The Founders Q&A
As we strive for transparency at Samaipata, this is an attempt to shed some light on our investment thesis and on some of the key questions entrepreneurs often ask us. If the answers laid out below fit with what you’re looking for from a potential VC investor, please do send us your deck! We review all opportunities sent to us.
Now on to you, guys!
What is Samaipata in 3 sentences? Time to reverse the dreaded elevator pitch!
Samaipata is an early stage pan-European VC fund.
We are a Founders’ fund, created by two entrepreneurs, José del Barrio, co-founder of the leading food-delivery platform in Spain, sold to Rocket Internet for $100 million and Eduardo Díez-Hochleitner, founder of a 3D sound system sold to Dolby, former APAX partner, and Chairman at MásMóvil, sold for $5B in 2020.
We invest in digital platforms with network effects at Seed stage across Southern Europe, France & Benelux, Germany & DACH and the UK.
From which fund are you investing from?
In 2020 we started deploying our second fund (€110M): the fund has a 10 to 12 years expected lifetime. We closed last year the portfolio “building” period of our first fund (€30M), raised back in 2016. We have thus approx. €140M of assets under management.
How is the team structured?
On the investment side, we have:
- Our two co-Founders & General Partners, Eduardo and José.
- Our 3 Associates Inigo, Cyprien, and Stephanie, covering respectively Southern Europe & Germany, France, and the UK.
- Nacho, our Venture Partner, who spent >10y in the Valley investing as a VC and launching Workday’s Corporate Venture arm among other things.
- And myself, Partner leading France.
On the operations side, we also have a CFO, Pablo, a financial controller, Eduardo, and a Head of Legals, Ramiro, who do a million things; amongst others, they lead the investment process post term sheet until money-in-the-bank.
You might also meet Alvaro, our Head of Platform, who is looking after our portfolio, and Daniel, our Head of Growth, spearheading our marketing efforts. And last by not least, and Judit, our new remote-office manager!
We also work closely with a network of Operating Partners that support the portfolio. More on this below.
In which companies have you invested in?
We have been lucky enough to invest in 24 great companies over Fund I and II, across Spain, France, the UK, Germany and Italy, spanning many different industries in B2B and B2C. We have >85% graduation from Seed to Series A. Not bragging, but the industry average sits at c. 20% (DealRoom)!
Our portfolio has raised over €350m post our entry. Tier 1 later stage VCs from the US and Europe such as Atomico, KPCG, Index Ventures, Northzone and Bessemer Venture Partners have invested in our portfolio companies after us. We have also 2 successful exits already — Deporvillage & FoodChéri
By the way, where does the name Samaipata come from? — Why the hell did you pick the least-easy-to-pronounce VC name on earth?
Samaipata is a word in Quechua. It’s a valley in the middle of the Bolivian jungle. It’s known for being a micro world, home to more than 25 nationalities that lived in peace and harmony for centuries. For us, it’s the ultimate example of diversity and team work, two values that are at the core of what we stand for. It’s also a nice analogy of the way we perceive Europe as a Tech hub.
On your investment thesis
What’s your mission?
We’re a Seed investor. Our mission is to support our portfolio and one of our key goals is to help our startups reach the Series A milestone: our involvement is strongest in the first 18 months and usually goes down gradually afterwards if the right follow-on partner has been onboarded. Above all, we want to be a travel companion that provides inputs & frameworks, but who is never taking the wheel at the place of the founders.
Ok. But what does “Seed” really mean? These days it’s all over the place, I’m confused...
For us, “Seed” refers to:
- A round usually ranging from €1m-€4m
- In a company with a live Minimal Viable Product (MVP), typically post commercial launch, with (very) early signs of product-market fit — that being said, we can invest pre-monetisation as long as there is a strong engagement with the product and a strong team behind the business.
- Where we enter as first-institutional money in (typically after or at the same time as Business Angels).
We generally don’t invest at the pre-Seed stage (pre-product & commercial launch), unless some exceptions.
Ok, clear for “Seed”. But what the heck is a platform?
At Samaipata, the world “platform” refers to a digital framework that creates the means of many-to-many connections and that defines the terms on which participants interact with one another.
Our definition of “platform” includes business models beyond standard 2-sided transactional marketplaces that merely connect buyers and sellers of goods & services (e.g Blablacar). It also covers SaaS-enabled marketplaces (e.g. Opentable), Market networks (e.g. AngelList) and many more hybrid models such as payment solutions with a strong software layer (e.g. Stripe), social networks with a matching component (e.g. Tinder), D2C brands powered by a network of suppliers (e.g. Made.com), Neobanks with a financial hub approach (e.g. N26), highly viral B2B SaaS models…
At the end of the day, we invest in network effects.
More on the way we understand platforms here.
Any no-gos?
