Jaap Vriesendorp (Marktlink Capital): The playbook of one of Europe's most active VC LPs

0:00Before we get into today's episode, take a look at your screen right now, because there is some amazing in which you're having right now. If you're an impact investor or working in corporate venture, specifically in sustainability or climate, I want to flag something for you. Happening just before the famous Moraline Festival on July 23rd in Belgium, we're curating the investor program for Love Tomorrow. And there's a separate program at the Impact Circle's Investor Lounge on Friday the 24th. It's curated, it's intimate. Conversations between impact fund managers, climate LPs, and corporate venture leads.

0:30We are hosting the program. If that sounds like a room that you want to be in, I suggest you go to the show notes. Many of these US tech companies were taking a head start over these European tech companies because there was just more money. And the returns in Europe look a little bit better. If you have less money to deploy, the prices become better. But still, these companies were winning and all the companies in Europe that set out to do great were being sold. I do think it is one of the things that we truly care about, right? We also set up an office in Belgium. We're opening up maybe two, three more offices across Europe this year.

1:00The reason why we're doing that is we want to enable Dutch entrepreneurs and also Belgian entrepreneurs, and there will be other countries joining, to invest in other European entrepreneurs instead of sort of being skewed into the public market where you end up investing in a magnificent seven. And Maria Draghi has done a marvelous way of putting that into rapport, but I think we saw that pretty early on. In order to be more than just, as we say in Dutch, a triple of the glue in the plat, more than just like a tiny bit of impact, we thought it made sense to create scale. And what was fundamentally behind the reason of Marklink Investment Partners and Wellad Ventures merging into what is now called Marklink Capital was the fact that we all agreed that together, we could create something where one plus one was more than two.

1:43And I think that is until this day being the driving force. And that is what has led us, I think, to grow faster than our competitors, hopefully we welcome all kinds of competition keeps it short but yeah i think that is what has been sort of the guiding principle welcome to a special euvc podcast episode this is part of the series of episodes i love doing which is me talking to lps across europe and beyond and today we have a special guest we have yap i will not dare to say your last name yap i i would make a fool out of myself i'll let you say it next yap's with mark link we're going to talk a bit about AAP's background, of course, we're going to talk a bit about the story behind the firm.

2:23Actually, this is an interesting one because there was wealth, now it's market link. We're going to talk a bit about of the whys and the hows and what that has enabled. So stay tuned if you're interested in learning from LP that's currently allocating in venture.

2:41This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Japp, welcome to the show. How are you today? Thanks. I'm doing wonderfully well. We just got our third daughter. So it's sleepless nights with endless love. Yeah. You're happy with your sleepless nights. You're happy with that. No, I'm fine. Honestly, super happy. Amazing. Congrats. Three girls, you said. Three girls. They're the future. Yeah, amazing. Amazing. Amazing. So Japp. before we start, give us a quick intro. Who's Jaap? And by the way, how do you pronounce your last name?

3:21Help me out here. So it's Jaap Friesendorp. It's a very Dutch name, which in this context of this interview might be relevant because we're a very Dutch firm. We have one office, which is in Amsterdam. Well, it's actually not true. We opened a second office in Belgium end of last year. But in the Dutch speaking part, so to some extent still true. And we have a very Dutch, I would say, culture. very direct, open, transparent and then my last name is Vriesendorp we'll try and practice that after the show David Vriesendorp, not too bad perfect Ixprikkenbich in Netherlands I love it, that actually sounds pretty good there you go, I'll keep that one in there just to show yeah so yeah, tell us a bit about your background something you and I were just chatting casually about was this idea of why are you in venture there's a million other things you could have done.

4:15So share with us a bit your background. And also then let's dive into that. Why venture? I think it's a good question. I don't know if I have the perfect answer to that question. I think life also happens to you. But in some extent, you are the creator of your own destiny. And that is also partly true for me. So someone said to me, if you don't know what to do, you should join McKinsey. There's lots of folks there who don't know what to do. And that sort of stuck with me. and I spoke to the guys at McKinsey and I thought it was very interesting. And so I applied for that job and got that job. And contrary, at least to popular belief now, I actually really liked it.

