VC Office Hours With HV Holtzbrinck Ventures Partner Jasper Masemann

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Cool, thanks a lot, Caitlin, for the nice intro, and welcome everybody. I'm here in HB Berlin Panorama Bar. So those of you who have been to Berlin in Germany, that's one of the famous bars at one of, I think, world's most renowned clubs if you like electro music. I don't, but this is not the bar. We just named our conference room like that. So a little bit background about Holt Spring Ventures. You pronounce it very well, Caitlin, by the way, which is a German name, but as you can see from the spelling, it's not really trivial, and even German would misspell it. It's the name of a publishing group. You might know Macmillan or Springer Nature, and we were originally founded 20 years ago out of a publishing group that wanted to explore the internet in the year 2000, which, as you can— maybe some of you remember, Wasn't the best time because afterwards the market crashed, but we survived until today for various reasons. It was the early times of e-commerce marketplaces, digital business models also in Europe. And that's what we did with the help of, of their money. We are totally independent fund nowadays. So as you can see on the slide, we are the 7th fund generation. We're just about to close our 8th fund at the moment, which is much larger. We have $1.2— I wrote it in dollars— billion assets under management. So that's across 3 funds. We have returned much more cash than we have raised, which is important to us, to our LPs. We're a pretty successful fund. And you can see it on the right side, right bottom side, that that's the German— not the German picture, that's the European picture. So you might know Index Ventures, Accel Partners, maybe some of the others. This is kind of the most prominent funds in Europe, so we're placed third there by the provider who had the data. We have more than 100 exits, 200 investments in total, and thousands of financing rounds. So pretty experienced VC, not in the US or outside of Europe, but some of the business models we've invested in you might also know. Maybe some of you have seen in the US Flixbus are driving around those green buses in the Bay Area or around New York. And we usually have raised about €300 million, that's in euros now, or $330 million funds as early-stage vehicles. And what is important to note is that we like to be one of the first institutional investors, especially in Germany, so in pre-product round, seed rounds. And then we could follow on in the same company with up to €50 million as an investment, 5-0. For example, in the company FlixBus, those green buses, we invested €100 million. So the idea is to be a multi-stage VC, to lead maybe the first 2 rounds and give the company enough runway to develop a product, develop a go-to-market model, and then expand internationally, globally. With the help of other funds. So we co-invest with funds such as Sequoia, Battery Ventures, and others you might know from the US. And that's kind of the idea. And that's also why we spun out of the publishing group more than 10 years ago, because we saw we would just need more money. Some of our LPs, by the way, are known US funds, also endowment funds from US universities. And then in the latest fund, I think some notable investments are Scoutbee, that's a procurement topic. I think that's pretty hot at the moment. Sendr.com, that's more in the logistics space. Verbit is actually an Israeli company that does transcription for universities in the US, but also for legal firms in the US. And there is Ultimate AI, that's, that's in the customer care area. And Vectornator is a graphic design software. Some of you might know Figma. Vectornator is also active in the US, so it's just for graphic design illustrations. And Caitlin, if you can go to the next slide. That's a little bit our portfolio, so it's very, very, very broad. We basically invest in every digital business model that where we can find some teams at a very early stage in Germany, and maybe we see a better team somewhere else in Europe, so we would consider that as an investment. But usually the initiative comes out of a German, very German perspective. That's our heritage, that's where we have the strongest network. Where most of our previous founders we backed are from, so serial entrepreneurs or angels. But there are some companies like the one Verbit I mentioned in Tel Aviv, that's in the top right, an enterprise— I would say it's more B2B software, but my colleague called it enterprise— where we like the sector, we liked AI or automatic speech recognition, so that kind of trend. And then we found this company in Tel Aviv and we just decided to invest. But we also do a lot of fintech, especially at the moment in core banking, so more B2B. We do mobility, also healthtech, so healthcare. There is a company called Dialog in that box that's actually from Canada. So it's telemedicine in Canada. I think it's the largest provider, and it's an originally— it's a Canadian company that was the only one we can find because we like the area, but we couldn't find anything in Europe. And Depop is something for young fast fashion, also very famous among young people in the US. So that's the portfolio, that's us, and now I'm open for your question. And Caitlin will have to tell me who's asking because I don't see anything on my iPad here.

Definitely. Thank you, guys. Dima here is the first one up, so if he wants to take it away and ask his question, that would be terrific.

Beautiful, thank you. My name is Dima, I'm a CEO of Stealthmail, it's an email privacy and security solution. And my main question is, what are you guys looking in, looking for in B2B enterprise companies?

