E491 | Patric Hellermann, Foundamental: “VC edge” aka differentiation

29:50So that set of experiences helps you to have an empathy for the day-to-day of the customers and the suppliers. And so that's what I mean here. So if you don't bring prior empathy, ask yourself, how likely is it that you truly are the perfect fit to build a differentiated firm? If your past experience, your close network fits to the markets you want to dedicate to, be geographically or vertically, then you might have a good starting chance to have some unfair empathy. Yeah, and empathy, in other words, is what we all know, so to say, as vertical expertise or expertise in the space in which you want to play.

30:32Now let's go routine. It's very close to empathy, but there is a nuance to it that I think is important. Exactly. So routine for us is about seeing ideally the same thing, but in different nuances over and over again. We oftentimes get asked, hey, so why did you go global? How do you source globally? How do you manage with a team that small? All these global deals. And the answer is repetition and routine. The no's that we get to after, and you notice it every year, I would say the time that it takes us to get to a quick no becomes shorter every year. Simply because at some point you will have seen the same pitch, the same models, et cetera, but in different market contexts, 10 times, 20 times, 50 times.

31:22I'm sure there are some that we have seen 100 times. And so if you're, let's say, generic investment model in a specific market, you might now say, hey, but I have the same thing, right? So I have seen the exact same company pitch me 50 times, etc. But the difference is the market context is not different. It's always within the same market context. And so when you change the market context, because you look at a similar market, but in different geographies, we believe it's that level of incremental learning within routine that makes you spot the unique things. Because to this day, inframarket, one of our biggest hits in our fund one portfolio, has not truly been repeated across the globe.

32:06And yet generic VC friends of mine have tried to back the exact same model in other markets and it did not work. So it's the change, it's the repetition against changing market context that I find so fascinating. If I should just add to it, because I think that's one angle to it. I think it's one angle to it that it's repetition on the same asset in different markets. I do think that it's fair to say that at least this is how I think about it. I think it's fair enough to say that it's having repetitions in your space. And that is both in terms of the types of deals you see. But I actually think that it's in every little thing of being a VC.

32:47And that's at least my angle to it, that there's nothing that can be compared to having many repetitions in something. I agree. The more specialized you are, the more quickly you can build up a lot of repetitions in that specific thing. And I definitely can get why you're thinking. but that's also because you're thinking very much from that picking angle that you started out with that was so important to your whole framework. I often think also from a firm angle. And I do think that it's, as a firm, also incredibly important that, as an example, you individually have had many repetitions on something.

33:28But if you're joining up with a partner, you also want to have repetitions together. because too often we see small teams fall apart, young teams fall apart. I agree. Sorry, Andreas, I have a provocative question here that perhaps you and I, we can't answer it right now, but I just find it fascinating. So without having the answer, how often is it being discussed in venture or emerging managers in their first funds deliver the best performance? That's a broadly discussed topic. And so oftentimes what's being cited is two reasons for that. If you listen to the public debate, one is, well, they haven't made their money yet.

34:13And so they are more hungry. I think that's a lazy argument. Perhaps that is a factor. But to me, that doesn't explain it. Unlikely. And the second one, well, maybe at that stage, they were just smaller funds. I think that is absolutely a factor. But what if the, hey, I'm actually not as successful in fund five as I was in fund one, if it's the same AUM, is actually a result of me actually not benefiting from routine from funds one, two, three, and four. Because if I pick a generic strategy, then every fund vintage, a new theme, a new fad of the day will come along. And perhaps I don't actually get to benefit from the learnings that I had in the themes that I picked in fund one or the successful themes that I picked in fund two.

35:05And they don't carry over into fund five because I don't use repetition and routine on a topic. I don't know. Maybe that is an interesting factor to consider. So what do I think on this? I think that first of all, it's very rare that we see anyone ever sticking to their AUM, even if we think about the inflation and thus that would allow for some fund size growth. So I think we probably have an N of zero there that have actually done that. So I think it's very hard to follow that line of thought. But what I would say is that I think that VC is so centered around outlier performers, both in the portfolio, but I also think that on the individual.

