Ertan Can, Founding GP of Multiple Capital on Multiple III & How emerging managers can demonstrate performance from Fund I - III| E298

29:15So this is also comes into, and the whole firm becomes a different firm. And I'm not saying it's, I think it's good that funds become larger and teams become larger. And, you know, it's good probably for the ecosystem. Founders feel much more comfortable probably speaking to those larger funds because they have like teams for everything. You know, it's like, it's different. And I think it has some reasoning behind it. And a lot of investors like it as well, right? So there's this 100 million threshold. A lot of institutional investors want to invest in 200 million plus funds. Totally understand it.

29:52And there is a market for that and there is reasoning for that. Do we think it increases the probability of having better returns if you invest in a 75 versus a 25 million? No. Do we believe that the probability of having higher returns in a 25 million is higher than, you know, in the larger funds? Yes. And that is like the thinking that I have of being extremely consistent and backing small funds instead of larger funds. Even though some of the best managers in our portfolio, considered best managers, are probably those ones who are raising$100 million in their second, third fund. Yeah, I was just about to say that and to everyone in the audience, if you don't know, we had this, of course, in the intro as well.

30:37Two names that we mentioned there, Angular Ventures and AirStreet Capital. These are firms that are very sought after and that the general LP market would say likely going to be great returns from the new funds being raised as well. where these are funds where they fall out of your belief system, if I should put it like. But don't I believe, like, do I think that Angular and Astrid are great funds? Of course I do think that. So I think they've built great brands. I'm super happy to have backed them in their first funds. I think the brands, and it's probably some of the strongest new brands in the venture ecosystem, in the European ecosystem.

31:17So do I believe it's wrong funds you should not invest? Definitely not, right? So everyone should invest if they can in their new funds as well. So I truly believe they're great managers. But do I believe that the new fund will outperform the older fund? Probably not, just because it's five times larger sometimes, so four times larger. So it's a... But will they outperform most of the new VCs coming to market? I think so. Yes, they will outperform because on average, they will be a good fund. They have a better brand, they have better access, they have better co-investors, they have better follow-on investors.

31:55So a lot of reasons why the fund has a high probability of performing well. Will they perform exceptional well, like a 10x or 15x fund? Probably not. But it's actually, it's incredibly interesting what you said before with the profile of LP that you're looking for. And now I'm just kicking tires here. But what I would think is, since you have this role, you're almost scouting funds, right? You're almost scouting first-time funds that will become amazing. And if you're not an LP that's incredibly plugged in, you don't get the chance to invest into Angular 2 or Airstream 2. Because maybe you would have maybe gotten the chance if you knew about them, but you just won't know about them.

32:44Correct. So I would think that you had a great product for someone who said, Ayrton, you do the first crazy bets. You spend all that time in the hopes of getting crazy carry out of a fund of fun. You spend all that time looking at 10 million euro funds, but we can't do that. But when you then hit the likes of Angular, we want one, of course, in the reporting to be kept up to date. and then we want you to know that we're interested in a London-Israel focused fund or based fund and you should come to us and tell us guys, I think this one is the fit for you and then you should start making sure that I build conviction or at least get the opportunity to build conviction and you get to meet the manager so that they actually can win that allocation right now most funds are not oversubscribed some do close over subscribe but in 2021 2022 it was not given that you would be able to get access into a fund like this and then having an lp to lift you in would actually be incredibly valuable i totally agree so 100 agree that we are something like a scout fund fund and And to be honest, we tried to speak with larger LPs about exactly that model.

34:09So where we said, you know, it's almost impossible for you to back first time funds. It's almost impossible for you to back a 20 million fund. Why don't you use us, you know, and get some insight and see like 30, 40 funds of the market and decide afterwards which ones you're going to back with a larger check and the second fund. And the probability might be also higher, you know, that you are getting into that fund because we might help you speaking very early on with these GPs. So it's an interesting angle. I think it's, you know, one of the, to be honest, one of the reasons why we exist. I think that that's potentially one of the anchor checks in the future.

