Andre de Haes: Co-Founder and Partner at Backed VC announcing their new $100m fund

0:00Hello and welcome back to the Scaling Europe show. I'm Seb Johnson. I'm here with Andre, one of the co-founders of BactVC, one of Europe's leading early stage funds, firms, who's got some very exciting news. Andre, can you tell us what the news is?

0:15Andre de Haes:said yeah very thank you for having me on um yeah the fund launches are never particularly interesting but um it has been almost a decade since we've uh started building backed and we kicked off with 30 million announcement back in 2016 and we're now at 10x the AUM with 300 million under management and we just launched a new 100 million dollar fund um at the legal hard cap and it was coincidentally right alongside doing our 100th deal so it felt sort of felt poignant to do our 100th deal alongside raising a large 100 million fund and and so effectively that's what we're announcing now we wanted to announce it just before slush because you know we have a large slush presence we do 40 events a year but we're doing six events next year next week at Slush.

1:04Andre de Haes:So we'll have about 2 ,000 people coming to the six events. And so it felt like a fun moment to launch this right ahead of seeing lots of friends in the ice. Amazing. Well, look, 100 million fund, 100 investments. This is like absolutely amazing news. So congratulations to you on the team. Can we get into what you're going to be using that fund for? So types of things that you're going to be investing in, what stage? I know that you always precede seed, but like more broadly, stage size what sectors are you looking for what type of founders are you looking for yeah so the idea of backed seb was to invest in areas that others were not touching um and to try and ride large paradigm shifts so back in 2017 we started investing in three main areas in firstly computational bio secondly manufacturing software and thirdly fintech and blockchain infrastructure and we built dedicated teams in each of those.

2:00Andre de Haes:So we're going to keep investing in those three areas. Alex and Yasmin will continue focusing on computational bio. David and I will continue focusing on fintech and blockchain infrastructure. And then we share the manufacturing side of the business. And so we're going to be basically backing founders, building generational companies where they have no competition. What we look for is companies that have a unique angle and that have no global competitor. So we avoid anything that's going to become, you know, a hectic market and a divided pie. We really want to back winner take all companies. And we're not afraid to take, you know, a lot of technical risk.

2:44Andre de Haes:and we're not afraid to go after complex sales cycles if we're rewarded with huge contract values in those companies. So we have companies like Thought Machine and Invisible that have individual customers paying them$40 to$50 million a year. Invisible, for example, has one customer paying them$60 million a year. So that's the sort of thing that we look for in our portfolio companies. well there's absolutely mammoth contracts i imagine like signing one of those must be like an absolute party in the office uh on the day that that gets done um but so it looks like yeah you're doubling down where you've seen a lot of success already you know you've backed i think five unicorns today 18 companies that are now valued at over 100 million and you're sort of doubling down on the core areas where you've seen success how has if at all your thesis changed from backed fund one to fund three the the biggest learnings and and they've been you know they've been ton of them because you know every vc you know us very very much included you know learns the hard way and you learn as much from you know the tough um investments as you learn from um the good ones it's very easy to look back you know with rose tinted glasses are the ones that have worked out and so you know there's changes to how we run the firm and then there's changes to how we invest right in terms of how we run the firm we really focus on you know the development of people in the firm we focus on providing a huge amount of structure and creating a culture where people can take very bold bets you know so lucia on our team you know builds a lot in ai uh david and yasmine have done a huge amount in terms of automated sourcing um in terms of building uh angel networks in our verticals uh vinay claire um sasha have launched very bold events um you know like three-day retreats um that we host for founders so and we really encourage innovation and that's something that you know we had to we had to learn to do which is how do you support people to take real risk as they build the firm and how do you encourage them to be firm builders and not just investors and then when when we invest um some of the learnings are simple but key which is you know move unbelievably fast show deep conviction for founders um offer them a term sheet you know more rapidly than others and the question is obviously like how do you do the work within that time period but but the much more complex nuanced learnings is really about you know what works in certain industries right so um how do you take bio market by bio companies you know uh through multiple rounds of funding and how do you get them into clinical trials you know within blockchain like how do you how do you set up a company to be able to do an ico rapidly so for example we seeded a company a year ago called zero gravity and and they've already listed at a 1.6 billion market cap you know so So we've made sort of Spotify like returns in 12 months.