Yeah, so it's actually a sector I focus myself on, so I sit on 8 boards of B2B software companies. It's a very simple answer. We're looking for something that has a value add that is 10x of what you can find in the market. Or I mean, don't say 10x, but it has to be something that is very, very much different, stronger, better than what you currently have as an alternative in the market. So AI was a trend that was enabling some of those capabilities. Um, but what we don't like, we don't like models that let's say have incremental, um, benefits, incremental improvements, and then you would have to rely heavily on strong sales, marketing, um, and brute force it into the market with a lot of money. So we're looking more for a product solution than let's say for a go-to-market solution.

And then you guys are investing in seed rounds as well, right? Yeah. Beautiful.

Awesome. So our next question is from Miriam. So I will let you take it away.

Yep.

Thanks, Kathleen. This is Miriam. Just for context, I'm a founder of a no-code platform. We are based in Berlin. And we help non-tech founders and startups build entire web applications without a single line of code. So my question is, two questions actually. First, as you are also investing in seed stage, what metrics do you look for at that stage? And what basically, what's the expectation on that stage? And the second question, what's your view on the current no-code market and generally not the no-code space targeting towards enterprises, but more trying the companies and the modern tools trying to consumerize the whole software development and engineering towards more broader audience? Whether it be smaller companies or individuals?

Thanks, Mariam. Very interesting space. So first, metrics is obviously difficult. What we try to do is we try to have a conversation with the founders about the problem they are targeting and how this solution can have this extremely— yeah, this fundamentally different effect and value add to the customer. Obviously on a, on more on a potential level. So you might have some MVP, you might have some ideas, but there is nothing finished yet. So it's a lot the discussion with you as a founder, understanding how you want to build the product, why this is so much better and why you are the right one. So that's kind of the metrics, it's more the conversation. So we will ask a lot of questions, we look at your answers, we then would go to people we know in our expert network and ask them if this is feasible, if that makes sense, and then pitch potential customers and see how their reaction would be. So there's a lot obviously in the no-code space at the moment. There are also a lot of topics around DevOps in open source or not. And RPA is again, there are again a lot of topics also no-code. So what we're trying to figure out is if this product would exist, what would be the customer reaction? And we would give you that feedback as well as value-add. So even if we wouldn't participate in the round, we at least give you some insights. Hopefully that would help you developing the product because we can come in later rounds. So we do seed stage, but we can also do Series C or later with, leading rounds with a ticket of $30 million. So that's why we have a high interest obviously in helping you. Coming to no-code, it's about the use case because at the end of the day, yes, you might build amazing capabilities on the no-code level, but a lot of people are doing that. But the big question is where will you get your traction and why? So why will customers resonate with, with your approach and how will that traction lead to something bigger? Because We don't believe in product-market fit at an early stage. We believe maybe even in product-customer fit, product and then leading to product-segment fit. But having that discussion, what are the adjacent segments and how you wanna grow this, that's the relevant point for us. Because at the end of the day, we have a large fund. The latest one will be probably about $500 million, the new one. So we have to return that money somehow and that requires a big company.

Thanks a lot. Thank you. Our next question is John, so I will let you take it away.

Hey, this is John from Xylo. Can you guys hear me okay? Yeah, perfect. Okay, um, so my question to you, Jasper, I, I, you know, I'm CEO of a company called Xylo. We're a B2B software company in the insurance space. We serve the insurance agents here in the US. And so we're in the vertical SaaS space, and I know you've, you've spoken about investing in companies that are, you know, that create products, um, uh, that create products that are 10x their alternatives in their market. Now, in vertical SaaS, at least where we're at, the idea is that we are supposed to replace some of the incumbent technologies in the space. Align with what you guys are looking for, or is it a different type of alternative product business that you try to invest in?

If I understand your question correctly, if we are looking more for horizontal SaaS versus vertical SaaS, or is it more around the value-add we're looking for? Because there was a little lag.

No, actually, it's a good way to sum it up. Yeah. Are you guys— do you guys invest in vertical SaaS, or do you prefer horizontal?

No, no, no, no.

We—

I mean, it depends really on the market size. What I do I didn't say to Maryam was obviously every VC has to check the market size and we do the same. It's sometimes a bit difficult as a European VC to, you know, we have to check the German market, the French market, et cetera, et cetera. In the US it's pretty easy. It's just a huge country where rollouts are easier, but we're not afraid of internationalizing companies. Our best exit Zalando, that's kind of the Zappos of Europe, was a €10 billion exit. They are all across Europe. So we don't mind vertical SaaS. Sometimes it's actually better because the value that you're creating is very specific to your industry. And Wefox is a very nice example from Berlin. I don't know if you know them, but they also serve insurance agents. It's also a pretty big company. So we looked at them, we liked them. There were just others paying a higher price.

And just last question to kind of piggyback off of that, what is a good market size for you guys in vertical SaaS?

The company should get to $100 million revenues in 5 years in a feasible way. That's a very simple answer, sorry for that, but that's kind of the question we're asking ourselves because post $100 million revenues, and I mean kind of more on the SaaS level revenues, It's getting much, much easier. Got it.

