E569 | Saul Klein & Yoram Wijngaarde: Dealroom’s Powerlaw, Europe’s $50B Gap & Backing Breakout Founders

0:00What if everything we think we know about startup success is wrong? Financials are what's needed to bring more institutional investors. It's also time to add, not replace the unicorn as a metric. For decades, we've chased billion dollar valuations while ignoring the fundamentals that actually matter. Growth in the innovation economy isn't just about valuation. If you can't over time underpin value with fundamentals, you aren't really going to attract investment at scale. But what if the smartest investors are playing an entirely different game? We are here to partner with founders as early as humanly possible.

0:41It's about conviction built through real relationships, not spreadsheet projections. Seeing the ups and downs of their evolution gives us conviction to keep following those breakouts. Yet Europe faces a brutal reality check. In 2023, at the scale-up stage, our ecosystem was$35 billion light compared to the Bay Area. But the stakes couldn't be higher. Those top 100 thoroughbreds alone have generated over 350 ,000 jobs. Can Europe's mature ecosystem finally close the$50 billion gap and compete with Silicon Valley? Join us as Saul Klein of Local Globe and Yoram Wingard of Dealroom reveal why the future belongs to revenue, not hype.

1:31We're hosting exclusive off-the-record LP AMAs, bringing together the people behind the capital, shaping the next generation of venture funds. If you're raising, planning to raise, or just want the unfiltered truth on how LPs actually make decisions. No pitch decks, no posturing, no script, just real conversations between serious GPs and LPs. Ryda Daouk El-Gisur, founder and managing partner at Amcan Ventures, is joining us for an unscripted, off-the-record LP AMA on 18th of September, exclusively for EUVC community members. Through Amcan, Ryda backs emerging U.S.-based, sector-focused managers running concentrated portfolios with emphasis on transparency, portfolio discipline, and conviction-led capital.

2:14She also leads Amkin Advisory, guiding family offices through bespoke venture strategies, and serves on the board of Endeavor while sitting on selection committees at Raise Global and Bridge Funding Global. Before venture, Ryder drove strategic initiatives in sustainable finance, giving her a rare blend of structured planning, impact thinking, and venture agility. This is your chance to ask one of Europe's sharpest LPs how they really assess managers, secondaries, exit strategies, and what most GPs still get wrong, or anything else you're dying to know. Access to these AMAs are limited to EUVC community members.

2:53Don't miss your chance to be in the room. Head to eu.vc forward slash subscribe to save your seat.

3:05It's more than just an alliance. This is a union of values. Let's start acting. This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Early last week, Dealroom released its 2025 Power Law Report, one that saw Local Globe and Phoenix Court rank number one investor in EMEA. Saul, thank you so much for joining us today. Congratulations. First question for you. After three decades in tech, what do you think this ranking says about your investment approach? We've been doing it for a long time. I think this ranking is fantastic on a couple of levels.

3:51One, I think it shows how strong the ecosystem now is in EMEA, especially by bringing in the idea of cults and thoroughbreds on the revenue side. But I think in general, what it demonstrates is how important it is to be early when you are assessing value. And that's obviously very fundamental to our approach. So it's a really great recognition. So Joram, as Sol just mentioned, didn't hear Colton Thoroughbreds. So let's talk about that. You found that we have now 700 Thoroughbreds across EMEA with your top 100 list representing companies that generate 100 million or more in annual revenue. This is a clear departure from our normal unicorn obsession.

4:40And that's, of course, for better and for worse. Can you talk us a bit about this shift and say why you thought revenue was the primary metric? And then I think we should have a discussion around whether this is smart or not? Fundamentals, so financials are what's needed to bring more institutional investors to the asset class, which has become a lot more mature. Like since the unicorn post was written by Eileen Lee, was it? More than 10 years ago, the whole ecosystem has matured. And so it's also time to add, not replace the unicorn as a metric. It's not going to go away for sure, but to add something a bit more robust as well.