36:07So the individual investor, the person that can be an investor. I think it's very, very hard to scale a venture firm with employee junior mid-level people without at the same time also specifically intentionally growing AUM so you can also justify lower performance on a returns basis. Meaning that why can you have a big fund that's justified that it has lower returns? Because you can put more money into that one manager and thus your dollar amounts that come back justifies that the multiple is lower. Because You can't fill a portfolio with 15, 10 million funds or 10 million euro funds or 20 million euro funds.

37:06No one has the time for that. Almost anyone, right? So for that reason, you would actually probably rather, in many cases, you would say, I'd rather go with a larger firm where I can put more money, but where I know that obviously it's not going to be a 10X or 15X or whatever, which I might get in a lower fund size. But here I have a machine that I can put more money into it. I know that it'll come back with a quite big certainty. I don't think you can have the outlier performance when you have a lot of junior and mid-level people that by definition are not outliers, but that is what you can get with a very concentrated bet on one person.

37:50The problem is just that it is incredibly difficult to pick VC managers. And you also, even with the smartest guy, have a very large risk if that's 30 investments and it's only 30 investments. And he can have the Midas touch and still not hit the right one. So for that reason, I think that the important thing to think about when you're thinking about AUM is, is this justified? Are you justifying the fund size increase and lower returns expectations with a de-risking of what you're doing because you're more solid, so to say, of an institution. So that was a long walk down how to think about AUM.

38:36But I do think that if I was an emerging manager thinking about, do I want to be one person, two persons, three persons, do I want to have five principals and seven associates or do I want to be just the three of us, I would 100 % think very seriously about what am I doing to my AUM ability here or my ability to return risk adjusted or give good risk adjusted returns versus my ability to just deliver raw DPI or raw work actually because DPI you can do more of with the other, but multiple on whatever someone entrusts you with is easier when it's a smaller fund. Yes, so that was a big ramble. I hope someone got something out of it.

39:23Now let's get into, so we just spoke about routine, the importance of building repetition in your game. Let's talk about distribution. This is obviously something that I care a lot about, but you're asking what makes your ecosystem realize your game and think of you first. That's distribution in your mind i actually so i first want to start with a topic of distribution when it comes to the founders that we that we all back right so there is a saying in the military where something like and i wasn't in the military so i'm just following it but i can't speak from experience here the current with the current discussions about tim walsh you have to absolutely disclose that whenever you make a metaphor or a story about the military say i have never been in the military i I was not 24 years in the National Guard and I was not deployed to Iraq.

40:10So I'll make that very clear here. But, you know, I've been following it. So it seems like in the military they have the saying, right? So where they say, hey, armchair generals talk about strategies and tactics and the veterans talk about logistics. And I feel the exact same thing is also in venture. Like armchair investors talk about models and product, et cetera. All of that matters. but actually the veterans that I talk to talk about distribution. And it's interesting, right? Because if you think about all the category creators that might be visible to you, how many of those have a true distribution flywheel?

40:50I would say in the ones that I have identified, all of them, 100%. And I think the exact same question is not asked enough about you as a fund manager, that you should ask yourself, okay, how do I actually distribute my differentiation, my message that differentiates me to my network, to my founders, to people that, you know, my buddies that need to call me, how do I distribute that? And so the answer can be multifold. So there I don't have a silver bullet, et cetera, but I do think this question doesn't get asked often enough, right? So don't be the armchair guy or gal, be the veteran and ask, okay how do i distribute my message how do i distribute my differentiation there's this one fund i just want to give it as an anecdote or as an example there's this one fund i've never interacted with a gp because he does mostly b2c no ven intersection with what we do but you know i looked at his fund as an lp got that's how i got the the fund deck and this guy his entire Here LP pitch deck is 100 pages of the merchandise he produces for founders.