34:44And we thought about it in the last two to three years a few times. And we reached out to, you know, one or two server-in-mouth funds with, you know, having this idea of sourcing funds, but not sourcing the funds. And still, we think that, you know, our fund of funds is probably still a very good financial bet for them. But they, like we try to sell the idea of, you know, yeah, we are not really the real investment you want to do. Just back us to make the real investments after. We still think that, you know, if they would be an anchor check in us, we are probably a very good performing fund just because, just by design, right?

35:24Just by what we do. I'm not saying I'm just better at picking funds than others. Just by design, because we're backing those small funds, we will probably have a better result than most others in the market. But yes, I think it makes a lot of sense. Okay, now I want to ask you about evaluating emerging managers, because this is a question that I get quite often from emerging managers. It might be first-time managers, but oftentimes it's the second-time managers. And what they say is, or second time funds, what they say is, we don't really have good markups yet. We're in a very tough market right now.

36:08We haven't been able, of course, we think we have great bets, but we don't have a bunch of companies that have raised that 5x their valuation. Some of them even raised their first fund on the back of a very solid angel track that was quite old or quite progressed. So they did have good markups in that. They raised on the back of a high TDPI, so to say, sometimes even DPI on their angel investment track. But now they've done their first fund. They're getting ready to raise fund two. and they don't have markups because of the market, because of everything. They don't have those markups on the first fund.

36:52What do you look for when you see that, when you see them coming to market? It's at 0.5 TPPI, 0 DPI, obviously. What do you do? So first of all, we don't believe that all of the VC funds in the market, first-time funds and including all of our funds in our portfolio will be outperformers, right? So there's this relation, like in a fund investing with the companies, you can't expect that all 30 companies that you're going to back will be outliers, right? So I think people have to accept, you know, what's called power law and a lot of other terms. Only a few will be, you know, outlier funds or have outliers in the portfolio.

37:38So that's the kind of acceptance that we have. So we think about 10 to 20 % of being really outlier funds and the rest will be average funds and some of them will be even underperforming. So that's the general understanding that we have. Now, there is a lot of randomness when it comes to being an outlier fund. To give an example, in our first portfolio, the outliers were completely random. We didn't expect that in random geographies, random access niche. So we believe in randomness in our portfolio. So to say, in other words, when we invest in 30 funds, we think that each of these 30 funds has a potential to be a 10x fund.

38:21Do we believe that all of them will be a 10x fund? No, but each single fund has a potential of being an outlier fund, okay? Now, what we want to do when we look at first time and second time funds, And the third thing that I would like to mention here is I think from first to second, there is literally no, you can't show real performance, right? Usually you raise first to second within three years. And, you know, the kind of funds we invest in, pre-seed, seed, you might have some markups, but that's not real performance. And DPI, sorry, even if you have an early exit in those early first three years, that's so, you know, you can't build a model on that.

39:02You can't say, oh, this guy has sold a company within two years. Now we are expecting him to sell every two years companies out of his portfolio. That's just not happening. For us, I think it's very unrealistic to look at performance from a first to a second time fund. So deciding on a second time fund based on the performance of the first time fund, it's almost impossible. I never do that, to be honest. So it's like, even if that happens, so if you have early markups, it's still too early. So those markups would be still maybe in two years, you know, not realistic anymore. The ones that actually went up will not be the ones that end up being the great success.

39:43Exactly. And maybe also DPI-wise, you know, not the same thing as a high markup. And other funds might be much better in three years in the future, right? So that's the randomness that I'm talking to. Now, what do we look for? You know, what is, like, it's quite obvious. is did the GP focus on his strategy that he sold us? So did he change? Did he behave opportunistically? Or was he extremely focused on doing what he thought he was doing? And was that the right decision? That's also something, you know, sometimes you're wrong. You think, you know, I'm going to do whatever. And then we realize, okay, it didn't work out.

40:25And that's also a reason for us not to mess again. But usually what we really like, and that's probably more important than performance, is consistency, is like building a great network. So if you are, if we can see that you are investing with the right other investors, co-investors, if you can attract follow-on investors that we think are really good names. And then, of course, the follow-on investors can be the large multi-stage firms. So that's totally okay. But are you able to consistently raise from those follow-on investors? Are you able to build networks to those following investors, to other great co-investors?