5:29Also, it has a bit less ambiguity, like either you have a hundred million in revenue or you don't, whereas with unicorn metrics, you know, this can become a bit outdated and people are not always there. They're very proud to say they became a unicorn, but not many Many people will go out with a press release to say that they're not anymore. I think that this 1 billion valuation still has a lot of value and it's more forward looking. Sometimes, in some cases, it is more relevant. So the combination of the two work really well. So you've been in the game for 30 years, as we just said. Can you walk us a bit through the unicorn fascination that we've had now, our shift to focusing more on revenue metrics?

6:16What has happened inside LocalGlobe? Has it really been something that has shifted or have you always kind of viewed it as at a fundamental level and then said, well, the media is unicorn infatuated. That's the game we play. But in reality, inside the firm, we've always been focused on the metrics. You know, as you said, I've been doing this now for over 30 years and I kind of loved my trade, if you like, in the Bay Area, in the US, in the 90s, and then learned through my time at Sky, and then at Index, growth in the innovation economy isn't just about valuation. It has to be a combination of the hope and promise that I think the unicorn term captured really, really well, but also the fundamentals.

7:09And I mean, just even to roll the clock back to Sky, you know, 2003, 2004, I remember us going from zero to 5 million and from 5 million to 200 million in a 12-month period. And, you know, revenue is a much less subjective measure, obviously, than valuation. Valuation is just the consensus between individual investors agreeing on a market price. And it's really important. But if you can't over time underpin value with fundamentals, you aren't really going to attract investment at scale. And I think back to Yoram's point, And while 20 years ago, we were operating in an ecosystem where companies like Skype that have reached 100 million in revenue were kind of once every few years.

8:12The fact that we now have 700 plus companies doing over 100 million in revenue that will venture back tells me that we are a really grown up ecosystem. And that any investor from an insurance company to a pension fund to an endowment can look at the products of venture capital allocation and say, wow, these are real companies generating real growth. And we have ways of pitting our valuations against the fundamentals. Now, that should never put us in a situation where it is just about the revenue or it's just about the margin. But, you know, those things end up being incredibly important. And I think, you know, no investor would say that at the end of the day, you know, companies get measured by fundamental financial metrics, including free cash flows.

9:10So I think demonstrating that in a 20-year period, because arguably we've only really been at it in EMEA for 20, 25 years, whereas in the Valley, it's been 50 years in the making. To have 700 companies that have hit this threshold, I think it's an incredible achievement. And that's the thing we should be really happy about. Speaking of growing up, Sol, I'd love to ask you a bit about the LocalGlobe or Phoenix Court journey. LocalGlobe is obviously early stage and seed, but then you've added in also the fund investing side and you've added in solar for growth. So latitude for fund investment, solar for growth.

9:55I'd love to talk to us a little bit about this perspective or the importance of having multi-stage firms and firms that can really do more than just the seed, so to say. Look, I think for me, this is, again, it's just the product or start with the premise that we are here to partner with founders as early as humanly possible. So pre-seed and seed, which is what LocalGlobe focuses on. And the founders that we're looking for are the founders who, in Andy Radcliffe language, are the founders who can ride multi-decade waves. And again, my observation, having been around for 30 years, is that the biggest waves don't just last for five years or 10 years.

10:46They last for decades. I mean, to put it in perspective, as an industry, we're still investing in semiconductors, and that wave started in the early 70s. We're still investing in the internet. That wave started in the mid-90s. We're still investing in mobile and cloud. That wave started in 2008. So if you are lucky enough to work with an exceptional founder, You meet at seed stage or what we call, if you want to meet a great surfer, you live on the beach. If you meet, you want to follow them all the way up into the hills and all the way to the city. Companies, you know, don't become bad companies as they grow.

11:30Arguably, they keep on getting bigger. And the power law teaches you that not just in the private markets, but all the way into the public markets, these outliers are the ones that generate the best return. So really all we've done with Local Globe and then with Latitude that invested early growth, rounds of 15 to 100 million, typically B's and C's, and then we piloted about three years ago our solar fund, which is sort of investing in the scale-up rounds, rounds of 100 million plus, it's just keep on following those founders that we see going from the beach to the hills to the city. And we now have in our portfolio, I think, 54 companies that are doing over 25 million in revenue, 70 % of which we invested in at seed stage.

