20VC Why Signalling Risk is Real, What Founders Need to Know About Taking MultiStage Money vs Seed Fund Money, Lessons Scaling to $600M AUM, The Secret to Hiring in VC; Hire People with No VC Experience & How Venture Will Be Disrupted with Rob Lacher

In this episode of 20 VC, host Harry Stebbings interviews Rob Locker, founder of Visionaries Club, discussing the intersection of entrepreneurship and venture capital. Locker, who previously founded Amaze and sold it to Zalando, and later started Lafar Media, emphasizes the importance of founders thinking independently about their capital needs and growth milestones, rather than succumbing to the hype of raising excess funds. Visionaries Club, under Locker's leadership, has grown to $600 million in AUM in just three years, backing notable European startups. The conversation also touches on the effective use of tools like Coder and Brex to enhance team efficiency and productivity. Locker and Stebbings delve into the nuances of VC, including the dynamics of fund management, the impact of U.S. funds in Europe, and the strategic approach to seed investing. They consider the potential for Europe's family businesses to become a driving force in the VC ecosystem, akin to Silicon Valley's tech giants. Throughout, Locker advocates for a VC industry that is as entrepreneurial and disruptive as the companies it funds.

• There is a diversity of successful approaches in the venture capital (VC) industry.
• Entrepreneurs should focus on their unique needs and goals rather than conforming to the hype.
• Founders should independently determine the amount of funding required, hiring needs, and short-term milestones.

"There are a thousand ways to be a great entrepreneur in the VC space. There is too much hype about what's right, what's not right. As a founder, just think totally independently, how much money do I need? Which people do I want to hire? What are my milestones in the next one or two years?"

This quote emphasizes the importance of founders thinking independently and focusing on their specific needs rather than getting caught up in the prevailing trends and hype within the VC industry.

• Harry Stebbings discusses the rarity of fund managers with entrepreneurial mindsets.
• Rob Lacher's background includes founding Amaze and Lafar Media before creating Visionaries Club.
• Visionaries Club, founded in 2019, quickly scaled to a significant amount of assets under management (AUM) and backed notable companies.

"So Rob founded Visionaries Club in 2019. In just three years, he scaled the firm to $600 million in AUM and backed some of Europe's best, including central Pigment, personio, Miro, and Leggy, to name a few."

This quote provides an overview of Rob Lacher's achievements in establishing Visionaries Club and highlights the rapid growth and success of the firm in the VC space.

• Coder is praised for improving team efficiency and collaboration in VC firms.
• Coder centralizes information, facilitating smoother team operations and decision-making.
• Brex and Intercom are mentioned as essential tools for financial management and customer service, respectively.

"With Coder, you'll never ask, where are the latest project updates? Anyone know what the performance stats are? This is really what bogs down teams and slows their productivity."

The quote highlights the benefits of using Coder to centralize data and streamline communication within teams, thereby enhancing productivity and efficiency.

• Rob Lacher's entry into VC was driven by a passion for entrepreneurship and investment.
• He was influenced by mentor Jochen Engard and the desire to connect old and new economy entrepreneurs.
• Lacher began his VC career through angel investing and subsequently co-founded La Familia.

"The first time I heard of venture capital was when I was 22 at university. And I thought after the lecture, fuck, this must be the most amazing job on earth."

Rob Lacher reflects on his initial fascination with venture capital and his eventual path towards becoming an entrepreneur in the VC industry.

• Rob Lacher discusses the importance of alignment and complementary skills in VC partnerships.
• He emphasizes honesty and shared vision when forming long-term partnerships.
• The balance between different perspectives and shared core values is crucial for successful collaboration.

"The more complementary ingredients that you can find in a person, the better it is. But you need to be aligned on the core, on how to do everything."

This quote stresses the need for VC partners to have complementary skills while sharing a core alignment on fundamental aspects of their collaboration.

• Lacher identifies with both roles of entrepreneur and investor, finding a balance between building a VC firm and investing.
• He highlights the entrepreneurial aspect of creating a VC firm from scratch.
• The challenge of hiring the right team for a VC firm is acknowledged, with a preference for young, ambitious talent over experienced linear thinkers.

"What gets me up in the morning is basically on the one hand side, we're entrepreneurs. We need to build the company that we're investing with, right?"

This quote captures Lacher's dual identity as an entrepreneur who builds his VC firm and as an investor who supports other companies.

