Jacob Houlberg, Co-founder of Evertrace: Evertrace helps early stage funds identify new investment opportunities

0:00Jacob Houlberg:Hello and welcome back to the Scaling Europe show. I'm Sub Johnson. Today I am joined by Jacob. Jacob is the co-founder of Evertrace. Evertrace is building the leading founder detection agents for data-driven VCs. Very lean, trusted by how many? 150? 200? 220 I think at this point. How many people are on the team? Three. Three. It's crazy. Super interesting story. We're seeing this trend towards data-driven VCs more generally and I guess you guys are building the engine to enable that. for those who don't know give like a one minute what's your story what's the backstory of the business yeah um so i mean the one-liner of evertrace is effectively that we help early stage venture funds identify new investment opportunities so it actually it's what we do is quite simple it's so simple i can even explain it to my mom which is very helpful we both come from a background in venture which is and the fund we come from is a pre-seed fund so that's really kind of the genesis right so like there's a lot of tools when you go further up the stacks series a series b etc um kind of like once the companies are established um the landscape felt very well defined you have your pitch books and stuff like that it just felt like the earlier you go the more signals are there that's just not being picked up by the traditional providers um so that's pretty much the genesis of why i decided to uh to start evertrace two years and like two months ago and you scaled rapidly what what's the go-to-market motion for like a vc tool like this um vc funds are notorious at speaking with each other a lot right so obviously we have kind of like the typical go-to-market we have like email campaigns linkedin ads and stuff like that but by far the strongest driver of growth is literally vc funds and to do things ever trace to each other um so i think that's it is massively a benefit if you have a platform or product that's good because then they'll just tend to like spread like wildfire um on the other hand if they don't like your product it always becomes very hard right because they continue to talk with each other um but we've been very fortunate that i think 60 70 80 percent of our customers are referrals or at least they might then get picked up on like a linkedin ad but they at least know us from someone else in the business which is uh is really really it also makes the initial sale a lot easier right and what is the key value add i guess for vcs is it like a specific type of founders a specific stage what what is it helping them find that they wouldn't have found otherwise So we do one thing and one thing only.

2:22And I think that's probably why we are successful. So we only focus on really, really early stage stuff. So the moment a founder goes into stealth, the moment a founder creates a company on a trade registry, like Companies House in the UK, they show up on our platform. And we don't do, at this point at least, anything beyond that. That also means that we can scale the product to a lot of customers without having a massive team, because the product itself is actually reasonably simple. It just goes very deep. And that is also our key differentiating factor because everyone asks us, like you're the three people, most of your competitors are like 60.

2:56How are you able to then create a product that's better in this niche? And the reason for that is this is the only thing we do. We don't go broad, we only go deep. And it's something we built that way from the beginning, but we especially doubled down like nine months ago on this and we can just see that the business has taken off since then. Because the story for what we are doing becomes easier to tell. There's less clutter, there's less like products on the platform that you have to explain it just it becomes very very simple right we just we help precede seed funds identify new investment opportunities and that's just it it's not like there's 10 different offerings on top so the story becomes clearer

3:33Jacob Houlberg:and you mentioned you know filings and companies house what are the things are you looking for conscious that maybe there's some of the data you don't always want to share but are there are the key signals that you know you can talk about whether it's going stealth on linkedin or is too late or what are the things out there i think i mean if you want to know on linkedin that will tend to be quite late right so i think the coolest ones are probably like domains is quite interesting because that can be quite difficult to crack so we scrape i think i was like 150 000 websites a day just then like that has changed ownership and then we pick up like a very very small percentage of those the trade ranks are just they're hard to do because you need idiosyncratic integrations with each individual country um we're just launching the us this week as well a trade registry um and then obviously i think stuff like github is also just it's a really really good signal because if you're on github and you're talking about creating new companies or like a new project or a new startup whatever it's high intentionality right um and similar to like patents and grants so anything where there's a high intentionality behind it i think is the best type of signals to pick up on interesting wow okay so there's those key signals you track a few key signals and then do you rank those early stage founders i'm like okay this is like this is who you need to be talking to this is going to be a great founder yeah i mean obviously we have our own proprietary scoring mechanism where it was like what have you done before what are you working on like the company in question etc so we rank kind of the founders and then we also evaluate the company itself because especially once you start hooking up into trade registries, you're going to get flooded with companies.

5:09I mean, we're literally evaluating every single company that gets registered in Europe, which means it's like 100 ,000 companies a day. It's an outrageous number, right? And the vast, vast majority of those are not interesting because they're holding companies or consulting companies or a car printer shop or whatever, right? So we screen out a lot more than we screen and that is just extremely critical to the core function of the business because otherwise you provide a fee that's basically completely polluted, unusable for our users.