4:53I think it's a phenomenal job. I don't know if I've added the most value, but I certainly enjoy doing the job. I did mostly tech companies in the beginning, working for sort of the big, big tier firms and technology, the hyperscalers. And then after my MBA pivoted and set up the, which was called McKinsey Fuel, the practice for startups and venture firms, basically supporting them. And I did that together with Baucommerchmann, who is now also one of my partners. And at some point we figured out that some of these firms were doing, some of these funds were doing really good returns and we tried to chip in a little bit of our own money and they didn't want it because we weren't big enough.

5:37And slowly this idea of a funder fund became to get to dawn on me. That's what we've been doing for the last five, six years. As an outsider, not of the industry, but outsider to what you guys are doing on a day-to-day basis, you know, wealth came on my radar as quite impressive, I must say. I was quite impressed, I'll be honest, because there was a lot of people in the market at the time raising. It was 20... 2021 was a good market. Yeah, yeah, yeah, exactly. I was going to ask you, was 21 or 22? There you go. 21 and then probably 22 was it was probably when i when i when i when i met you guys i would guess that was a real start yeah exactly but you know what i was impressed by was well here's a dutch team could go europe like that no nothing against dutch uh quite the opposite uh my first boss was dutch and i and i loved working with dutch people but like here's a european team who kind of came out the gates running like your first fund was quite sizable like my mind might not be serving me right but I kind of remember first time I engaged with you guys you had already 50 raised 50 million and there was a lot of people trying to raise at the time that weren't really succeeding at least at that level so I'd love to hear you talk a bit about the early days of wealth so at the time was wealth like how how was that and what allowed you to be at least in my view successful with that fundraiser first time from the fund?

7:04Thanks for the question. It's fun to do these sort of episodes because I also have to think about it myself, which triggers a lot of thoughts. No, I think there's a couple of elements that feed into that. I think the first one was we had the idea for some time. And so when we came out, we had a good, at least a good starting strategy. We had a first bunch of meetings lined up with prospective LPs. We had a couple of really good relationships from our years at McKinsey and before that in Venture. And so I think it wasn't sort of starting from scratch. It was more sort of starting the engine while the car was already halfway downhill.

7:46So I think that helped. And the second thing is that whilst sort of starting this, I was reading the Dutch newspaper and I came across an article. about two other guys who had started Marklink Investment Parkers. And one of the guys I knew via Viya and we connected. And I think from a very early point, we decided that we should cooperate and eventually merge the whole thing. And I think the traction that we have been able to get, fortunately, has also been for a big part, been part of that decision. and why is that the case? Because they were doing a private equity fund-to-fund, we were doing a venture capital fund-to-fund and we found that first of all, LPs don't want private equity or venture, they just want good returns or they want a certain type of portfolio but more likely than not, they want both, right?

8:45As part of their sort of estate planning or part of their wealth management. Secondly, when you're with four guys and soon someone else joined, it was five guys. It doesn't matter whether it's guys or girls, but in this case, we're all guys. You know a lot more than you know with two guys. So we're also smart guys. We're ex-albitvest people. And so I think that the level of diligence we did, the level of sort of decision-making became higher. And the third thing is when you were five people, you have a bigger investor base, you can make bigger investments. And so you can hire a CFO, You can build your own KYC team to make that transition smoothly.

9:25And so you can make a little bit sort of more sort of deeper investments that go a long way that otherwise would refrain from doing because they're frankly quite expensive in these early days. And so I think those two things, so restarting it at McKinsey, don't let the folks there hear it. But, and then teaming up with, with, uh, Bastian and Pete Hine at project investment partners early on, I think that really made the change. Sort of coming out the gates flying. Yeah. Yeah. It's interesting. Cause you're saying, you know, kind of, you know, what, what allowed you to do that was this ability to pitch something that wasn't just venture, right.

10:03It was just like good returns. Um, I wonder like, you wanna, well, the strategy that we believe will yield good returns, right? That question being like, do you want to put some words onto like your LP profile? Like who are you catering to? Like who's your client? Because I think that's insightful to understand as well. Sure. No, for sure. So I think we're unique. Unique is probably an over-exaggeration of a word for asset management. But let's say we're different. I think that might be a better word in a number of ways at Marlion Capital. And one of the ways is our LP days. And it is different in the way that I would say 90 % plus of RRPs are Dutch entrepreneurs.

