The Case for a United European LP Strategy

0:08Despite a decade of proof points, European pensions still allocate only marginally to European venture. Not because of returns, but because of structure and coordination. Professor Philippe Thiby has worked inside that gap, pushing Europe's largest institutions to move. Today, he lays out why LP fragmentation is now a strategic weakness and what a United European approach could unlock. Please welcome Professor Philippe Thiby. I will talk about the European LP strategy. And I will start with a simple fact, is that capital decides outcomes. You know, in Europe we have a lot of good universities, good scientists, we have a lot of entrepreneurs.

0:53But when a company becomes successful, when a European company becomes successful, they tend to not only look for US money, but also they are US controlled. And that's a big waste for us and for our citizens as well. So that's, I think it's a fact of life, and that's exactly what we want to change. And this is why I think the spin of the conference about capital is so important. And the thing is, I think all of us are aware of that today, but the thing is how can we make this happen? the second idea I want to push forward is that for LPs technology should be a priority if you look at our history in the 19th century Europe was leading the world you know about the British Empire the French Empire how come?

1:57because these two countries in the first place historically have promoted Is it already special? Or do we have to do anything? And as a result of that, and in defense as well, and military, they could be able to exert influence in many parts of the world. Today, the clock has turned. We have turned the clock. Now, Europe is in the middle of between a rock and a hard place. we are faced with two increasingly unfriendly powers, the US and China, that master technology. And they know that technology is the source of power. And what makes things even worse for us, if we do nothing, is that artificial intelligence is not only a hype.

2:54Artificial intelligence is a general purpose technology. that is very similar to the first and second industrial revolution because while the latter were the domination of mechanical force, artificial intelligence, if that works, will master cognitive intelligence and will bring the same kind of productivity gains that we experienced in the last century. And it means also that all that will be shareholders of this venture will get this proportionate return. So I think that's the very reason why LPs should be invested in technology, above the fact that, of course, MSCI TMT is more than 35 % of the global capital market.

3:51Are we equipped to do that? Yes, I think Europe is equipped to do that. Europe, you know, the savings of the households in Europe are about 35 trillion, north of that probably, euros. It's more than the US actually, in terms of savings. The issue that we have is that we have savings, we don't have capital. And what we need to find is, or to develop is a formula to transform savings into capital. because as we know since the great economists of the 18th century and even since Karl Marx, the capital is a factor of production that needs to be employed in full force. So that has been made clear by many reports, starting with the Draghi reports, with Fright and everybody because he was talking about 4 trillion euros in 5 years.

4:54But again, 4 trillion if you compare it to 35 is not a big deal. I think the mistake in this report is that it promoted public money, which I think is kind of no-go for many people. But we have a lot of private money. So the question is, how are we going to action private money there? The Cookies Noyer report that was delivered in Berlin last week is a strong encouragement to do that via private money. And I will extend a little bit on that. So what is the... How can we do that? How did we do that in France? I think in France we had public action with private money. The public action was to sponsor the idea at the highest level in the country by the President of the Republic, Emmanuel Macron, to say technology is a good thing.

5:52And then we discussed with the insurers that managed to trillion in France as a way to castrate them, if I may say, to invest in this asset class, which is a legitimate asset class. That has worked. They have invested so far 14 billion euros in VC and public equity tech. Together, we have created a platform of 160 funds, 80 % of that being VC. one quarter of this being first time which I think is very good because there is a new energy that has come to us we have 10 funds managing over 1 billion which I think is stressful to go after the big pockets of this world and what is very important in our mind is that 80 % of the money is invested in the EU and half of that only in France So it's a truly European venture that was asked for diversity reasons by the LPs themselves.

7:08And the pillar to do that are political backing, quite important to put the story in the mind of the people, of the decision makers. It is alignment of interest. We told the LPs that they invest for the returns, not for patriotism. Nobody has been promoted for patriotism, under my knowledge, but for the returns that the team brought. It's governance, which is owned by the LPs, and it's about professional execution. so how can we do that in Europe the thing we don't want to do is to bring with the French model I think sometimes we have a reputation in France in giving lessons and lecturing the world so certainly not in the Nordic country I would do that what we propose is to create a platform where the willing LPs would meet and invest in VCs that operate in the EU, in different countries that are not bound by national geographies.

