorable that is authentic to Stefan and myself definitely helps when competing for the best years. So that's, I would say, in a nutshell, why we came up with a new brand. And then obviously, Nerds and Pioneers, it's funny because we were thinking about a new brand in terms of authenticity, both in terms of like, who are we? And we're like a bit quirky and we like things to be funny. And so it needed to be something that would reflect this. And then also the question was like, who is our target customer in a sense, right?

21:20Like, who's the founder that we back? When we go through the founders we backed in, again, in the last 18 to 24 months, they fall into the nerds and pioneer bucket. And so the idea was really to find a brand that resonates with the founders we liked back. We talked to a number of them about sort of how they see themselves and how they would like to be or what they are drawn to. And that's basically where we came out. we're a firm that likes to back nerds and pioneers, hence NAP. And the funny thing is also obviously NAP is taking a nap, i.e. sleeping, which is the complete opposite that everyone is doing in this industry, which is kind of funny, unintended in a way, but just the way it happened.

22:10I got to ask you, because everyone that's big in the ecosystem and knows, will also know that your partnership changed with this. I would be remiss if we didn't drill a bit into that because every founder, we talk so much about how the founder manages, how founders should manage, you know, this period of splitting up. And in venture, it gets even more complicated in many ways because you have these past investments that are done. You have the LP. Some came in because of that person. Can you shed a bit of light on how you manage this process? Rene, I'm also going to ask you, how does an LP think about this either specifically with Calvary Slash and App, but also with other teams that break up and decide there's a better path individually rather than together?

22:58as you mentioned right the last year was definitely quite a I'd say transformational one for for us so not just the name changed but also the team structure changed and a lot of things we kind of did in a certain way over the past couple of years and that very organically grew to something we kind of questioned over the course of the year and and to be honest changed to a certain extent as well and and now from kind of on experience I can tell that something that you need as a GP, especially as one, even if you do this for nine or 10 years, but you're still doing it kind of for the first time, is to a certain extent a sounding board or somebody can leverage experience as a certain level of guidance.

23:42I have to say EIF is anchor, but also many, many more of our existing IPs and the whole name kind of cavalry came from, we do have quite a broad existing IP base. they have all shown quite a level of dedication and availability for us. That was far beyond what we expected and what definitely helped us navigate through this. Because, of course, kind of founder splitting up, it happens, especially kind of we started this firm nine years ago, almost 10 years ago now. Together, we kept working successfully together for quite a while. And while nobody sets out to do so from the beginning, things change, right?

24:23And at some point, you just have to look each other in the eye and find a solution. And having something like a sounding board for us was definitely helpful. Yeah, your question was on me. I mean, how can I really help you? Like, yeah, a few of these changes, something I can shed some light upon here, which is maybe helpful for some of your audience as well, is that maybe contrary to some expectation of people, changes in Vichy firms happen very relatively frequently. So if you were to take a lifespan of an investment firm, a Vichy investment firm, and take 15, 20 years and look at people who started it and who are there 15, 20 years later, you will find quite a significant amount of change in the firm, not only in terms of strategy sometimes, but also in terms of team.

25:14I think there are two interesting aspects that are to be considered. One is, of course, that there's a, let's call it a certain difference within a team that can occur, that can lead to change, or there can be a kind of an externality and a change outside of the firm that leads you as a firm to reflect on it. On the later one, I think it's important, or at least I noticed that over years, for VC firms that you constantly need to think over the years, do I need to alter myself? Where's the opportunity? If you take a thought example, you say you extrapolate yourself 50 years going forward, and if Claude and Stefan would tell me in 50 years' time, they have Claude and Stefan, NAP, they invest in early-stage NERJ in Europe with a closed-end fund.

26:01maybe we haven't tackled enough problems. Maybe there are things we need to change in this region. Maybe they need to look at different types of entrepreneurs. Maybe they need to invest differently. They need to look into different types of opportunities that were not there, different types of technology. So constantly rethinking this is something that is very important for a venture firm, I believe, which clashes a bit sometimes, unfortunately, with LP expectations. Because on the one hand side, some people like to have certainty, which I totally understand. Like continuity, I do the same as in the past, three, four funds.

26:35But if you really think about it, you would need to expect some change at some point in time, either in terms of where you want to invest, what type of entrepreneurs are you backing, how you approach investing, etc. So that's a natural evolution, and I think every firm should focus on this. Same for the team. A VC team that started might be the perfect team for maybe a duration of 10 years. but after that you might need other people and there will be better people and you need to think about how I incorporate these people into a firm that's why a lot of people struggle to do that it's not easy mentally for some people because you have a strong link to the brand everything you've built to let this go a bit and take some other people to take over and to the first thing I mentioned kind of you have sometimes different views within pinch I would say and that's also something that crystallized within Claude and Stefan's journey with some of the other team members as well.

27:36And they crystallized a new strategy out of it. And this is also quite natural. That can happen. Some people just have, you know, more appetite to do space-related investments or do something in crypto or whatever. And just some part of the other team just doesn't feel, have the capacity, experience, the ambition to do something in the space. So it's good to then also find moments to find ways to build a new team, I would say. But, yeah, change is more there on a day-to-day than people might expect, I would say. And it's a good thing. I'd love to ask you all to reflect on, and obviously for you, Rene, it's multiple funds, but reflect on the core learnings about how to manage a process like this.

28:19When you think back, what would you wish that you had caught earlier? What would you wish that you had done as part of the process of being the founding team? Are there something like, you know, I wish that we had actually looked each other more in the eye on every quarter basis? Or should we have evaluated more every time before we go into a fundraise? Like, do we really like, does this work? And like, what are the things that you wish you'd done more of or that you would just advise others to do? One thing is for maybe, I'm not sure if it's contrarian, but we also, of course, do assess these kind of team changes on an LP side in terms of kind of a post-mortem.

29:03Anything where there's a larger team change, if you like, or what are the root causes they're learning for us, for me, should we have done something different? I think what you can find yourself quickly in is a kind of an over diligence model. they say okay next time because that happened i do this and then another team that just piles up in terms of kind of a take the box approach and i do a gigantic amount of questioning and forth and back does it really result that the effect i may be may be wrong that i don't want to have happen or some apiece don't want to have actually happened question mark what i think is most important, what was the biggest learning for us, well, not big, but important learning for the organization, for us also always, be brutally truthful.

29:53I've gone through various team challenges in venture firms. I would say good ones, bad ones, ugly ones, beautiful ones, young ones, old ones. I've seen a lot of things in an investment period in year 14, whatever it is. Be as honest as you can towards your investors, your advisory boards, even if you have these structures in your funds. And they typically have an interest to help navigating that situation for the best interest of everybody. But the honesty is the most important thing. But in this case, I think Claude and Stefan have done this very well and the entire team as well to make that possible.