Thank you, Jasper.

Thank you, John. Our next question for you, Jasper, is Sanjay.

Cool. Hi, Jasper. Sanjay Goel, CEO of Nacho Nacho. We are a B2B SaaS marketplace. So our buyers are SMBs who manage and control all their SaaS subscriptions on Nacho Nacho. And our sellers are SaaS vendors who use Nacho Nacho as a new user acquisition channel. And we use fintech as a way to connect our marketplace. So I see you have fintech investments, I see you have enterprise SaaS investments. So we're not in any one of those, we don't fit neatly in any one of those spaces because we are an enterprise SaaS, we use fintech and we're a marketplace. So I wanted to hear what are your views on, if you have a thesis on marketplaces and have you done any work in that area?

Actually, we did a lot of work on marketplace, so we have marketplaces. Sorry, it's not on there. Last investment we made was in Schüttflix, which is a very German name, but it helps you— you can order sand or gravel or any kind of, how do you call it, cement with an app if you need it on the construction side. So that's actually a marketplace, very specific one. The Scoutbee I mentioned is also kind of a marketplace, more on the procurement side. And we're actually looking at models like Vendor You might know them, it's more on the enterprise level, but in that B2B SaaS vendor space. So yes, that would be very relevant because we're actually— my colleague and I were currently looking at a few business models in Europe.

I guess my question is more about how do you evaluate a marketplace startup that is, let's say, at a seed or Series A level where the traditional metrics of enterprise SaaS like MRR or retention or churn, they don't really apply because marketplace have a very different dynamic. And once the flywheel gets complete, it can scale very, very quickly, but you don't see that in the early days. What you see is the different ingredients that can lead to that network effect.

Yeah, agree. So we have, for example, one investment, Delivery Hero, which is IPO'd. They just entered the DAX 30. So that's kind of the Fortune 500 in Germany. And when we think about marketplaces, it's usually about, I mean, one side of the marketplace that you are better in control of because you always have that issue of how to scale it and how to scale it efficiently, not have customer acquisition costs on both sides at least. So that's one thing that we do at seed stage. We discuss with the founders how you want to scale one side of the marketplace and how does that enable— how does that create network effects for the other side so that it gets more relevant. But it's obviously a bit, it's a bit of a theoretical discussion, maybe with some numbers, but you can't really prove it yet. So it's, it's really around how do you give one side of the marketplace better access to the other side, and why can you do that better than others? And I can tell you, we are looking at B2B marketplaces for 20 years since our existence, and they are huge. Those markets are amazing, but usually it fails around this liquidity question, getting to an efficient level. And then scaling the marketplace. That's why we haven't seen big B2B marketplaces yet. But your space is very relevant because simply by the fact that SaaS is growing, people are buying more and more tools, getting really difficult to handle all of them, having transparency, paying the right prices. I mean, we all know you can have Salesforce for $150 per seat or for $60. You just have to negotiate it well.

Thank you.

Thank you. We have another question up from Jim.

Hello, my name is Jim Gibbs, and I'm the CEO and co-founder of MeterFeeder. So yeah, cities have been losing billions of dollars trying to price the curb for shared vehicles like Car2Go, Zipcar, FedEx. So we actually made a way for traditional and autonomous vehicles to pay for parking with no human interaction, so cities can make money and I can stop getting parking tickets. So my question is more of a practical question. Just your general process, you know, from, you know, introduction, best way to reach out, and then, you know, how the partner interviews and things like that go along.

Yeah, so we are very network-driven VC. We like— we are much faster if we receive deals via our network. So if you know someone of LinkedIn that's connected with someone from us, that makes the process much faster. We answer emails sometimes faster than other times depending on how busy we are, but you can find our email addresses on our website. So we try to be approachable, but obviously sometimes we're busy. It doesn't matter if you have a direct contact to a partner or to an analyst, because we all work in a pretty big team, so we discuss deals every day. What is relevant is that you have that contact and that first call conversation, which is usually 20 minutes, and we get an idea on problem solution and market size, at least from your perspective. And then we try to feedback within a week if this is relevant or not to us, and we can close the deal within days. Normal process is 2 to 3 weeks depending on the ticket size. If we would invest $30 million initially, then it's probably more 2 months, I guess, with the full due diligence. But I usually close deals in 2 weeks. Thanks.

Thank you. So we have about 8 minutes left and we have another question in here from— again, I apologize on the name pronunciation— Abir Abu.

Hi, uh, thank you for spending the time with us today. I know how busy you are. My company, Legstock, is a combination of a legal ops as well as a marketplace connecting businesses with attorneys. This COVID has changed the way in which we are seeking funding. Have you seen any trends and any advice for entrepreneurs on their journey seeking funding in the process?