5:55Andre de Haes:And so that's what we're really trying to do is set up, you know, companies for rapid growth and the speed with which companies are getting to, you know, large round sizes has gone up hugely. Yeah, super interesting. I mean, that one particular deal is, yeah, I mean, the IRR on that must be amazing, you know, from 12 months to, yeah, unicorn, yeah, listing. I always want to talk about the process of raising the money itself. I mean, like, you know, I touched on your track record, a bunch of unicorns, like already half a dozen exits at least, 90 % follow-on rate from seed. As LPs, I can understand the appeal about, you know, the track record that you've got.

6:38And I've shown that your top two funds are kind of within the top 10 % performing funds of their vintages. Was there anything else that LPs particularly liked about your, either your thesis or your experience or the industries that you're investing in? Was it something that really grabbed them and captivated them other than just the pure metrics?

6:57Andre de Haes:The biggest thing that LPs look for is edge. And, you know, what's been interesting is seeing some VCs build edge through media, through online media. Right. And Seb, I'm excited to see you launch a fund, 20VC style and announce 400 million. um but you know what harry has done and what you could do is exactly that is leverage an online brand you know to run a fund and what we do is we've built the biggest offline events offering so you know if 20vc um and seb johnson stands for you know online content we stand for offline content and we now run 40 events a year so it's the largest event offering of any fund i believe globally and that provides us with an offering for founders where the sell is you're not joining back to partner with you know a an investor that sits on your board you're joining a community in the same way that you know you'd go to Harvard Business School not for the classes but to be a part of the class you join back to be a part of the class and I think that's why we've had such a high win rate you know we've had a 97 win rate since inception um and um it's really not because of us it's because of the strength of the community and the fact that at our events a seed stage founder gets to you know stand alongside you know founders of 10 billion dollar plus um market cap companies and that those people become their angel investors and they become their mentors and the sorts of friendships that you build when you do a three-day jeep safari across morocco or when you do a you know three-day retreat in Portugal is completely different to what you build you know in a one-hour meeting in a meeting room let alone a zoom

8:49yeah that's super interesting okay so you're yeah I mean I read that yeah 40 events a year you've got six slush next week there's a lot of events and how does that help or does that help at all in whether it's like finding deal flow itself do you run specific events to help that side of the business or is it mainly just about building that community and helping that community

9:09Andre de Haes:to help each other no it creates a flywheel so you know we invite to our events prospective founders that we want to build a relationship with um so you know last year we had we had over 4 000 um founders and gps that came to our events most of those were founders and that creates a you know a relationship which we can then nurture um and then you know continue inviting them so we to invite them to about four each to about four events a year and then to meet with them in between that and it means that when they then go out to raise we're top of mind or ideally we actually just preempt the round and in over half the rounds that we did last year we actually preempted the round and and uh and closed it before anyone else saw it um so that's the um that's the initial uh sourcing strategy on events um what it also does is allow us to engage a community so you know to have lots of angels present um so that when we offer a term sheet to a founder we say right come in alongside the top 10 fintech angels in europe and that syndicate is much stronger than a syndicate that's just backed or that would be you know just a another top tier fund right so people really value um the presence of of angels particularly if they're sector specific angels or angels from jurisdictions into which they want to expand so we'll bring on board like you know top valley angels and top sector specific angels and so the the event flywheel is really helpful there and then it also helps with actually scaling revenue for the companies because when we do for example our bio conference we invite you know the heads of procurement and the heads of m a from GlaxoSmithKline and Nova Nordisk and Novartis and Roche and so you know we've had companies sign very very large contracts thanks to meeting um you know the ceos or c-level execs of the large companies that they're trying to sell into and we do the same in fintech we do the same in manufacturing um so you know it's it's powerful to be in the room with you know the ceo of lloyds um uh if you're trying to sell into lloyds yeah absolutely okay so you use it for for sourcing and to kind of get founders and preempt them which is interesting because i often hear that yeah you vcs are being pushed more and more that if you want to win you've got to be doing more preemption that's kind of like even faster than moving fast is is preempting and then you also use your support the portfolio to help them gain mentors and to help them sell um okay that's super interesting i can really like i can definitely see the appeal of that um how much was or has ai and the kind of the market environment that we're in how much did that like come in or come up from lps in the raise process and how has that at all changed the way that you're looking at deals and founders yeah it's there's a definite two-track market of you know companies um that are ai native and companies that are just trying to embed ai and everyone's trying to embed ai um you know given it's a whole new platform shift um but we've definitely seen um that companies that are not ai native have a radically different fundraising experience for us from the LP perspective you know we we back a lot of AI native companies within those three sectors so um you know within bio we're doing mainly AI driven therapeutics so applying machine learning um and um and you know building either building LLMs or biological data sets um you know so that's companies like uh cosine or using AI on top of biological data sets to come up with novel therapeutics.