41:00Are you invited to competitive rounds because of what you do? So are you liked by the others? I think that is much more important for us than early performance from fund one to fund two. That is just, we think performance will come if you do the other things right. And do we think performance will always come? No. But the probability is high if you're a small fund, if you do things right, there is a probability that performance will come. That is more important for us, the probability or the optionality of having that performance in the right fund, than having someone who had maybe two or three markups and sells as a performance.

41:37The greatest thing is IRR. Not even multiples, but IRRs. At some point, we have 120 % IRR in our first fund after six months of the last markup. Sorry, that's even a negative information for me. because if you think that sells or that is relevant, then you haven't understood really the fund KPIs or what really brings a good return. So we're not sold on this. So higher IRRs in the first one, two, three years, doesn't matter at all. High multiples, of course, is great, but it's not. So give you an example. If you have a higher multiple, if you're one of the funds with the highest multiple in our fund, with your fund, but then you raise 100 million fund in your second fund, I don't care about the high multiple in your first fund.

42:27I'm happy because I'm in your first fund, but I wouldn't invest in the second fund. So it's more nuanced. I think that is also misunderstood by a lot of LPs investing into emerging managers, that performance is not, you don't look at performance like you would look in a fund, raising fund five, fund six, and then really track all the performance down and find out patterns that work again or consistent. So I think it's a very different kind of selection work. And other nuances are much more important than the pure performance in terms of IRR or TVPI or DPI sometimes. But even that is almost not relevant in the first two or three years.

43:08Are there, Ayrton, any KPIs that you would say are worth looking at? Portfolio, company, progress? Do you look into that? Do you say, okay, you've done 15 investments. Obviously, you don't yet have markups on any meaningful number. But I know this company and I know this sector and they're doing very well and all that. Do you go down to that level? So what we look at is the range of entry valuations. So that is a kind of good KPI for us. So not the progress of the companies, but because you can't, again, you don't have power about that, right? But the range of entry valuations is very, very, like that's a KPI that I'm looking more at.

44:05So are you able to get into the whatever, you know, in your market, geography or vertical is the typical low range of entry valuations or what is considered pre-seed, seed? I think we are always talking about the average in our portfolio should be below 10 million entry valuation. So if funds tend to have much higher entry valuations, you know, I know a lot of GPs don't care about that. And they think if you are in the right companies, it doesn't matter. Yes, but you don't know when you're investing if you are in the right company. So if you accept a 50 million valuation, a 30 million valuation, if the average is 25 in your portfolio, that is rather a bad sign for us.

44:43because that shows that you're typically investing after signal, right? So after there is a signal, after it's a very competitive front. What we like instead is someone who has conviction and invests one step earlier at a lower valuation. It might be wrong, you know, a lot of times, but hopefully sometimes also right. But that is like the real value, I think, that I'm looking at when you think about fund KPIs or, yeah, KPIs in an early stage, earliest stage fund. Do you have any example of a manager, you don't have to mention the name here, that did this very well in describing their narrative and everything around the fund in a way where you, you know, around the performance of their first portfolio that, you know, you thought this is very well done?

45:32Most funds are really good today in preparing and selling and pitching their fund twos, even fund ones. So I think the job is done very well. And the education part in the last years was probably also very well. So a lot of the GPs coming into the market, whether it's their first or second or third time fund, they're well prepared. The pitch is typically really well signed. I wouldn't say I'm seeing really bad pitches anymore. And it's making our job more difficult also, right? So if everyone is really great, it's more difficult to select. That is very, very true. I always say that there's no salesman that's as effective or as good as a VC.

46:25r10 any advice you'd give to emerging managers in this situation of raising fund one to fund two right now what should they um think about i'm preparing even though they're great presenters what what is it that you'd like to see more of our perspective is different from let's say the general lp perspective okay um for us consistency small fund size you know if you're a solo gp we're happy if you stay a solo GP, whereas a lot of other LPs, for example, expect you to have a second partner in your second fund, etc. Right. So for us, it's more consistency and trying to understand the market. And if you really change your thesis, there should be a very well, you know, it should be very well thought through why you're changing that.

