Backing Alan from 2017 to €785M ARR at a €5B valuation: Jan Hammer, Partner at Index Ventures

0:00Jan Hammer:Hello and welcome to the Scaling Europe show presented by Deal. This episode is sponsored by SurrealDB, the multimodal database for AI agents. Omni, the AI analytics platform trusted by growing companies like Perplexity and Cibesia and VentureComet, the platform that gives startups and scale-ups real-time equity tracking, daily business insights and automated management information. Thank you for joining me. Please like, comment and subscribe.

0:32Jan Hammer:Hello and welcome back to the Scaling New York Show presented by Deal. I'm Seb Johnson. Today, I'm joined by Jan Hammer Partner Index. How are you doing today? Great. Thank you. Thank you. And you? I'm very good. Thank you for joining me. It's been a very busy week in terms of European tech news. Today, one of your portfolio companies, Alan, has just announced a$100 million raise at a$5 billion valuation. Crazy. it's a five billion euro valuation yeah billion dollars amazing yes the company's gone a long way since we first invested in 2017 that's for sure they've just surpassed 785 million of ar on track for a billion where's that growth come from it's just the beginning so when we first invested in 2017, the company was a startup in France, a couple of thousand members.

1:27The primary market they were going after was small companies, freelancers in one market. And it was really just nascent with a big ambition. What was really incredible was the scope and the breadth that they imagined back then. So pretty quickly, while gaining scale in France, moving upmarket first towards midsize companies, then towards large enterprises, now all the way to public bodies with hundreds of thousands of members, they always had their sights on international. So the second market they opened was Belgium, quickly followed by Spain. And the most recent market opening has been Canada.

2:16And so you could say it's a company across multiple continents and they've got their sights on more countries. More countries are in the pipeline. And not only that, but actually Alan is really aiming to not only serve companies and public bodies as their customers, but actually they have sights on running full national healthcare systems.

2:47Jan Hammer:Amazing. And it's really interesting. I was watching your Bloomberg interview from seven years ago when you first invested in Series A. One of the things that you said at the time was, this has the ability to scale internationally and to tap into lots more markets. and that's going to be a big growth lever for them down the line. And now here we are, you know, seven, eight years later and they're starting to see that strategy play out in real time and you're talking about how they're going to go even more internationally. Can you touch on any other countries that they're looking at and maybe why Canada as well?

3:18Yeah, I don't want to talk about specifics of what's not yet been open, but it's pretty clear that they have delivered. They have delivered by obviously setting their sights on this big ambition, but at the same time staying grounded and sort of building the company brick by brick. Canada came really with the intention to branch out and do things that are further away from home. The healthcare system in Canada is in some sense is similar to a number of the European systems with a sort of a mixed mode, some public contribution, private and corporate contributions, and a high penetration of corporate-driven insurance.

4:09So it was really not just an experiment, but also a demonstration how the company can serve markets further afield. I hope that gives you an inspiration for you know, there's more to come Yeah, no doubt It's certainly just getting started

4:29Jan Hammer:And I'm curious because they've seen crazy growth from going off the public sector I think they signed something with what was it, the Ministry Ministry of Finance and Ministry of Ecology Yeah, and these are huge contracts onboarding I think it was like over 130 ,000 and civil servants. How have they grown into being like a young, scrappy startup when you first invested to now this very mature organization signing contracts with some of the biggest kind of departments in France? Like how have they done that? What have they had to do to be able to sign those contracts? Yeah, well, thank you. I love that question.

5:07And really, you are getting into, you know, underneath the hood and really you're hitting at the essence of it. So what Alan did is really do the hard thing first. And when I said earlier that they built the company brick by brick, what that meant was really taking the long road and not rushing to sort of linearly add more companies, add more customers, but actually they spent time investing in infrastructure, their own claims processing engine, cutting out sort of bits that would be typically outsourced around customer interaction and customer service. And that results in some incredible stats, like where with traditional insurance companies, you'd get a claim reimbursed in a matter of weeks.