8:29So we have our initiative in France, the Germans have win. We have started discussing with the Germans to gather maybe 20 LPs. There will be 15 LPs that operate both in Germany and France. and it's a nice way to shed light on people that do Europe technology on the bottom-up mode. And if that were, that would be an open platform for other countries to work. We believe that ecosystems should be national or will be national in the first place for many reasons. So, you know, we were told that it will be a long speech and I always overspend two minutes. So I will conclude to say that, OK, we have a lot of reports that are very good, that we need some action.

9:26I will come back to my Marxist reference. I know that this is a capitalist country with a left spin in the Nordic. And I apologize for those who have already listened to that, but I have one rallying cry, which is LPs of all European countries unite. Thank you very much. Chris, I wanted to bring you on, and everyone should hear why. If I start with that framing, we just heard from Professor TB. TB has been absolutely instrumental in everything that really speaks to getting pension capital, getting insurance capital, as is the case in France, into venture. You've been a bit of a similar role in the UK.

10:16Can you just describe the initiative that you're taking in the UK and where you've progressed to? Absolutely. Hi, everyone. Chris Elphick from the British Private Equity Venture Capital Association. Been working on this for a number of years and a lot of inspired by the great work that Professor Tibby has done. You know, the British were not too modest to take inspiration from France on these things, as we shouldn't be. And in a similar way, so as an association for private equity and venture capital funds, we've been tracking for years how, you know, basically, especially in venture, You know, there's one consistent thing when it comes to pension fund investment, institutional investment into UK venture.

10:55It's been consistently zero or 0.000 something every year for the last decade. And while, you know, 10, 5, 10 years ago, well, that's fine. Who cares where the money comes from? I mean, you know, the UK is the third largest venture ecosystem in the world. And, you know, it's been as high as two thirds of the capital that our VC funds have raised as comes from overseas, which is great, right? We're attracting inward investment. That's all great, isn't it? But I think especially as we were talking about thinking around tech sovereignty and our own independence, especially the last few years, we've been thinking, okay, that probably needs to change.

11:36Because not only from a commercial perspective, all the upside of these brilliant returns that our members generate are going to teachers in Canada and to US endowment funds and to LPs in the Middle East, we're not, as a nation, getting the upside of this fantastic industry. And then the other side of that is also, especially at the later stages of venture, the UK, even though we have a fantastic seed Series A ecosystem in particular, at the later stages, we don't have the funds to pick up that investment and scale our companies and keep them in the UK and in Europe. I want personally the UK to be seen as a UK and Europe, UK being part of the European ecosystem more and more again, that we have the scale and the ability to keep those companies in the UK.

12:26We've had an easy out for years, the last 10 years, of seeding these amazing companies and then selling them to the US and listing them in the US. It's been nice, but that I don't think is going to cover much longer. So, sorry, to get to the actual point of your question, so in the UK we've had a series of reforms which has meant that the large pension schemes in the UK have agreed to put 5 % of their assets into private markets and we want a good proportion of that going to venture. At the moment it's gone from 0 % to 0.007%, I think according to the Atomico State European Debt Report, which is progress of a kind.

13:01But I'm hoping to see more of that money coming through this year and I understand lots of VCs are speaking to pension funds in the UK. there are lots of problems, both regulatory and culturally, which we're trying to overcome, but I'm confident we'll start seeing more of that. Can I ask you both the question that we're all pensioners in here at some point. We all just want, in the end, a good, solid pension that can actually provide for our future. Is there any problem between, you know, is there a dichotomy? You have to, if you want returns, you have to go to the States. if you want to back Europe's future, you'll go to Europe.

13:39Is that a true statement or is that completely false? I don't think so. I think the LPs in France that are not very much invested in the US either for maybe a not so wise reason, which is to say our liabilities are in euros, so we prefer to invest in euros anyway. So, I mean, in modern finance, there should not be that an issue, but that's a fact. So I think the issue is much more against, generally, a reluctance to invest in technology at all stages than Europe. It's just they don't know, you know, I think it's a vicious circle. If you don't know an asset class, you don't invest in the asset class.

