Heidi Roizen (Threshold Ventures): On average our investment period is somewhere around 6-7 years. It’s longer than the average marriage in the United States. Take your VCs very carefully
26 Oct, 2020
Andreas Winiarski is Chairman & CEO at awesome capital Group. He was Managing Partner at Earlybird Venture Capital, one of the leading VC funds in Europe with about 1.5bn USD capital under management. Prior to that, he served as Managing Director & SVP for Rocket Internet. Furthermore, he served asManaging Partner and Senior Advisor at Hering Schuppener, the #1 strategic comms consultancy in Germany, and is a digital advisor to the German government.
I got an offer by the Samwer brothers, founders of Rocket Internet, in 2012 to become their first spokesman. I had luck and honor to build up the communication structure for Rocket Internet over the years – not only for the company itself, but also for the portfolio companies. This was my beginning, as I’m originally a media guy. Over the time it turned out that I’m capable of more than writing press releases for the things we are doing.
I would say that Casper – the very successful US mattress startup. It is still very successful, it is stock-listed now. They decided to enter the European market. There were many copycats, because there is available (but also limited) market: there are 5 or 6 big mattress manufacturers in Germany alone. Casper is selling mattresses online, which means that you cannot test it, you cannot lay down on it, and that is quite unusual. It was quite a tense fight. It was something I still remember and I’m still sleeping, by the way, on my own Casper mattress I’ve got for free, because Casper was a client of the Rocket Internet’s PR agency spin-off, RCKT.
For Earlybird Venture Capital, where I’m still a venture partner and used to be a partner, it’s like 5000 startups per year. At Awesome Capital, of course, it’s is much less, something like 500, because we are startup ourselves. We hope to have more in the future. Still I should admit that at the end the best offers do not come from inbound, but are recommended by our network, so the quantity says nothing about the quality.
We do both, of course, especially as Awesome is a new brand at the market. I guess we are quite well established already regarding the niche of China, as we are the only German VC with people on the ground in China. When it comes to China it’s never easy, but we are quite established. Nevertheless, you always can grow your network, so we attend conferences (hopefully, they will be back soon). We reach out directly founders and teams we know. Nikita Fahrenholtz is our venture partner, is the Co-Founder of Delivery Hero. So, we use multiple approach, because you have to fight for the good deals, and the earlier you find them, the better chance you have to get it.
We are looking for companies that fit into our investment criteria with ambitions towards China. That’s our sweet spots. We are forcing nobody to go to China, but we advice them to take advantage of huge opportunities China offers. Of course, we are looking on financials, what market are they targeting, is it big enough and relevant enough to create at least half a billion Euro company’s turnover. We don’t invest in small business cases. We are looking for outstanding founders’ personalities, and that’s the only thing where you can really trust your judgement at the beginning. You can check every number, but if the people are not good enough, you will always fail.
As early as we can, so we start with seed and early growth stage. We are even helping German corporates and family offices to do later stage Investments. For us, it is the whole life cycle. Our sweet spot is to be as early as we can, so we are even not afraid of initiating the foundation if we find the right people and have discussions with them. As I said, we are more investing into the right personalities.
The vehicle we have for venture capital right now is only investing in Eastern and Western Europe for companies with ambitions towards China. It does not mean that we invest in China – this will be a separate vehicle later for Chinese companies which want to explore European markets. Right now Awesome is investing only in European companies which we can help. We have also a stock market fund, we are investing into a stock listed companies, and over 60% of this fund invested in Chinese companies stocks.
It’s a venture fund. We are Awesome Capital Group, we are uniting not only China, Germany or Europe, we also uniting the assets class of venture and stocks, because every startup wants to become a stock listed company one day. We have a stock fund, and we could also prove at this direction. It is quite unusual business model, when VC company has the stock fund, but I think VC also needs to be disrupted. And it is important for venture team to identify right stock-listed tech companies we want to invest in. It’s not the case that technology is not relevant anymore when it’s stock-listed – it’s quite opposite: the right technology becomes even more important. Venture and stock are connected with each other, so we share insides from stock market to startups’ teams and vice versa.