12:22So we've been really privileged by focusing at that seed stage to see these companies grow up. And some of these companies, whether it's Wise or Melio, we're investing in all the way through. I mean, while obviously we were lucky to invest in Wise through Local Globe at the seed stage, we reinvested through Latitude, and we actually invested through Solar in their direct listing. And we've been shareholders in Wise for five years since they've been in the public markets, because in our view, this is still a company that has a lot of upside. So it's often said that VC is an access class, right?

13:01So I guess from that perspective, it makes a lot of sense to leverage that access to double down on winners. Is that a fair way to think about it? Yeah, 100%. And, you know, I mean, one of my partners, Julian, talked about access, insights, and engagements or, you know, having seen the movie before. So, you know, if someone is investing at an early growth stage or scale-up stage, You know, very few of those firms will have seen, you know, the ups and downs of those businesses. And, you know, in our view, you know, numbers only tell you so much, but really, you know, working with the founders, working with their team, seeing the ups and downs of their evolution gives us, you know, a lot of conviction to keep following those breakouts, founders and those breakouts.

14:02firms. And as I said, having been around for a long time, I've seen that even in the public market, you can get extraordinary returns. I mean, I was lucky enough to compete with Netflix when I was running Love, Phil. And just to track the Netflix stock, I bought a dollar of Netflix, let's say, in 2002, 2003, I've sat on that dollar of Netflix for 23 years. That dollar is now worth$1 ,250. If you'd invested in Amazon in 2002, they would have been public for five years. Your dollar in Amazon in 2002 would be$20 ,000 today. So if you're lucky enough to be an outlier, our view is that you should just keep going.

14:55Could you talk to me a bit about how we solve the growth stage? Because you're obviously doing it from within the Phoenix Court world. I'd love to ask you, what are you seeing in the ecosystem, Saul, that are working and that we should be doubling down on? And what are you maybe a bit more hesitant around? Well, look, I think as Yoram said at the beginning, one of the biggest challenges that we have in the UK, in Europe, in EMEA, is that we've become actually world class at creating great early stage companies. You know, these companies, this cohort, 700, that have reached the 100 million revenue mark.

15:45However, if I just look at the UK or the five-hour train ride from King's Cross that we call New Palo Alto, in 2023, at the scale-up stage, these rounds of 100 million plus, our ecosystem was$35 billion light compared to the Bay Area. Not the US, just the Bay Area. And I think, you know, Joram, correct me if I'm wrong, I think that number got worse in 2024. You know, the gap at the scale-up stage went from$35 billion to$50 billion. And it doesn't take a genius to understand that if companies hit a certain scale and a certain stage, they need capital to keep growing and to keep expanding. And, you know, if the companies in our ecosystem at that stage, just compared to the Bay Area getting$50 billion less per year, obviously they're going to get their terminal value, their exit values, their enterprise values are going to end up, you know, being smaller.

16:54So, you know, I felt for quite a while now that until we bring in capital at scale at that stage, we aren't really going to sort of fulfill the potential that we've now, I think, evidenced and demonstrated through these data sets. Now, to be fair to large pools of capital, domestic, regional insurance companies, pension funds, the evidence just really hasn't been there. You know, five years ago, 10 years ago, 15 years ago, you couldn't have said, oh, look, here are 700 companies doing 100 million in revenue that didn't exist 15 years ago. You know, that would just be nonsense. But today, I think we have the evidence.

17:41And now, you know, it's just really important, I would say, for sort of European economic growth and developments that we pay attention to these thoroughbreds, that we pay attention to these cults, that we pay attention to these unicorns, because this is where the jobs are being created. I think those top 100 thoroughbreds alone have generated over 350 ,000 jobs in 2024. So this is not just about science projects. This is about jobs, it's about growth, and it's about economic development. And I think we could all agree that's something every country in Europe really needs right now. Now, the only thing to add is that not only is there this 35 to 50 billion gap, but to the extent that European or EMEA scale-ups do get funded, also like 80 % is coming from overseas.