14:38If you don't invest in the asset class, you don't know the asset class and on and on. So because the asset class is small in the world, maybe 2-3 % of the world, some LPs believe that it's avoidable. It's too much of a hassle for something which will not move the needle. Personally, I think it's not the best fiduciary alignment with the savers because the theory tells them to invest in all legitimate asset classes. And VC is a legitimate asset classes that has produced the Amazon, Meta, NVIDIA and the like. All the big US tech firms have been funded by VC at some point. So I don't see any asset class that can be more legitimate.

15:34And the fact that it's risky is, in my view, is not a problem because the portfolio there are some volatile asset classes some that are not volatile but the The portfolio risk is reduced by diversification, which is also a 101 lesson in finance. So if you miss a legitimate asset class, you miss an opportunity to reduce the risk of the portfolio. Really quickly, I want to ask both of you, and this is the final question we'll make it to cover here. I want to ask you, what are the steps we've got to take across Europe and what steps are being taken when it comes to getting more institutional capital into Venture and Tech?

16:24You know, I think the steps... One side is institutional, driven by the EU and Capital Market Union, 28th regime and the likes. which is very important, but that will take years. So I think we don't have the time to wait because the geopolitical forces are not waiting. And we lose weight by the minute. So we need to be active. I think my view, that's very personal, is that we must start in countries in the first place with the ecosystem, because the ecosystems are made from people that meet with each other, but they don't only meet, they trust each other, and they report to some extent to public authorities in each country.

17:23So I think that is the ecosystem. And the ecosystem is institutions and people. I think that in every country, I would welcome that in every and everybody here I think would welcome that in every country there are forces that influences the public authorities and the LPs to take a look. It's only take a look. Do the homework and work the other way around. Justify why you do not invest in venture. That's how we should be I think how the problem should be set. So I think that's really a national push, especially because defense is also in the equation, and that's by definition very national. And then, or in parallel, we must bridge to get the critical mass, because Europe is a continent of a considerable wealth, a GDP that is the second in the world, and our competitors, they are continents.

18:33So Germany is not going to save the day. France is not going to save the day. The Nordics, despite all their qualities, are not going to save the day. So we need to work together and find common grounds because you don't order people to work together. You need to find the right alignment of interest because it's financed and it's all about interest. And I think there is an alignment of interest, which is that the companies in all our countries will be better funded. The reason why, as a French, I've been to maybe Poland six times in the 15 months, or Germany, or here in the Nordic, which is a privilege, is that I think that if there is better VC funding in all these countries, it will be better for the French companies, which is the purpose of the French government by definition.

19:31So that's a win-win. And that's why every country, even those without a financial ecosystem, should find a benefit in it because it will fund their companies. Even the companies that are very late on finance, you see Romania, for instance, they have been funded by, you know, they have very successful startups that have been funded by US funds. So their choice is, are you going to be funded by the US or by European VC? And I think the choice should be obvious today. Chris, with a counter that's already 20 seconds beyond, I'll give you the last. I endorse all of that. And I would just add, yeah, from the UK perspective, I think getting the balance right, you know, how much carrot, how much stick do we have to sort of turbocharge it and make this happen?

20:20because, as I said, we're coming from a standing start, or a lot of countries are, where it just hasn't happened before, so it's not going to happen overnight. So patient to an extent, but also the need to see this happening because at the moment we're seeing that next wave of technology coming through and 11 labs and others, we're seeing them and putting the Series A in the UK, and then who steps in, putting in 100 million rounds in every couple of years, it's the big US funds who keep stepping in. So until we can, we need to just try and challenge that and make sure that doesn't happen because at the moment, And it does seem like we're not as aligned, especially in areas like defense.

20:52It is now a national strategic priority, I think. And you're seeing that in European governments. And we need to be as joined up as we can to change that. And I would say to everyone in the audience, you're all opinion makers. We actually can move the needle if we come together to try and influence the people that are in power, both in the regulatory space, but also in our pension funds to move towards more money for our European tech ecosystem.