We only invest in tech-based, asset-light type of models, so no pure Hardware /iOT models, pure Deeptech, Biotech etc. We also need to see “many-to-many” relationships and some kind of network effects built into the model, generating increasing returns in the medium term.
So for instance, Enterprise SaaS with a value proposition siloed to the company without strong data network effects involved and/or plans to “platformise” the offering, or“1-to-many” developer tools are typically off scope.
Cool, got it. What industries & verticals do you cover?
We are vertical agnostic, and we invest across all industries in B2B and B2C. As most VCs, the only companies in which we cannot invest in are “unethical” and/or non ESG compliant businesses.
By the way, why are you specialised? And why in “platforms”? Aren’t marketplaces dead already?
We really believe that being specialised as a VC helps you become a better investor. First, it allows you to be a better “picker” as you have access to a more qualified dealflow and get quickly more efficient at analysing the same type of models; then it allows you to be a better “deal maker” as you’re building credibility and expertise in the industry, and hopefully a better board member as most platforms often face similar operational & strategic challenges. Finally, we do believe that a portfolio made of companies similar in nature can generate powerful network effects, i.e synergies related to knowledge.
And why platforms? We are all convinced in the team by the “Power of Platforms” as we see them as highly scalable and defensible business models as they typically have strong network effects. We believe they are here to stay. We have been lucky to experience it first hand as entrepreneurs and investors: José’s initial company, la Nevera Roja, was a platform in the Food delivery space and Eduardo IPO’ed a wedding platform as well.
What do you mean by network effects and increasing returns?
“Increasing returns to scale” is the idea that in today’s digital economy, output increases more than proportionally to changes in input levels. The player that gets ahead gets further ahead, and conversely the player that loses advantage loses further advantages. It thus becomes possible to build defensibility in a sustainable fashion, and businesses can protect long term profits in a competitive environment, with those increasing returns powering winner-takes-all markets.
There are different ways to generate increasing returns but we believe network effects to be one of the most powerful drivers of defensibility and long term value creation. They are typically enabled by “many-to-many” connections built into a network and they materialise when a company’s product or service becomes more valuable as i) more users join the network or ii) when usage/engagement between users in the network increases.
In which countries are you investing? I am a US Inc. yet most of my customer base is located in Europe and the team… well… is remote now and split all over the world. Does this work for you guys?
We only invest in Europe and more specifically in the countries where we have a very active presence aka Southern Europe (i.e. Spain, Italy and Portugal), France & Benelux, the UK & Ireland and Germany & DACH. Ideally the founding team and the main customer markets need to be located in those geographies for us to be able to add value. That being said, in a world becoming more remote, we are increasingly flexible with team location.
Ok! So if I’m a platform based in France which launched commercially 1 year ago, then it’s a go right?
It indeed seems that you fit our investment criteria. That being said, once we have validated this, we then strive to understand (amongst other things):
- Is the market you’re operating into suited for a “platform” type of model? e.g. Is your demand & supply side fragmented? Is there a “polygamous relationship” going on between your demand & supply? Is there a structural high risk of bypass in the industry? etc.
- Can you really build a €100M+ in annual gross margin / net revenues business in this space? At point of investment, we need to believe that businesses we invest in can potentially be a “fund returner” (aka generates >€1bn in Enterprise Value at exit given our typical stake exposition). Taking into account typical multiples, it looks like a minimum of €100M in yearly gross margin or net revenues is a required milestone. That is why it’s key for us to understand your real Total Addressable Market (TAM), as well as your ability to scale rapidly in this TAM.
- Can you achieve sound unit economics (Long Time Value / Customer Acquisition Costs) on your value proposition?
- How does your cap table look? At our stage of investment and given subsequent rounds dilution, it is important for us to have operational founders properly incentivised, typically in control of > 80% of the equity at Seed.
On the type of deals you focus on
What’s your average ticket size?
We typically invest tickets ranging from €500k to €2m, with an average sitting at €1.5m. At the end of the day, it’s really depending on the stage of development of the business.
Do you lead deals? How open are you to co-investment? Do you have a minimum ownership stake?
We typically lead deals. We strive to be fairly hands-on and when we invest in a company, we are fully in. The “Spread and Pray” mentality can prove successful; yet it’s definitely not our DNA. For Fund II, we are planning to invest in a maximum of 30 companies, which is a fairly concentrated portfolio.
That being said, we are very collaborative in our approach and we often co-invest with value-added Business Angels and/or VCs that can provide an alternative expertise to what we bring to the table.
As a result we do not have a “minimum” ownership stake. Yet we strive to reach a minimum of +15% of the cap table. This is a consequence of our investment thesis. We’re a Seed investor, not a Series A investor, which means that the Seed stage is the only time where we can build stake. We will likely be diluted — at a certain point — in subsequent stages.
Do you follow-on?
