E536 | Alex & Valentina, AdHoc Ventures: Betting Big on Human Interaction Tech

0:00What if the technology meant to connect us is actually tearing us apart? Yes, so what is the biggest problem in humanity at the moment? We think that this is building genuine human connection. Digital platforms promise to bring us closer together. It also is a disaster because it actually destroyed the longstanding principles of how people interact with each other. The cost, a staggering market opportunity slipping away. And this 150 billion problem is also actually growing, so it's expected to double in the next five years. But two investors see a different future, backing the companies fixing human connection.

0:36We are going to back early stage companies in human interaction tech, but a special focus on sales tech, HR tech, workforce benefits and relationship tech. Their approach? Hands-on partnership that delivers results. So what we actually do is that we sit down together with our startups and help them not to lose focus, but define a very clear path how they can grow their top line. Discover how Ad Hoc Ventures is betting$25 million on the future of human interaction tech. This is the EUVC podcast.

1:26from first time to seasoned investors the euvc syndicate is not just about capital Get involved. Co-lead deals, share insights, bring in great people, and help shape the pipeline with us. Visit eu.vc forward slash syndicate to learn more. 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 Alex and Valentina with me from Ad Hoc Ventures. They're raising their very first fund together, so this is an exciting one. You all know that we are absolutely invested in trying to help European VCs get off the ground.

2:05So this is yet another of those episodes where we're spotlighting a manager trying to get off the ground here in Europe. Alex, Valentina, please take the floor. Tell us who you are. Yeah, sure. Let me take the floor. Thank you very much for having us here. We are super happy to be in your podcast. So we are raising a fund that is focused on human interaction tech. We have invented this concept ourselves, and we are happy to tell you more about who we are in more details and about human attraction tech and about the fund. So let's start with me and my background. So for the last seven years, I've been a successful venture investor.

2:39I've been running a$120 million captive investment fund called SD Ventures, Social Discovery Ventures. And this is actually an investment arm of the third largest online dating conglomerates, the private online dating big company. And managing this investment business, I have done successful early stage investments in unicorn companies like Flo, Revolut, Patreon, etc. And they've exited from two of them. And also I have secured investments for us into top tier funds based in the Valley like Kostla, Neon Depress Associates, DCM and others. 35 funds, it's a huge number. And also I have done three M &A deals in online dating space, successfully integrated it into the main holding.

3:36And I also would like to tell you about myself. So I developed as a professional at Bailin Company. On the international level, I have focused on the value creation plans and M &A strategies for public and private equity companies. And we joined forces with Valentina to solve what we think is the most important problem of our time. Yes, so what is the biggest problem in humanity at the moment? We think that this is building genuine human connection. We strongly believe that building real human connection is essential for us to survive. But however, digital platforms have broken down real human connection, even now we are connecting via Riverside and it took us several minutes to set everything up.

4:23And this experience, we strongly believe this might be enhanced significantly. And we are trying to focus on the product that helps to adapt into this new normal where AI and tech are disrupting in some sort of way both personal relationship and business relationship. Yes, so that's why we have invented this human interaction concept to invest in solutions that help people to interact with each other in both personal and business ways and adapt to this new normal where people communicate online, where people meet their couple online, where the majority of the work is made online. and this experience need to be enhanced by new products, new era of products.

5:16And I also want to back up things that Valentina just mentioned with numbers, so for you to get some feeling. So you probably know in the post-COVID era, we tried to get more efficient, more remote. A lot of things started happening remote, which weren't remote at all before. This includes, for instance, sales, move completely to online. HR onboarding also moved online. and also like dating moved online with Tinder, Bumble and all that kind of stuff. And while it is timely efficient, it also is a disaster because it actually destroyed the longstanding principles of how people interact with each other.

5:54And this created inefficiencies both in the business context. So people are just losing money or not getting as much as they should have. And also people feel more solitude and feeling more detachment from their teams and from their partners. However, this is also a great business. So we have defined four segments which are specifically attracted by this human interaction tech problem. One of them is sales tech, as long as the people who are buying and selling are humans. The second is HR tech, as long as your employees are humans. The third is corporate stress management and mental health, especially a few due to the recent trends in the recession issues and the post-COVID era.

6:42And fourth are B2B solutions for dating entertainment, similar to the conglomerates where Valentino was working previously. And this 150 billion problem is also actually growing. So it's expected to double in the next five years. So it's a growing business opportunity for startups to operate in. At the same time, it's a great venture opportunity because what you see here on the page are just some examples of M &A deals conducted by big platform players such as ServiceNow, Matchcom, Atlassian in the recent couple of years. However, if you would just check, like every couple of weeks, at least one player conducts a big acquisition in this field, which showcases that big players also see the need to actually make their offering more human direction techie.

7:34I would put it like that. In addition to that, all these big players also have a dedicated corporate VC arms, which usually invest at the later stages that we do. and they are usually companies that you can exit you or get upruns from and including a software discovery group, software discovery ventures where Valentina was working, but actually every big company in human interaction tech has also their venture arm. Yeah, so what we do given this large communication revolution that is happening, we are going to back early stage companies in human interaction tech, where special focus on sales tech, HR tech, workforce benefits and relationship tech, those solutions should be B2B.

