Sramana Mitra: Let’s double click down on your portfolio. In what shape did they come to you? What stage? What is it about them that attracted you enough for you to make the investment?
Daniel Keiper-Knorr: Typically, we try to be the first institutional investor coming on the cap table. However, we don’t see ourselves as a typical institutional investor because we run a very specific model that differs significantly from the standard two and twenty VC model. Apart from managing €50 million as supported by two to three principals and double the number of analysts and associates, our model is different.
I said we managed €230 million. Currently, we are doing this with a team of 50 people spread in offices in chronological order of the opening – Vienna, San Francisco, Munich, Berlin, and London. We have run the San Francisco office from day one. Back in 2011, we already had a third of the team full-time based in San Francisco. The team over there typically helps us in screening and benchmarking deal flow. Then we identify a company over here in Europe.
We quickly show it to our US partners and see if this idea gets them going in or is not exciting to them. Once the company is on the portfolio, the US office helps a lot with fleshing out the US go-to-market strategy. Also in the later stage when they’re approaching the later funding rounds, they do a great job when it comes to presenting those companies and prequalifying potential following investors and making sure the entrepreneur has only to do those meetings that are worth attending.
We try to spare him from all those empty kilometers that typically are there when you’re going out in a fundraising campaign. We’re trying to deploy your first check of €500,000. This implies of course evaluation in the range of €2 million to €5 million. That company is definitely in pre-product market fit. This is, at least, our understanding from the European perspective. We like to see a company’s pre-product market fit. However, they should have at least a prototype working for first POC’s.
These are not necessarily commercial POC’s. They’re running it, at least, in an internal test environment for the B2B space. We try to get in between minimum viable products aligned and product market fit not totally reached yet. Sometimes there can be false positives. Together with the entrepreneur, our job is to take his product, bring it together to the market, work on the positioning, and run through a pivot together with him.
All we do is point to the target of getting the company series A ready. This means shaping out the product, testing the market, winning some first customers together, maybe bring them over into the renewal phase of the contract, take the learnings out of the market, refine the product, and stock up the team. Of course the core team and the entrepreneur are there but clearly the SVP level is not. We then run our own HR unit, helping our portfolio to recruit, trying to fill those blanks, getting the team complete, the product in shape, and the market tested.
Then we expose signals from the market, increasing all the volumes, and all those things that tell us that the company is about to approach product market fit. In terms of business, this is the famous $100,000 MRR number that should be clearly in sight. How would you start to fundraise without a clear path to crack the $100,000 within the next one or two quarters?