5:58The vast majority of Allen claims are reimbursed within a matter of seconds. You can only do that when you've built your company on scalable technology that can handle high throughput. And of course, those early days, I'm talking about really the infrastructure of the company. There are other blocks, the underwriting engine and the policy engine, the whole data layer, which allows the company to collect and organize a personalized data set, leading to a personalized program for each of their members. And all of that is actually pre-AI. and then comes AI. The company is really ready and is at the forefront, certainly across our portfolio, when benchmarking with other portfolio companies.

6:51They are the leading example of companies using AI. And healthcare as a discipline, as a sector, is a perfect ground to apply AI. You've got lots of personalization. you've got lots of data points and putting those together obviously you've got you know an incredible amount of stuff what can go wrong what can be you know what kind of treatment protocol the patient may need and actually this is where alan really shines of course with the caveat it's regulated it's there's you know the topics of medical liability so there's some obviously caution guardrails and but but the use of AI within Allen is exemplary and again it started at the infrastructure how code is created marketing material then moving kind of to the middle office it you know interfacing with the customer example would be the claims reimbursement all the way now Most recently, AI coming to the front line where the member, the person insured can communicate with a virtual assistant, helping with triage, finding the right clinician, getting medical help.

8:13This is all assisted by AI. And again, we're still just at the beginning. So there's more to come in the future.

8:21Jan Hammer:Amazing. and I read that they have achieved operational profitability in France, they're targeting group profitability by 2027. Has AI played a role in helping them to achieve profitability as well? Absolutely. So the stats around headcount per task or revenue per head, I mean, those stats are really off the charts for Alan. It's a company that's an incredibly smart user of AI. So that's definitely got a great deal to do with it. Amazing. How are you thinking more broadly about non-AI sectors at the moment? You know, like Alan is a very old, or not very old, but like from the fintech era, maybe 10 years ago when fintech was absolutely popping and index was making a bunch of investments into the industry.

9:11Jan Hammer:Now everything is about AI. What's it like, you know, working with these companies who are non-AI in this world of AI? Are they finding it harder to stand out? Are they finding it harder to fundraise when you are looking at these companies? Are you assessing them compared to AI peers? Or do you have a slightly different take when it's a different industry? Yeah, I mean, I'll give you sort of two answers. One is kind of the index approach and one is kind of what we look for, to your point. You know, the approach we take is really backing the most incredible entrepreneurs. We look for daring, ambitious, but grounded entrepreneurs with resilience, clarity, and ability to execute.

9:58And part of that is their ability to attract a world-class team. That doesn't change. So we view AI as yet another wave of technology innovation. Yes, it's the one that's around us, all over the press, and it's kind of everywhere. But it is, I think we should remind ourselves, all disruption and large tech companies have been driven by successive waves of technology. This is another one. And so what endures is actually backing the generation leaders, the best talent that there is. And in that, when you look at it through that lens, it doesn't really matter where the company is coming from or what they are attacking.

10:48The lens, the North Star that remains constant for Index is backing these incredible people that are generational entrepreneurs. Jean-Charles is one of them, and we've been fortunate to work with so many others. So that's sort of our approach. The second one is sort of where those companies are at. You ask about industries that may not necessarily be AI industries. Of course, at the tip of the spear is the provision of AI, you know, the model companies. And we've been, again, fortunate investors in some of them. Then you've got the picks and shovels and all the enablers around AI, the kind of the middle layer.

11:30Again, we've invested in some of those companies. And then comes the application layer. And to your point, we are looking at industries where AI can deliver a product or service, where AI can be transformative to the outcome, where AI can deliver value for customers ultimately. And I think in some sense the tech industry gets so absorbed in talking about development cycles and products that used to take years to deliver in the SaaS world. And then they took months to deliver. And now we talk about days to outcompete the previous competitor. And it is so easy to lose sight of the demand, what the customer wants, whether that's an enterprise or whether that's a sort of a retail, like consumer, physical user.

12:26And at the end of the day, the intersection between finding that product and the market, where kind of product market fit exists, is where sort of reality happens. And that's where, you know, the best entrepreneurs will make that magic happen. and your lead-in to suggesting that some of these great outcomes have happened in industries like fintech or now we're talking about healthcare, there's no surprise. They are very hard industries in terms of fintech, it's capital requirements, it's regulations, it's the operational complexity, KYC, compliance, all of those things that any fintech company has to manage.

