Andreas Klinger announcing his new $15m Fund!

0:00Scaling Europe hosts:Hello and welcome back to the Scaling Europe show. I'm Seb Johnson. I'm here with the one and only Andreas Klinger. Andreas, thank you for joining me today. Hey Seb, thanks so much for having me again. It is a great day to have you. You've got some absolutely amazing news to tell us. Why don't you just kick off? What's the news? Big news is we raised the fund. So for the last few years we have been focusing on pushing Europe forward as much as we can. with my solo GP fund we have been pushing this as much as we can with like all our investments but now we raised a full dedicated fund on focusing on essentially accelerating Europe's frontier tech so robotics automation manufacturing you name it anything where Europe is good anything which is like outlier we we want to invest first check first round we are known to be weird we're to be crazy we are happy to be first check amazing how much have you raised it's a fairly small fund because it's meant to do like 200 to 500k checks uh so that the fund itself is like uh was meant to be 15 million we raised it's like in last year in uh between june and june-ish and october november and then we had so much inbound that we opened up another 5 million so it will be 20 million and all that is done like in a month or two amazing so 20 20 million what you're probably going to make 30 40 investments yeah and you talk about being first check very very early what does first check mean in hardware robotics uh very frequently it means meeting people who have a prototype uh who are maybe very engineering heavy not really like as like business heavy for example and uh figuring out a way to make this to an actual company like that's a very common one uh And it's also like in many cases, it means investing in stuff that just it makes sense, but it also just doesn't make sense yet in a weird way.

1:56You know what I mean? That's very common for a lot of the things we are doing, especially like we this is not public yet, but we invested in a solid propulsion rocket company, for example. And that's something that is like normally like a little bit more on the crazy side. and we were like, you know what, we want to be your first investor. Manage should be the second one, actually. We partnered with a friend of ours on it. Or other things we do, like what we invest in, is fully automated electric tractors that can lift four tons and pull as much. We did now, just last week it got announced, is a monowheel robot.

2:36So basically, do you know Star Wars, the BB-8? Basically that thing. you know and um that thing is like meant for security uh it uh officially can go 10 kilometers per hour in officially way faster and uh it's like a little ball and like self-stabilizing it's the only actual monowheel uh right now i think worldwide uh that actually works in that level um and a bunch of other stuff like i don't want to like bore you to death but like basically the idea is robotics factories machinery automation uh anything that's like hard to build annoying to

3:12Scaling Europe hosts:build is usually very interesting to us amazing i actually saw that i saw a video of that company where it was like wheeling around a conference center i think it was it was just like zooming around and i was like that's fucking cool and that's like i think a fifth of the speed it can do a 10th like this is like really funny like when that thing actually like like speeds up it's very impressive actually yeah cool and how are you finding these companies like what's your kind of sourcing strategy really depends really really depends um i think nothing unique to any other VC fund a lot of a lot of work like you have to have a certain like ceases in our case for example robotics and then just like make sure you just stay on top of like pretty much any trend any person that you think could be relevant that's one aspect the other one is we do a lot of like media work so we do like a lot of youtube and this would be actually one of the main things we want to focus on this year where we try to feature the most ambitious startups in europe and we go to directly to the robotics labs and like feature what they do behind the scenes without the whole hyper intellectualization that you have on you know panel events or something like that like literally just show the robot show the machine show how it's done through that is like coming a lot in um yeah that's basically like i would say outreach and a lot of the stuff through the media work we're doing yeah i was going to ask because that youtube channel is quite new but it's already got like a quarter of a million views um as i was i was interested whether that is part of the strategy it is about i guess making yourself an expert drawing these startups to you and then getting access i guess yeah in a way uh the way i think about it it's fun yeah yeah like i I wanted to do something in this direction because I said, like for two reasons, like my DD, like we don't show enough, like Europeans are horrible in branding.

4:59Europeans are horrible in promotion, especially self-promotion. And I just wanted like, hey, there's like absolute world leading companies in Europe. Like we should like promote them more, push them more, just change the narrative, you know, because so much of the narrative we have in Europe about Europe is actually from the outside and all this kind of stuff. So this was for us super important to go very intentionally and be like, hey, this is some of the best people in the world building something that can easily become number one in the world. Let's feature this and go behind the scenes and actually show how they're doing it.