• The difficulty lies in balancing entrepreneurial tasks with investment responsibilities.
• Building a strong team is key to unleashing a VC firm's potential.
• Hiring for a VC firm is challenging due to the unique combination of qualities required in candidates.

"I think it is this balance of being an entrepreneur and being a VC with all the things that you have to do at the same time."

Rob Lacher discusses the complex challenge of juggling the roles of an entrepreneur and a VC, emphasizing the importance of team building in overcoming these challenges.## Starting a Fund

• In the beginning, fund founders do everything themselves, covering multiple roles.
• It's vital to instill the fund's unique DNA early on.
• The goal is to hire people who excel in their roles, allowing the fund to grow exponentially.
• As the portfolio grows, founders cannot manage everything and must delegate.

"Look, in the beginning, you're doing everything right. So it was just Sebastian and I starting the fund, and you're CFO, your chief media officer, your chief investment officer, and you just cover everything."

This quote emphasizes the multitasking nature of starting a fund, where founders take on various roles before hiring specialized staff.

• Visionaries hire people with a mix of job description and freedom to innovate.
• They avoid hiring those with an entitlement mentality, focusing on those who believe in the entrepreneurial spirit.
• High salaries are not offered; instead, they provide equity and career growth opportunities.
• Visionaries value co-entrepreneurs who can rapidly become partners and lead funds.

"We hire people, that we give 50% a job description of why we need someone, and 50% we give them the degrees of freedom to use their time to really unlock what they love doing, what they're good at, and what really in turn brings our company to the next level."

This quote outlines Visionaries' hiring philosophy, which balances structured roles with creative freedom to maximize employee potential.

• Entitlement among potential hires is a challenge.
• Visionaries seek individuals who are willing to take risks and are not primarily motivated by high salaries.
• They prefer to hire those who are passionate about the company's vision and willing to grow with it.

"I think it's an adverse selection. Like, those are not the people that we want to get with visionaries."

The speaker suggests that those who demand high salaries may not be the best fit for a company that values risk-taking and entrepreneurial growth.

• A new fund must offer a clear value proposition and be a "painkiller," not just a "nice vitamin."
• Investing in hype deals without differentiation leads to an average market index, which is not the goal.
• A blend of hype deals and unique investments can impress LPs and demonstrate market savvy.

"If you want to be a new fund for a cap table of a founder, you need to be a painkiller, not a nice vitamin."

This quote highlights the importance of having a strong, unique value proposition to stand out in the competitive fund market.

• There are two seed investment models: broad portfolios (like Y Combinator) or concentrated portfolios.
• Visionaries focus on a concentrated strategy, aiming for significant ownership in a few high-potential companies.
• The goal is to invest in companies that can provide exceptional returns, even if it means higher risk.

"The other model is that you try to build a more concentrated portfolio of 25 companies where picking is more important."

The speaker explains Visionaries' preference for a concentrated portfolio, emphasizing the importance of careful selection in seed investing.

• Visionaries aim for 10-15% ownership in most of their seed investments.
• They keep flexibility for exceptional cases where different investment structures might be more beneficial.
• Clear communication with founders about investment strategy and partnership expectations is crucial.

"We say 80% of our receipt portfolio is ten to 15% ownership and 20% we leave room."

This quote describes Visionaries' typical ownership targets and their willingness to adapt their strategy for certain investments.

• Visionaries focus on pre-seed and seed stages, avoiding Series A due to high competition and valuations.
• They return at Series B when they can add significant value through their network and expertise.
• The fund complements other investors by providing focused investments rather than competing with larger funds.

"We're good at pre-seed seed. We've all been entrepreneurs before, and we will love working with founders, really at those dirty early stages."

The speaker explains Visionaries' strength in early-stage investments and their strategic choice to skip Series A in favor of stages where they can add more value.

• Visionaries maintain a consistent reserves management strategy, allocating 60% for follow-on investments.
• They avoid momentum investing and encourage disciplined fundraising among their portfolio companies.
• The fund size has increased to accommodate larger initial check sizes due to market conditions.

"In the current fund, we have 60% reserve. In a seed fund to follow on, 40% is initial reserve."

This quote reveals the fund's approach to reserves management, highlighting a disciplined strategy for follow-on investments.## Founder Decision-Making and Fund Selection

• Founders should conduct deep referencing before choosing to work with a fund, treating it like a binding commitment akin to a marriage.
• Long-term thinking is crucial; founders should not be swayed by large investments from US brands without considering the implications.
• Many founders at the seed stage prefer European seed funds due to closer relationships and meaningful engagement with partners.
• Founders should be independent and selective, choosing funds that offer significant checks and board positions from partners, not associates.