Once again, we’re a Seed investor. We do not “lead” any round beyond the one we entered. However, we can invest up to €10M per company and we typically do follow-on provided our Investment Committee approves the deal and a new investor decides to lead the next round, validating the company’s new valuation. In that case the general rule is to follow-on with our pro-rata (but our ticket will depend on our stake in relation to the size of the round).
How many companies do you invest per year?
We’re planning to invest in a total of 25 to 30 companies over the next 3–5 years, hence we will do 6–8 deals a year across our key geographies.
Do you do a Due Diligence (DD) over all the companies you invest in?
Yes, we do — a financial one and a technical one. First, we do have a fiduciary duty to our Limited Partners to do so (after all it’s not our money that we’re investing!). But, more importantly, we believe a well-executed DD can actually bring a lot to the business itself as it can shed light on key improvement areas when it comes to internal processes and reporting. And we only work with highly pragmatic DD providers across our geographies, that focus on the most important items and very much respect the time of founders.
On your investment process
What’s your typical investment process look like? Aka how long of my time are you going to suck in?
We’re fairly quick in our decision making process. When the timing is right, from 1st interaction to term sheet it takes approximately 3 weeks — yet we could move faster if required.
There are 2 touch points with the our investment team (i.e. fairly informal Q&A sessions held on Zoom), corresponding to 2 distinct “Investment Committees”. Additionally, if you’re based in one of our key hubs, we like to meet Founders face to face. It’s key for us to understand that there is a high fit (on both sides of the equations!)
We are also fairly analytical in our analysis: we spend quite some time looking at the business’ data (both financial & operational metrics), on understanding overall market dynamics, the competitive landscape etc.
What type of KPIs are you looking at during the analysis process?
We’re fairly data driven at Samaipata, hence even if we invest super early, we do spend quite a bit of time looking at your data analysing historical traction, cohorts, demand & supply concentration etc. We can help you a lot on this as we’ve built over the years some interesting analysis tools.
By the way, what is most important for us is not necessarily your top line, but the retention and the engagement of your user base, and any indications of strong “customer love”. We prefer a business with fewer, but passionate users, that consistently come back to the product, than a wider user base less engaged. “Liquidity quality” is key for us.
Finally, we are also obsessed with Unit Economics as a function of Cost of Acquiring Customers (CAC) and LifeTime Value (LTV). It’s obviously not a prerequisite for you to have sound unit economics when we invest; yet it’s key to show us that you think of your business in those terms and that you have a plan to make those unit economics work in the medium to long term.
How does your Term Sheet look?
Our term sheet holds no surprise and our terms are 100% plain vanilla: standard information rights & governance, Founders’ vesting, drag along & tag along clauses, 1x liquidation preference (with a 20% carve-out) etc.
On the way you actually work post-investment
How do you differentiate yourself from other VCs in what you bring to the table?
In a world where competition is increasingly between VCs, we like to think that we are different on 4 different points:
- Access to our platform designed to support portfolio teams, which we like to call the Hive. We are committed to support our founders on Fundraising, Talent and Growth.
- Specialised focus on digital platforms with network effects. We have extensive knowledge in defensible models enables us to better understand key success factors of long-term value creation
- Laser focus on Pre Series A Stage. We are Mastering the Seed to Series A journey, with an operational support framework dedicated to this stage and strong synergies within our portfolio of companies.
- Unique pan-European footprint, allowing our portfolio companies to tap into a Europe-wide network when it comes to fundraising, talent or sales. We strongly support internationalisation
What is the Hive?
The Hive is our Founders’ support platform.
What are your requirements when it comes to reporting?
Our job is to help our businesses grow. In order to achieve this, on top of money, we strive to add value as much as we can. Without information it’s very difficult for us to add value, as otherwise it’s hard for us to truly understand the business and to have actual insights.
As such, we see boards, monthly calls and reporting documents not as a way to ensure “legal compliance” but as a way to ensure information alignment between you and us: they are basically communication channels.
Also, we see reporting as a way to help you become better decision makers. What you send us each month should be a subset of your internal reporting tool that we can help you build and that should be a lever to pilot your business on a daily basis. Our view is that if you’re not close to the data of the business, you’re basically blind.
More pragmatically, we’re fairly flexible with format & length of reporting (we’ve banned ppt slides internally!), as long as we have enough info to be able to help you.
Do you always take a board seat?
We usually take a board seat as we are hands-on and once again strive to add value to the companies we invest in. Disclaimer: we are on call 24/7 but we don’t get into the day-to-day operations of the business, that’s founders’ territory.
That’s it! Thanks a lot for bearing with us. Hope it was useful. Do not hesitate to contact us if any of the above is not clear or if we haven’t included any of your key questions.
And as always, if you’re a European platform founder looking for Seed funding, please send us your deck here or subscribe to our Monthly Founders Kit here! You can also check our our content here.
The Samaipata Team