5:39Jacob Houlberg:Interesting. Okay, yeah. And how does it work if I'm a VC? What's that interaction like? Am I getting alerted to some of these top founders? Am I going into my search and databases for maybe defense tech or AI researchers? What does that experience look like? So, I mean, effectively, you can consume our data in three different ways. So you can consume it on the platform, the MCP or the API. And it's essentially like a step for how technical your team is. So most of the smaller funds, they'll use our platform. They'll go in, they'll create an investment thesis, like something that matches their investment thesis.

6:13So they might invest in specific geographies, specific industries, or they might even invest in diasporas, right? So it's a French fund that I invest in. I invest in France, but I also invest in the French diaspora anywhere in the world. So those things, it's like you basically create kind of like, this is my universe of potential founders that I want to see. and then you create a search and then you get alerted whenever there are anyone who shows up with these particular characteristics that you're looking for. And that's kind of like the simpler way of using it on the platform and then you can take one step further where you start using the MCP.

6:49So that basically is just you connect EverTrace to your cloud code, to your codex or something like that and then you basically get your AI agent to help you source And that has several different kind of benefits. One is you can make your searches a lot more broad. Because if I'm a VC analyst and I get like 100 companies a day, it very quickly becomes unmanual. Like I'm not going to be able to evaluate 100 companies. But for Cloud Code or for Codex or whatever, it's completely irrelevant. So you can evaluate a lot more companies and you can evaluate them in a lot more specific fashion, right? So we don't know that much about you beyond what we can read on your website.

7:28But you can construct an investment thesis that's extremely clear. Like I'm looking for these type of profiles with these backgrounds. I think PhDs in these fields are extremely valuable to me. And then you can get whatever AI agent you're using, you can get that to include that in your evaluation criteria. So you can be broader and then have a lot lower false positive rate. And I think the beauty of this is that you can do all of this in natural language. You don't need to be super technical in order, because you can literally just sit and chat with Codex and build all these skills, build all this investment thesis from scratch without needing a degree in computer science.

8:05And that's also what we see. So quite a few of our customers now are starting to roll over to the MCP. And then the secondary step to that is literally setting up a recurring job. So they'll go in, they'll get all the potential founders, that's quite broad, that are relevant, and they'll just populate this here. They can even populate with nodes. this is the company, this is the person I reach out to, this is how you should reach out. So I think that's the second kind of technical layer. And then you obviously have the even more technical layers like the Atomicos of the world, who basically just ingest everything through an API and then they have their own internal models that says like these particular backgrounds, these particular companies are extremely interesting.

8:44So they can just take all of our data and then they just run it through the internal ingestion engine. Which I still think makes sense because what we're supplying is still to some degree a commodity. So it just makes sense that there's like a centralized player that does this instead of Atomico doing it and Early Bird doing it and a third kind of like DataDurton fund doing it, right? So we just, we do it and then they get to apply their own criterias on top.

9:11Jacob Houlberg:And do you track success? Like are you able to see actually not only was this investor like tracking this founder, they then invested in it officially three months later? Yeah. So two things on that. The first thing is we actually on purpose don't track what you invest in. So we don't like touch your CRM or anything like that, because then you get into like a little bit of an iffy kind of like middle ground. However, the next product we are building is basically just now we know the full universe of relevant companies globally. The next thing is just basically monitoring news, websites, social media following and stuff like that for which of these companies raise money.

9:50And then you get a few different things out of this, which is extremely interesting. The first thing is, obviously, you get another product that sells your investors. Because now you get, these are the new companies and these are the companies that raise money. But the secondary thing is that you also get a really interesting data set. Because you get the data set of these are the ones that are, these are the companies that were successful in raising money. But you also get, these are the companies that tried to raise money, or at least very likely tried to raise money, but wasn't successful in it.

10:19and then you get to do a lot more interesting analysis than just saying like successful companies look like this because then you can actually contrast it with what does not successful companies look like and then you get a much better and much more balanced view.

10:34Jacob Houlberg:Would like, I'm imagining the tool you built if it's powerful and if it's good and if the data that you're collecting is amazing surely there's an opportunity for you to start investing, right? I think everyone asks that question. Is that on the roadmap? I mean, especially if you're doing as well as you're doing as lean as you are. I mean, I feel like it's one of those where if you start doing it, you basically dilute your focus. And at that point, you are an investor with a data product attached. And I think, first of all, I think it becomes hard to do both. I think it becomes hard to sell data and then say, like, we're also investing on top of this data.

11:14Because everyone who buys from you will be like, Like, okay, are you looking at it like the first five days and then you're giving us whatever you decide not to invest in? Are you giving us stuff with a delay? So I think there's just some inherent conflict of interest that you have to tackle. And then the secondary piece is that you're basically left in exactly the same position of an efficiency that we're trying to solve. So we're trying to solve the efficiency that 10 different funds or like 100 different funds are going out and they're building their own stuff. Like they're building their own internal pipelines instead of just building the evaluation instead of the gathering.