41:58Absolutely insane way of distributing his own fund to founders. And then through that distribution showing, hey, actually your logo could be on my merchandise. Or here is all the events where I can distribute your company, B2C, again. And so that's an anecdote, right? So how do you distribute as a fund manager the differentiation that you seek? Yeah, obviously, I've been in many distribution conversations with emerging managers, given that we have a podcast focused only on this and also that we do what I would call strategically aligned investments for EUVC. So when we do LP investments, we often back people that have realized that whatever we're doing is an important distribution channel to them.

42:41So that's why it's a match made in heaven there. And that's also why some are better for us than others. So I can only say that I completely agree. And I think that you said an important thing, which is the flywheel, because any emerging manager is more than anything constrained on their own resources. And if you don't have a flywheel around your distribution so that everything you do, and even as a manager, if you don't have a flywheel around how your firm works and how the different things interlock, you will run out of time. And again, if we go back to Anthony Dannen, I don't know if you love me or hate me for mentioning multiple times in one episode, but what I love about his model is that his whole portfolio model is built around his edge being the one who interacts with probably most early stage fintech founders, even before they get started.

43:45And everything from portfolio model to network, to his communication, to ticket size, everything that he does is aligned around his way of investing. And you can do it differently, but pull out one part and change as an example, what he does to a more concentrated bet, like a very concentrated setting would not work. It doesn't work anymore. I wholeheartedly agree. And that's where I think that it's so important when you think about distribution, thinking about how does it not become a marketing cost for you to do distribution, but interlock with everything else that you do. Yes, because in Anthony's case, I would even argue, so Anthony and I, we have many shared friends.

44:28I don't actually think I ever interacted with him, but I know him through many friends. And I think the one thing that I would say applies from our discussion to Anthony within his specific context is he gets picked he doesn't have to you know he's not the starving lion in the cage because he actually moves upstream of the competition and I think that that's exactly what you're pointing out so if your entire model is derived from this mindset you can find this level of differentiation yeah yeah I think you know one day I'm going to collect pitch decks from all all you guys and put them on our website because I I think everyone needs to see what a good VC deck looks like.

45:06But it's hard to come by unless people, if you just put on your LinkedIn, you're an LP. You can get them sent all the way. Emerging manager hacked you right there. So let's go to arena, picking the arena that you play. Tell me a bit about how you think about that. So together with this episode, we're going to put out stuff. And in this connection, there are tools and resources so to say, and you should definitely check here how Patrick and his team at Foundamental picked their thesis and picked their space and how they argued to their, to LP, so to say, and even to themselves that this is a space that's worth putting our fund size into our team and to all that.

45:52So the arena, we use this fancy term, but in the end it describes you as a fund manager, as a GP having to make choices on the geographies, the markets or the themes that perhaps you want to focus on a little bit more, and then the stages. It's these three things. You literally will have to decide these because it will make you better or worse in deploying. And then it will also appear more or less likely that you can return DPI to your LPs, depending on which choices you make about the arena, geos, themes or markets, and then stages. and I think everything that we've discussed up until here, empathy, routine and distribution informs your arena picking because if you have a specific unfair empathy and you believe that empathy allows you to gain routine and repetition faster than others, earlier than others and then you perhaps have a specific distribution angle that might already tell you where you should deploy your capital And this sequence to me was for fundamental very important in hindsight.

46:58I wish we had approached it exactly this way, but in hindsight, we were lucky that we did. Because if we had started with, oh, let's do growth stage in this market because this is where currently the music plays, we might never have had a specific empathy for it. Or we might have never had any repetition to draw upon. Or we might have never had any distribution advantage that plays in that. Because if I start with that kind of mindset, to me, the analogy is what I love to tell founders that I work with. I love to tell founders, hey, if you approach your company building from a top-down market picking perspective, you will be in narrative telling mode because you will be saying to VCs, oh, we're the AI for X or we're the open AI for X because you think that's where currently capital gets allocated.

47:51But maybe you have absolutely no reason to play there, no license to operate, etc. And that's the equivalent of starting with the stages, markets, geographies where you think the most capital will be deployed, but you not having an empathy. So I think the sequence that we've been discussing up until here should inform which arena you play in. So I'm incredibly opinionated on this. Let me have it. And I am because there are so many VCs that we all have a plan until the first boot hits the ground. And that is fair enough in so many different parts in life. But I think that I always put it as you don't design the VC firm that you want to build.

