In the 87th episode of "20 minutes VC," Harry Stebbings interviews Yepe Zinc, a General Partner at North Zone, who has played a pivotal role in establishing their London office and has a focus on fintech, SaaS, marketplaces, and mobile sectors. Yepe shares insights on the evolution of the European tech environment, emphasizing the digital economy's growth, and the shift from infrastructure to applications and services. He also discusses the state of venture capital in Europe, noting the alignment of VC talent with entrepreneurial realities and the cyclical nature of investments. The conversation then turns to the fintech space, where Yepe highlights the industry's ripe potential for disruption due to legacy banks' service gaps and the attractive margins in banking services. Despite current frothy valuations, Yepe is optimistic about the availability of development capital to accelerate innovation. He also touches on the success of Nordic tech companies, attributing it to a combination of structural factors and a culture of success breeding success. Lastly, Yepe emphasizes the importance of momentum and continuous performance measurement in startups, offering a glimpse into his investment philosophy and deal sourcing approach.
"I'm Harry Stebbings and this is the 20 minutes VC. And do you know this is the 87th episode?"
Harry Stebbings is the host of the 20 Minute VC podcast, and he is introducing the current episode, emphasizing the extensive content available from previous episodes.
"Yepe is the general partner at North Zone who have investments in just some of the most unbelievable companies, including the likes of Spotify, trust, Pilot and Bloglovin, just to name a few."
Harry introduces Yepe Zinc, highlighting his role at North Zone and their notable investments, indicating the influence and success of the firm in the venture capital industry.
"All you have to do to be in with a chance is head over to the website at WW dot, the Twentyminutevc.com all in letters and sign up for our newsletter."
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"I probably had a slightly unusual way in. I was working as a junior analyst in corporate finance at Deutsche bank."
Yepe Zinc explains his non-traditional path into venture capital, starting from a junior analyst position at a major bank.
"The principal investments were way more profitable business than the advisory business."
Yepe notes the success of the principal investments strategy, which led to a shift in focus at Deutsche Bank, and indirectly influenced his career trajectory towards venture capital.
"The overriding factor has really been the rise of the digital economy."
Yepe describes the primary factor in the tech market evolution as the dramatic increase in the number of people online and the prevalence of smartphones, which has shifted the focus in the tech industry.
"I think if you look at the vcs now in Europe, finally you have the talent within the vcs much more aligned with the entrepreneurial scene."
Yepe observes that the current VC talent in Europe is more in tune with the needs and realities of entrepreneurs, indicating a positive evolution of the VC industry.
"So hopefully that's very different."
Reflecting on the past failures of many European VC firms, Yepe expresses hope that the current VC environment has improved and differs significantly from the early 2000s, suggesting a more sustainable future for venture capital in Europe.
"So typically you will have at least one up and downturn in a single fund cycle. So your job really as a VC, is to make sure to anticipate it and manage value through upturns and downturns."
This quote emphasizes the inevitability of market fluctuations within a typical VC fund cycle and the importance of strategic management through these periods.
"And if I look at our current biggest winners, Spotify and Avito, we invested in the around and Spotify just before the party finished in September of 2008, when the bull market was still very strong. And Avito, we invested in 2010 in the deep bear market."
The speaker highlights successful investments made at different points in the market cycle, suggesting that good investment opportunities can arise regardless of broader economic conditions.
"I think he felt we were all the way at the very peak. Right now, I think that's too blanket a statement."
The speaker suggests that the assertion of being at the peak of the market cycle is an oversimplification and that the situation is more nuanced.
"I see a lot of valuation bubbles in certain subsectors or in late stage VC investments, and that's really because you have a lot of tourists coming in, like hedge funds and other non consistent players putting money into the VC game."
This quote explains the cause of valuation bubbles in certain areas of the market, attributing them to the influx of capital from non-traditional VC investors.
"So the reality is, from a service side, it's a very ripe market to disrupt."
The speaker identifies the banking industry as particularly vulnerable to disruption due to its lack of innovation in service offerings.
"If you look at banking services, typically there's a lot more revenue that can be driven."
This quote highlights the financial attractiveness of the fintech sector, emphasizing the potential for high revenue generation.
"Yeah, no, of course they do. And there are barriers to entry and it is harder to get in as a startup in fintech than many others because of regulation, et cetera."
The speaker acknowledges the challenges faced by fintech startups due to the regulatory environment and the incumbents' advantages.
"It is possible to step in and take these incumbents head on and winning."
This quote provides optimism for fintech startups, suggesting that despite the barriers, success against large, established companies is achievable.
"I think we're very much currently in the first wave of seeing fintech companies literally succeeding by providing an online experience."
The speaker describes the current state of the fintech industry, emphasizing the initial disruption caused by online banking services.
"I think you will find much more sophisticated setup structurally within the startups that's literally going to disrupt the disruptors."
This quote predicts a future trend where new fintech startups will innovate beyond the current offerings, leading to further disruption in the industry.
"Well, I think security is just starting. I mean, one thing is to have your Facebook account hacked, but an entirely different thing is to have your bank account hacked."
