EUVC #264: Bastian Larsen of BlackWood VC on building on the back of a strong angel community

0:00Hi, everyone. Welcome to this episode of the EUVC podcast. I'm David and joined by Andrea, as usual. Today, we are welcoming Bastian Larson. Bastian is the founding partner of Blackwood Ventures, a pan-European early stage VC fund focused on fintech, web3, and cleantech. Blackwood has a value-creating approach that leverages AI to minimize biases and a proprietary pan-European network of over, and pay attention to this, 1 ,200 angels. That's huge. Blackwood had a 10 million USD first closing in early April this year, if I have my data correctly, with a 50 million USD target. As of today, Blackwood has made investments across five countries in more or less six months or so, counting companies like Captus Trips and Cinegrin AI.

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1:53This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. So, Bastian, let's start this thing off with how you got into venture. Tell us the story. Sure. So thanks for having me on, both of you. Well, I guess the story begins with maybe something I should mention to begin with is that I grew up in a very artistic family, so something very different from finance. My father was an artist and designer, some of my brothers are as well, and I'm sort of the black sheep of the family that decided to go into the obscure side of the world called finance.

2:37but after finishing my studies at CBS in Copenhagen, I started working at BlackRock in London within their alternative investment department. There I was focused on product strategy type of things, fundraising, launching new funds, etc. Then after a while in London, I got the opportunity to move to Geneva to work with the global head of alternatives, got a bunch of experience, I was actually ready to start my own business at that point. But again, I got the opportunity to move to New York to co-lead product strategy and investor relations for their M &A hedge fund. So still within alternatives, I joined a team of 12, 13 people, was the only one not from the US, not with a Harvard MBA in a way, and learned a ton.

3:28We grew it from$3 to$10 billion within 18 months, making it the fastest growing hedge fund in the world. And I saw that now was then the time to launch my own business. And given my experience within Alternative Investments, I had learned about how to set up a fund structure that makes sense, how to provide a fund opportunity that was differentiated and that would be able to create good returns. And then you sort of had an understanding of the fundraising cycle as well. So I looked at the VC market in Europe, had a bunch of friends who had launched startups, a bunch of connections within the VC space, and always saw myself working with younger entrepreneurs, and sort of fostering the innovation rate in Europe as well.

4:24Simultaneously, I saw that more and more money was coming in from the US and Asia to Europe. It seemed that the valuations in those other regions were getting a little bit out of control. So I thought there would be something to do within the pan-European market. So I decided to quit my job at BlackRock, did my MBA at Oxford, wrote a book dedicated to the younger generation of entrepreneurs and also launched Blackwood simultaneously. And I think the whole idea was to really build something that was unique, something that was much needed in the market, in the European VC market. And that was, one, a lot of VCs invest in tech, but they don't necessarily use tech internally.

5:06And the other thing primarily for me was the fact that there's a bunch of angel investors in Europe, but a lot of these resources are sort of undervalued and underutilized within the VC market. So I thought I'd change that. Very cool, Bastien. And I will want to deep dive on that because I was actually having a really interesting chat earlier, actually yesterday night with one of the GPs that we love about working with Angel and collaborating with Angel and she did share some cool data with me. But before we go there, just to keep things as usual as our loyal listeners will know. Share with us a pivotal moment.

5:45It's an interesting one and it's quite uncommon compared to what we've heard in the past. Sure, yeah. I mean, again, I think there's been quite a few pivotal moments in general, but one that really stuck with me and something that I can relate to the world of venture capital as well is I grew up in a bunch of different countries. I've lived in 10 countries. and again through this hardest upbringing you know my family didn't really have need to be in one place and so we moved quite a lot I got to live in Australia for half a year Greece for half a year and even Greenland for half a year at the North Pole and so while I was there as a young teenager you know I was helping my father to teach fishermen how to paint as a way of sort of helping them become more happy and therefore more productive.

6:37And we were working with these ex-prisoners, ex-convicts who were working there. And I remember one of them had a severe drug addiction and seemed sort of helpless. And the fact that he learned how to paint, it really gave him another motivation in life because it turned out that he was really great of this and so he focused most of his attention on the painting and less so on the drugs and the misuse and I really you know we saw that change his life entirely and I think you know what it brought to me even as a teenager was the fact that one small positive impact can really change the whole trajectory of your life you know and I think that's very important for all of us not not just in DC, but just for us as human beings, is the fact that if you have the right resources or the right influence, you can really do something great in life.

