10. October 2012–
Klaus Hommels' early-stage investments in Skype, Facebook and Spotify have earned him a place as one of Europe's leading angel investors. Here, on a short break during the recent CEO Berlin conference, we asked him about his approach to investment.
What was your path into investment?
It started when my grandma gave me $20,000 bucks and she said if you lose something – to buy stocks – if you lose something, I cover it. If you gain something, you keep it. At that time, I was a very fast right wing with Puma shoes… Puma made an IPO. I said, OK, I know this, great shoes. So I bought with this $20,000 bucks, Puma, and I tripled the money. So I earned $60,000 at a time when I got $20 bucks pocket money a month.
I thought, this is so cool, this investing. I just telephone twice and I make more money than the next 100 years of pocket money.
How old were you?
What do you consider to be your biggest success with investment?
I probably have a different definition that you'd expect. My biggest success is if I can be part of, and be instrumental, that one entrepreneur with a big vision can realise his dream. So, being part of the story of Skype or being part of the story of Spotify.
What's your most expensive regret?
One business I did, it was Wunderloop [a $10m Series A investment alongside Skype's Niklas Zennström]. I think at the end it was too early. It was a behavioral targeting network so big data, everything that everyone is talking about now, but two or three years too early.
What advice would you give to someone starting out as an investor?
Before you start becoming an investor, you have to work in the industry. Just with financial metrics, you would hardly get accepted by cool entrepreneurs in which you want to invest. It's not a financing discipline, it's a service industry...
You have to have certain capabilities that the entrepreneur would appreciate. You know a little bit about KPIs, logistics, online advertising. Otherwise, you have nothing but money, then you most probably end up at the losing part of the equation...
This industry is an inefficient market, meaning the difference between the top quartile and the second quartile is gigantic. If you don't have the high likelihood that you can end up in the first quarter, it's total altruism.
Do you feel like you still take big risks?
Everything which you're proud of and which you're glad about has to hurt if it doesn't work... I don't want to have one foot in the fridge and the other in the oven and say I have two average warm feet. No, I think there has to be risk involved.
What's the best book you've read recently?
I only read biographies. That was the biography of the Quandt family.
The family that own BMW?
But basically starting way earlier. Günther Quandt had to manoeuvre the family assets through depression, through wars, and it was very smart the way he did it.
Who are a few investors that have taught you things?
That's difficult because… At the beginning, I had a lot of luck so I got into it, then I had already developed my style before I even got to know these people. But for me some appreciated people to talk to are Lee Fixel, Michael Moritz and Sonali De Rycker.
Any particular reason?
So Sonali is super smart and analytical. Michael Moritz, I'm on a board with Klarna with him – he brings deep Silicon Valley knowledge and valuable company building experience. When we have a board meeting, he comes three hours earlier and has discussions with the second and third hierarchies. The moment the board meeting starts, he knows more about the organization than the CEO is willing to tell him...
Lee Fixel, I think is totally cool because he thinks about winning markets. He belongs to a hedge fund so it's a different view to investing. He says, OK, if India is a multi-billion market, why should I care about the $200 or $300 million that I lose in the beginning?
So he goes in and writes checks to a variety of e-commerce companies. Then he says, OK, which of those performs best, is the best team with the best managers. Then he gives them 50 to 100 [million]. Then he's sure he can get everybody... He was in MercadoLibre, in Yandex, in Flipkart. He's everywhere.
What's a sector you're not investing in that you think you should be?
I think I should get closer to B2B models but I've always had bad experiences with it. One thing that shocks me always, that makes me nervous, is – if you have a B2B model, the only thing that you can do is call the person in the company that will decide on the use of my product. If it doesn't pick up, or he doesn't get it, there's nothing you can do.
That makes me nervous. With a B2C company, you can buy adverts or whatever and then you can get going, or twist the model. You are more in a self-determined mode... but, as a matter of fact there are more billion dollar B2B companies than B2C companies. It's just that the B2C companies are more shiny.
What's something you're really excited about?
I'm totally excited about electromobility. I thought, for example, I'd never even touch a Citroën but since it was the only electrocar on an island where we spend holidays, I rented a Citröen e-car. It was cool… I'm fascinated by that.
Image credit: Puma shoes – Flickr user beatplusmelody
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