18:40So even the money that they are raising is barely coming from, is barely local. I'd love to ask you something because, yes, we can always get new growth funds and there are strong people working on that, obviously, with capital coming from KFW and EIF being directed towards that. there's maybe one place where I think that we can do a real difference in this podcast today, which is talk a bit about how do you take a firm that is traditionally seed stage and pre-seed and grow it to become a real franchise that can act across the value chain. What would you say to those that are out there now, have proven themselves in seed and pre-seed, the firm is growing, and they feel like now's our time, we should actually go for the multi-stage approach.

19:31What would you say are the core learnings, the core things to be mindful of? I think our learning, as I said, is just to sort of follow the founders. Every new vehicle that we've created, Latitude and then Solar has really been a response to wanting to stay in the game. and to support the founders. The bigger those cohorts have become, the clearer it was to us that in the early days, let's say before we institutionalized Latitude as a fund, we would create a number of SPVs to continue to invest in our most promising companies. And I know a lot of people do that and have done that in the last five to 10 years.

20:21But when you start to see at least in our case, there are 54 companies that have hit$25 million thresholds. It makes no sense not to have institutional vehicles, both at the early growth stage and then at the scale-up stage, to participate. And even, quite frankly, if it's to help your LPs generate co-invest opportunities. So for us, actually, latitude doesn't lead rounds. Solar doesn't lead rounds. And actually, our fund sizes at the latitude stage and at the solar stage are relatively modest for funds of those sizes. And we do that because for us, those funds are there really to concentrate capital on companies that we've invested in primarily from seed stage and to facilitate LP co-advests.

21:15So my advice would just be to follow your customer and your customer is the founder. And if your founders keep growing, assuming you are a good partner to your founders. And, you know, most seed funds really are because they've been there at the beginning when nothing, you know, exists. And, you know, you can continue to follow. and you know I think you know it's actually quite important particularly for LPs that are new to the asset class to have managers that are close to the companies that can help them really sort of understand what's going on so you know to me this access and engagement is is a real positive now obviously you have to be careful that you don't fall in love with all of the investments you make.

22:12But I think at least in our case, this is where not leading at latitude and not leading at solar has been a really, really good discipline because we're making a capital allocation decision that's really very different from a traditional multi-stage fund, I would say. Have you ever felt that the inability slash the requirement that you are not allowed to lead, Have you ever felt that that kept you from being able to do an internal round entirely alone that would put you in a better spot going forward? Not really. I mean, occasionally we will, you know, work with a company to write a note to the next rounds, you know, which, again, for me is really about supporting founders or teams to kind of build more value into a future financing.

23:03thing. But generally, it's for our perspective, it's kind of maximizing alignments with the founders around not pricing, but also being clear to our LPs that we are not going to be setting the prices at the latitude stage for companies that have come out of the local globe pipeline. And I think that clarity has really helped everyone. We're on a tight schedule here. So we only have four minutes left. And I want to make it to just touch on one critique that there's been by some around the report or the methodology, which is, of course, that there's 100 points given to seed stage investments and only 30 to series A, which then of course kind of skews you could argue in the final point system, the whole report or the findings, the awarding of the winner, so to say, towards the seed stage.

24:07I think you also earlier asked the question, shouldn't we emphasize more growth states, especially because that's where the gap is? Yes, there are a lot of seed investors in Europe, but research also shows there's a massive difference in quality. And for example, if you raise from the right seed investor, you have a four times higher expectancy to convert to Series A and to raise from the best late stage funds. So I think maybe we have a high quantity of seed investors, but I think we need a much better picture also of the quality. And overall of the weighting, look, it's based on the kind of median valuation uptick between rounds.

24:57What you also see is that if you look at kind of the likelihood of investing at seed stage to a company that becomes either a thoroughbred or a unicorn, it's way and way lower. About half of growth stage investors invest in a unicorn. Also about half invest in one that reaches thoroughbred status, but only one in 10 seed investors invest in one unicorn. Where it becomes really even more interesting is the ones that invest in 10 or more unicorns. That's one in 1 ,200 firms that invest at seed stage in 10 plus unicorns. So that's where you really want to know where the outliers are. And so that's what's been kind of the thinking behind the methodology.