48:43the VC firm that you need to build is the one that you have kind of arrived at, so to say, for your life. And yes, then you can decide whether you do want to do a concentrated portfolio or a broad one, a large one. But you just cannot say right now things are happening in sustainability and then, okay, then we change our strategy to be a bit more sustainability focused or so on. Or if you just don't see an absolutely clear line from everything you've done into now launching your firm so that you're just plucking LP capital into everything you've built so far, so to say. And it might be serendipitous.

49:33It's oftentimes serendipitous. But if you're not building on top of an installed base that you've built for the last 10, 15 years, I doubt anyone will ever be a good VC, a good emerging manager. That's also why, coming back to the fund one that we spoke about, why are fund ones often so good? Well, oftentimes they are someone who have had this buildup and then finally unleash it into the world with a fund one. So they might have the craziest backlog of seven angel investments that are rolled in. Or they might have the biggest network from their last large firm they were in, where they haven't been able to do the investments within this thesis because it was too weird, too niche for the firm they were in.

50:23And now they just, you know, there's too many opportunities. They can't not do it anymore. No one else is placed in that arena. So for that reason, they're getting into it now and they're getting the LP capital to allow them to do it. Because once you describe that story, you can't unsee it. I think that's also part of why firm ones are often so good or fund ones. So I'm incredibly opinionated on exactly this, because I think that if you're not made for the fund that you're building, I don't think that you can do it. I love hearing you say that. I haven't heard it expressed that succinctly, but I agree the way you say it.

51:06Another saying that we have in fundamental, whether it's right or wrong, it's just our conviction. So VC is notoriously unscalable. The only thing in VC that scales is knowledge. It's the only thing that scales. If you think brand scales, think again, because actually the brand value gets diluted every year in VC, the more money comes in. If you think your network scales, it's untrue. Your network does not scale. Your network at some point will not accept more intros from you or more recommendations from you simply because curation implies that it's curated. And the more you give curation, the less the value attached per curation.

51:45So your network will actually not scale beyond a certain degree. We believe that the only thing in VC as a fund manager that scales is knowledge, which goes back to your point and also goes back to the question of, hey, maybe fund five at some point for a horizontal generic VC firm is also less likely to generate fund one return because at some point you might veer away from the knowledge that you have used in fund one. So that's why we say knowledge scales. So that I don't agree with. I do think brand scales. I think A16C is a great example of it. I think Seedcamp and Yerb is a great example of it.

52:25Just to touch on the, or counter the example of a fund one or fund five that won't return fund one type DPI. I think Seedcamp is very well positioned to do that. And they're exactly as you said, a broad portfolio play with a generics or whatever you want to call it, at least not sector specific firm. And that's because brand scales, I think firms scale as well, but it's up to a specific level. But then to be fair, are they going to generate the same as fund one? Probably not, right? Are they all Carlos Reshma? It's very hard to mimic the founders of any GP firm or any VC firm. I think that the GPs that break out to build their own thing oftentimes are absolute enigmas.

53:21And I think it's very, very hard to scale that without losing something. But then as long as you gain something else, which is then the ability to take large checks and return large dollar amounts then it's all warranted okay now let's go players is it actually a game if you're the only one in the arena that's an ask that's a big question and one that i'm gonna really enjoy to pick apart because i know some players they're from the lp the question to ask here is hey if you're the only player in your arena going back to the arena question we just had are you really playing to win is it even a game if you're the only player in the arena playing you know ping pong against yourself my answer is probably not and so what it means or what it implies is that for your differentiation and the way you set your differentiation against picking your arena is if the arena is void of any players maybe it's not an arena worth playing in just yet maybe you're too early maybe it's just not just not an arena of course you also don't want to be in an overcrowded arena and at least most people would say that's something that would not allow me to execute on a differentiation and I think that that's the the question to answer here if I if I pick my arena let me validate that I will have competition that might be on a similar focus than me but then my differentiation is how do I win against these whatever five that that do that in ConstruTech we were not the first ConstruTech fund when we started in January 19 with fund one there were four maybe five in the U.S.

