Need Funding? Read On
We continue to demystify capital with Creandum’s Simon Schmincke and get his Top Five Tips for Founders
Simon, how did you become a VC?
Well, I’ve been a developer and coder all my life and I worked as freelancer for agencies since I was a teen, it enabled me to pay for my studies and fund my very expensive photography hobby. (Check out Simon’s road trip around North America, cracking bit of procrastination)
I did a business Masters and afterwards everyone was donning a suit and becoming a consultant and was loving it, but I wasn’t. Alex Kudlich of Rocket Internet convinced me they were ‘less latte macchiato and more business’, this was a turning point for me. I wanted to go global, do Asia, Latin America. I became a global entrepreneur, set up FoodPanda and started my career at Rocket. I began to build companies globally and became the CEO of HelloFresh North America. (Side note, HelloFresh is now worth 3 billion dollars, and FoodPanda generates revenue in the hundreds of millions, I get the feeling Simon’s the kinda guy you want on your ‘team’)
I wanted to stay in the US, I was living in New York then the US decided not to give me a visa, so I was kicked out because of some weird-ass US immigration law. So I was like, FML what am I gonna do with the next year of my life. So, Rainer Maerkle, who was a VC for HelloFresh sat me down in West Village and we had a long chat for 2–3 hours about what a VC was, what he did, how it works — it sounded great and just what I wanted to do. I knew that becoming a Junior VC was near impossible in Europe with the big funds, but I had good references and I became an associate at Earlybird — right place, right time. It was not planned at all. (So for all you budding VCs out there, don’t plan, just get kicked out of the States and the rest will be history…)
I made two very good investments (NUMBER 26 and Movinga) for Earlybird, they’re my babies, and they brought me a lot of attention. I then moved onto Creandum and I was looking for a combination of opportunity, freedom and a chance to develop. This is what Creandum offers. We have a ‘Creandum family’, associates join, then become entrepreneurs and then return. It’s a very tight knit alumni network; we create a company culture with active and inactive team members. I was a developer with global experience; it was a good match for Creandum.
Why should founders be concerned with Creandum?
There’s a European VC theme that many firms claim to be international and have ties to the US but when you look at the make-up of the firm and the investments they make, it is simply not true. At Creandum we historically took 50% of our investments to the US when the timing is appropriate, and the business model makes sense. We have four guys permanently in the valley; we have offices in two of the biggest Entrepreneurial hubs (Stockholm and Silicon Valley and are putting more and more emphasis on Berlin — see, I told you Simon was the kinda guy you want on your team).
We have the capacity to help people on the ground, the ‘Creandum family’ spirit which helps new companies to a degree I’ve never seen before. If you are an entrepreneur that wants a global company, come to Creandum. Easy.
So let’s talk about the growing US influence everyone’s getting so excited about
US investments are exploding in the EU. But just like we’re afraid of adverse selection over there, they fear it here — what does that mean? Well, it means that if you hear about this great stuff going on in Berlin and you’re in California, how do you know it’s true? But if you have a pal that you trust and have a good relationship with, then you’re safer. This industry is a relationship game, the more and better relationships you have, the easier it is to attract funds. Why do we move firms to the US? It’s easier for US investors to invest if they’re close, having people on the ground means it’s easier to get funds, proximity is everything. Additionally, the US is the biggest Western market and usually the second biggest after your own, if you start in Europe in the first place.
Any golden nuggets for founders?
Making a good company, solving a problem, being scalable, good teamwork etc. this is all true but let’s talk about teams.
1) Mind-set of building a truly global company
2) Attract talent as a founder. Every hire must be better than the one before, attract and motivate internationally experienced talent. Ailing companies complain they can’t get the talent — good companies simply never have this problem. I look for how data-driven a company is. I can spend 2 years building a company/product, then it fails, or I could spend 6 months and get the product out here testing it and getting feedback. Collecting data. Good founders study KPIs that affect their businesses, how they affect the product and change the product based on that feedback rapidly.
What are you looking for at COSBER16?
Capital On Stage is famous for bringing together good investors and Founders. By turning the classical model around, you have truly understood how the industry actually works. Good entrepreneurs choose VCs. In the good deals I see the entrepreneurs are making sure I’m the right guy, they’ve done their homework just as much as I have. We’re buying the product they’re selling and if there is more than one investor, they chose whom to sell to. I hope to find entrepreneurs who truly understand that. Entrepreneurs who understand the financing process are the ones who are successful.
Any thoughts on the future of VC investments? Machine Learning?
Few VC firms apart from selected US bigshots put a good part of the decision making in the hands of a machine, the machines actually help in the process. Success of a company has so much to do with the entrepreneur that I find it hard to believe that it can be done through data alone. For the ultimate decision, you will need people. However, for sourcing deals, software is useful, but identifying an investment and making a decision are two different things.
We recently hired Wiliam, one of the first Data Scientists at Spotify do help us get better as well.
There are two types of VCs, one that do hypothesis investing and others that do opportunity investing. Hypothesis investing is when companies set up a hypothesis at the beginning of a fund but when a good opportunity comes along, they can’t take it because it doesn’t fit with their hypothesis. Strictly speaking. In contrast, opportunity investing is like f*** that, when I see a good one, I’ll take it’. Creandum (and myself) are somewhere in between, I find something I like, a niche, a problem to solve, I then create a hypothesis, identify opportunity find the best angle and more importantly the best team.
This is the approach I believe in.
Aye Aye Cap’t Schmincke.
So readers, what have we elicited are Simon’s TOP FIVE TIPS FOR FOUNDERS?
- If you want to GO global THINK global and focus on specific investors
- Relationships are fundamental, ‘our industry is a relationships game’
- As a founder, you have to be able to attract talent
- Data, data, data, data
- Understand the VC world and the financing process
Like what you hear? Simon is attending our event in Berlin THIS THURSDAY to pitch to founders in our unique reverse-pitching format. Founders also get AT LEAST two 10 minute one-2-one’s with investors of their choice. Go to http://www.capitalonstage.com/en/events/berlin-2016/ to find out more.