7:34And it all starts by that little push, and then it has to obviously be followed by constant action and habits. And I think I took that away at a young age, and that's why I wanted to start my own business. It was to create an impact and to do something that was positive. And I think venture capital just, you know, is the perfect area for that. As you foster innovation, you're supporting the next generation of great founders. And at the same time, with a little bit of guidance and a little bit of positive knowledge, I think you can go a very, very long way. Now, Bastian, let's go to the Take a Stand section.

8:14Take a start.

8:23And I'd love to ask you, Bastian, to comment on this quote, which is there's too few European growth stage funds in Europe. Sure. I mean, it's a relevant statement. You know, it's true that within the European venture capital market, especially at the growth stage, you know, it has been lacking a little bit behind the US. And I do believe that in recent years, we've seen sort of a reduction, you know, in terms of minimizing that gap. and there has been a few more growth stage funds in Europe and also increased interest from international investors in the region, which is something that I mentioned earlier on.

8:59And I think that is also why we see in general that, you know, when European startups start to go well, well, what do they do? We've seen it time and time again. They decide to move to the US specifically for that reason, right? To continue to fuel the growth and also because the IPO market there is perhaps a little bit more receptive in general. Now, I think this needs to be contrasted as well with the current market we're in. The funds and in general, the market has been the hardest on those that have been very close to the IPO stage. IPOs have dropped off a little bit in recent times and therefore growth stage funds and startups that have been in the later stages, pre-IPO have suffered massively.

9:48So, you know, I think now would be a great time to launch even more growth stage funds as well, given that the valuations are quite low on the market. And I think the vintage year of 2023 and 2024 will be great for that. So I think while it has been lagging behind, I think now is a great opportunity for people to really go into that and do more in that space.

10:16you know i think it's for for the attentive listener there's there's something interesting for us in talking with you you know you work a lot with angels so do we uh that's kind of a big part of what we do in terms of investing we are angels ourselves and i i was um as i hinted before i was chatting with with a gp friend of ours uh she attended an event yesterday uh that shared some report and some data on angel investing. And if I remember, the numbers were something like 80 % of angel investors do one deal only. That's it. More than half of angel investors are founders in Europe, are founders, former founders.

10:57And the true challenge is to get angels and high networks, generally speaking, to do more than one deal and to think of portfolio instead of of one-shot successes, right? But your whole model is very much connected to working with high net worths, working with angels, co-investing with them, which is incredibly hard to do. I think many talked about it. She succeeded. So I'd love to ask you, do share a bit the struggles, what have been the main hurdles in building back with the way you've decided to and how have you gone around it? Sure. No, great question. I think it's very relevant as well. So, you know, actually, we were lucky enough to get, you know backing from some high net worth individuals ourselves you know we launched blackwood sort of as a startup but we said listen we have this idea to create a really unique venture fund but it will take two years to get there so you know we needed you know cash and resources for for two years in order to build exactly you know the tools and the networks and everything that we needed to have before launching our fund and i think that's a very unique opportunity in a very rare case to have that opportunity to spend two years on building everything you need right and so you know i mentioned at the beginning i think one was leveraging technology within our processes i can talk perhaps more about that later but on the angel side we thought you know having good access to all of these bright minds and people with capital is something that we can leverage during our due diligence and also something that they might benefit from right because we probably screen a lot more startups and maybe in a different way than they would.

12:35And so I just thought the synergies were great. And so where we started out, we also are partners with a bunch of nearly all angel networks in Europe, I think, by now. So we have access to a lot more than 1 ,200. The 1 ,200 angels that we have on our platform are purely our own relationships that we've built up. And so scaling that was interesting, right? Most angel networks charge a fee to be part of. And we thought, we don't necessarily want to make money on that. We just want access so we can make money in other ways and they can benefit in other ways. So we decided to make it free to get in.

13:14And we can charge in other ways when they co-invest. But making it free and then talking about our mission helped tremendously. And at one point, we were getting 300 new angels onboarded every single month. Now the thing is, there's a power in the numbers, but at the same time, it's all about the relationships that you have. And so for us, what we decided to do, I think it was about eight months ago, was to say we're going to stop the growth of the angel network and really focus on nurturing those relationships. And so in order to do this correctly, you also need more resources, which we were fortunate enough to have.

13:50So we have two people working full-time, and a big part of their job is essentially just building relationships with these angels. When they sign up, they provide information about their – they upload their LinkedIn, so that is great as well. We have a good idea of what they've done in the past when they're a sector expertise. They provide more information in terms of what they're really focused on and their know-how. And at the same time, they give information on how many deals they've made in the past. and what their average potential ticket size typically is. And I'm happy to say that on the 1200, I think the average ticket size is around€70 ,000.