47:10So we don't like like hype funds or hype thesis, you know, whatever currently the hype is, you're moving into that one because you hired some specialists and now you're also a blockchain fund at the same time, you know, next to being a generalist fund that you've been in the last fund. So it's like the kind of, you know, focus is very important for us. But if you look then from an LP perspective, the general LP perspective, I think a lot of GPs raise the small first time funds are going to raise a larger second time funds and then also have public LPs, for example, government LPs as anchors now the perspective is very different right so um so they are preparing to raise from those um lps and i think there is a reason for that and um for us again if you look from our perspective and that's what i can share is really trying to stay very consistent trying to have a very similar model small funds seed pre-seed stage focus um trying to build your brand i think that is super important in the current environment where the market is extremely competitive.

48:16Are you recognized as the go-to GP for what you do, right, in your region or in your vertical? Are you the go-to GP for synthetic biology? Are you the go-to GP for gaming? Are you the go-to GP for blockchain, crypto, etc., etc., or are you the go-to GP for parts of Eastern Europe or Baltics, etc., as a generalist? So this is much more important than the numbers in your first fund.

48:49I want to just shift the pace a little bit and ask you to give a shout out to someone you absolutely love in the ecosystem. Yeah. Well, I became a fanboy of, I don't know, do you know Jamie Rode? No, I don't know Jamie Rode. Jamie Rode is... I do. She's in the US though, right? Yeah. I became a fanboy. She does share some very great analyses on Twitter. And listen to her podcast. They're great. And it's like, I mean, she worked for a family office. Now she left the family office and joined a funder fund. I think she's doing a great job and also a great job explaining why, for example, small funds, micro VCs, seed funds, and a portfolio of seed funds make so much sense.

49:36I think she's selling what we do much better than we do. So she's perfect in using a lot of details, explaining why a fund-to-fund model and investing into small funds is great. So Jamie is really doing a great job speaking about it in the last 12 months, several times, several podcasts, great ones. The other one in the European ecosystem, of course, I really like is IceMod. Let me just, before you go there, let me just add a note because you're absolutely right. Jamie is very well known for being very data-driven. Yes. And she's been on... Did you say that she has her own podcast? Because I didn't know.

50:16No, she didn't. She's been on our good friend Michael Sitchmore's podcast in October 2023. Great episode. I remember listening to it. And then she's been on multiple others. Has she been on either? Does she have her own podcast as well? No, no own podcast. she's been speaking on several podcasts about this topic. I think from her family, she brought, for example, tax implications, which was like, no one speaks about that, but that's so important, right? And so that's one that I really liked in the last 12 to 18 months. I think I've listened to 10 of their podcasts. She's a really good one. And again, sometimes I should share her podcast to explain what we do because she explains it so well.

51:01um yeah and and and people should follow her on x as well she's very active there uh she was like the chart of the week and that kind of thing there so definitely worth following yeah i mean i think she isn't doing less in europe um but is is a great mind um lp mind and of course there are the others in in the u.s ecosystem like bezer who's doing a great job also educating and being transparent you know bringing transparency with the platform open lp um if you're not a subscriber just on the newsletter of open lp they're just sharing i think every week or every month a list of great articles and shows relevant for gps you know from from our lp stuff and venture on luck as well uh samir khachi's yes correct there's so many like i mean you know um And Samir is very often mentioned in the OpenLP newsletter, for example.

51:59Yeah, they're very close. So in the European ecosystem, I think Isomer is just one of the early private funder funds doing a good job. And so Isomer is one of those co-investors, co-LPs, LPs in general for emerging managers that make a lot of sense. I think they bring, they're larger than us. They're more people. You know, they're probably a more added value when it comes to help. And also they are like bigger tickets than us. So it's a different LP, but I like them a lot because they're also very consistent in what they are doing. They're building the market. You know, that's so important. That's the ones.