12:45Andre de Haes:So that's most of what we do on the bio side. In fintech, we're investing a lot in AI driven services. We're closing around right now in AI driven treasury management for companies. So, you know, you automatically move money across your different bank accounts, optimize the yield, you know top up your bank accounts before you pay payroll and then similarly in manufacturing most of what we've been doing for AI for eight years is AI on top of manufacturing data sets so it's things like optimizing the way you allocate work across a semiconductor manufacturing company it's optimizing the way you do separation you know of liquids in sort of distilling factories.

13:32Andre de Haes:So AI has been a key theme for us for a long time. The question now is, given everyone's piling into the space, is how do you make sure you back the companies that will really endure? It's very easy to get to a million in revenue. It's very hard to build a durable platform that will still be here in 50 years time um and that's that's what we're really trying to to assess is both like is this tech um and these data sets are they are they differentiated and defensible um but also can this founding team you know can we envisage at least one of the founders you know running a large-scale public company um does he or she have you know what it takes to manage a thousand people um do they have what it takes to speak to large hedge funds um you know on uh on sort of complicated active investor calls so that's what we're trying to assess and how do you assess that you know at that founding team level what kind of traits characteristics are you looking for that to give you the confidence that they can go all the way one is one is like absolutely insane slightly slightly unseated ambition you know like what What is it that why is it that someone and everyone says they want to build a billion dollar company.

14:56Andre de Haes:But, you know, when you really sort of test that, like, where does that maniacal obsession come from? The second is sales ability, right? Like, have they and we measure that by saying, for example, have people joined the team to take massive salary cuts because they believed in the cult that the founder was building? um i think the third is like deep self-awareness right which is like you know founders succeed if a they adapt um and you know the wisdom of ancient texts like the book of changes the chinese book of changes is all about adaptability and a ceo journey is about going through multiple phases of leadership you know and that first phase is often one of like building and hustle the second one is one of delegation the third is one of real like network building and customer building and then the fourth is one that's more you know a role of chairmanship um and like empowering others and as you go through those phases you know you need to be able to to to fundamentally like have a different role and do that with self-awareness and humility um and then And I think fourth, it's really just like deep IQ.

16:14Andre de Haes:You know, it's someone, an absolutely brilliant mind. When I look at some of our, we've re-backed a lot of founders recently. So we're in the process of re-backing in Fund 3, the seventh founder that we're backing for the second time. So we've already done six and we're doing a seventh. And when I look at those founders that we're re-backing, a lot of them we backed young. you know one of them james de coombe we backed at 19 on co-mind he just raised 100 million for co-mind launching another business that we've backed pym de witt and you know we backed at 23 you know the the guy was making over a million dollars a year you know between the age of 13 and 16 right everyone else was just in school um you know and and so by the age of 23 when he founded medal you know and and we seeded him um he was just so brilliant um that it's now you know not surprising that he's trying to build like the largest gaming LLM globally.