55:09that had dedicated to ConstruTech for five, six years already. And it does serve as validating the category. It does serve as preparing the soil to adopt more water, adopt more seeds. To your point that you have educated me upon last time, also it allows LPs to actually benchmark GPs. So there's many benefits to having players in the arena and being not the only one because the conclusion, hey, if I'm the only one, I'm differentiated. That would be the wrong conclusion. Yeah. Well, I'm sorry that we are in agreement. I thought we would be in agreement. But that's exactly the LP angle that you would normally have, that you would normally see is you need to see, obviously, anyone can make anyone make an exception.

55:57You never know. But in general, as a sophisticated LP, you'll look to see that the category is validated, that there's actually someone you can benchmark against. Also, because this is VC, so we're all contingent on having follow-on funding, you can also just see financing risk be huge if someone does something too specific. So I think that would be my point on the player's part of this question. It's dangerous to be in too small of a niche or too nascent of a niche. Now let's go to the next one then. This is the second to last one. Liquidity. You're asking the question, why will your game minimize time and maximize probability to DPI?

56:45I mean, you literally already read the question, and I think there's not that much to add, except I don't think GPs, when they start their funds, actually ask this question. I would take a gentleman's bet if someone had godlike visibility over what's going on in people's minds, which nobody has, but I would take a gentleman's bet that eight out of 10 GPs before they start their fund do not ask the DPI question. I would take that bet. And I think that's the secret here is, hey, if I do think my fund strategy, the arena I pick, the empathy I have, the routine I gain, the distribution advantage I have will minimize the time to DPI and maximize the probability of DPI.

57:35When you answer that positively, I think you have a very strong differentiated strategy. Oftentimes, though, and that's me being critical of our profession, we go back to Peter Thiel's professions and say, oh, but we're in a power law game. And all I have to do is hit that one outlier. Honestly, Andreas, and this is me being very opinionated about our own profession, I actually think that is a super lazy excuse to avoid any kind of accountability and making rash decisions. Huge market. I love this founder. Let me pile in. Do you see Sequoia is leading? Actually, that tells you nothing about DPI.

58:20It tells you nothing about your contribution to that DPI. I have companies in the 3D space that is an insanely liquid M &A market where some of them hopefully in that market can drive outlier returns, be the next Autodesk, for example. But it's interesting how many of them generate 200 to 600 million exits. If I, with a 50 million fund, buy 10 % in any of these because the market is super liquid, I have the best network to the strategic acquirers. I have a track record of curating highly well-performing firms with strong products. I can actually positively influence relatively large outcomes at ridiculous revenue multiples in that market.

59:14So I'm using this as an example. And there are many markets like this where, hey, don't be lazy. Don't go, oh, everything is power law. It is, but you can generate DPI below power law. It's just that people don't tell you that. we have in our community, we have a series of sessions on portfolio modeling. And there, it's exactly, you know, this discussion that we're also having in those classes. Do you have to, so to say, strike for the outlier every single time? You might argue that you would when you invest, when you underwrite the investment in the beginning, where the actual portfolio of a very high performing fund will oftentimes have not just this one big outlier and then the others, especially in Europe, especially in sectors where you don't necessarily go the IPO route, because that's where you generate these absolute power laws.

1:00:18But when you have many of the verticals, many of the exits that we're seeing in Europe, they don't have that. That's exactly what you described is the 200, 300, 500 million euro acquisitions that then were much less dollar or dollar hungry. You burned less cash on the way there, which can then generate great returns. It's super hush, hush and dangerous to talk too much about, I think, because it can make, that's important to say, because it can make people think that then we need to open the playbook of private equity. And that is not what we're saying. That's not the message. It's still VC playbook, but it's just that when you get to the exit side of things, the the game changes a bit and it becomes a bit more like a private equity play, so to say.