10:48We have over 2 ,500. We have over almost 3.5 billion in AUM. And all of that comes from Dutch entrepreneurs. I don't think that is sort of similar to other funder funds in Europe, but you cater more to maybe institutionals or single-value offices. That's a big number, right? That's a big number. You skim through it, but that's a big number, right? That's a very, very big number coming from individuals. So it's not coming from a pension fund or something. And truly, that defines also the whole DNA of this company. So the way we set it up is we started, for instance, outsourcing everything. So we did fund admin with a trusted party and we used an investment platform of another party.

11:31And we did KYC with an agency. and little by little, we found that those platforms or those fund admins or those KYC ages, they don't scale with 2 ,500 LPs. So over the course of the last five years, we have started doing everything in-house and so we've built our own machine. I like to say that, especially being a venture, we never set out to be a tech company and somehow we end up being some sort of tech company ourselves because we need to build the backbone to process all these people. And that's one thing. But the other thing is, for instance, we do 50 events a year. So we do an event every week almost, which sometimes are like very content heavy on secondaries or on the venture space or on the liquidity profile, cashflow management, tax related topics, but also sometimes just fun, right?

12:29our flagship event is our Formula One Zontfort event, which attracts over 2000 people. So it's the fact that we've raised capital from Dutch entrepreneurs has determined very much the DNA of this company. Yeah. And I guess, you know, if we go back to this topic of wealth and markling, right, which now is markling, you know, I guess someone looking at it surface level would kind of look at it as a merger and then come up with all the questions that you'd have around a merger. It's a bit different, right? Because as you said, you guys were partners from the get-go. It was more like, how close are we as partners?

13:09And you just kind of deepen that partnership. But that means that from the get-go, you were catering to the same ICP in a way, right? So the Dutch entrepreneur, right? In a way. Can you kind of share a bit of what was going through your mind as you were going through these hoops of okay partnering with them getting closer with them and then eventually that leading up to this merging right what was going through your mind what what were some of the things that you you kind of had to make sure to be comfortable fully kind of merging uh whatever that means right but just kind of operating under the same brand so there's the there's the obvious and the normal obvious stuff right the obvious stuff is that it needs to be synergies in business model.

13:56The obvious stuff is that you can make these sort of deeper investments together and that will create sort of a better company. I think what is maybe less obvious is that we, from a very, very, very early beginning, believed and still believe that skill matters. Skill matters massively in this business. If you can write big tickets and small tickets, if you're flexible, we believe you're a winner in this space. For the simple fact that you can get the better sort of deals with the funds that you want to invest in. And so we thought that skill mattered because it would improve our business model and would improve sort of the returns we could yield for investors.

14:38But we also believed skill matters because of the sort of underlying reason why we're doing this. And the underlying reason why we're doing this, and my due, this is 2021 or 2022, depending on how you look at it. So pre-Mario Draghi report and stuff. But we already saw at McKinsey that many of these US tech companies were taking a head start over these European tech companies because there was just more money. And the returns in Europe look a little bit better, right? Because if you have less money to deploy, the prices become better. But still, these companies were winning. And all of the companies in Europe that set out to do great were being sold.

15:21And so I don't know if we're as European-minded as you are, David, but I mean, you named your company after it. But I do think it is one of the things that we truly care about, right? We also set up an office in Belgium. We're opening up maybe two, three more offices across Europe this year. The reason why we're doing that is we want to enable Dutch entrepreneurs and also Belgian entrepreneurs, and there will be other countries joining, to invest in other European entrepreneurs instead of sort of being skewed into the public market where you end up investing in a magnificent seven. And I think that and Mario Draghi has done a marvelous sort of way of putting that into rapport.

16:07But I think we saw that pretty early on in order to be more than just, as we say in Dutch, a triple of the glooiende plate, more than just like a tiny bit of impact, we thought it made sense to create scale. And what was fundamentally behind the reason of Marklink Investment Partners and Welled Ventures merging into what is now called Marklink Capital was the fact that we all agreed that together we could create something where one plus one was more than two. And I think that is until this day been the driving force. And that is what has led us, I think, to grow faster than our competitors. Hopefully we welcome all kinds of competition keeps us sharp.