If we want to be very fast, we can be very fast. I learned my craftsmanship of working internet, and using it, I can decide to make a deal within days or 1 week. But it can also take much longer, especially at Awesome, where we are managing 3rd party money. You have to think twice, check everything. You need to see the pool of investors. We do not want to be the lead investor, because we are new and niche fund. With China, there is no need to go aggressively into the market. We want to cooperate with the existing and established funds which are much bigger and more relevant for founders. We want to be co-leaders or just part of the deal, that’s why we have to wait for the other funds and their check protocols. Still, if we’re convinced by the personality and the idea, a deal may be done in few weeks.
Usually, it is $500k. Sometimes we do $250k. As new fund, we can’t do too little tickets, otherwise the portfolio will be much too big. And we can invest up to $15m Euros in one company.
I hope that every company we invest will become a unicorn, but this is of course not realistic, I have to reduce my expectations on that. As early bird fund, we expect 25% of our portfolio to perform very well, about half to perform average – it is enough. Our ambition is that nearly every company we invest in has a good future, because we can be very selective as a niche fund and the Chinese opportunity. I would hope that for us over half of our portfolio will succeed. I would prefer to deal less and to invest more in companies already in our portfolio.
For big VCs, it’s usually 25-30% of the company for $3m or so. We strive for much less; for us 10% to 20% would be perfect. And I would always advice founders not to give away too much of the companies too early, because if you lost already the majority at the first round and you go to Series B, it is not the best sign. I know, it is not easy for founders, because they need money and VCs dictate the valuation. So I think, if you are engaged earlier in something between 10% and 20%, you’re in good position for upcoming events.
You always need a good mix of both in the team – a business personality and a good engineer. Technology without numbers and sales is nothing. The history behind Apple is that two very smart people met and accepted each other. That’s what we look most for – a diverse team with acceptance for diversity, with division of skills between business and engineering. An engineering only team might fail, but you need something more than awesome business plan to win. I really think that the diversity is the sexiness of life and the diversity is the sexiness of a deal.
Diversity defines success. In most of the times teams create the best companies. But of course I also met solo entrepreneurs early that totally ipressed me. It was clear that these guys are going to succeed, because they were smart enough to take advices from their tam and others. That were rare exceptions, but in general not everyone is a genius, so we prefer to work with teams.
Oh, many of them, I would say. At the beginning the consolidation between the founders is very crucial. I think that every second team of founders is somehow disrupted over time by the Investors. This is always something where the whole company can break up. It is very important how the founders get along when the pressure is on. If you have money, you have also responsibilities, so it is important how they spend the money and how transparent this spending is. To be honest, nearly every team can manage something if you give them a cheque; without a cheque even a genius cannot do much. Another important thing is how they treat the team, how they gain talents into the company and how they manage them and let them stay onboard. This is something where Rocket Internet was not good – we lost too many talents too fast. We could afford it, because we were the Stanford University of Berlin back then – we had a huge inflow. But in general a startup needs to attract right talents and then retain them over time. If you see at the very beginning that they are not good in it, there is almost no chance that it will improve over time.
Berlin is the #1 hotspot in Germany. If you combine everything from outside of Berlin, all the interesting projects, you will get pretty much the same number as what you can find in Berlin alone. It is a capital for entrepreneurs in Germany. But that’s only due to the numbers. Talking about quality, we find more interesting projects coming from all the engineering universities from Aachen, Darmstadt, Munich. As Germany is a federal country, we have many centers, that’s why we see a growing scene in local universities. The best combination for investors is to find the technological startups all over the country and bring them to consumer’s perspective of Berlin and investors’ network there.
I’m a former citizen of DDR, and I’m one of the very few executives from the former East Germany. There are still 5 or 6 times difference in numbers, you know. Still, I mentioned Nikita Fahrenholtz, the Co-Founder of Delivery Hero – a multi-billion dollar unicorn. He is also an Easterner. This is not that relevant anymore, because East and West are not like Black and White in the US. We have overcome this at the young generation. It is not a part of their mentality anymore.