1:01:15But it doesn't mean that you all of a sudden in the sourcing stage and in the winning stage and the covenant stage want to play a PE playbook. But it does obviously in a portfolio mix look a little bit like a PE playbook. Here's another fun to that point that you're making, Andreas, that I've learned to admire. Yeah. So a friend of mine that I worked together with when we were at Eon, the large utility, this is 12 years ago, we were colleagues, had lost each other out of sight. And then all of a sudden he emerges as a partner at this Dutch VC firm called Set Ventures. Set Ventures is a Series A fund, right?

1:01:54We've had them on the podcast. Sorry, come again. We've had them on the podcast. Amazing firm, right? And hyper-focused on energy. And so the point is, so energy is a relatively liquid M &A market because there is a lot of capital from strategics in that market. And the strategics operate in a very fast changing industry. And so SET has built a network and a reputation among these energy firms that they have high quality companies in the portfolio. So they can make certain assumptions about their own ability to pick DPI firms and to influence the path to DPI. And that, to me, is what this discussion point of liquidity is about.

1:02:39It was episode 127 with Rene Savelsberg. Okay, I'll go back to it. It's my go-to firm when it comes to energy topics. Really cool. That's cool to hear. Well, now, of course, they're also on the GoToPodcast then. Let's go to the final one in the seven questions, the discipline question. What will make you stick to your game when your ecosystem shows you other deals? Tell me about that while I mute and say hi to my son. Yeah, so discipline. I'm sure every GP that is underway for a while has had this occurrence where, hey, someone shows you something outside of your investment scope. Maybe you're dedicating only to Europe and a buddy shows you an interesting deal in the US.

1:03:34Or maybe you're doing only Europe, someone shows you Israel. Or maybe you're investing in construction tech and someone shows you something in prop tech. And so whenever it's just a little or later stage, a higher valuation, lower ownership target that you have set out, what makes you stick to your discipline to say outside in no? That's the question. It doesn't mean that you have to say outside in. By all means, take the call. If you have the time, in the end, it's only you who can make the prioritization. But the question is, what would make you say no outside in? If the answer to that you cannot clearly define, I would say you probably don't have as strong a differentiation and strategy set as you think.

1:04:19And that's discipline. And so the other thing to your point here, Andreas, that you shared with me in the show notes might be processes. You asked me, hey, Patrick, what processes do you have that makes you stay disciplined? Honestly, I don't know, Andreas. I don't think we have hyper-specific structures or processes. I think it lies in the people, in the persons, how they prioritize. I tend to be a person that is hyper-prioritizing. And I actually tell my colleagues, I think the number one across the world underrated business skill is prioritization. If humans were better at prioritizing, we would get 10 times more shit done in our lifetimes.

1:05:00So to me, I think it comes down to prioritization. Yeah, so I have two children. So that definitely helps me prioritize. But let me just make a comment on the discipline part here. I think two things. One, obviously, it's okay to veer outside of your strategy. that is why you have you know you have an LPAC that you can ask it's why you have uh typically 20 or so that you're allowed to do outside of your core focus without having to ask anyone those things it's why you have a max amount that you can go outside of your normal check size you know without having to ask anyone all those things so it's absolutely okay there's also a reason why I think the famed investors would all say that we have a strategy until we don't so to say right or there's no price that will not let us do a round or so to say decide to invest my son just joined us for those watching on television I've told him he can be here but he cannot say anything.

1:06:19Let's see how he does. So I think that on that point, it's incredibly important to remember that you can veer away from what you plan to begin with, but you have to have a very good reason to do so. And that is where I asked you about process. One thing is inside a firm, you can have that, well, okay, this is how we do it, but it can also be your own thought process. These are the tests that I run through with myself to make sure that this makes sense. I have two tests. Before I solve tests inside of my own head, and now you've actually reminded me of one or two occurrences where maybe in the firm's processes this happened.