11:49Because I think the evaluation is really, and at the end of the day, that's what a VC fund should be good at, right? They should be good at identifying or like evaluating if this startup is going to be 100X or 1 ,000X or 10X or much more than just identifying which potential investment opportunities are out there. Because that is, we see it as a descriptive problem. It's like, it's solvable. And once it's solved, there's no reason to go out and actually resolve it. whereas the other one is predictive, where you're trying to identify the future and how it's going to look like. First of all, it's much harder.

12:23And two, I think that's pretty much in the wheelhouse of VCs.

12:28Jacob Houlberg:So is that a no? Would you not do it? Yeah, exactly. So my point is, I think that that's unlikely for us to do. It's something that we've been discussing, obviously, but I think it will require a completely different focus for the company. Yeah, it makes sense. And let's talk about the overall approach, though, because you raised a very small amount of VC funding. Yeah, it was more angel running. Angel rounds, but you raised a very small angel round. You're obviously doing well, over 200 funds with three employees. I'm assuming you're profitable, unless you're all paying yourselves. Exorbitant salaries.

13:04Jacob Houlberg:So I guess, like, what's next? You know, like, I guess you, in some ways, you're sort of off the VC path. You raised an Android, you don't need to raise the seed of Series A or Series B. What's the game here? And also because you've made some acquisitions, right? So what is the journey for you over the next five years? Especially, is it staying loads of focus on where you are today? Is it expanding geographically? What does it look like? So first of all, it's a very good question, right? And something we also continue to internally evaluate. So if we just start with kind of like our funding journey, we're very deliberate about not taking on VC money and only taking on angel funding one we didn't think we needed it and if you don't need capital my general rule of thumb is don't get it because if you get it you're going to spend it so I think that's the first thing uh the secondary piece is that if you take VC money the other customers because you're selling your VC funds might have exactly the same question that if you're starting a VC fund yourself are you like providing better deal flow whatever through your investors so you have a little bit of like some strangeness there.

14:08And then the third thing is that I really love this place. It's niche, there's not a ton of competition in it, but that also does mean that it's not the best place for a VC bet. And in order to make it the best place for a VC bet, that just necessarily means that you need to go above and beyond because you can't really make this into a unicorn or whatever you want, like a massive company, because the market is just not there. You can make it into a very good business, especially if you're not a lot of people, that you can then decide to run, continue to expand or sell or whatever. But it becomes very hard to make an actual billion-dollar business that you can IPO without expanding into multiple different verticals.

14:51And we didn't necessarily want to do that. So our trajectory is, one, we're going to solve early stage. And then the next step is basically just to eat our way up the stack. so early stage then investments and then once you have investments then you can cater to even later stage VC funds then you can build products around this like you can build diligence products etc so like there's a lot of different adjacencies that fits very neatly together in this and where

15:18Jacob Houlberg:do you you know harmonica is a good one in the u.s they are vc back they seem to be like spending money that there's no tomorrow yeah how do you see you know kind of comparing yourself to them First of all, I think Harmonic is a great product. And I see us and Harmonic basically, I mean, obviously there's some overlap, right? One, we sell to VC funds, both of us. But we have a lot of clients in common and they'll tend to use Harmonic for a little bit later stage and they use us for early stage. So there's this, I think there's a natural fit together. Obviously, sometimes like some funds will only use us, some funds will only use Harmonic, but they will tend to focus more on companies that exist, trajectories out there doing, raising rounds, and stuff like that.

15:58If that's your focus, like if you're a Series A fund, like it makes no sense to go with Evertrace. If your focus is pre-seed, that's really our sweet spot, right? And if you span across, then you can like, then we do see quite a few people who multi-source. And it's also some of our clients, which we talked to like a few years ago, we're focusing mostly on Series A plus, but then because with AI, everything moves so fast that it feels like the funds are going earlier and earlier because I mean lovable is quite easy example right but if you didn't hit lovable early like there's no way you're going to hit it later because I mean you're never going to get into

16:36Jacob Houlberg:it right you're never going to even talk to Anton yeah yeah yeah it's interesting and then let's talk about the acquisitions you I think you made one of last year what's the rationale there is that like a market expansion is that a product play talk to me so I mean we made three last year and we have been in discussion of making a few more this year. Wow. I think there are a few different things to it. One, the acquisitions we make are just, they're very suited to be integrated because we effectively sell the same product, which means that we can take their customers and then directly roll them onto our platform.

