Our First Year at Speedinvest x

Reviewing Speedinvest Network Effects first year by the numbers

As 2018 comes to a close, it’s that time of the year again when everyone publishes annual reviews. I’m jumping on the bandwagon and take this as an opportunity to reflect on our first full year of Speedinvest Network Effects. In September 2017 I joined Speedinvest as a Partner to launch and run our Focus Fund Speedinvest Network Effects a.k.a. Speedinvest x. Thanks to our amazing LPs, we were able to do a first closing of the fund already in November 2017 and announced it to the public end of January 2018. Since then a lot has happened — not only for the growing Speedinvest x team, but also overall at Speedinvest. Following Speedinvest’s new focus fund strategy, we roughly doubled our total AUM to over €200M, set up and closed 3 new focus funds (shout out to my Partners Marie-Hélène of Speedinvest i, and Stefan of Speedinvest f, who run our Industry and Fintech Focus Funds), launched our operational support units Speedinvest Pirates (Growth Hacking) and Heroes (Recruiting) and, as a result, doubled the size of the overall Speedinvest-team to approx. 60 people. We also opened 3 new satellite offices bringing Speedinvest’s footprint to 6 cities in 5 countries across 2 continents (Vienna, San Francisco, Moscow, Munich, Berlin, London). As you can imagine, it has been quite a busy year for all of us at Speedinvest. In the following, I would like to share with you what this meant particularly for us at Speedinvest x. Hopefully, this also gives you a good impression of our “day to day” job i.e. what a Venture Capitalist does IRL.

Meet the team

In the course of 2018 the Speedinvest x investment team grew to 4 people: Krishan, Jeroen, Philip and Mathias. We’re working closely with my Partner and one of the co-founders of Speedinvest, Michael, who helps us navigating the broader Speedinvest ecosystem.

Let’s not forget the following people that have joined for parts of our journey so far:

• Yuliya who is now working with our “sister fund” Speedinvest f,
• Greg who is finishing his Master’s degree at Copenhagen Business School (and supported us for our recent Marketplace Conference in Berlin), and
• Isabel who followed her entrepreneurial spirit and joined our portfolio company TIER Mobility as one of the first employees from day 1,
• Daniel Hoffer who joined us as a Venture Partner in San Francisco e.g. to launch The Marketplace Conference together and then joined Autotech Ventures as a General Partner.

Hiring for and building our investment team has kept us particularly busy over the last 12 months in order to build a well functioning team that has the energy, skills, experience, knowledge, curiosity and guts to support our growing portfolio. I am therefore very happy that we will welcome 3 additional new team members in the course of the next 3 months to bring the total team size of Speedinvest x to 7 people including one additional Partner. Personally, I am particularly proud of A) the diversity of the team (in terms of gender, nationality, professional & personal background, age etc.) and B) the fact that we work in a highly distributed setup across our Speedinvest offices in Vienna, Munich, London and Berlin. Here is a quick “diversity” breakdown of the fully staffed Speedinvest x team (7 people):

Age:

• Youngest team member: 25 years
• Oldest team member: 53 years
• Average age: ≈34 years

Gender:

• Female: 2
• Male: 5

7 different nationalities:

• German (2)
• Polish (1)
• Austrian (1)
• French (1)
• USA & British (1)
• Dutch (1)

Professional background (multiple choice possible):

• Founder (3)
• Startup Employee / Mgmt. (4)
• Tech Investor e.g. VC, Angel or similar (3)
• Corporate (2)
• Consulting & Finance (2)
• Author (1)

Languages (multiple choice possible):

• Dutch (1)
• Polish (1)
• English (7)
• German & Austrian (4)
• Spanish (1)
• French (3)

Everyone in the team maintains different hobbies ranging from sports such as cycling, running, hiking, mountaineering or Muay Thai, over professional writing, reading, rap music or collecting sneakers, to running a climbing park or language school in their spare time. What unites us is A) our passion for early stage startups with the potential to develop powerful network effects and B) the fact that every member of the team has significant operational experience that we want to put to work for our portfolio companies.

Last but not least, all of this wouldn’t be possible without the support and backing from our excellent Community, Operations, Legal & Finance teams based in the Speedinvest headquarters in Vienna. Reflecting on the past year, the Speedinvest ecosystem served as a perfect “fund accelerator” to get everything up and running in “no time”. It allowed us to hit the ground running and be able to focus on the important things from the very first day.