52:45And there are several new ones, right? So AQVC, AlphaQ, Equation. there's mark there's so many new funder funds now coming into the market we will see like how that has an effect i think the more we are the more education gets also into the market so i don't have to explain what a funder fund is anymore if you know 10 others have explained that to the lp already and i think if you look at the u.s ecosystem again they're like probably 100 plus funder funds in the u.s ecosystem and we're just in europe at the beginning of that you know becoming a 100 plus funderfund ecosystem in the next 10 years maybe.

53:23And this actually takes us perfectly into the next thing that I wanted to talk to you about, because I just wanted to quickly ask you about this whole rise of funderfunds that we have in Europe. You've said it a couple of times, 50-ish new funderfunds having come to market. Notably also seeing considerable private raises by KFW and EIA. I think there's two topics there for us to talk about. You decide which one we start with. So new private market LPs or public LPs or public fund of funds raising money from them. People who know me know that I'm not super positive about public LPs. The development of public LPs in the European ecosystem So what's happened, you know, if you think historically, you know, when the EIF started, the initial idea, and they've mentioned this several times in the past historically, was that the EIF is going to make themselves obsolete.

54:26So create a venture ecosystem and government LP should be obsolete over time, creating private LP ecosystems. And the same is, I think, true or should be true for the KFWs, the BBBs, the VPIs of this world. There's so many, like almost in every country, you have a public LP, government LP, backing VC funds, and not only emerging managers, but established managers as anchor LPs. You know, the question is, why would you need a government LP backing an established VC fund with taxpayer money as an anchor LP? So, question for itself. Now, what I'm missing, I think, and what I've tried to talk about in the last year several times publicly is why do the government LPs not create a fund-to-fund ecosystem like they have created a fund ecosystem?

55:17You know, the job is not to replace private fund-to-funds or fund-to-fund ecosystem. They should be not considered the fund-to-fund ecosystem in Europe. If Europe wants to be a competitive, similar, venture ecosystem like the US, we need a private fund-of-fund ecosystem as well. It's obvious. It's like, I'm not trying to reinvent the wheel. We just have to look over to the US ecosystem and see we have 100 active fund-of-funds, some of them multi-billion dollar fund-of-funds with 30 years history. Now, why don't we create that ecosystem? And if it's needed with taxpayers' money in the European ecosystem, I think that's like the kind of criticism that i have for the development in the government fund fund world what if i challenged you by saying that well we we do have 50 new funder funds coming to market yes so so isn't it blooming yes so but none of those 50 funder funds coming to the market in the European ecosystem will receive at the moment any government backing.

56:23Now, if you have this information and then look at the second information that most emerging managers who raise a slightly larger fund have government backing and governments explain that without the government backing, those VC funds would not exist, wouldn't be created, don't have an anchor, then why don't you think that funder funds would need the same thing? I think most of us funder funds have a big difficult time to raise capital. Again, there is not the natural anchor investor for us. So we have to find that anchor investor on a private side. Now talk to all the emerging managers of the last 10 years who received anchor checks from the BBB, from the BPI, from the KFW and EIF.

57:08Talk to them and ask them, what would you have done without that anchor check from the government? They wouldn't exist. Many of them wouldn't exist today in the same way. And many of them probably wouldn't have raised or survived without that anchoring. And the government LPs say that themselves. It's not something that I'm saying. They are saying, we have backed those managers. Without us, they wouldn't be existing. Now, the understanding is there that they need to back those emerging managers. Otherwise, this ecosystem would not exist that exists today. So I'm saying it's the same thing for the funder fund ecosystem.

57:44And if you look at the fund of funds, the 50 that you mentioned, many of them are very closely tied to either a very wealthy family. So it's an FO that starts to raise funds, which is perfectly fair and good. But that means that it originates in a certain place that's definitely not democratized. Think about that. So think a second about that on a VC front. So if VCs would create their VC funds by being backed by a family office, a family office-related VC fund or corporate-related VC fund, which happened a lot. That's where the capital had to come from. That's where they had to be originated.

58:32You're completely right. And then I was about to say, and then there's another avenue, which is also being very close with the bank. And that is something that many of the 50 funds that you mentioned also are. So there's really two very often seen characteristics for these fund of funds. So I think that that's a caveat to what I said before when I said, well, but we do have 50 fund of funds coming to market. Yes, but many of them come from these very specific backgrounds. Now, what's going on top, and I think I've never mentioned this publicly, but I don't know if people are aware, and we should say this, right?