8:19We focus on B2B because we strongly believe that we should not invent new platform, but we need to enhance the existing experience on the current platforms. So as you might remember, I've been managing an investment fund and I have already done several human attraction tech investments. And here is a track record with more than 27 % IRR and more than 2x DPI and with three unicorns and two exits. We also, in the last two years, together with Valentina, were specifically looking into doing human traction tech deals. And we have built a portfolio of 10 companies, which have a cash-on-cash result of 4.3x and has also a lucrative multiple of 1.5x TDPI.

9:10And while some might say that it's too early to track that, we still believe that it's an early sign that this thesis makes sense, that it's viable. And I also want to provide you one more additional zoom-in example. So we have a company called Simplim in our portfolio, where we entered when the valuation was$5 million. And they are now in negotiations to actually up the valuation by 50x, which also showcases that the other venture funds and startups in this field are growing and growing rapidly. Another example of our track record is that we were admitted by Coolwater Capital. This is a Y Combinator for Emerging Managers in the United States.

9:55We have just recently concluded their program, and we expect to come in October to a very large demo day in the States to present our thesis and present our track record in front of dozens of dedicated funds for Emerging Managers. We are also backed and supported by a very strong premier team by venture partners who help us to source, peak, and support deals post-investment. So they all help to cover us the verticals that we invest in. So one is Alexander. He has spent more than 10 years in go-to-market strategies, five years at McKinsey, most recently by a big call center as a service startup.

10:36In the middle, you see Alexandra. She is a successful CEO of a large dating app, also part of the social discovery group. She helps us to pick best deals in the B2B SaaS for dating solutions and support them post-investment. And Evgeny, to the right, he actually has spent more years in the AI MLR &D. Even before, a lot of people learned about AI and MLR &D because he started doing that 15 years ago. He is a successful CTO from Berlin, and he helps us to pick technologically viable startups and to help them also post-investment. And we also have three unfair advantages when you compare us to other VC firms.

11:19Number one is that we use McKinsey Brain Toolkit when we support our startup's post-investment. So what we actually do is that we fit down together with our startups and help them not to lose focus, but define a very clear path how they can grow their top line, whether it's new regions or whether it's new clients and so on. One example is a company called Intradex. When we invested in it, they had more or less stable revenue growth. However, we saw more potential, how they can grow in faster than they do. and we helped them to define like regions, where to start and to move forward. And in just a quarter, they doubled their revenue and signed such prominent client as SoftBank.

12:05And just so that you understand what Intradex is and get a more feeling of what we invest in, if you have ever used GOG, this like expert search platform, basically Intradex is a company which helps you find warm intros to decision makers in Asian countries so that you can sell your products from Europe or United States in the Asian markets. And they also have GOG as one of the advisors. Second unfair advantage is given my experience in investing in those funds in the logos that you see on the slide, I have built personal relationship with everybody on the slide and beyond. This means that ad hoc portfolio companies can directly arrive to decision makers of top tier venture funds that invest after ad hoc.

12:57I have an example of one who a petrilo company is raising right now and I was able to make a meeting with several venture funds even if it did not formally fit the criteria but still they had a meeting and now pending the investment process and decide on the future right now. So we help founders with that strongly. And number three, our unfair advantage, we personally know large players in human interaction tech, such as McKinsey, Social Discovery Group, BainMatch, Atlassian, Salesforce, and some others are coming because they're our ex-employers, our friends, our advisors. One of our portfolio company, Maxion, they have secured a round from ex-matchcom executive, became not only an investor to our portfolio company, but also an advisor.

13:56And this is thanks to our team. Another takeaway here that we see pilots that those corporations do with our portfolio companies and some of the pipeline companies. So if we see that the pilot of some company is extending and becoming a contract, this directly appears in our pipeline. So speaking more about our pipeline, how we do sourcing, beyond that, we are thought leaders in human interaction tech. We frequently speak in conferences such as Emerge, Reflect, Dating Insights. And we also have direct access to gated communities that you might see logos here. However, I would like to tell you a quick example again That we recently have done investment into a very hard-to-reach founder She is ex-CEO of Tinder, ex-CEO of Headspace She is building a company called Mina And this is an AI relationship coach And we were able to invest along with Sequoia Capital and New Process Associates and AI fund.

15:09And it was hard to compete with other funds, but we did it because we are strongly in this specific topic in human interaction tech. And also, Eike, last but not least, if you want to discuss human interaction tech with us, you can contact us our email address, which you see on the slide, or just scan the square code and you will directly hit us on. Andres, I have a question to you. I'm sorry to... Yeah, have you ever preferred to communicate with GPT or other AI tools over real human connection? Or maybe somebody of your friends have faced this problem that is more interesting and more efficient and faster to communicate with AI tools rather than with real human?

15:59So I would probably not say that I've ever preferred to communicate with chat GPT over friends or real people because of it being more interesting. Because I think that there are parts to interaction that AI does not deliver right now. However, the way I would describe it is that if I need to get stuff done, I very often prefer AI. And I would, in many cases, do I have that? Can I pick between an AI solution or a person delivering the same solution? So to say, I would definitely pick the AI solution because I get quicker iterations. And I also feel that if it's a problem that the AI is able to solve, I'd prefer the AI.

