VC’s with an Iberian Footprint

Episode 5 | Lakestar | Stephen Nundy

Lakestar

Lakestar is a leading venture capital firm that invests in outstanding digital and technology entrepreneurs worldwide. Lakestar operates in early and growth-stage ventures by partnering with outstanding entrepreneurs worldwide, focusing on internet and technology companies that can quickly achieve global scale.

Lakestar has a presence in Zurich, Berlin, London, New York and Hong Kong.

Interview

Stephen Nundy — Partner & CTO at Lakestar

1. Can you tell us more about you (background, interests, fun facts)?

My route into Tech was via a last-minute switch to studying Computer Science at Uni after realizing that my first dream of being a yacht designer was going to be difficult as that industry in the UK was in serious decline in the 1990s. Whilst bitterly disappointed everything happens for a reason!

2. How do you describe your investment thesis in terms of geographies,
industries, stage, and ticket size?

Lakestar’s mission is to find, fund and grow disruptive, technology enabled businesses that are founded by exceptional entrepreneurs in Europe and beyond.

Our ambition is to back entrepreneurs across their entire lifecycle, from pre-seed all the way until pre-IPO. Lakestar has a dedicated early fund with a focus on seed tickets (ticket sizes 0.1m — 15m) as well as a growth fund with a focus on series B, C and D (ticket size 20m — 70m). Even though we have our sweet spots in each fund, we can essentially write tickets from 100k to 70m.

In terms of industries, we follow a thesis approach to ensure meaningful conversations with entrepreneurs. Organizing along core theses means we can cover the market efficiently and have an edge when competing for the most promising deals. While we will focus on opportunities in these sectors, we remain open for other opportunities or specific sectors that may emerge over time. Our core theses are currently Fintech, Healthcare, Digitalisation, Future of industries, Deeptech Games, B2B Commerce and Sustainability

3. How is your typical investment process in terms of steps and timings
(describe it briefly)?

Given our thesis approach, we frontload a lot of the DD process. Our ambition is to already fully understand macrofactors such as market, competition etc., and to purely focus on company specific issues. This allows us to move at a fast pace and make the process as friendly as possible for the entrepreneur.

The first step of the process occurs before we even speak with a company and involves us evaluating whether this is a space that we are interested in and whether we could add value to the company in question. We follow up with a call and use the time to meet the founders and receive more detailed documentation on the business model and product. From here we can determine whether we want to enter the DD process. If we do, a second call is arranged with the lead partner on the respective thesis to mainly discuss our findings from the previous documents and to set a timeline for the process.

The process includes us sending over a detailed Q&A, customer references, financial analyses and more market research on our end. This usually takes around 1 week and if the results are positive, we have a final call with all partners to take a vote on the proposition. From first meeting to termsheet can happen in as little as one week.

4. What are the main characteristics you look for in an entrepreneur? / In your view, what makes up a successful entrepreneur?

There are lot of conventional factors that one looks at such as prior experiences, have they been a serial entrepreneur etc. Aside from this we look out for passion, empathy and resilience. A successful entrepreneur will spend most of this time having to convince investors and employees to trust them. In order to do so, it takes a very special personality type that is able to captivate and motivate others, the ability to do so is very important to us.

The other thing that we focus on is passion, a lot of the times things will go wrong, and it will take someone with intrinsic motivation to power through these times and keep pushing himself. Grit and perseverance will lead to recurring opportunities and reduce the role of luck.

5. What are the three most common dealbreakers you find after meeting an
entrepreneur for the first time?

The most common ones include not understanding venture dynamics and the need to produce returns of a certain magnitude based on our investment mandate, is this a leader who can build a big company/followership, there is a lack of clear vision to disrupt over the long term — we are not short term investors.

6. In your view, how much equity should the founding team own before raising a Series A round?

Generally speaking, the more the better. It also depends on the amount of money that has been raised to date, especially in today’s markets where a seed round can be 10m+. The standard scenarios we want to see cap tables where the founders are as incentivized for the outcome as their financers — when that isn’t balanced then we have a problem.

7. How do you add value to your portfolio companies?

The basis of our value add is the unique combination of entrepreneurs, investors, technologists and financial experts within the partnership.

We regard ourselves as partners and on a par with our entrepreneurs rather than just portfolio investors or board members. we believe in providing flexible, bespoke and timely support to our management teams and we tailor our level and type of involvement to the strengths and needs of each company and team, with very different levels of involvement depending on the maturity of the founder and the stage of the company.

With the set-up of our value-add expert team, we are confident that we are optimally positioned to give support on a broad range of topics. If needed, we do not shy away from devoting significant attention to a portfolio company’s operating strategy by providing actionable insights based on our experience and by extending strategic relationship introductions. Depending on the specific needs of a company, we become intimately involved in operational topics such as talent strategy, marketing and sales, technology set-up and financing as well as providing companies with necessary PR support.

8. Is there any company you regret not having invested in (anti-portfolio)?

We pass on companies all the time that with hindsight do very well — you have to reflect on whether there was something you missed in your DD or position/understanding that was wrong, or if in reality the reasons for passing were still valid, even if the financial return, on paper, or reality, would have been good. These are long term relationships — we see many fantastic companies so this is a reality you need to live with and celebrate overall success of the industry.

9. Do you have any specific industries / sectors you are looking at into more
detail right now?

As mentioned, we follow a thesis approach, each thesis has their sweetspots but a broad overview would be:

- Fintech: We believe in a future where centralized and decentralized financial system co-exist together.
- Healthcare: Healthcare is undergoing its own digital revolution — and, the patient will finally come fist.
- Digitalization infrastructure: We will all become producers of technology to fuel the digitalization of the workplace.
- Future of industries: Technology is re-defining every single step of the value chain for some of the biggest industries that haven’t been digitized yet.
- Deeptech: The next trillion dollar companies will be borne by novel tech breakthroughs built upon substantial engineering.
- Games: Games will continue to cannibalize media as the industry grows market share at the expense of Film, TV and others.
- B2B Commerce: Digitalization will lead to an emergence of end-to-end, Amazon like customer experiences in the B2B world.
- Sustainability: Climate tech is becoming the investment opportunity of this decade with nearly unparalleled scale and breadth of application.

10. What were the top three reasons that made you look at the Iberian
ecosystem in the first place?

Talent in Spain and Portugal has really evolved — there are many great companies that have produced 2 nd and 3 rd time startup veterans, the lessons you learn from the past is a great skill to bring into a new venture. On top of this the quality of technical universities has also risen in the last 10 years.

The Spanish and Portuguese are by nature explorers and risk takers — great DNA to dedicate to being an entrepreneur — a very open society that welcomes new ideas and nations to help build teams to bring success across Europe and beyond!

11. What is the best way for a company to apply for investment at Lakestar?

Feel free to simply drop us a message on LinkedIn or send me an email at
stephen@lakestar.com

About The Series

VC’s with an Iberian Footprint invites investors that have Iberian companies within their portfolio to share insights and industry knowledge. With each of its episodes dedicated to a different VC fund, it provides an informal, and deep look at the VC world.

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