"I think those founders that we want to back are those guys that really do deep referencing on the funds that they want to work with and have a super clear impression why they want to work with which fund."

This quote emphasizes the importance of founders performing thorough research and having clear reasons for choosing to work with specific funds.

"I see two thirds of the founders at seed stage that have those term sheets rather going for european seed fund setup because they want to keep the Iran open to choose from those funds."

This quote reveals a preference among founders at the seed stage for European seed funds, which may offer more tailored support and flexibility.

• Founders should actively consider the implications of partnering with multi-stage funds, including the potential for reduced attention and the signaling risk if the fund does not lead the next investment round.
• Multi-stage funds cannot maintain quality if they lead too many seed rounds.
• Signaling risk is a real concern, as other funds take cues from a multi-stage fund's decision not to lead the next round.
• Price optimization is often overlooked by founders, who may not realize that multi-stage funds might not want to maximize the valuation in subsequent rounds.

"At seal you're a very small check of a huge fund."

This quote highlights that in a multi-stage fund, a seed investment may be a minor part of a larger portfolio, potentially influencing the level of attention the startup receives.

"It is terrible for you as a founder if things don't work out, there are three scenarios."

The speaker outlines the three possible outcomes for a founder if a multi-stage fund does not continue investing, illustrating the potential challenges and perceptions within the venture capital community.

• Small boards can be beneficial as they necessitate active participation and hard work from members.
• The best role for a VC on a board is to serve as a devil's advocate, expanding the founder's options rather than pushing their own ideas.
• Large boards can be detrimental if they provide conflicting advice and lack clear direction.
• Misalignment between VCs and founders can occur due to VCs' ability to be opportunistic with their investments, whereas founders are more singularly focused on their current venture.

"I think small boards are great because it forces everyone to work hard."

This quote suggests that small boards can lead to more effective governance due to the visibility of each member's contributions.

"I think it's opportunism."

The speaker identifies opportunism as a potential source of misalignment between VCs and founders, with VCs having a broader portfolio to manage and founders being more singularly invested in their venture.

• The speaker values long-term commitment to their investments over immediate financial gains, such as through secondaries.
• Correct pricing and valuation at the seed stage are crucial to ensure the startup has the right strategy and optionality for future funding rounds.
• Founders and VCs should align on the vision for the company's growth rather than focusing on the exact valuation or ownership percentage.

"I don't want to say that I'm absolutely not interested in money, but I think my North Star is if I do what I love doing every day."

This quote reflects the speaker's philosophy that passion and long-term vision are more important than immediate financial returns.

"We've never had a negotiation at the seat stage with a founder about price point because we wanted to have 1% more or 2% less."

The speaker underscores the importance of aligning with founders on strategic vision rather than getting caught up in minor differences in valuation or ownership stakes.## Venture Capital Funding Rounds

• Discusses the importance of having enough funding to reach various versions of a product (V1, V2, etc.).
• Emphasizes the US's ability to provide sufficient runway for startups to iterate and develop beyond their initial version.
• Highlights the iterative nature of startups and the need for multiple versions to reach success.

"You don't get v two with a million. In most cases and most things we set need the v two. They have some fail, they need iteration. It's on the second or third thing."

This quote explains that a startup typically cannot achieve a successful second version of their product with only a million dollars in funding. It underscores the necessity for iteration and the common occurrence of failure before success.

• Toby at Shopify believes that the best businesses are built around constraints, which can be either artificial or real.
• Constraints can drive innovation and efficiency within a business.

"Like Toby at Shopify said to me the other day that the best businesses are built around constraints, whether artificial or real."

The quote conveys the idea that constraints, whether deliberately imposed or naturally occurring, can be beneficial in the business-building process, fostering creativity and resourcefulness.

• Discusses taking a long-term view when evaluating companies, ignoring cyclical trends and focusing on what is fundamentally healthy for building a great company.
• Encourages entrepreneurs to think independently about their funding needs and milestones.
• Suggests raising slightly more capital than needed to ensure a longer runway and better positioning for future fundraising rounds.
• Advises that ownership can be optimized in later rounds if the company performs extremely well.

"Looking at a company, we take a 1015 year perspective and exclamate any cycle thinking or whatever. Just think about what is healthy and what makes sense to build a great company."

