Today we announced the close of a Berlin-targeted fund from Earlybird, much to the eager anticipation of Berlin founders looking to win a piece of the pie. To provide some guidance, VentureVillage contributor Ciaran O’Leary decided to let you in on what exactly his team is looking for, and what you should keep in mind before pitching:
To start with, I’ll provide the “technical” parameters on how much we want to invest at what stage. Here it goes:
- We’ll invest in Seed from €200k – €500k approx
- Series A: €1m – €3m
- Series B / Growth: €5m – €10m
- For new companies our focus will be on Series A and Seed though; we will do some growth where we feel we can add value at that stage
- In general once we are invested we invest in all following rounds and can deploy up to €10m-€15m per company
- However we like working in strong syndicates that add value and can deploy significantly more capital than we could on our own
What are we looking for?
1. First and foremost, on disruption
We try not to look at the copycat debate from a moral / emotional perspective, but rather a purely economical once. We simply believe that in general truly disruptive models will yield higher returns in the long run (take 5-10 year perspective instead of 2-4 years). Also we like backing the best / ‘natural’ entrepreneurs and these are hard to find at copycats.
2. Sustainable “lock-in” network effects
We often get asked why we do not have any e-commerce in our portfolio. Again no wider issue with e-commerce, but given the choice we’d rather back highly scalable businesses that are creating strong network effects – i.e. platforms that improve and generate value the larger the user / customer base is and that you just wouldn’t want to do without.
In the end we believe that the best product and execution will win; so we are looking to back teams that have incredibly strong product DNA. We will be looking more at the alpha / beta version of your product and less at your PowerPoint.
4. A global perspective and set of ambitions
We will be backing strong regional plays in highly regulated markets such as finance, energy, insurance (where value chains can be disrupted and opportunity is $1bn+) but there is increasing evidence that Europe is creating global category leaders and we want to back teams with the largest ambitions.
5. Tidy use cases & SMEs
In terms of areas we’ll invest in I think we can’t be too religious (and disruption will be applied in places we can’t think of right now) – but I see two trends I’m certainly excited about. One is as follows: it appears we have created a bit of an uber-social mess on the web, cluttering use cases and the way we communicate – it would be neat if entrepreneurs started tiding up the web again, giving us back super crisp use cases (this has already started).
There also appears to be a lot of room left for disrupting processes at SMEs. Everyone thinks of payments or collaboration, but just think of how little innovation there has been on the corporate side of things over the last ten years – I sure hope more web ideas / technologies will be used to cause more disruption there.
I recently wrote here on VentureVillage about how we feel about VC investing in Europe – I encourage you all to hold us accountable against this.
Image credit: flickr user Mukumbura