59:09The KFW just started a private fund of funds. So they are raising now from private institutional investors. KfW Capital is a government entity. They've started raising private money. So they are going into the competition of those 50 funder funds. Now, the big difference is KfW, it's more or less free of fees. They're pitching a funder fund to institutional LPs to invest in a funder fund as a competitor, let's say to isomer not we're not like we're not the institutional lp fund fund but the institutional lp now thinks about okay if you invest in isomer we pay carry and higher fees if you pay in that government fund the fund we have no carry so they are like in our opinion distorting somehow the market not only by not investing into or not creating the venture fund fund ecosystem but by creating a competitive product without fees now imagine they would do that at the fund level so So who is a big fund in the ecosystem?

1:00:10Atomico, right? 500 million fund. So now imagine the British Business Bank would go out and say, we are raising now a very similar model to Atomico. It's like we're doing the same thing, multi-stage, early-stage investing. But DRLP, who backed Atomico, we have no fees attached. You can invest in our fund. There is no carry attached. We will hire the people from the market. We have a lot of budget. We're the government. Imagine this would happen. All the atomicists of this world would spend probably a million in media to write about it and speak about it. Exactly this is happening at the moment at the funder fund layer, at the funder fund world.

1:00:50And no one speaks about it. That's so interesting. And that's why I'm mentioning this now. And I will probably mention that over the next years. Because it's worth speaking about it in the next five to ten years. That this happened at some point in the European, in this specific case, in the German ecosystem. And I think it's a kind of distorting, disrupting the third layer of the VC ecosystem. Hard to entirely disagree with. Try to. It's obviously not fun to try and race on market terms against someone who is not racing on market terms. On the other hand, of course, they do serve an important role of educating, as we've spoken about.

1:01:32So it's in no way us saying anything about KFW and EIF and so on and our entire role in the ecosystem. But this specific point of raising private capital on terms that are only possible because they're government-backed, that's where it starts to get a bit muddy. I think we can say it like that without offending anyone. You're probably interviewing them also a lot. Yes, I am, but it's more that obviously this will be hurt by many in the ecosystem. And I don't want to in any way, I always say we live and die by our integrity with what we're doing. If we did a podcast for the wider masses, we could be less than ones and we could care less about, you know, always trying to look at it from different perspectives.

1:02:23But given that we try and be a more serious voice in the ecosystem, despite all the memes and gifs we do, I just want to just put the gavie out there that it's not in any way that the whole system is rigged or that we do not like the institutions at all. They play an incredibly important role. But this specific part is definitely something that we should be talking a bit more about. And now, the quickfire.

1:02:59Now, Ertan, that was the feisty part of our interview. Now I will go on to our quickfire round and I'll ask you to give us your piece of advice that you would have given yourself 10 years ago. I think the first and most important is to take advice more seriously myself. So I think I got a lot of advice and there's like a downside on a pro side. about it. I think I should have taken more advice, I think, in the last 10 years. Has anyone told you not to talk publicly about the... That's so interesting. Everyone, all my advisors talk. It's probably like, the thing is, I'm not benefiting by talking about it.

1:03:42So it's not a benefit for me. I think if at some point any of the governments will have a fund-to-fund mandate, I'm the last one getting any money from that right so so but at the same time i i'm like as you said already and i think as the market thinks i'm quite open talking about this kind of things in the market right so i'm if if not me who should talk about it right so it seems that no one else cares or most people don't even know about those details so i think i have a kind of role also in the market to speak about it and and to in a kind of way bring transparency in the market. So yes, maybe if I want to raise more capital, I should take that advice not to talk about these things.

1:04:28That's right. You have two other parts of the advice to yourself. Yeah. I think I always underestimated the fundraising part. So that's the kind of thing that I realized. I always thought, okay, if the thesis is so clear clear and if the TVPI and the DPI becomes realistic, then it will be much easier to raise capital and we will be oversubscribed because the results are so great. And in reality, it's just completely the opposite. It's like, I have the feeling, you know, I still have to return the second and the third fund with DPI and then maybe some will be convinced. So it's a really long-term, especially for funder funds, I think a long-term game.