16:49But yeah, I think that is what has been sort of the guiding principle. Are there any fundamental tensions that result from the fact that you're focusing on different asset classes? So like venture, private equity growth. So an example, right? Recently, we were having a conversation. I can't remember the exact contest, but it was an LP asking a fund of funds a question about asset development. And the conversation revolved around a lot like, well, with venture, you're really focusing on getting these assets financed. Whilst with private equity, you're focused on getting a slice of the pie. So there's some small details around the operating models that are different.

17:33Does it come with any downsides? Because we've talked about the upsides of you guys working together. Does it come with any downsides or with any challenges or with any nuances that maybe aren't evident? I think it's a good question. I think where I see sort of most conflict of interest is not between people who have multiple products versus people who have one product, but between people who have products and give advice or people who have products or give advice. And so when we are competing for entrepreneurs here in the Netherlands, for instance, we don't give advice. We have a product. We invest heavily into our own product.

18:15So if this product fails, it will be our money on the line as well. But we don't advise you to take the product. We will pitch to you as best as we can on the merits of the product and the merits of the team and the merits of the strategy. But it's up to you to decide whether you want to participate in that or not. And the question of whether you want to do private equity or venture or a call investment fund, we've recently launched private credit, that is up to you. We will tell you the difference in risk, in return, in timelines, in liquidity. And that is for you and or your advisor to decide.

18:48I think where more problems arise is if you have the big investment banks with their private wealth departments who are advising the client on their ideal asset allocation, say, yeah, you should do 10 % in venture and 20 % in buyout and 40 % public markets and 30 % of bonds. Then it becomes tricky because they're basically not saying you should do 20 % of venture, but they say you should do 20 % of venture in our venture product. and then a conflict of interest starts to emerge, right? And so I think one of the other reasons we have been successful at what we do is that we keep a very sort of strict tension in that.

19:28And we say, we don't give advice. We're not a family office. We're not here to advise you on how to spend your money or invest your money. That is, there is hundreds of good advisors out there. There's even more bad advisors out there. and we're happy to refer you, but that's not our job. Yeah. There's two things I really want to ask you about, and I'm battling which one first. Let's do product first. So you spoke a lot about product now, and you kind of dropped in there. We recently launched the private credit. How do you think about your product and how it evolves over time, right? And this is a topic we don't really cover much on our podcast because most of our guests, well, most of our guests are VCs first, and then secondly, most of our LP guests are either family offices or a kind of a dedicated VC-only kind of strategy.

20:20So this is actually a new topic for our audience and for myself. So how do you think about product as you grow? And I guess it's an LP-informed thing, but I'd love to hear you kind of explain that a bit. I think we've always seen ourselves as private market specialists, even if you look at sort of the early innings of this firm. And we never set out to do just venture. We always set out to do sort of a broader array of products, but always within the private market space. And I think there's a couple of sort of elements to further explore there. One is private markets is an alpha generating industry, right?

20:56You can actually have an impact both positively and negatively. If you look at public markets, it's like everyone knows that it's better to invest passively. You can buy Vanguard and you will be better off. And not just fees wise, also just performance wise. And so why do we pick private markets? Because we believe there's sort of alpha to be made there. There's manager selection that needs to be happening. There's liquidity management. There's a whole bunch of sort of value levers you can pull. And secondly, it's always determined by the appetite of the clients. So we saw that there was appetite for venture.

21:30We saw that there was appetite for private equity. We now see that there's appetite for co-investment, a little bit higher risk, but also potentially higher return profile. and there is appetite to do private credit in the right way. And so that's all within the spectrum of private markets. And as you know, there are still some other stuff to discover in private markets as well. You have infrastructure, you have real estate. I don't know if we will touch upon many of those very soon, but we always set out to be sort of a private market specialist. And I think that is still, right, if you look at the Goldman Sachs family, I think it's called Eyes on the Horizon report.

22:09And you see how much is private markets. It's only still 30 % of sort of wealth of people, right? It's not cash. It's not cash equivalents. It's not publics. It's not bonds. I think it still is a relatively small subset of the whole pie, but a subset we like to specialize in. This idea of doing a lot with very little people, focusing on talent, focusing on high performers, focusing on people who really know their stuff because that creates leverage, right? We cannot not cover AI. We have to talk about it. And I don't want to do a very high-level conversation. Just curious to know, like, how much are you leveraging AI?