I am very thankful to be able to work with and be surrounded by such motivated, talented people. I know that this might sound cliché, but we wouldn’t be where we are today if it wasn’t for the people in our team! Thanks for joining the ride and trying a new approach to early stage Venture Capital together with us!

Speedinvest x Logo

Investment Activity Part 1: Portfolio

Initial Investments

Since launching Speedinvest x we’ve invested into 11 different companies. 7 out of those 11 investments were closed in the last 12 months i.e. since January 1st 2018. 5 of those 7 new portfolio companies are already disclosed to the public: Admix, TIER Mobility, Kodit.io, Packhelp and Byrd. 2 more recent additions to the portfolio prefer to stay under the radar for the time being. Deals already closed and disclosed in 2017 are: Stowga, Maxfun, MyClubs and Sunlight.

Since the launch of the fund, we made, on average, one new investment approx. every 41 days or approx. every 6 weeks. Looking only at the 7 deals done in 2018, Speedinvest x averages approx. one new investment every 52 days (= approx. 7 weeks). In 8 (or ≈73%) out of the 11 initial investments we have completed thus far, we’ve led the round contributing min. 50% or more of the round. We’ve co-lead 2 (or ≈ 18%) other initial financing rounds (contributing between 30–48% of the total round size “on par” with the other co-lead) and, in the one remaining case (or 9%) we simply only co-invested by contributing 25% of the total round size. On average, we contribute 53% of any initial round that we participate in and hence mostly act as a lead investor. These numbers underline our highly conviction-driven investment style — which is not only a platitude for us.

Here is a snapshot of our investment activity so far (since launching Speedinvest x, initial investments only):

I believe this overview and the investment pace (one new investment every 6–7 weeks) is a good indication of how we intend to invest going forward: Be conviction-driven, be fast, be the first institutional investor on board, act as a lead and invest 50% or more of pre-seed or seed rounds that are between €0.5M and €1.5M in total size. If I could wish for something, I would like to stay loyal to my own as well as Speedinvest’s roots meaning do less “bigger rounds” but instead a few more smaller ones or, simply put, stay close to the very early stage.

The geographic split* of our first 11 investments reflects our Pan-European approach:

• United Kingdom (all London): 3 (≈27%)
• Germany (all Berlin): 3 (≈27%)
• Austria (all Vienna): 2 (≈18%)
• Poland (all Warsaw): 2 (≈18%)
• Finland (Helsinki): 1 (≈9%)

*= Geography: Location where company is incorporated and/or headquartered, does not necessarily reflect geographic focus of the company itself

We’re working hard on adding more cities & countries to this list in the future, especially focusing on Scandinavia and BeNeLux (primarily covered by Jeroen Arts) as well as France & the Iberian peninsula (primarily covered by Philip Specht). That said, we strongly believe that great companies can and will be built anywhere. Therefore, we try to cast a wide net which is another reason for our highly distributed team setup and Speedinvest’s Pan-European focus. Thanks to our Speedinvest San Francisco office we also remain open to deals in the US.

Fun Fact: 2 (≈ 18%) out of our 11 portfolio companies are led by a founding team of 2 brothers!

Follow-on Investments

From the 11 companies we have backed so far, 4 have either already secured follow-on funding from new, external investors or have signed term sheets and are currently in the process of closing these rounds. That means that >36% of our portfolio companies have secured follow-on funding within less than one year (!) following our initial investment. So far, TIER Mobility was the fastest one securing a significant Series A round within less than 8 (!) weeks after our initial seed investment.

We´ve participated in 3 out of the 4 follow-on rounds. Though, due to our fund size and focus in terms of stage, we do not see ourselves as a potential lead for follow-on financing rounds.

As most of these follow-on rounds are not yet disclosed I cannot share any more detailed insights right now but I am confident we’ll be able to do so in the future. ;-)

Investment Activity Part 2: Deal Flow

Our “VC CRM” Fundstack reveals that, in the course of 2018 (Jan 1st to Dec 21st 2018) we, Speedinvest x, were in touch with approx. 1’147 different companies. Over the year, +758 companies, or on average ≈63 companies per month, were added to our pipeline. The delta between those 2 numbers (1’147 vs. 758) can be explained by the amount of (open) leads that were “carried forward” from the previous year (2017) to 2018.