14:29Is that self-reported as of now? Or do you already have some deal-making data that you can compare what's self-reported and what's actual? And the reason I ask is twofold. One, with the angels we work with, we have a similar process. We ask, how much are you willing to commit? And then over time, we see how much they commit. And it's obviously always slightly different. but also last time I looked at it, the average angel ticket in Europe was 10 or 15K or so per deal. So 70 is very high, right? Yes, exactly. Obviously, that's driven by outliers. I would say the median is 25 around there. So I think the median is much more relevant to look at than the average.

15:08So it's a good point. But I would say we've categorized this group of angels into different, I guess, subcategories. And obviously, out of 1 ,200, we probably have a really good understanding and relationship with 50 to 70 of them. And we know exactly what they're capable of and know their networks. But we still think it's important to have the longer tail. And so we might open up again and push to get a bigger angel network just because during our due diligence, we can use that as well. And so whenever we look at a CO2-specific startup somewhere in Europe, we can filter through our network and find 10 relevant specialists to speak to.

15:53And the reason that they signed up is specifically to get access to these types of startups. So their willingness to help us look at the technology, for example, the business side of things is extremely high. And so that really provides us invaluable feedback. And in terms of a specific number or deal, we recently invested in FinTech in France. I could talk about that in a lot of detail. But what we decided to do is the technology in itself was perhaps less revolutionary than some other things. but the main thing was about getting the product to market in as quick a fashion as possible to then increase the odds of getting acquired in the future.

16:37And I think in that specific case, it was very important for us to onboard a couple of angels from our networks that could help with selling the product and also provide guidance as they roll up the product across borders. And so we found two specific angels. One was an ESG specialist with a PhD and the other one was a partner of a very large law firm in Switzerland that had expertise to sort of roll out this type of product internationally. And so I think that that's really the perfect mix of a win-win-win for the startup, for the angels and for us as a VC as well. And I think that really summarizes the unique aspect of our model.

17:16So at the end of the day, you're leveraging the network for DDing and you're inviting them in to co-invest in First Ticket. Whenever it's relevant. Yeah, exactly. But you're handpicking profiles, right? Yeah, that's the ideal scenario. But I think in some cases, there might be startups that in future rounds primarily need cash rather than more expertise. And I think having access and the ability to offer more broadly to all the angels in our network, the ability to inject cash is also something that shouldn't be undermined. It's something that might de-risk the investment from our perspective and other investors in previous realms.

17:57Marstyn, can I ask you a bit more on the 1200 numbers? So we've gone through the journey of having, I think we got to just shy of a thousand members and then we said, wait a second, it doesn't make sense to have this many. Also because it's proprietary information that we need to be able to talk about and that type of thing. So for that reason, we set up some barriers not monetization. We didn't want it to be that, but we then implemented that you had to commit to, you know, we have a pledge that you have to sign. And that one says that you must commit to one deal per year. And of course, or be very active or considered very active by David and Andreas.

18:41And as such, of course, if you have a good reason to not invest in any given year, fair enough. but we are doing enough deals across Europe and across verticals. So it should be doable or there should be something matching most people. And that's kind of how we have then gone from$1 ,000 down to$300-ish, of which a sub-segment has invested. And I guess I can also say that we're around 120 or so that have invested with us out of that group. How do you take that 1200 and divide that into and what's the barrier to be amongst those 1200? Yeah, good question. It's something that we are actually starting to implement as well.

19:29So I think maybe that's the magic number around 1000. It's something you start to think about. And we're also working on developing a specific platform that will also help with enabling secondaries and things of that nature for the angels in our network which is quite exciting and so we we're still in the process of exactly deciding what to do so it's too early to say address but there's there's the pledge that is that is i think step one but then there's also monetization to really take a person from a pledge to a committed potential investor In general, again, I think there is an advantage to having it free in the beginning just so you get access to as many people as possible.

20:15It's all then about having the resources internally to get to know them. And so I would much rather prefer to go that route and scaling it up. I think there's 350 ,000 angels in Europe. We think we can take a pretty big part of that market and then scale up the relationship management team as we grow on that front. And the results and the impact that we'll have on the IRRs of our future funds and this fund is obviously hard to measure, but I'm very confident in the fact that it will be well worth the investment. So we're taking a bold view in that sense, but we're very strong believers in it. Can you share a bit on, because you have a bull on your team who's head of platform and does a lot of community development.

21:06Can you shed a bit of light on how you work with that 1 ,200 people group to keep them engaged and what you've seen work and what you've seen doesn't work? So what we've seen work is taking a much more personalized approach. We do host events once in a while throughout Europe where the clusters of our angel group are based. So I think that's part of it as well. It's actually having physical meetups. But what hasn't worked is just making it very unpersonal. That's the mistake that most people make. They blast something out, and then that's where you don't get a lot out of it. And so I think actually making that filtering process and focusing on the people with expertise in that subject area, that's where it helps us.