5:34Not this on the panel when everything is rehearsed 50 times and very abstract. Show the actual prototype. Show the actual thing. And that's the idea of the YouTube channel. And it's still early. We started with this basically last year. it's like a few test runs and this year we want to double down so if you have like good companies that you think you should feature like let us know yeah absolutely you know i want to go back

5:55Scaling Europe hosts:to the point that you mentioned about being earliest you know that you really a lot of your investments seem to like really are the first check that they get what was the thinking behind that do you think that europe has a problem with underfunding uh technical companies at the earliest stages i mean in in general um i think europe but pretty much every market outside of Silicon Valley has the issue that getting your first investment is usually the hardest. Like the moment you have, like it switches from an if to an when, like the discussion changes, you know, and very frequently, like when you have like your first enough money that you can just like focus on actually creating proof points, like repeatedly and like quickly and just accelerating on your own without like constantly hoping for something, you know, the moment you have that money, you can actually accelerate in that moment, like usually a lot of other investors become also very interested you know um and that that's kind of what we do um the the other reason is also like when i was a founder back then i i wasted over a year with my very first funding you know i mean and uh in hindsight i did everything wrong you know but like i didn't know better but like i thought i think so it's like true for a lot of founders that also there wasn't it felt to me and i don't want to say this is still the case but like maybe it is most investors uh follow the market more than their own conviction and uh which in practice means once you are like one of the things that will work you will work a lot but getting there is really really hard like we perceived like that is very very hard so like this is why like for me like back then the main thing we want to do with this fund if product is like building the fund that i would have wanted back then as well you know hey you're building something weird you're building something crazy you're completely obsessed with this you know like give it a shot you know like that kind of thinking and does a lot of the value that you bring you know being that first check because i imagine you know having yourself and prototype back at back a founder very very early does that then open a lot of doors to other investors is that then yeah and is that one of the big value ads for for founders i i mean i i usually joke to founders that if they ever have to rely on value out of the investors they're already lost so i don't even want to use that term to be very honest yeah but uh we very frequently set up the round we very frequently help uh like building the round so maybe even if not the first investor very likely would invest making the most introductions but um it's it comes it this comes actually out of like something very practical like um we we only invest if like we are genuinely excited about something and this sounds like an obvious thing but it's not like you you cannot convince me with spreadsheet that something is a good investment and i'm way too asperger adhd or whatever to to to fake it you know so i can genuinely only talk about companies i'm excited about i can only jump on calls with founders i'm excited about you know everything else you would instantly like my face is like a book an open book you can instantly see if i'm like bored and annoyed you know i mean so the same is true with like uh helping them founders like if i wouldn't be genuinely excited i wouldn't invest and if i'm genuinely excited i want to help as much as possible you know and you feel free to ping any of our founders like very likely uh at least in the early days you were most likely one of the most heaviest supporters and people making introductions like when they get some more successful they have more friends and then they're usually good you know yeah yeah but at least in the early days very very commonly and what does that due diligence look like for you then if you know if your metric is almost like am I really excited by this?

9:27Scaling Europe hosts:Is this a bit crazy? What does that look like? Is that like you go meet the founders, play with whatever they're building and just see if you think it's cool? It really depends. The abstracted intellectualist answer is I use a mental framework, which I call credentials, execution and innovation, where basically the idea is who is involved, who is the founders, who is the other people, the credentials basically. The second one is execution, have done nothing, maybe a pitch deck, and has like$5 trillion in revenue. And the innovation is like, this is basically this thing that exists, but like different.

10:06Or it's like so freaking new that we lack the language for it. You know what I mean? And what I like to do is, for example, I don't think of myself as a deep tech investor. I think of myself as a frontier tech investor. I want to invest in things where the research shows that this is possible. And it maybe has even been already tried for another industry or like a different use case or something like that you know but maybe we'd want to figure out like now if this can be applied to this new use case so my goal is not to invest in things that are so new that you don't even know yet what the language for that will be you know um but that you have already for example have already proven that it technically can work so for example we invested in luma labs which is a video ai company like super super early you know like very very much first investor and but at that point they could already show prototypes and also existing research was like pointing this direction and so on and so on like you knew that in the next two years there will be enough breakthroughs even if that team alone cannot do it you know and um they raised now like a billion dollars or something like this uh but so like ideally like uh frontier you know like it makes sense but also like it's a little bit too much out there you know like that's the perfect combination on credentials the ceo ideally is a personification of the company so if it's a like a very technical product the founder has to be very technical the ceo has to be very technical you know um and ideally there's a certain right to win if this makes any sense like you have been obsessed with this topic for multiple years now you have built something similar you have worked something similar like there is a certain right to win for this.