22:50Like, how much do you think you are? Do you think you're like 80 % there, 5 % there, not even there? Kind of wish I had more time to look into it. Have you been able to leverage it in any way already? Like, just curious to hear your thoughts. I think when we set out on this journey, we got someone like a data scientist from McKinsey to join with us. So he left McKinsey and joined, which was then called Weld. And he built the first models. And we're using like GPT-3 back then. I think that was the version. And we're like, what is this? and we obviously used it in completely the wrong ways and made all the mix-ups that we could make.

23:32But I think we were very, very early to the game. And not just like AI, but more like data science. Questions like how many funds doesn't, if you would go into an office of a fund of funds and go to the main allocator and say, what in terms of yield is the best number of positions in a fund? How many vintage do you need to have in a fund to get the optimal spread? Is emerging managers, is that an alpha seeking strategy versus established blockchain if you can get access to the best? And how much do you overcommit and what is your confidence level on that? I think 80 % of our competitors would have a experience-based answer rather than a data-informed answer.

24:21And so I think prior to this whole AI thing blowing up, I think we were already, and we've published a lot of this research as well, and we're standing on the shoulders of giants of doing this research because a lot of good research has been done, but mostly in academia. but I think we were very sort of data heavy from the get-go. If we now fast forward to where we are today, I don't think that there is huge progress since then. And so that makes us a little bit paranoia, but we still feel we have scoring models. We use everything that everyone else has, but I still feel that sort of the fundamentals of those initial analysis still hold.

25:03And so, yes, you can augment a investment memo by using AI, or you can have all the calls you have with GPs tracked and then absorbed. But I think the real, this is not an industry of millions of funds, right? This is not big data. It's like, I'll give you one example of what does work for us, which has nothing to do with AI. and that is we send out a survey every year to all of the funds we invest in asking them what we can do better, how they see the market and what gets them excited. Like other managers, portfolio companies, that is where the magic sits. I think AI can help with solving the fundamental questions.

25:52I think we've gotten a fairly good estimate of the answer to those questions. I think we're still very much in the early innings of AI and I'm very sort of excited to see what is going to happen. We use AI on a rudimentary basis in screening and drafting, but I don't think we're the front runner in saying we let all of our decisions be run by AI. That's not us. And we might be wrong. We might be wrong. You reminded me of an actually really good podcast by someone other than us, which is really rare. I know. It's a podcast. Must be Ari Stemming. No, actually, no. But it's around this topic of data science, which you mentioned.

26:37It's really cool. And the podcast, I'll drop it in the show notes when we publish this, but it's from David Weisberg, How I Invest with David Weisberg. And it's about super forecasting. And it's this guest. I cannot remember his name. I apologize. But he's managing, I want to say, more than$20 billion. He's a CIO managing more than$20 billion. And he's talking about using probabilistic forecasting. and this is private markets, not venture, of course, prolistic forecasting to kind of benchmark against like S &P 500, MSCI, et cetera, et cetera. So you made me remember that and it's also a great listen for anyone interested in this topic.

27:13So if you enjoyed that bit by Yap, this might also be a podcast you'll enjoy. I want to change - Can I maybe add one thing to this? Yeah. You also have to remember, David, we're super boring people. So you have the actual entrepreneur building the technology. You're not a boring guy, Yap. You're fun to be around. I might not be a boring guy, but as a collective, we're boring people. We're in a boring industry. So you have the tech companies, like the entrepreneurs, putting their life on the line and doing a moonshot to get to all or nothing. Right? Very excited. You get the VCs who get to spend time with these amazing entrepreneurs, help them, skill them.

27:53One level of abstraction, more boring, but still exciting. And then above that, you have the LPs, right? And this is, so we're now discovering what AI can do for these companies. I think there's a lot of fluff, but still we're seeing the first maybe beliefs of what can happen on the lens of the VCs. And I think that would be like young guys doing it on their own, discovering proceed routes before anyone else. And then above that, we sit. So I think there is some time for adaptation as well. So I don't want to, this is not about being lazy. This is about being realistic about sort of change, the time to change.