The speaker emphasizes the critical importance of security in fintech, given the higher stakes involved with financial data breaches.
"The other side of it, I think, is the business segment."
This quote indicates that the speaker sees potential for innovation and disruption within the fintech business segment, suggesting it is an area of particular interest for future investments.
"er behavior you're changing, it starts on the consumer side, then it's a small business segment and then it's the large business segment. So I think we will see that." "Do you think this excitement around the fintech space is creating bubble like valuations for those fintech startups? Have you seen that personally when investing?" "Yes, in many ways I find it scary, but that's supply and demand speaking. I think we spoke about the cycle. I think we will see that changing as the cycle changes."
These quotes highlight the progression of fintech investment from consumer to larger business sectors, the potential for overvaluation due to excitement in the space, and the notion that the investment cycle will eventually shift, impacting valuations.
"Innovation and also currently invest in series a, am I right?" "Yeah, we try to be stage agnostic, so we do anything from literally a to d round."
The speaker confirms the stage-agnostic nature of their investment strategy, indicating a willingness to invest in startups from early to later funding rounds.
"Speaker C: Okay, absolutely. And then being a dane, I have to ask, Skype, Spotify, we mentioned, obviously Spotify earlier. Series a round for you, Soundcloud, Supercell King, all these nordic companies, what is it about the Nordics, do you think, that's generating this club of unicorns that are just dominating the tech scene at the moment?" "No, I think you're right. I mean, we're not wanting to dish London and UK, which is doing great, but if you look at it, we see very few of the current crop of great winners coming from here. Whereas clearly Stockholm, the Nordics are punching way above their weight."
The speaker acknowledges the exceptional performance of Nordic tech companies in the global tech scene and attributes it to both historical and current factors that foster innovation and success.
"I think it's back to the not being transaction focused. If you don't know which sector excites you and you spend time in the sector before you're making any investments, you are unlikely to ever find the great ones."
This quote emphasizes the importance of sector expertise and relationship building in the investment process, suggesting that a non-transactional approach leads to better investment outcomes.
"Ambition is really a mindset. It's about that feeling that you're on a mission to challenge the establishment, and about that recklessness and purity of thought and saying, we just want to win."
The speaker describes ambition as a key trait for both investors and startups, suggesting that a shared mission and drive to succeed are vital components of the investment philosophy.
I think it's always about leveling up. It's about saying, how fast can you learn to be the best and deliver the best product? No, it's not daily goals. It's about having continuous KPIs and continuing measuring whatever you have so that you have the ambition in line with performance. And therefore you always make sure that it's dynamic.
These quotes highlight the focus on continuous improvement and the use of ongoing Key Performance Indicators (KPIs) to ensure that a company's ambitions are matched with its performance, thereby fostering a dynamic environment.
It's so different from startup to startup. But for me, it's all about momentum. If I don't sense that momentum and momentum can be in product development, if I don't sense things are happening, then I always push, because I think momentum is when you have momentum, you can do amazing things. If you don't have a momentum, everything gets tougher.
The speaker emphasizes momentum as a key indicator of a startup's potential for success and the need to push for progress when momentum is not present.
I'm quite dull. Skype City method to get around London. Genius to sign documents. It's important. I'm more of a dabbler, so I use newsify to sort of scan through a larger amount so I don't really have a single one to log on to. Although in Europe I suppose I'm enjoying currently Fred Deston's strictly vc.
The speaker lists the productivity tools they find essential and describes their approach to consuming information from various sources, with a mention of a preferred newsletter for VC insights.
Fintech. I suppose Peter Thiel has to be head over know the lighthouse there with PayPal, stripe, palate, et cetera.
The fintech sector is singled out as particularly exciting, and Peter Thiel is recognized as a prominent figure in the field due to his contributions to major fintech companies.
Yeah, I'm less of a fan when it comes to business literature. I'm less of a fan of people searching for malay ways of delivering startup success. So personally I enjoy reading things like growth engines. I can't remember who it was by Ellis, I think, who's really just a collection of interviews with founders. And what you read is the randomness of every single startup. It's different stories. And the red thread is really tenacity and learning through failure.
The speaker reveals a preference for reading material that provides diverse perspectives from founders, emphasizing the importance of perseverance and learning from setbacks.
Was a company called Crosslend. And indeed that is one I would describe as this second wave of fintech companies. A consumer lending company and its management has been sitting as part of some of the first wave companies and saying, hey, we can do this better. And they've set themselves up in a way they think is superior to the current wave, and I believe them.
The quote explains the speaker's rationale behind investing in Crosslend, highlighting its strategic advantages and potential to outperform earlier fintech models.
And if you would like to catch any of the resources mentioned by Yepe in the show today, head on over to our site@www.the, twentyminutevc.com where you can find all the links to the resources. And I specifically recommend startup growth engines. Absolutely amazing. Really is a must read for all interested in startups.
The host provides information on where to find resources discussed in the podcast and makes a specific recommendation, also promoting a giveaway to engage the audience.