11:45Got it. And execution, I call the fund prototype for a reason. I genuinely believe it's not that hard to, like as an engineer myself, it's not that hard to just spend some time to actually build a viable prototype for something. And it changes how you talk to investors. And there's a lot of people who are, because of their credentials, just raising a pitch deck. I'm open to this, but it's not usually what I do. usually I want to see people who were excited excited about something want to build something and then while doing that figuring out that that should actually be a company you know I mean that's

12:20Scaling Europe hosts:the ideal case yeah got it okay and um how did you find the fundraising process itself like I know that you shared a bunch of numbers recently about your fund performance you've got fund one fund two the growth fund all of those performing really well fund one and the growth fund are around you know 5x multiple uh fund two two and a half multiple and then you know real cash out as well fund one you've nearly returned the whole fund growth fund two and a half three x i think it was given those strength of numbers how did you find the fundraising process yeah yeah so for anybody not in vc will be shocked to hear that these numbers put you in the top five or top one percent worldwide because the funds are quite young you know so that's uh like three years four years old at times um so i think i'm in a fortunate position like i have done enough in my background um in my career like i've been a founder i was like in multiple silicon valley companies that matter like prototype sorry product hunt angel list coin list on deck and so on and so on and we're like core leadership there in all of these and then additionally the funds i have done in the past all of them are top one to top five percent worldwide so i'm a little bit in a fortunate position that i uh for me fundraising i think was a bit easier than the typical current fund because the climate apparently is i can tell as well the climate right now is really hard to raise a fund and i think i'm in a fortunate position that i had like uh um i had it way easier than most we see funds right now and also the fund is very small by design you know and one of the reasons is to make fundraising not annoying yeah because if i would raise 50 million that that would be a very different discussion now you know i mean do you think prototype can get that big or do Do you think you've got to stay small given that your first check?

14:05If I see a purpose, yes. The main reason why I want to stay in a certain size, which is comparably small, is A, I want to run this like a solo GP fund. Even if I hire people to support me and give me leverage and build up YouTube and all this kind of stuff, I do investments because I generally enjoy that and I generally want to work with the founders. And I can only do this in a certain bandwidth. The other thing is the checks that I do is small enough that I can join an angel round. I can lead an angel around, I can join a pre-seed without over-dominating it. But I also, it's big enough that I can tell a founder, look, here is, let's say, 200, 400K or something like this.

14:45Do nothing else. Get the one or two people we're already discussing and focus on this for three months. Make it real. And everything else right now is a waste of time because the moment you have it real, it changes the discussion to everybody else. you know i mean and um so that's a luxury position to have this kind of smallish biggish some in between check size and also be able not to raise forever because like if you think about it like every bigger fund one of the partners does nothing else but fundraising from lps and as much as i really loved my lps and many of them are with me for like this the fourth fund now for many i don't want to spend my time fundraising from lps so being able to raise a small fund makes very effectively and very quick, you know.

15:29And we raised the core part of the fund like last year in like three, four months or something like that, you know. And the main issue we had actually was not the fundraise itself, but the fact that we were focusing on Europe with the new fund and the previous funds were all global, you know. So it was just like a little bit different target group. So like, I think it's a luxury position. I would only increase it if I have a clear reason to do, you know. So for example, if I would say I want to change the model or there's like two or three people I want to get into the fund, and otherwise I don't have enough volume for that.

16:03If I want to fundamentally change what we do, I would consider it. But right now, for what we want to do, that size is actually perfect.

16:11Scaling Europe hosts:Can I touch on something you mentioned there, how your first funds were global and this one is going to be European-focused? What was the thinking behind going from global to Europe? So during COVID, we moved back from San Francisco to Europe. And I noticed that a lot of my American VC friends became a little bit more, like the tonality shifted more hostile. I think now with Trump, it's like kind of obvious and with J.D. Vance and everybody, you know, that back then it was kind of like, it's weird. It's no longer like making fun about Europe in a nice, you know, Big Brother way, but more like genuinely like weird, you know, like in friends of mine, like in Berlin called it like a dumb kink, you know, or something like that.