21:25Venture is relearning an old lesson. Time matters more than timing. Long-term capital is being tested on patience, governance, and conviction. Christina Brink from Volvo Group Venture Capital, Daniel Capricorn from Speedinvest, and Joe Schorch from Isom Capital operate at that edge, across corporate, institutional, and evergreen capital. They'll unpack what it really takes to succeed as a long-term venture investor today. Please welcome Christina Brink, Daniel Capricorn, Joe Schorch, and moderated by myself, Andreas Moncom, co-founder of EUVC.

22:02I'll open with the question that we come from this very wide, wide perspective of what can we do as a society. If we look at the allocation level, I'd love to ask if we start with you, Joe. I'd love to ask you, how do you think and how do you vet managers across Europe in a way where you are able to allocate as consistently as you've done and with as much success? Well, the exciting thing about Europe is that great tech companies are coming from everywhere. Literally every company in Europe has multi-unicorns now, which is great. The problem with Europe is that literally every country is creating great things.

22:51So how do you deal with that? I think our approach is to try to meet everyone. It's a lot of work. We fly to every single country. We try to meet every VC fund and understand where is the market opportunity, what's their strategy to approach that opportunity, and what's the experience of the team to execute that strategy. I think there's a three-leg stool of any private fund. Exciting market opportunity, strong strategy to approach that to generate return, and then strong team to execute that strategy. In Europe, a lot of the VC community is quite young and new, so you can't apply the track record analysis that you can in other asset classes.

23:34There isn't 40 years of history. Most of the system rebooted after the financial crisis. so you've got to go to first principles and meet the people and understand what is their experience how do they execute and if you do that it's the most I think Monsieur Tibby said legitimate asset class if you look at long term numbers it's the highest performing major asset class in big statistics but the dispersion of returns is high when you invest in a company you may lose your money you may make 100x The range of outcomes is unbelievable. So I believe diversification is the way to take the risk out of that.

24:16And so far, that's why we run large diversified portfolios for institutions. And that works very well. So every day of the week, we're making money. And every day of the week, we're losing money. But that's the nature of building business. Coming up on almost 100 fund investments, quite significant. Christina, you've invested as a pension fund manager before. now you're doing so on behalf of Volvo Group. What Joe just said, does that resonate? Is that how you think about it? Yes, I think I agree. And I think it's very different to change role as an LP, being a financial LP, looking for one type of fund investments, and now being more a strategic LP, looking for another type of investments.

25:03And our main strategy is direct investments, but we also have a small fund program. And in this fund program, we are looking for managers that in some way fits into our industry and can drive the growth and the innovation in our industry. How does a fund investment complement your direct investments? I see it mostly from a portfolio perspective because the direct investments are Series A and beyond. and through the funds we can reach the true venture type of returns with seed and early A. And that type of investments are difficult for us to make as direct investments. These companies are typically too small and too young to be able to collaborate with large customers or partners like Volvo and others in the industry.

25:58So it's a way of combining our... Create early interest across Volvo Group for what type of innovation that is happening across the industry. It's a bit of a very good looking glass into the future as well. Yes, yes. And also the type of relationship that I had as an LP representing large institutional capital. That is different compared to today because now we have more continuous dialogue we help the funds in their due diligences and their sourcing and we can also potentially work together with the portfolio companies so we have a much more active conversation with the funds that I invest in today Daniel, representing the other end of the ecosystem so to say you're one of the GPs out there raising you've done that for a long time and you've been massively successful Tell me a bit about where you're seeing LPs that you're meeting in Europe, and not only talking about the institutionals, but also the likes of the group that we have here, family offices, wealthy individuals that are looking to invest in funds.

