VC spotlight with Breega
TL;DR
- Breega announced a new €150m early-stage fund with a focus on UK startups, which will expand their existing pan-European portfolio.
- We sat down with Dan Shellard, Partner at Breega, to chat about this new fund, the value-add Breega provides to founders, the firm’s fundraising experience and much more!
The quickfire round…
Please introduce yourself and your role at Breega
I’m Dan, and I lead the UK team for Breega.
I began my career at Google covering various roles, and spent the last part of my career there working on Google Analytics. From this experience, I launched my first company, Qubit, in 2010, successfully scaling it with backing from Balderton, Accel, and Goldman Sachs. In 2021, we sold Qubit to Coveo. I’d left Qubit by this point to establish a D2C fitness busines, before joining Breega in January 2023.
Where are you based?
I’m based in London. But Breega, as a fund, is HQ’d in Paris with offices in London and Barcelona.
How big is the team?
We have 31 people at Breega. This is slightly larger than some other firms due to our 7-person Scaling team, which supports our portfolio companies on key verticals such as growth, brand building, people, governance, etc.
You are currently raising a fund. Can you talk me through the funds Breega has already?
Our first fund, a Pre-Seed/Seed fund, launched in 2015 and is now on its third vintage. This is the fund we are currently raising for. We also have a Venture fund focusing on the Series A stage, which is on its second vintage.
Great, and what are their focus areas?
The Pre-Seed/Seed fund is agnostic, investing anywhere from €500k — €3m. The Venture fund has a much narrower scope, focusing on FinTech and FinTech adjacencies, investing typically €5m, but we can do up to €8m.
What geography do you focus on?
Completely pan-European, covering the UK, France and Iberia. We don’t currently have a Partner focusing on the DACH region, but we are considering it.
What is the background of the founding partners?
The Breega DNA is that we are all ex-founders. That’s the heritage of the fund. The three founding partners wanted to build the fund they wished they had when they were founders.
This philosophy is carried through to everyone they hire into the partnership. I got to know Breega as they invested in the Series A of my last business.
A deeper dive…
You are raising €150m for your third vintage of the Pre-Seed/Seed fund. Talk me through this fund and what you are looking to achieve with it.
We aim to build on what we have already done with the previous vintages. However, this time, we will have a renewed focus, taking a more pan-European approach now that we have boots on the ground in the UK to tap into the ecosystem there.
The fund will follow the same principles: it will be opportunistic investing in great, tech-enabled businesses and providing them with the guidance and tools, through our scaling team, to succeed to the next round and beyond.
You touched on the scaling team there. Capital, when investing, is essential, but the support offered to companies when receiving investment is equally crucial. Can you provide more colour into how you support your portfolio companies beyond just financial capital?
The Scaling team is a key resource that we offer with four vertical expertise: Human Resources, Scaling Strategy & Business Structuring, Growth and Brand Building.
It’s not mandatory or forced upon our founders, but it’s a resource available to them.
When we invest, we run a workshop with our founders to really understand and identify where they need the most support. Then, it’s about adapting the services that the team can offer to the specific startup.
With a lot of the companies I work with, their primary need has been on the hiring side. We can help here by offering access to our operator network and the best recruiters in the space. Or, our growth manager will launch a growth mission to help the company with a specific growth challenge, for example, CRM implementation, cold outreach campaigns or optimising the sales funnel & conversions. It really does depend on what the startup needs.
You refer to yourselves as a ‘Full-stack fund’. Can you explain what this phrase means?
So we aren’t just giving you a cheque and saying good luck. We provide you with help and resources along the way to support you on the journey.
Typically, when we invest, we prefer to lead or co-lead rounds and take board seats. This allows us to actively assist and support founders in the boardroom and in addressing the challenges that extend outside of it. Having great people that we can connect founders with goes deeper than just writing a cheque into a company.
And you have to invest in, right? These resources come off of the margins of the fund itself, as we need to hire great people who can actually help and support startups on a day-to-day basis.
Fundraising from LPs
Given the market environment, it would be great to get some insight into your fundraising journey so far and any tips and tricks you can share.
I joined Breega in January when they kicked things off. What I learned really early on is that these sales cycles are exceptionally long. It isn’t easy to meet prospective LPs and close them within six months.
We started fundraising in early 2023 and had closed over half of it by the summertime, which, given this climate, is a fantastic accomplishment.
What allowed us to do this?
We’ve got a lot of proof points. This is not the first fund that we have raised. The first fund is one of Europe’s top-performing funds, having already returned a lot of capital. So, we have a history and a track record that we can point to. Then, we can also point to subsequent funds and show how they are tracking very similarly to fund one.
Breega invested a lot of time and resources in sales way back when. When you know that you aren’t going to get a yes for this fund, you still need to make sure that you have the meeting. Keep them warm, keep them updated. That then pays dividends when it comes to really tough fundraising climates, in that you have built up a big enough pool of potential LPs that you can go. We also have a specific person at Breega to lead the fundraising process, so we have the right resources to deliver with an incredibly long sales cycle.
Because of the previous funds, we had happy LPs who wanted to follow on in the next fund.
And what type of institutions did you raise from?