16:52So maybe. but like genuinely in a weird dismissive dismissive way you know and the problem i had is half the stuff they said was like just pure propaganda pure wrong pure like what the hell this doesn't make even sense you know and just plain wrong and the other half was very much true you know and very much like completely valid criticism and everything i generally didn't know which one is worse so out of that came like uh the the effort to do more pro-european work because i genuinely think we cannot compete as individual small countries neither in a startup ecosystem nor an economic system or anything else but only on continental scale because the competition is now the u.s china soon india and afterwards like other large blocks you know um out of that came like pro-european work like we launched like a larger community and so on and so on and then we said like okay we actually need to change the system itself and like fix the system so we launched EO Inc, which is an effort to create a pan-European legal entity, which is hopefully end of this quarter, we see the first legal proposal.

17:57So let's see what they do, but hopefully moving into actual law and reality. And out of that, I also realized that for the last two years, I mainly did all of my investments European focused. And then it was like in a weird situation because I pitch my fund. It's like, look, I invest in American front tech or software or whatever. and then I do it like in India and South Africa and Latin America and like you name it you know like I have a satellite company in Ahmedabad in India you know I have an AI company in Brazil and you know I mean like this kind of stuff and so the public thing that is mentioned about the fund and my actual reality of me like having me investing in last two years pretty much only in European companies is a little bit off and especially for my American larger LPs like Europe wasn't the most interesting investment market you know like as a like little bit geo opportunity diversification sure you know but then why just europe you know um and so like i had to i made the intentional decision of like for fund three i want to make it as explicit as possible this fund focuses on europe you know i want to invest in the most ambitious startups in europe and it will be explicitly focusing on stuff where europe is exceptionally good at which is usually hardware robotics automation these kind of things you know and um that had in the beginning a little bit of an explaining to do but i think by now we we have this done do you ever feel any tension between

19:22Scaling Europe hosts:the work that you do with eu inc in europe and trying to be really bullish and very optimistic on europe versus you know maybe what's right or best for your portfolio and your founders and what's best for your LPs? No, not personally. So for LPs, it's easy. Like VCs actually, people tend to think of VC as an average thing because they see benchmarks and everything, but this is the wrong thinking, you know? VC is only about outliers. Like the whole job of like use a VC fund is to invest in outlier. And if you can do this in Europe, you do this in Europe. If you can do this in the US, you do this in the US.

20:01if you can do this in anywhere else great you know but just by increasing the pool size by default that doesn't happen you know so like i did very different sourcing back then than i do nowadays you know i mean so that for the from the ap point of view it doesn't change much um and uh like europe as an asset class in average is worse but if you invest in the best company it doesn't matter you know um and also like if you invest in an average we see fund you anyway don't make any money you know i mean so like there's no point the uh from a point of view from a founder you know like in hardware especially you can actually produce better and cheaper and more efficient in europe than you could in the states i know like there's no point in producing instead the discussion is more actually produced in china you know um and i don't insist that they produce here like i i have we have the network we can help with that but like that's not that's not the goal you know yeah if you do software developer tooling or something like that of course you should move at least some of your founders should move at some point to the Bay Area because that's the biggest customers are there.

21:00So the micro and the macro can pretty much split. So I personally am a big fan of San Francisco. I think every engineer should have lived there at some point in their life. I think it's good for every founder to be there regularly or even move there for some time. But it doesn't change the fact that we need to fix Europe as a startup ecosystem because we need tech innovation. We need the next generation of GDP-driving companies here. so like the difference between fixing a system and like uh doing what's like good for individuals can be like the not necessarily one-to-one the same yeah yeah got it interesting um i always

21:35Scaling Europe hosts:wanted to touch on uh you know some of the metrics you know that growth fund of 2022 yeah already returned nearly 3x cash what's driving that luck but if any vc tells you anything different they're an idiot like a liar or like very good in branding i don't know No, but I can tell you. So in practice, the growth fund was, during the SERP phase, I noticed that a lot of my follow-ons were just happening too quickly. And I wasn't really comfortable putting them into my main fund. And the SPVs weren't really quick enough. And it was like a whole thing. So basically, we decided, you know what, let's split this out and make a dedicated fund for this.

22:16And originally, there were one or two larger LPs for this that unfortunately in the last month it like basically collapsed as companies which is a whole discussion for different podcasts um but anyway like so we did the growth fund um and the idea of the growth fund was basically um follow-ons and what i would say is like off-seas bets so like stuff that didn't really fit into the main fund uh or like like uh like you know just let them dress do kind of thing yeah um and that fund surprisingly worked really really well because if you do like 30, 40 companies, you know which ones are very likely to be huge successes.