16:50That's how I would put it, right? And I would write if I have to spend, I also enjoy the, in many cases, I enjoy the interaction with the AI more than I do with the person in the sense that if it's with an individual that I try to develop something with, I feel like that process is more tedious and you spend more time on issues that are harder, so to say, than what you do with an AI. Like there's more uncertainty in the dialogue with the human than there is with AI. So I definitely think that AI has a beautiful future ahead in that respect. Where I would say that it has had the biggest change is that co-pilot is a beautiful word.

17:38I'm sorry that Microsoft ended up being able to run away with it. But a co-pilot is exactly what it is, both in my personal relationships and my business relationships. I never debate facts anymore. I never go down a route for too long in a conversation without AI being pulled in in some way. And if it's business, we always have at least an AI that makes sure that everything that is said is captured so that the knowledge space within EUVC keeps being built on. So to answer your question, I think AI definitely has taken a very, very large role in my life. Yeah. Thank you very much. And this is exactly a description of the revolution that is happening right now in the communication world.

18:24And this is the problem that we are addressing. How to adapt to this kind of tech and AI revolution that we need to adopt both in personal business. I'd love to ask the two of you one question. A way that I understand specialist funds sometimes is that they are built around an inflection point and an insight. So an inflection point in the market might be regulatory or societal or technological, those probably being the three biggest. Here we can clearly see the societal, which is what you just pointed at. The technological is, of course, the JGBT moment, so to say, captured by that very well. And then there's the insight of the founders, which is, of course, both the insight that you have, having worked with STV and seen how there's both operationally in the core business that I'm sure you had eyes on as well, but also in all the underlying businesses that you were reviewing and trying to understand.

19:23that you could see that, okay, there's something happening here. But I'd love to ask you, this is kind of to validate that there is a market and there's an opportunity growing that's interesting. I'd love to ask you though, when it then comes to being a VC fund in this, it requires that there are founders that want to pick you. And you had a good line there or part of your speaking line here was your unfair advantage, but I'd love to ask you a bit about what are the commonalities between businesses that operate in this interaction tech point? Because what I always say is when you have a life science fund, your value as a life science investor to a founder is very clear.

20:11You know the path to market. You know how to navigate all the regulations. You also are able to understand the technology, at least to some levels, so on and so forth. So it's kind of quite clear there that there's unique empathy for someone being specialized. Is there something similar when it comes to interaction tech, where the fact that an investor is specialized in this brings you extra value? So I think one is that Valentina is just a very well-known investor in the space because she was banking companies like Floor, which means that companies in the corporate stress management just come to her.

20:48And also the companies are all around like relationship awareness, dating, and B2B serves for this to just come to her because they just know her track record, know like you have seen her at Forbes, they see her because she's a CalPont Fellow and so on and so forth. So this one, so they just know and want to come to her because they want your opinion, including Mina, this company just came to her because they knew that coming from the company, you probably would know how their relationship wellness works. This one. And second is when we already start talking with the companies, it's usually we clearly outline to them how we can support them going forward and that this value adding will be concrete.

21:29So we just say to them, guys, we know how private equity would do with their portfolio companies. And we'll do this with you together. And a lot of startups at the early

21:42to boil the ocean. I actually apply this in a mechanics that I would do at work, like how I can secure you together, focus on one market, focus on two clients and see that I grow there and then expand next. And we help them do that. Showcasing that we do this successful income and like startups want to do this with us, a lot of our startups also keep us sweet active. So it means that they just, like we have a confirmation that what we are saying makes sense. And this is second. And thirdly, we have a very strong team of venture partners who also support them with pilots. So for instance, like the company called Animus, the Alexandra, like our venture partner, she brought it firstly to the pilot in her own like dating app and then helped it expand to the further like dating solutions in her conglomerate.

22:29So we like provide them viable support and whether it's strategic or like very concrete interest. We create some kind of gravity for human interaction tech, and that's why everybody knows that we are kind of raising this question. That's why we are centralizing this question. That's how people know about us. This is one. And second, we study and continue studying the strategic plans, focus of large players, as I have mentioned, Salesforce, Tinder, VegCom, Atlassian, et cetera. what are their plans to do pilots, to do investments, to do acquisitions. And we kind of adopt the whole strategy of the whole fund, also raising their vision, and we kind of impact this vision as well.

23:22I absolutely get it. And I think everyone that knows how an early stage GP, first-time fund GP, is hustling to get things done, I think at least we all agree that we'd love to see more money your way. Valentina, Alex, thank you so much for coming on the pod to discuss this. Thanks so much. You're watching, Jess. Thank you. From first time to seasoned investors, the EUVC Syndicate is not just about capital. Get involved. Co-lead deals, share insights, bring in great people, and help shape the pipeline with us. Visit eu.vc forward slash syndicate to learn more.

24:01Tear down this wall. It's more than just an alliance. This is a union of values. Let's start acting.