17:08Andre de Haes:And, you know, he just arrived, he just announced 134 million raise on his first company and a 40 million raise from Kostler on his new company, which we'd seeded. So it's, it's finding, you know, unique brains like that. Because the, you know, people like Zuckerberg and Bezos, they are like they are special minds with both unique intellectual insights right it was Bezos that championed AWS it wasn't someone else at Amazon it was Zuckerberg that championed the WhatsApp acquisition so you need that kind of level of vision combined with all those other things that I mentioned and then the very the sort of add-on thing is resilience right you just get punched in the face over and over again as a founder it's it's easy to glorify it but it's unbelievably tough it's largely lonely it always takes 10 years plus right because if you're selling something within less than 10 years it's never for 10 billion and so any company that matters takes at least 10 years and generally takes 30 and so you know you need to endure and i'm a big believer in the enzo ferrari um in a notion that um your ability to tolerate pain is like one of the biggest predictors of success.

18:27Yeah, super interesting. And those stories that you were reading off is amazing. And it's amazing that the founders that have come with you on that journey from your earlier funds want to partner again with BACT, which is obviously like an amazing testament to the support that you provide and the relationships that you've built and that sort of that flywheel that you mentioned earlier. No, I think it's, yeah, an amazing testament. I also, I'm conscious of time. I want to get onto, you know, the market at the moment. We're seeing a lot more cash being deployed, especially across Europe, but we're seeing less cash than previous years actually be invested into VC as an asset class.

19:02And you're one of, you know, I guess one of the standout stories of this year, raising a hundred million dollar third fund, an amazing result. What advice would you give to other perhaps, you know, smaller emerging managers or other established VCs who are trying to raise another fund and who are kind of struggling in this current market?

19:20Andre de Haes:it's a really long game. And, you know, we actually host an event called the long game. Um, and, um, we, we bring a lot of the top LPs there and it's a really long game. And so I remember on fund one, you know, talking to a bunch of LPs who said, Oh, we, uh, you're a little too early for us. Um, you know, we should keep in touch and maybe in three to six years. And I was that's so long now the notion of like building um you know nurturing lp relationships for like a 10-year period um is completely normal like we we had we had 10 funder funds coming to our latest fund and um six of those were people that i'd met at least six years ago and had continued nurturing a relationship with for for six years um and um and there are a lot of the top funder funds you know in in europe and the us but they they didn't just back us you know on one meeting let alone one year you know they they backed us on like very consistent engagement um and it's really not just about performance it's about trust and a deep human relationship because the best lps are making commitments over three vintages um and the very very best lps um and we're fortunate now to have a few of them on board but um you know lps like top endowments or you know funder funds like um lgt they've been doing this for a long time you know when you speak to yale they're really trying to say right can we underwrite this for 20 plus years and that's the level of you know trust and commitment you you need to show um and so there are so many brilliant managers out there and it's very hard to differentiate.

21:08Andre de Haes:I think the other key thing to do is to not be afraid of being contrarian and not being afraid of being polarizing. You know, it's way better to be loved by 10 % of the LPs that you meet and 10 % of the people that you meet and slightly dismissed by 90, but absolutely adored by 10 because they're like, this is different and fresh and remarkable um then it is to be considered to be good by 100 percent of people but not brilliant by any um because there are lots of other brilliant funds right and there are funds you know like index and i'm doing a fireside next week with staffan from creandum you know there are funds like creandum that have been around for over 20 years have got exceptional returns are very very well run are um hyper institutionalized have track records with companies like Spotify and Trade Republic.

22:05Andre de Haes:And so, you know, there's always a slightly more institutional easy bet if you're trying to have well-polished edges. So, you know, have sharp edges, stand for something, be bold. Okay. So yeah, build the relationships over a long period of time. Don't be afraid to take an edge and to stand out, I guess. Yeah. So especially as an emerging manager, that makes perfect sense. You've got to differentiate yourself from those big, large funds you've got to be different you've got to be having a different perspective um well andre thank you so much for joining me it's been like great to chat and it's amazing news for you and the team so congratulations again yeah well said thanks thanks so much for having me on thanks for taking the time and and uh yeah look forward to seeing you slash next week and spending some time in person yeah let's do it yeah i can't wait cheers