1:05:11And I always underestimated the fundraising part so for my younger self don't ask underestimate that one right so it's it's like be prepared think about everything early on and just don't understand underestimate it and i think the third thing is like you asked 10 years 10 years ago i think 10 years ago for me personally was really an inflection point so i i really changed and did everything in my opinion you know looking backwards did right. But then after the 10 years, I think within the last 10 years, there were small things that I could have done differently. For example, raising the last fund in Germany, structure-wise, was not a good idea.

1:05:53I think I should have moved to Luxembourg with the fund at least earlier. I should have focused on specific LP types instead of focusing on everything, everyone, including institutional LPs. I think I should have realized early on that institutional piece are not relevant for us. So these are like, I think, so many things that I learned afterwards. And also the whole ecosystem changed a lot for us. You know, so that's also something. We often have people saying they wish they had bought more Bitcoin. Oh, yeah. That's also one of those that is very, very clear in hindsight. Now, what are your top tips for emerging VCs that are racing across Europe?

1:06:39Try to identify the most realistic LPs for you. And that might be the closest people in your network, like other angel investors, founders who do invest in funds, smaller family offices. For funds, also corporates, because might be strategic partners. so try to think before you're reaching out to everyone in a broad broad way i think most of that is will be noise and will not be helpful try to use intros so if people were considered well in the markets makes an introduction to a fund that increases the probability that someone looks at your fund from a you know with a different view and in my opinion the third like the most important for us is try not to change your strategy every six months.

1:07:29Like try not to adapt just because the new strategy is easier to raise capital. Just try, you know, to be very focused on what you do. And if that focus does not lead to raising a fund, that be it, you know, that's, I think that's better than raising a fund with a different focus just because of raising a fund. I think that's not, in my opinion, that should be not your target. And what's the most counterintuitive thing you've learned in venture oh that's uh yeah that's a that's a difficult one because sometimes you see people that you don't click with that you don't like right and i always i try to invest in people that i like and that i click with but sometimes those that you don't like seem to be very good managers you know or can be very good managers so it's counterintuitive for us for me to make that decision and still invest in that people, right?

1:08:27And that's something that I had to learn. So in the beginning, I was like always against it. But it seems, you know, looking historically, some of those people that I didn't like were one of the best managers I picked. How does that influence the relationship after it started? The good thing is for us, relationship is overestimated. So we are a small LP. we are legally in the LP so we will benefit from the fund performance even if we don't like each other and we are relatively passive after investing so we're not like super active with the portfolio it seems that it looks like we're very active in the market, talking to a lot of GPs etc, but the funds we invest in, after we have invested in, we're relatively passive it's not like that we have a big communication with them and relationship so with their like there's probably around 10 % funds that we are planning to do a re-up you know so three to four right those three to four we try to build again the relationship to you know see when they are raising their second funds and if it's if if it's a fund that we expect it will be and if we can be part of it so but most of the others especially those who went bigger and raised larger AUM firms, we don't really have a big relationship.

1:09:51It's funny to hear because it's so different from what I'm used to, right? Because we think of it very much with the same angle as Isomer, that we make this bet because we want to continue, because we believe in all that. Believe in continuing with the fund, not that you don't believe in them. And also because we believe in the, from the EUVC perspective, it's the same thing for Isomer, actually. We believe in the extra value that can be extracted from the relationship following the first investment, right? So it's really just the start of the relationship because we're looking to co-invest, because we're looking to leverage it on our side with EUVC, of course.

1:10:34I think anyone looking in can see, okay, we run a media business at the same time, the podcast, the events and all that. So for that reason, yes, it's a value that we have to our VCs. But at the same time, it's also a give and take relationship. Because, of course, it's also incredibly valuable for us that we can piggyback on things that they do and we can leverage them. But Andreas, we don't have a media business. You know, we don't do co-investing. We don't usually plan to re-up and they know it, right? We try to be very transparent about it. So we're very different to ISMR in my own opinion.