1:06:58Let me share those with you. Before I do, one quote that the business person that I admire taught me verbatim that relates directly to what you said. So the counter example to what you said was this person's mantra. And that is, you know, you have a strategy when you know when to say no. You know, you have a strategy when you know when to say no. Doesn't mean you always say no, but when you know when to say no, that's when you have a strategy because it is clearly defined boundaries. To the question. So first in my own head. So one, why does that person show me a deal or why does that founder come to me?

1:07:36If the answer to that is very obviously aligned with what I stand for, what I know, what I have empathy for, what I have routine repetition in, there's a good chance that maybe even if it's outside of my scope, it should be something that I should consider. And two, the second question is, why can I help this firm? I have passed on many deals that are somewhat at the fringes of our scope. I will not tell you which ones, but I oftentimes see something in a wider manufacturing space where people think, hey, in that part of manufacturing, it's relatively close to what you're doing. And I've repetitively passed on companies in that specific part of manufacturing because I say my competence doesn't translate there.

1:08:26It's not project based. There is not a lot of service elements to it. It's more pick and pack. It's more e-commerce. even though it is manufacturing, it doesn't share the characteristics of what I have empathy and routine for. And ergo, even if they feel I'm a preeminent person to ask you to take a look, I won't have the ability to accelerate this firm. And so if it's not obvious why I'm being asked and it's not obvious why I can help the firm, in my mind, that's two questions that in my thinking process helped me prioritize. In our firm, it's the weekly meeting where actually if you participated, Andreas, you would not believe how unbelievably adversarial our weekly meeting is.

1:09:11And people sometimes get a little bit – so like new joiners, sometimes they have a trauma after the first time we meet Mondays because there's no filters. I think we could do a better job on highlighting what we love about a firm and what could go right here. I think we're trying to get better on that front. But on the other side, we're very, very good at actually pointing out when we're not a preeminent investor or it doesn't make sense. So there's a little bit of that group dynamic where we all ask ourselves that question. I think all good investment meetings are held on Mondays because you have to to make sure that you have four days to just rebuild love in the room after you've battled it out.

1:09:58All right, Patrick, let's go to the last one, the body test. We've touched on it in the beginning, so I think it's really nice that we come back full circle and just revisit the body test and why this one is so important. So if the buddy test is asking yourself to test your own differentiation and strategy, why will your buddies call you? And if the answer to that is not obvious or the answer is, well, because they're my buds or because we're best mates or because we know each other very long, that in itself will obviously not scale. you're probably not the only person that could claim that same advantage.

1:10:41And you definitely can't have that same advantage with 10, let alone 100 people. So there needs to be another reason why these people in their immense WhatsApps will actually think of you. And so if you can answer that with something else that is not because we're best mates or we know each other very, very long, or I was the best man at his wedding. If it's not that answer, then you might have a real edge here. Yeah, you're calling it the body test. I'm sometimes from the LP angle calling it the national champion or the global champion test. It's so difficult if you don't have a lot of experience in a space to be able to diligence whether someone is only a national champion, only in quotation marks, or a global champion.

1:11:28but the fact of the matter is the adventure is a global game and in many cases it's not enough to be a national champion or in the national championships maybe you can be a national champion but if you're only in the championships to a non-qualified person you would look like you're the best guy on the field i've never seen anyone run or play like that but then if you've met someone who is actually a global champion you realize wait a second This guy wasn't actually as good as I thought. I also say to many, and this is on the business angel side or the family office side, when they're investing in obviously small-sized family offices here, but the people that haven't done a lot of LP investments and don't have a big framework for it, one thing they have done is they've hired a lot of executives typically.

1:12:19And I sometimes say it's maybe easier for you to think about this as a hiring. You know, if you're hiring for someone to do this job, would you hire this person? And that's oftentimes a framing that's easier for them than the framing of, will I invest 200K or 500K with this guy? Patrick, what a conversation. Thank you so much for joining for it. It's been incredible. We're going to do so much fun stuff together, I'm sure. Thank you for having me. Here's a few words from our beloved sponsor. Welcome to the European VC podcast, sponsored by Flow. Combining technology and regulatory rails, Flow is enabling the private market.

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1:13:39Yes!

1:13:48than just an alliance this is a union of values values let's start acting