21:52It's where it helps the startups. And ultimately, it's what will make the angels in our network invest. So I think knowing as much as possible about each and every single angel is really critical. And so we do a lot of work on that side of things in general. And I think given that we're not a complete generalist fund, we do have some focus areas being FinTech, Web3, and Cleantech. And so we focus on gathering angels that have an interest within one of those specific sectors and that have their relevant knowledge as well. And so whenever we focus on a deal within one of those, that cuts our angel network by a third.

22:31But at the same time, they're much more highly specialized. And so I think that's how we approach it. Mastian, it's now time for the shout out segment.

22:46I'd love to ask you to give a shout out to a co-investor, an angel, that would be interesting, or an LP for being awesome. and if possible share the story behind that awesomeness. Yes, I think I will actually focus on an LP that's also one of the earlier backers of Blackwood. So his name is Jacob Kielgaard. He has run a multifamily office of over 2 billion euros in Luxembourg and he's been managing the wealth of some of the most high-end-worth individuals in the Nordics for over 35 years. you know I used to work for him actually in Luxembourg over 10 years ago and then after a while after he tried to get me on board and me saying no because I had all the opportunities at BlackRock you know he was really the first guy I called whenever I decided to set up Blackwood and telling him about this crazy idea to build something truly unique and that it would take a little while.

23:42And so he was just in from the beginning. He had seen me earlier. He had seen my trajectory and he really believed in what I was going to build. And so the fact that he trusted to invest very early on was a huge support. And then giving his network, I could focus on actually doing the work and doing all the nerdy things in my corner. And then I was hoping that he would make a few introductions later on, right when we started fundraising for our first fund. And that is exactly what has happened. And I think, you know, that's the reason why we were able to raise$10 million in four months earlier this year, you know, in this crazy hard fundraising environment is that, you know, we had spent the years and the time to build something truly unique.

24:29And also because we had the network and, you know, him having managed a lot of money for a lot of people over a long period of time. The fact that he trusted us to also invest a pretty large amount into our fund from day one was obviously a big seal of approval.

24:49Now, Bastian, let's dive into your three biggest learnings over the last 10 years of your life. And you're pretty young, so I guess what last 10 years did I guess get us down to like 20 or so? Yeah, I guess. Yeah, around there. I think, you know, and it's actually something, you know, again, I've written a book about going from something, a very unstructured environment growing up to perhaps the most structured environment in an M &A hedge fund in New York with my boss having used to be, he used to be a nuclear engineer on a submarine in the Navy, right? So I think it's something that I've thought a lot about, about the learnings that I've had and what can potentially help others in the space.

25:29And I think the first thing is really staying curious, embracing, in my case, curiosity around finance, venture capital, but also more creative aspects in life, art, in my case, music. I just had a kid recently with a musician here in Denmark who's been quite successful. one. I think, you know, it's just the more you're curious and interested about different areas in life, the more connections your brain is going to make automatically. And, and therefore, when you make investments in VC, you'll have a much easier time trying to predict the future in a way. The second thing I'd say is building, I guess, meaningful relationships that come straight back to the shout out I just made, right?

26:17This is a person that I worked for over 10 years ago. I really gave it my all. And whenever I had the opportunity to build my own company, he was really there to provide support from day one. And I think you can't really underestimate the power of having those great relationships and building them, even from the age of 19 or 20. And they will really snowball over time. So that's something I think is important. And then for me, I've learned as well the importance of, I guess, leadership and being able to build a team even internally here at Blackwood. We're a pretty large team compared to the size of our VC fund thus far.

26:56But I think it's important to be able to align people on a common goal and a common vision because that is ultimately what will deliver success as well. Awesome, Bastion. Thank you for sharing that. I think that must have been an interesting experience. I might read your book. It's been like that. I think it might be an interesting read. It's funny, I was just in Heilbronn where they built Appai, the new AI center that's predicted to become the largest one in Europe. It's funded by the founder of Lidl and I was invited by him and the group there to see Appai last week. And I was there with a bunch of other VCs and entrepreneurs.

27:41and I have to say I was surprised by the fact that some of the largest me sees in the world decided to buy my book as well. So it's something I hadn't talked about too much. It's always a little bit intimidating marketing your own book but they were happy about it. I come from the opposite background so my family are all scientists and so I'm the black sheep in the opposite direction because it's much less structured. It's funny to compare the complete opposite. it's like mirroring each other. And I also wrote a book, but it's for children and I'm not ashamed of marketing at all. Okay. I would love to hear more about that.