13:08In healthcare, we discussed, yes, there's needs and wants and demands, but there's also healthcare compliance, medical liability, responsibility. You know, the getting it wrong has a real cost. And so both of those industries, and there are others, whether it's, you know, aerospace, they are hard industries. There are big problems to solve. And that's where we see AI as an enabler. AI can cut down some of those cycles on the supply side, and AI can help deliver better products for those users. And that's, again, that's where we're spending time. And unsurprising, we are making more investments in these industries.

13:57So we're relooking at opportunities in financial services. We are spending a lot of time in healthcare, But we've actually made a number of investments in and around hardware and manufacturing, including space. And, you know, I go back to there are big industries, there are difficult industries. And actually, this kind of new technological wave can help unlock those opportunities.

14:25Jan Hammer:And when you meet companies in these industries, are you assessing them in a different way to say how you assessed ADN or Wise or Robin Hood back in the day? Are you having to think about it differently in this new world? Well, thank you for the question. I love that question. No, absolutely not. And that's where I come back to our North Star is the entrepreneur. We're assessing the entrepreneur, their ambition, their ability to deliver, their commitment, their passion, their clarity. we're assessing that first and foremost and then secondly we're keeping an eye on the customers you know is this a company just a sort of another technology out or actually is this a problem in there's a problem we'll go and solve it and that's where the best entrepreneurs sort of quickly spot um typically they felt it you know they felt it themselves they quit whatever they were doing because they were feeling the pain in whatever their job was previously.

15:26They spotted the problem and they go, ah, there's a problem to be solved. Let me go and build a company to figure that problem. And thirdly, we here at Index keep grounded in terms of the business model. Of course, there are lots of projects that may have a research element or other ingredients, and that's excellent. There's nothing wrong with that. But at the end of the day, we will come back to a sound business model where the company is solving a problem that exists with existing users, new users that are willing to pay for that product. It's sort of been true ever since startups were startups.

16:08So we're, you know, in short, we're not looking at today's companies differently than the previous generation.

16:16Jan Hammer:And when it comes to maybe not assessing them, but maybe sourcing or supporting them, you know, you mentioned that Alan is an amazing implementer of AI. Do you see the role that yourself and Index playing in supporting companies change at all? Are you trying to take some of the learnings from one portfolio company and help other companies rapidly adopt and implement AI? Have you seen your role in supporting entrepreneurs change at all? Yeah, we, of course, we're there to support our companies. We can do our maximum. We also ensure that the best entrepreneurs are networked and that the companies spend time together in our portfolio family.

16:58And that's a big component of sharing best practice. and yeah, I think that's critical. The networks and the density of networks is probably more important than ever. A lot of these companies have diasporas and we see that in our portfolio. Successful companies sort of create new generations And we're actually seeing a remarkable rate of second-time entrepreneurs. If I look at founders that have come out of IGN or founders that have come out of Revolut, founders that have come out of other successful index portfolio companies, the network density is a really important component.

17:49Jan Hammer:Amazing. One final question. Index has had an absolutely phenomenal 12 months, probably one of the best 12 months of any firm ever in terms of liquidity. I mean, there's obviously WizToday, Dream Games, Scale AI, Figma, Secondaries at Revolut. It's been one of the most, I imagine, lucrative liquidity windows for the firm of all time. Do you think this window is going to stay open when you look at the wider market? Do you think there's more to come? Do you think the market is going to stay as active and as open as it has been? Well, we don't manage our companies for exit, so we don't manage the investments for liquidity.

18:23What we do is we partner with the world's best generational leaders and we equip them with everything that we can possibly do for them to succeed and realize their ambitions. So, so long as we're doing that, the rest will hopefully look after itself.

18:41Jan Hammer:Amazing. Well, Jan, thank you so much for joining me. It's an amazing milestone for Alan and no doubt for you in the firm as well. So, thank you so much. Thank you. Appreciate it.

18:54Thank you.