⅓ HNWs, ⅓ large financial institutions and ⅓ government-backed entities.
Deploying capital
We briefly discussed Breega’s sector focus across the two funds earlier. Can you provide some further insight into what it is that you are looking for beyond the sector focus?
Differentiated Go-to-Market
Particularly on the consumer side. I love to see businesses or founders that have really thought through a differentiated GTM. Long gone are the days where your fundraised money goes directly to Google and Facebook. So I like to see founders who have thought through how they are going to solve the problem of scaling efficiently.
Founders who are open, honest and realistic with the challenges they need to overcome to scale the business.
It’s really important, especially given that the Breega team have all been on the other side of the table, for us to truly understand what are the core challenges the business faces. The reality is that every business has fires that they need to fix, and we are there to help with that. So learning about these upfront allows us to decide if we are the best partner to help with that.
Clear identity of who you are but more importantly, a clear identity of who you aren’t.
It’s very easy to try and be everything to everyone. To build great companies you have to say no to some opportunities along the way.
Great to get your insight on that. I really liked point number two, ‘being transparent to ensure you find the right partner to help grow the business’.
What was the last investment you made? And why did you have conviction in that investment?
The last investment we made in the UK was Send Technology, which I believe you advised on!
What we loved about Send was that the founding team were real industry experts. They have been in and around their world for a long, long time, and so understood the different dynamics and the different stakeholders intimately.
They built a product that solves a real problem for insurers. And there is lots to love about the dyanmics of their business, such as the large deals and the sticky revenue. But it’s also important to understand the downside of what comes with that, such as long sales cycles.
They had been extremely cash efficient up until that Series A point-they were a profitable business in 2022. They had built themselves to a good scale whilst being profitable, particularly in this climate, these are founders you want to back.
Yes, you are right; we did work with Send on their Series A. We loved working with them — it’s one of our largest deals to date!
Does being profitable and cash flow positive take risk off of the table for a VC? Does it provide VCs with a bit of ease, given that it decreases the downside risk?
More than anything else, it gives you comfort that they are thinking about where they are spending their money and watching their burn.
When money was cheap, a lot of companies threw cash at things that may not have had an impact or provided an ROI. When you have a frugal mindset, because they were bootstrapped for such a long time, you know they won’t throw money down the drain.
It definitely provides some comfort in that you know they can get the business to be cashflow positive if needs be, but you also want to see them spending the money so they can invest and grow quicker.
Ultimately, we want to know that the company will spend their money wisely. This bootstrapped mindset allowed them to be super-efficient with capital.
Looking to the future…
The fundraising environment has been really tough over the past year. We are starting to see a couple of green shoots. What are your thoughts on how the market was in 2023, and where do you see 2024 going?
Reflecting on the past year, joining the venture space has proven to be exceptionally interesting. The slower pace of deployment has allowed for thorough due diligence, a stark contrast to the rapid transactions observed in previous years with term sheets getting fired out left right and centre.
We also saw companies strategically extending their runway to fine-tune metrics for when they seek additional funding. Notably, there has also been a prevalence of bridge rounds, with clear-cut Series A rounds being less common.
An intriguing dynamic unfolded, with Seed companies raising at some hefty valuations, while Series A appeared to return to more realistic numbers. As we step into 2024, the key question is, how will these two worlds interact?
Amidst all this flux, one constant has remained: there are exceptional companies out there with great founders.
Those with prior venture experience, especially as second or third-time founders, understand the Venture track a bit more and its implications. Raising a Seed round at a very high valuation sets high expectations on the founder to deliver the corresponding value through great performance. That’s where the serial entrepreneur may be a bit more savy in how they navigate fundraising and company valuations.
Despite the uncertainty, the Venture landscape holds some great opportunities for those willing to explore and engage.
What are you looking forward to with Breega?
I think it’s a great time to be in Venture. While acknowledging the challenging fundraising climate for both founders and VCs, historical analysis of post-crises vintages, such as those emerging from the early 2000s or 2008, reveals them as some of the best performing.
I’m excited about supporting some exceptional founders and going on some great journeys. There are still a whole load of problems that need to be solved, presenting ample opportunities for innovation, and we have a great infrastructure to support these founders. There is not a better time in my mind to be investing in Venture.
I agree; it’s looking to be a very exciting time in the sector. And, just to finish, what three sectors really excite you at the moment?
ClimateTech — This is a big problem that the whole world needs to get behind. I have met some great companies in this space.
FinTech — Every day, I see different opportunities here. Less neo-bank opportunities but some great stuff in infrastructure.
AI — This is such an interesting topic that has been around for a long time; we had a form of AI back in my Qubit days. However, it’s been gaining significant attention. We are particularly interested in companies with a specific edge, such as exclusive access to specific data or a unique talent pool that enables them to create products and solutions in a way that sets them apart.
Many companies within the space are harnessing open-source LLMs. However, it’s worth noting that these companies often lack significant defensibility.
Great, and I completely agree on those three sectors; we have a big focus across those areas as well.
Dan, it’s been a pleasure to chat. I look forward to seeing how your 2024 predictions come out!
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Read previous VC spotlights with Greencode Ventures here, Node VC here and ScaleUp Capital here.