25:47And you can see also SoftBank, Tiger, Insights. So there are some later stage investors that are also in there. Could you tell me a bit about the difference between picking at seed versus picking at the later stages? Look, I mean, you know, the most obvious answer to that question is just, you know, the amounts that you have to go on at feed stage is really, you know, the people and the people's view on the markets and what the people say they're going to build for that market. and you know sometimes there's a little bit more evidence sometimes there's a little bit less evidence but you're really really again i love the andy radclick framing you're backing the server and you're backing the the fact that this is a sort of a multi-decade wave obviously you know as the stages go on and personally i don't really like feed a b c etc because i think people name these things all sorts of crazy things.

27:00You can have 60 million seeds and 150 million A's. And actually what I love about the deal room methodology is it sort of frames the stages on the amounts of capital raise. And I think that's a much better way of sort of looking at early and breakout and scale. But I think in our view, even when companies get to the point where they have lots of data that you can look at and you can do customer calls and look at a cohort and all sorts of metrics. From our point of view, I'd say at least 50 % of what we're looking at, even at that stage, are the founders, the team that the founders have built and how they operate.

27:51Because, you know, if you look again at the companies that have gone on to compound year after year, long into the public markets, it comes down to just like exceptional founders, incredible leadership, and their ability to build great teams that sort of whatever is happening, they can find their way through or kind of pick themselves back up. And that's why, to me, the DNA of seed investing is very consistent across stages. So to me, early is a mindset. It's not a stage. But you hone that mindset at the feed stage, is my belief. And, you know, again, in 20, 30 years, I've seen a lot of the Series A funds or even the Series B funds or even the early growth equity funds come down to the beach.

28:52You know, like the beach is a pretty cool place to be when the weather's nice. But you've got to be crazy to live on the beach 24-7, 365. And I think, you know, that's what seed investors do. they live on the beach and you know they don't have a bungalow overlooking the beach you know like a series a fund they live on the beach and i think you know you've got to look at people who have gone through cycles and remained there and it's very very few and i think you know obviously i'm talking at our own book here but to me we're starting to see a body of evidence now with these with these rankings where you really see the value of living on the beach you know 0.9 seed camp yc and others you know these are all firms that are sort of really shining in these rankings and you know the other thing is that's um you know even whether you look at the emir rankings or the global rankings it's the companies the firms that are sort of right right at the beginning um you know that are the ones that are are really i think building these cohorts of value so thank you so much for joining me today sol i want to give a big shout out to you first foremost, of course, congratulations with topping out the ranking, but also thank you so much for continuing to contribute so much to the European ecosystem.

30:29It is incredibly valuable. It's one thing what you do in the ecosystem with the founders, but also coming on the podcast today, talking about how you've built LocalGlobe and PhoenixCourt into what you are today, talking a bit about the importance of growing with your founders and staying with them and finding ways to do that as a firm, I think is incredibly important for our VC ecosystem to really pick up on and learn from. Thanks so much. Have a good week, everyone. We're hosting exclusive off-the-record LP AMAs, bringing together the people behind the capital, shaping the next generation of venture funds.

31:02If you're raising, planning to raise, or just want the unfiltered truth on how LPs actually make decisions. No pitch decks, no posturing, no script, just real conversations between serious GPs and LPs, Raider Daouk El-Gisur, founder and managing partner at Amcan Ventures, is joining us for an unscripted, off-the-record LP AMA on 18th of September, exclusively for EUVC community members. Through Amcan, Ryda backs emerging U.S.-based, sector-focused managers running concentrated portfolios with emphasis on transparency, portfolio discipline, and conviction-led capital. She also leads Amcan Advisory, guiding family offices through bespoke venture strategies, and serves on the board of Endeavor while sitting on selection committees at Raise Global and Bridge Funding Global.

31:49Before venture, Ryder drove strategic initiatives in sustainable finance, giving her a rare blend of structured planning, impact thinking, and venture agility. This is your chance to ask one of Europe's sharpest LPs how they really assess managers, secondaries, exit strategies, and what most GPs still get wrong, or anything else you're dying to know. Access to these AMAs are limited to EUVC community members. Don't miss your chance to be in the room. Head to eu.vc forward slash subscribe to save your seat.

32:24Tear down this wall. It's more than just an alliance. This is a union of values. Let's start acting.