The quote emphasizes the importance of focusing on the long-term health and viability of a company, rather than getting caught up in short-term cycles or trends.

• Discusses the potential for Europe's family businesses to become major tech drivers similar to Google or Amazon.
• Highlights that many of these family businesses are profitable, fast-decision makers, long-term thinkers, have domain knowledge, and control global supply chains.
• Suggests that leveraging the strengths of these family businesses could significantly benefit the European VC ecosystem.

"If you take those family businesses together, I think this is our Google. If we unlock the alpha domain knowledge in those verticals, if we unlock the profitability, if we get that into the vc ecosystem, this is how we can build our Google together, combining the domain knowledge and the capital available."

This quote underscores the idea that by tapping into the collective strengths of European family businesses, Europe can create its own version of a tech giant like Google, thereby enhancing the VC ecosystem.

• Discusses the need for family businesses to embrace their entrepreneurial roots and take risks to remain competitive.
• Suggests that these businesses need to invest in new areas and think about their long-term business models.
• Questions who will catalyze the change needed to unlock capital and encourage risk-taking.

"Those companies and those people need to be entrepreneurs and go back to their roots."

The quote highlights the necessity for established family businesses to reignite their entrepreneurial spirit and take risks to innovate and grow in the modern economy.

• Envisions a future where venture capital is disrupted by those who are investing in disruptive industries.
• Believes that unlocking domain knowledge and capital from successful B2B founders and family entrepreneurs could reduce the need for traditional VC funds.
• Discusses the potential for a new, smarter approach to venture capital in Europe.

"Venture capital itself got disrupted for the first time in history because VC are investing in disruption, but have been the least disruptive industry themselves in the last 50 years."

This quote suggests that the venture capital industry, despite its focus on investing in disruptive companies, has itself remained largely unchanged and is ripe for disruption.

• Discusses the role of media in venture capital and the potential for leveraging media to become better investors.
• Considers 20 VC not just as a media company but as a data company, due to the extensive information gathered from founders and companies.

"My job is to build the next great venture firm at the intersection of venture and media and to leverage media products to allow me to be better investors."

The quote explains the speaker's goal of creating a venture firm that utilizes media not only for publicity but as a means to gather data and improve investment decisions.

• Shares personal preferences for investing in European seed firms, specifically microfunds like Beyond Capital and Kokoa.
• Expresses belief in young, ambitious, and intelligent fund managers.
• Discusses preferences for growth firms, highlighting a preference for 180 North due to their humility, domain-specific focus, and deep engagement with founders.

"I believe in those young managers that are hungry, hypersmart, talented and still have this ambition to win."

This quote reveals the speaker's investment philosophy, which values the drive and intellect of young fund managers who are eager to succeed in the venture capital space.

• Questions the emphasis on economic growth as the primary goal for Western economies.
• Suggests that relentless pursuit of economic growth is no longer suitable and calls for a new value system.

"I think growth is not the right north star like economic growth for our western economy anymore."

The quote reflects a shift in the speaker's perspective, challenging the traditional focus on economic growth and advocating for a reassessment of societal values.

• Shares personal values, placing family at the center of importance.
• Discusses the legacy one leaves behind, suggesting that the love for family is the most significant aspect of one's life.

"It will be something in the direction for Kate, love of my life, because family for me, as much as I love venture capital and tennis, even though I'm not talented enough, is the most important thing in life."

This quote conveys the speaker's belief that family is the most important aspect of life, surpassing professional achievements and personal interests.

• Expresses admiration for Doug Leone's work ethic and hunger for success at an advanced age.
• Discusses the importance of being fully committed in the venture capital industry to be an effective partner for founders.

"Keeping that hungriness, keeping that discipline of working 150% hard still at that age, is something that I think is very inspiring."

The quote highlights the inspiration drawn from observing a seasoned professional who continues to work with passion and dedication, serving as a mentor and role model.

• Discusses the desire to build Visionaries to endure for decades, rather than setting a linear goal.
• Emphasizes the importance of the network of entrepreneurs and the potential for great achievements to emerge from their collaboration.
• Expresses a belief in the power of ambitious dreams and the ability of the team to shape the future of the company.

"I don't want to think that way because then it's a linear goal. So I don't want to retire yet. I'm hungry, and I want to build visionaries to endure the next 30 or 40 years."

This quote reflects the speaker's long-term vision for Visionaries, focusing on building a lasting and impactful organization rather than pursuing a finite goal.