22:57You know what I mean? Like you don't need to do follow-ups just to save your grace or something like this. You know what I mean? It's not like in a main fund if I lead that around and if I don't do follow-up, it's like a weird signaling. It doesn't matter to anybody if I do follow-up or not. You know, like it's not that the check size are so big. Yeah. So you can be a little bit more picky, you know, And with that one specifically, we had a follow-on in one company that had a very large exit and raised only one round ever. Wow. Well, technically, they raised like multiple smaller angel checks in roughly the same valuation, you know.

23:35And they never raised any larger amounts of money and they sold for a billion dollar to Atlassian, you know. And that's the best case scenario for a VC, especially if you do first round and first check. And then we had also like a few other smaller exits. And then we additionally had a markup by two of our core winners in that portfolio. So that fund worked really well. But it's also like in hindsight, the effort of having an extra fund for that was like too much. So what we do with fund three is we just put them into the main fund like again. Because also the market is not as insane as during 2022 third phase.

24:09Scaling Europe hosts:Yeah, interesting. So that growth fund was essentially just like double downing on a lot of the initial successes from the early fund. yeah also like keep in mind back then during serp like markups happened really quickly like you do a seed round and then half a year two three months later there's a series a like are you now comfortable doubling down or not that's like you know and if your fund is framed as like early stage and all of a sudden you you throw half your money on uh follow-ons you know that's a weird weird messaging yeah got it okay um all right look i want to finish on some quick five questions if that's right please go what uh have you got like a favorite personal tool that you're using maybe it's automation maybe it's ai maybe it's a small robot like a what are they called a reachy mini is that something that you that you've got that you love using dude i'm a very very boring uh terminals browsers apple notes period that's very boring like i i write i write my own scripts for stuff.

25:08I have everything in the browser if needed. You know, I'm very boring. I use web Gmail since 10 years. I have my own system there. Everything is like, like as independent of potential startup failure as possible, if this makes any sense. You know, like my passwords are in an open source tool that's like, I think, 20 years old, you know um you know i mean like uh like do not like don't mess with my systems because my systems are as simple and reduced as possible yeah nice okay number two what is the number

25:42Scaling Europe hosts:one trait that you look for in a founder obsession obsession it's it's it's like it sounds like a cliche i don't know if maybe but it's if somebody no matter what the discussion is you have get somehow back to their own topic and not the company the topic you know and you just like Like, you know, like, it's really, really hard to, like, I can talk with people about everything as long as they're excited about it. Yeah. Like, a friend of mine is excited about special differences in international visa law, you know? I talked with him recently, like, for three hours about it, you know? But I need people to be excited and obsessed about the things that they want to build and spend their time on because that's also, for me, the thing that I look for.

26:24And that's the only, like, I connect with people about their own personal obsession and interests, you know?

26:29Scaling Europe hosts:Yeah. Yeah, so that single track mind, you know, they just can't get off that topic. Yeah, I'm the same. I'm the same. And the beautiful thing of investing is that you can combine this with ADHD. So you can like jump between different topics. Yeah, that's super interesting. Yeah. Okay. And final question. Please. What has been the single biggest miss that you've made in your investing career to date? There's too many.

26:57Too many. So with my first fund, with the very, very first fund, I intentionally kept focusing on a niche, which was back then distributed work, global work, like remote work, essentially. And then COVID came, made the fund very successful, very popular, you know. But I also intentionally passed on a lot of really good companies. So, for example, Superbase in their first round. They have like this famous chart where it shows like their growth. I talked to them before that chart, you know what I mean? And I passed on them and like I think I made a few introductions. I helped them a bit. I have like tons of those companies where I made a few introductions, helped a bit, but I didn't invest in the end.

27:31I had a brief moment in time where I was like, I will only do first round, only first check, only first whatevers. And then I passed on Vercel in their, I think, 60 million post series A or 80 million. I'm like, I forgot the numbers, but like double digit, I think it was still, you know. And I was like, no, no, no, I do only do early stage, you know. so my big learning from that is not so much the individual companies because i would be surprised if the founders even remember me the uh the big learning for me is you have to have a thesis to keep yourself accountable but also know when you break the thesis so the job of the thesis is almost like to exist so that you intentionally know when you break it

28:12Scaling Europe hosts:yeah and when you find those exceptional um outliers interesting well adrius thank you so for joining me congratulations it was an honor I love what you're building you're absolutely crushing it you're doing this amazing hybrid world of like policy media investing with your own founding and operational experience you've really done it all so again thank you so much appreciate it mate appreciate it mate and keep doing what you do dude like this is super important this is super awesome big fan love it thank you so much cool bye bye

28:48Thank you.