Speedinvest x monthly deal flow development in 2018 (as of Dec 21st 2018)

As you can see the MoM deal flow development follows a certain seasonality with peaks just before the summer break (June) and in autumn (October). February was somewhat “artificially inflated” (and January artificially “low”) as we announced the fund the last day of January and, as a result, received lots of inbound leads in the following month due to press coverage etc. December should come out higher than indicated due to accumulated backlog and the timing of this blogpost. The spread between the lowest (August; +28) and the highest month (October; +89) is pretty significant (+/- 68). Please note that these numbers are already “net of” i.e. exclude any dubious and unqualified approaches that are clearly not meant seriously — thanks to our colleague (and key employee) Lukas a.k.a. “The King of deal flow” who qualifies leads and “separates the wheat from the chaff” to make sure all serious requests get the time and attention they deserve. This number also includes outbound leads of companies that we proactively reach out to (and of which we definitely want to do more; more on that below). Please also consider that this is only a fraction of the overall deal flow we see and attract at Speedinvest. Due to our focus fund strategy we, at Speedinvest x, have the luxury to follow a precise focus and hence only leads that could actually be a fit with our thesis (network effects) are pursued by the Speedinvest x-team. For other leads, our colleagues from our sister focus funds (e.g. FinTech) and our different horizontal clusters (e.g. DeepTech) take over.

From this “top of the funnel” (1’147) approx. 339 or 29.6% graduated to “Long List”-status (within 2018) which means, at least, one member of our investment team talked with the founders and had a proper call or meeting (often this is even more than just one person). Considering that we’ve been only max. 3–4 FTEs in the investment team throughout 2018 this means on average almost 100 calls or meetings per FTE over the whole year. From those >339 long-listed companies approx. 84 (or 24.8% of the Long List i.e. 7.3% of the top of the funnel) made it to “Short List”-status which means several members of the investment team spoke to or met with the team and the deal had been discussed in depth in our weekly internal deal flow meeting in which all investment team members participate. Eventually, we made 7 new investments this year which means 8.3% of short-listed companies or, 0.61% of the total top of the funnel. From that point of view, chances to actually secure funding from Speedinvest x are significantly below 1%. I don’t know how this number compares to other VCs but it seems right to me. After all, particularly at seed stage, we’re looking for the “needle in the haystack”. For 2019, I would like increase our total top of the funnel to get closer to an average of ≈100 leads per month. I am confident that with the help of our new joiners as well as by getting closer to the local ecosystems in the UK, France, Spain, Portugal and Scandinavia we should be able to increase that number.

Simplified Deal Flow Funnel of Speedinvest x (calendar year 2018)

A KPI related to deal flow that I personally care about deeply is the average number of days a company is at a certain status in our pipeline. This indicates how quickly we get back to teams and how fast founders know whether or not there is general interest from our side. Basically, it`s the breakdown of our “investment pace” as calculated above. Our internal goal is to provide a (first) answer to every (serious) message within max. 14 calendar days. Right now this number averages 5 days which is great. But, including the average days at status “to reject” which currently is 10 days, that number increases to 15 days (or even 18 days if you also include “Long List”) which isn’t great. I expect that with our new team members joining in January we will be able to significantly bring down this number and be a lot faster. The status with (by far) the highest average number of days is “Short List” with 21 days (remember, currently less than 8% of companies actually reach this stage). In general, this seems right to me as those are usually the cases and teams we really “fall in love with”. Then, we need the time and diligence to dive deeper and learn more in order to make up our minds and take a final decision. That said, our goal should and will always be to keep the “waiting time” and “uncertainty” as low as possible and that’s what we’re striving for!

Here is a geographic breakdown of our 2018 deal flow origination covering the top 10 countries:

Speedinvest x — Top 10 countries in terms of deal flow generation (CY 2018)

For this analysis we (only) take the +758 companies into account that were added in the course of 2018. The top 10 countries cover approx. 80% of our total deal flow, but that also means that there is a significantly long-tail of ≈20% spread across many different countries. The DACH-region dominates with ≈27% of deal flow origination (which is not surprise given that 3 of our 6 Speedinvest offices are located in that region). Surprisingly (and mostly thanks to Dan), almost ≈20% of our deal flow originates from the US that are second after Germany. The UK ranks third originating over 16% of our total deal flow. Overall, the top 3 countries account for almost 56% of our total 2018 deal flow. As a to do for 2019, we definitely need to and want to “up our game” in the Scandinavian countries, France and Spain in order to further diversify and cast an even wider net. Unsurprisingly, the 2018 Top 10 cities in terms of deal flow origination are:

1. London (UK)
2. Berlin (Germany)
3. San Francisco (USA)
4. New York (USA)
5. Amsterdam (Netherlands)
6. Paris (France)
7. Hamburg (Germany)
8. Madrid (Spain)
9. Warsaw (Poland)
10. Copenhagen (Denmark)

In comparison to the country breakdown this list shows how centralized the ecosystem is in the UK (London) while the DACH-region’s startup ecosystem is relatively decentralized across multiple hubs.

In terms of sources of deal flow, approximately one third (32.7%) of our deal flow originated from outbound activities including events (blue). A bit over a quarter (26.7%) came inbound e.g. through our website, Linkedin, Twitter etc. (red) and over 40% was based on referrals (orange) i.e. through our network (other VCs, Angels, our own team/partners etc.). The following (simplified) pie chart gives you a bit more detailed impression of how we find and get in touch with founders at Speedinvest x:

Speedinvest x — Breakdown of deal flow sources (orange: network/referral, blue: outbound, red: inbound)

Going forward, I hope that we will find even more time to actively reach out to companies and potential founders i.e. do more outbound. As our Speedinvest x portfolio continues to grow I also expect and hope to get more referrals from our existing network of founders and portfolio companies.

Events

Don’t stop reading here yet, I’m not going to bore you with a list of events we attended throughout the year. Instead, this is about the events we hosted and organized. Earlier this year, we launched The Marketplace Conference together with Dan Hoffer of Autotech Ventures. The inaugural event took place in spring in San Francisco followed by a first European version of the Conference this winter in Berlin. Altogether, over 700 people attended at least one of the 2 conferences, thereof over 70% founders or startup employees. To make these events happen we spent more than €200’000 (and countless hours of our own hard work & sweat) thereof raised approx. €70’000 in sponsoring and relied on the contribution and participation of over 60 speakers and panelists. These events aren’t profit-driven and it’s not our intention to make money. Check out and follow the Youtube-channel featuring recordings of the different sessions. Many thanks again to all contributors as well as our partners Point Nine Capital, Market One Capital and Autotech Ventures for getting this off the ground!

The Marketplace Conference Berlin 2018

Additionally, the Speedinvest x team attended over a dozen startup- or entrepreneurship-related events such as Slush in Helsinki, South Summit in Madrid, Pirate Summit in Cologne, The Next Web in Amsterdam, Point Nine’s Founder Summit in Barcelona, SaaStr in San Francisco or Wolves Summit in Warsaw.

Fund Management

An important part of our business that should not be underestimated is to raise and secure our own funding so we have enough “dry powder” to invest into promising startups. I‘m therefore very happy that we managed to reach our fund target size of €25M in the course of 2018. As you know already, this amount is doubled by Speedinvest’s horizontal funds to a total of €50M. Speedinvest x now counts 16 different Limited Partners (LPs) thereof 5 large ones like e.g. Russmedia, ProSiebenSat.1 PULS 4 or Schibsted (MPI) which, in aggregate, represent almost 90% of the total fund size. The remaining, smaller LPs representing around 10% of the fund size are a couple of (marketplace) entrepreneurs, Business Angels and high net-worth individuals that share our passion for early stage startups with the potential to develop powerful network effects. Our LPs sometimes co-invest with us, share interesting deals with us or simply help us with their experience and knowhow when assessing interesting investment opportunities. I’m very grateful for their trust and support and couldn’t wish for any better investors!

Looking back at the past year, I must say that it has been a quite eventful one. If someone would have asked me about a year ago where we would be by the end of 2018, I wouldn’t have been able to predict half of the above. All of this feels very much like a startup, we’re building a company and putting together the different parts of the puzzle “on the fly” while we are already right in the middle of it. This is very exciting, a little bit frightening and humbling at the same time. Above all, we’re having a lot of fun while we’re doing it and I’d like to thank every single founder, team member, (co-)investor and business partner for sharing parts of this journey with us! Thanks for an amazing 2018 and looking forward to 2019! Happy New Year!

Thanks to Philip Specht, Krishan Allen, Nina & Lukas for reviewing an earlier version of this blogpost.