17:11We also then at the backend make sure that the product and the data, et cetera, it fits into our backend as well. So they just get a strictly better experience, which means that the integration process itself was like two weeks and then the founders were just free. Like we grab all the data, we grab all the customers and then onto our platform and then we alter the races. So you don't need like a half a year integration plan because then it just becomes massively complicated, right? And that also means that we're able to roll three companies into Evertrace in like no time with no extra employees, better coverage and just more like more customers in more geographies.

17:49so it just it was one of those things like everyone won because we get more customers they got a good deal for like their company uh and we get a better combined product as well

17:57Jacob Houlberg:yeah amazing makes sense what's it like selling to vcs especially pre-cc'd you know i don't know i guess you probably deal with the range of like very big funds with lots of management fees and probably serial funds that are probably tighter like what's that pitch like it's funny because so i used to work at bain um where our primary clients at least the ones i worked with was private equity customers, right? Or private equity funds, which have, let's put it like this, a lot more money. I think you could probably pack the entirety of the Nordics into like a mid-sized private equity fund. Yeah.

18:29So it is different than selling to other VC, like other investors, right? And so you take the entire investment space, a small portion of that is VC and the entire VC space and a small portion of that is precedence. So our market is just not the biggest and it's not the ones that has the most money. that presents kind of like some potential challenges however i really like yet one you get to know your customers extremely well two they're not that big so they make decisions very quickly three the only thing that really matters at that stage is just well you're solving an actual problem for them if you're solving a problem for them then you can find a deal if you're not solving a problem for you'll take out very very quickly and that also just means that there's there's no interest space right so you're very unlikely when you sell to like a big corporate you might get like they might buy you and then tuck you away somewhere and then the subscription just rolls forever that's extremely unlikely in a pre-seed fund or in a seed fund because the capital or like the money they have to spend it's just not that high so you get much more you get much quicker feedback on whether your product actually works because if it doesn't work this is like they're gone um which i actually kind of like um we also build monthly mostly i mean we have some yearly contracts but otherwise it's month to month so you do get quite good and quite fast feedback which helps build the product and then there's another the last thing I would sell by like selling to VC funds is that they're extremely eager to be early adopters which helped a lot in the beginning where the product was a lot worse than it was today but it was much more handheld and we still went out to specific funds like look we'll sell you this product and we'll make sure that your deal flow is just amazing because worst case scenario we will basically sit like we'll help you source so I think they're much more open to trying new things compared to like a big corporate

20:09Jacob Houlberg:yeah that's interesting and it probably helps that it's so competitive right now. You know, the market feels so competitive that people are looking for an edge, a bit of alpha. And so being able to provide it is probably, I mean, yeah, it's probably worth a swing for them. Also, I think it's quite funny because at a specific point, being early in a deal is alpha, right? Because you're in there, there's no one else, then you basically get a better deal. But at a point, it turns from alpha to beta. And then if you have no sourcing, or at least no kind of platform that enables you to source deals, then you're not even going to get the market returns because sure, you'll get something from your network, which is great, but you're not going to get basically anything else that someone else hasn't looked at.

20:51So if you just want markets or beta returns, you need something. So basically what I'm saying is that it becomes table stakes quite quickly.

20:59Jacob Houlberg:Yeah, and I guess it's probably, yeah, that actually makes total sense, especially with all these tools with its harmonical specter. Now everybody, all the internal ones of people building, everybody's got something. So I guess you have to have something. It just depends on whether you're picking the best one or you're combining them or you're using them in different or interesting ways. Exactly. And we also do see people who've tried to build it internally. And I do think most funds kind of like, they run into a wall at some point because someone builds it, it's like 20 % of what they're doing and then they have to continue to maintain it, right?

21:32It's better if you just, if you integrate with something and then build something pretty lightweight on top. that becomes much more doable.

21:39Jacob Houlberg:Yeah, that's super interesting. It's interesting. Yeah, it just doesn't feel like the right thing that VCs to be doing. I can understand the appeal is like, oh, we'll build our own tools, we'll build some alpha. And it's like, are you really the people to be doing this? Exactly, right. And if you really want to, so I was speaking with a fund, a data-driven fund the other day, and what they're focusing on now is basically have like 20 years of deal memos. And they'll take all their deal memos and then they'll condense that into how to optimally evaluate potential investments. And that, I think, makes a ton of sense because there you're sitting on data that no one else is sitting on.

22:14You're sitting on stuff that you build conviction on, but you're not trying to go out and build your own CRM. I mean, it's a bit like, you wouldn't build your own server racks, right? You just rent cloud storage or cloud from AWS. Yeah.

22:31Jacob Houlberg:Well, we're out of time. Thank you so much for chatting. I feel like this is that I could talk about this all day because it's like I don't know this is so interesting right and it's so topical at the moment with the rise of these tools or how competitive it is I want to take it thank you so much for joining me best of luck I'll be watching out to see if you do make any more impositions it's an interesting space to watch but yeah best of luck thank you very much appreciate it