27:10What do you see them do well or maybe do less well when it comes to thinking about fund investments? Interesting question. Not so easy to answer. What I see them doing well is that they invested all right? That's the first and it's way too little out there actually allocating in a way the the asset class is Deserving for not only the the LPs the GPs and the portfolio companies that we're investing in but the wider economy in public um What I think most people struggle with when assessing venture as a part of their portfolio location is the long-term characteristics of it, it's probably the asset class with the longest insecurity of the outcome that you have to wait for like five six years to have an idea of your LP ticket will it do well will it do not so well how will you do it after all and Then under the truly understanding the power law effect That's something that's so fundamentally not in our human like, you know, DNA and brain, we always assume things go linear, and they don't.

28:44And in venture in particular, this is most visible, and yet most difficult still to understand. So if I would wish not only the LPs, but also the GPs properly understand, is the power law effect. It's everywhere. everything in the end is a hit driven business in professional sports you only see the top 0.1 % actually make it into the limelight and all those others on the way there get hurt or are less fortunate you don't see in business it's no other than in venture Joe if I can switch to you because you're obviously also and often times you're raising from families that are investing alongside you as well, so to say, with a lot of LP commitments themselves.

29:40What are you, like, I imagine that as a professional capital allocator, you might sometimes feel like you want to bang your head.

29:51We'll stick with Daniel. As much as I understand their urge to do so, if I'd be really honest, just don't prior Series C. because the likelihood of the investment to fail is just so big. And, I mean, we run an investment team of nearly 30 people. 30 people across five offices that do nothing else but sourcing, scouting, fighting for allocation, and then managing the portfolio. This is 30, hopefully highly skilled people, comes also at a significant budget. these are offices in Berlin, Munich, Paris and London and Vienna among some not the cheapest workplaces that require significant financial and personal effort to really build and actually run a portfolio and yet we calculate with a 60 % loss rate so if you like you know do probably three investments you may expect one to work and still you don't know if it's a massive outcome to justify the risk and the money at risk that you put in.

31:09Can I, if I ask the two of you, if you were to give one final piece of advice to people wanting to allocate more to venture, what would be your advice if we start with you, Cristina? Yes, I think if you consider investing venture, you probably have more capital available in other asset classes. And I think you will become a better investor in the other asset classes if you invest in venture. Because you start to understand the tech, the pace of development. And often you can see that a venture company, early stage, quite soon ends up in your buyout portfolio. So I think you will become a better investor in general by being active in venture.

31:56Great. Beautiful. Yeah, it always strikes me. None of us are using less technology year on year, right? It's literally in everything we do, driving your car and so on. So as a longer-term trend, you must and you will invest in technology, whether it's through buyout or whatever. I think the power law point, and it ties with my earlier point, which is you must have patience, as you said, but you must diversify because it's a hits business, as you said. and diversification is the way you control for that risk. But my advice, if you haven't yet invested in venture capital, think about entering through secondaries.

32:36I mean, that's a really interesting play on Europe right now because we've had 15 years of guys like that building amazing stuff. And there is a lot of supply at the moment. And there's good supply and there's not a lot of demand. So what I mean is you can buy in as LPs are tired. Some of these families who put money in 10 years ago, they haven't had enough back. So this is an interesting moment where you can build a portfolio with kind of accelerated velocity and then do primaries together and they work well, which is well known in buyout, right? We do that in buyout strategies, but not enough people do that in venture.

33:16You cannot understand European venture dynamics without understanding how public capital actually works. Michael Schäfer, president of the European Innovation Council Board, sits at that intersection, where public funding, venture capital, and industrial scale meet. In this fireside, we'll focus on execution, how the EIC works with VCs, corporates, and institutions to turn deep tech into European scale. Please welcome Michael Schäfer in conversation with myself, Andreas Moncom, co-founder of EUVC.

33:50Mikhail, let's just make it clear to everyone talk a bit about what you've done with the EIC how many companies you've helped fund from the early get-go the focus on deep tech, the momentum that has gotten started all because, honestly, of the EIC Well, the EIC itself is a startup we started only six years ago but in six years we had a difficult start, to be frank like the ERC 20 years ago. But we have funded by now 742 companies. So it's a big size. We have about 115 trusted investors, so regular investors that co-invest with us. With a multiplier for each euro public money we put in, we get three and a half.