1:11:09Exactly. And that's why I said it's interesting to hear because it runs contrary to everything I'm used to. And there's another thinking, like I always, you know, that I use that term democratizing access, you know, to the venture, bringing, you know, democratized access to the venture ecosystem is one of the early terms that I used when pitching my fund. By the way, I got the advice very early on to take it out because a lot of family offices don't like the word democratization. So I never took it out. I think we just took it out now. No, it's still on your website. Yeah, probably. So we are also not.

1:11:48But, you know, if all of our funder funds, all of the funder funds would re-up in most, like if they were great in picking the best managers and just re-op and that's their main business what happens is and that's what i'm saying you know about the large fund of funds were invested in the european ecosystem they're backing two funds at the moment excellent index and they think they have access to those two big brands and they don't need more so they cover europe with a backing excellent index and there are still fund of funds claiming that right so there are only two funds in the european ecosystem that are relevant now who will invest in the other all the emerging managers i think like i feel much more comfortable backing you know with 80 percent of my money 80 to 90 percent of my money new emerging managers that i really believe are doing a great job or will do a great job instead of backing up backing you know fund two fund three fund four of the managers that i've backed early on and i think i'm not the right lp for those you know as you said um there are so many other lps who are great in backing you know fund number three fund number four fund number five with much larger checks so we are i see myself in backing emerging managers and i don't want to i don't want to be put into that um you know place where i'm like not doing new funds anymore i'm super happy and comfortable doing all the time new funds new managers and that's where i feel like really um and there is a different uh there is a similar discussion also with vc funds backing you know um serial farmers you know serial entrepreneurs i'm super happy and comfortable backing not serial entrepreneurs or serial gps right so using that and there's so many the majority of the LPs are great and doing re-ups or are the typical re-up LPs and there's a reason for doing that, that's totally okay I just want to play in a different way this game and I'm super comfortable and also I realize maybe that's also one of the learnings of the last 10 years, I try to focus more and more what I really like to do Right.

1:13:47So what I think is a good fit to to me personally, where I feel comfortable and I don't like I don't like to do things where I have to push myself in and feel uncomfortable. And sometimes it's it's the wrong decision. Right. So it's not always perfect, but it's still like life is short. I'm 50 years old since a few days. So it's, you know, try to focus on things that make you happy and things where you feel comfortable intrinsically. And that is more important to me than building a huge firm, trying to do re-ups and funds. I think that is the right way to live life. That's at least why I am doing what I am doing and not something else.

1:14:31So Ayrton, thank you so much for coming on the pod today. Anyone listening in, I really hope you enjoyed this. Go on over to multiple.capital if you're an LP and see if that's a match for you. If you're a VC, go there and see if you should get in touch. Airtan, normally GPs get best in contact with you via your form on the website, am I not? Correct, correct. There's a contact us button on our website. It leads you to an Airtable form. That's the best way to get in contact with us because the team has access and we regularly meet and talk about the funds and then make a decision very quickly, usually.

1:15:11And if you like it, we reach out and we want to see more. I always say that sometimes people forget that a fund investor is in the business of doing this. So we don't need to be pinged on LinkedIn 20 times, right? No. Ayrton, thank you so much for coming on, everyone. I hope you enjoyed this episode of the European VC podcast. Do drop us a review if you enjoyed this and also follow the pod and subscribe at EU.VC. Here's a few words from our beloved sponsor. This episode is part of a series dedicated to raising venture funds across Europe and come together with the launch of the State of the European VC Fundraising Report.

1:15:52Together with our friends at Isomer Capital and Flow, we've spent the winter digging into our past nearly 300 episodes, as well as the latest market data and Isomer's vaulted data treasury to uncover how the tech reset impacted the fundraising market in Europe and how leading VCs across the continent have changed their strategies, tactics and operational handbook filled with graphs beautiful narratives and video interviews providing an entirely new and engaging experience you can enjoy for hours on end don't miss it pre-register to get it at flow.io forward slash race that's f-l-o-w-w-dot-i-o-forward-slash-race your venture journey redefined This was their finest hour.

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