Yeah, so we have closed— how do you say— you say writing checks, we don't have checks in Germany, but we wrote a couple of checks remotely. We don't mind that, especially in seed stage. You would always say the team is one of the most relevant factors, and that's difficult via video, but we think with the conversation that should be sufficient. So we don't mind that, but still What you should consider is that people, if they are sitting in your room and spending time with you, that's different than if they have a Zoom call, get distracted, calls, etc. So I would highly recommend to— Rippling did that with a memo, but that's a longer one. I don't know if you know the company, but it's always very, very helpful for a VC to have a good summary in an email because a slide deck I know there are those standard slide decks also from Sequoia. They're very relevant. But if I pitch it to my colleagues, if I discuss it with my colleagues, having that summary that you created, because that's your point of view, is really helping me to communicate with others. VCs usually work in teams, rarely, rarely alone. So I think that's something that has more relevance nowadays than before. Because before it was, you know, yeah, it was more personal. It was spending more time. I think the deals— we're spending less time on deals nowadays. We get a bit spammed, I can tell you. It's not that we have less deals. I think we have actually more deals this summer. So try to summarize as much as you can and focus on the relevant facts. For a VC, it's always the problem, the solution, why is this relevant, why now, and the market size. And your team.

So this is a request beyond the traditional executive summary that I would attach to an email invitation for a pitch, or is it beyond that, or is it smaller than that?

I would say it's at best what the points I mentioned and one sentence for each in an email, and then the details are in the attachment. What we often see is those emails that are talking, saying like, you're very busy and, you know, we do all this and then see everything in the attachment and then people lose interest. So if you catch the attention in an email, it's like a good website or a good book. You should catch, you should answer all the questions already very short in an email. Then I think nowadays that's the best you can do.

Yes, thank you, very helpful.

Thank you. Okay, so we are at a few minutes, so I'm going to have you take one more question from Efrem Epstein.

Yeah, and Camilla, I think Camilla was also waving. I think you don't have the button to wave, so maybe to Efrem.

Well, Efrem, you take it off, and then Camilla, if we have time, we'll go to you.

Okay, I'll be very quick. Jasper, thank you very much.

So a quick question.

First off, what is— I'll be very quick— what is the biggest mistake you see in pitch decks?

The biggest mistake in pitch decks is not getting to the relevant points. So again, it's basically one sentence for each of those areas that I mentioned. You can take the Sequoia deck, and it's just one sentence per slide that is relevant, that sticks, that sticks in my head, that I remember. And I can only remember probably 5 to 6 things that I would share with my colleagues. So if we get 20 pages of very detailed slides, it doesn't help me. So that's a very common mistake. So you're trying to control the situation, you're trying to influence the person, by writing too much on a slide. It's, by the way, the same for bad salespeople. They talk too much. Good salespeople listen.

Thank you.

Cool. Camilla?

Hi, thank you so much.

Camilla Olsen, co-founder, CEO of Savitude. And our design studio is a collaborative platform. It's an ideation platform for fashion designers and merchandisers with advanced aesthetics to keep collections on brand and suggests new designs that work for all body types, and it saves a month in development. The reason I think it might be interesting to you, and that's why I want to ask the question, is I noticed you have interest in— you have investments in Zalando and some other boutique independent lines, but you also have invested in graphic design plays, and this is like a cross between those two. Is that something of interest to you? It is a B2B SaaS business.

Yeah, it is of interest. The big question is how is it different, how you will get traction in the future, because as you can— you know better than me, managing creatives, scaling creatives is not trivial. In the graphic design space, Canva is a very interesting case for that and a pretty huge company. So there were a lot of Canva at the beginning, and now there's just one. So how will you be the one will be probably a discussion because setting it up, having the idea is one step, but scaling it and then commercializing, monetizing it is the second one. I think that will be a very relevant discussion. We have Depop in our portfolio, that's secondhand fashion. It's a huge company nowadays, but that idea you saw it in many countries and we invested because one of the founders, Simon, he was well connected with celebrities, so he could kickstart the whole thing. Dieter Fontys was one example. But, um, so that differentiated the platform on the marketing level much better than others.

Right.

Well, thank you for that. It's my third predictive market, uh, predictive modeling company, so I can answer your questions. I look forward to contacting you.

Good.

Awesome. So that is all we have time for today. Jasper, thank you so much for taking the time. I thank the rest of you for joining us for Annual at Home. We are hoping to see you guys tomorrow for all the sessions and any other hours of networking you've got going on today. So again, thank you, Jasper, and thank you to the rest of you, and I hope you have a great day.

Thanks everyone.

Thanks, thank you.

Stay safe.

Thank you, Jasper.

Jason M. Lemkin.

Ciao, everybody.

Thank you.