Yes, of course. I wasn’t suppose to invest in that company, just was a digital coordinator at Axel Springer. Our CEO came back from Silicon Valley with a proposal to invest in the company which name I found to be totally silly. Axel Springer ended up investing in that company, despite its totally – for me – silly name “AirBnB.” So, you know how wrong I was. It made me humble at the very beginning of my career, because AirBnB had that exponential growth and I knew pretty quickly how stupid I was. That’s why I never allow myself to laugh about a name or a team. Jobs and Wozniak weren’t the smartest looking persons, but they really changed the world. Clothes mean nothing – it’s all about the brain. You cannot see the brain. Of course, I rejected many good opportunities, but at the same time nobody ever lost money by not making a deal. If you are managing third party money, you must be very conservative. The truth is in the middle.
I’m a German, and we, Germans, love everything around cars. It is a crucial industry for our country, because ⅓ of GDP is generated by it. And if you look at the ranking of the most innovative companies in auto industry, there is no big German car manufacturers there right now, but Tesla and Toyota. This is something that we should speed up to conquer the crown of New Mobility. Industries we do not invest in are everything around Armory, Gambling, something like that.
No, not at all. There is a recession the media writes about, sinking evaluations and difficult time for startups to raise money. The truth is the funds are raised, and we have seen new funds closed in UK and Germany. In general, of course, it’s a tough situation for everyone, because there is uncertainty, and uncertainty is something which the market does not like. For VC the worst may come in 1 or 2 years, but right now, over the last few months, there were fundraising rounds. You will, definitely, see many firesales, which is also a great opportunity for VCs. I think it’s much more mixed picture then it is described by the media. Who is suffering the most is the old economy, but at the end COVID is just an accelerator for the shift. Old industries are going to die, and now they have less years to die. Everything based on innovations is accelerated by COVID, and we can see it very clearly. I just hope that all our portfolio companies are about innovation. They are growing very fast, and that is also a part of the truth.
I’m working the whole day, so I’m not spending much of my time reading or watching movies. And I’m definitely not a big fan of startup scene as a lifestyle – it is a serious business. Still right now I’m watching The Loudest Voice series about Roger Ailes who built Fox News. As Fox News was a startup for Rupert Murdoch’s News Corporation, the series shows very clearly how important the marketing was all the way. It is important as well for every company you’re building, not only for a TV channel. It also shows how important the founder’s personality is. Of course, most tech companies have nothing to do with politics, which Fox News has a lot, still it is a good example of how to build and develop a startup.
I’m sure that what Thomas Edison or Carl Benz did was really fundamental. We are used to look only on what happened over the last 20 years. We should never forget that people were on this planet well before us and will be after us. We shouldn’t take ourselves as too important. East India Trading Company was a groundbreaker 300 years ago for global trade. For today, Google is #1 technology wise, but Microsoft and Intel created an opportunity for these guys to become what they are. So, for sure, Intel, Microsoft and Google would be my choices.
My job is my hobby #1. My dog is my second hobby. And gardening became my new hobby recently. If you are working in an office with papers and people, gardening creates a nice contrast, when you’re outside with the soil on your hands, hearing nothing but silence. It is really good. Also, if you’re doing a good job with what yo’re doing, everything is green and clean. I hope that everything would be as clean and balanced with my job as well.
I started my career as a PR person, and I already changed from media to investing. I want to profit from this opportunity for the next couple decades – as long as the market wants me to be in there. I think, everyone should have a twist in his or her life. We have only one life, and you shouldn’t stay 50 years in one job. For me right now it is the best job possible. I really love to enable other people changing the world and helping them – even if they don’t change the world, just create a good return. That’s wonderful. As you see, venture was not enough, so we created a stock market fund to think more about other class of assets.
In China it is, certainly, Tencent, while I also admire Alibaba. Tencent is a media company. I know many people there and what they are doing on a global scale – it’s amazing. Now this new Mansion Towers thing they are building over Shenzhen. This is really a holistically thinking company I really admire. And in Germany it would be a car manufacturer. I’m driving some BMW, yet I admire Volkswagen-Porsche too.