May 18

Reflecting this year’s Q&A with Warren Buffett in Omaha

As Warren Buffett has become mainstream, it is now easy to confuse the forest and the trees of the headlines. I made my first trip to the annual meeting of Berkshire Hathaway in 2008 and have been to the event seven times in total. Going back to Omaha is not so much about learning something new, but to be reminded of the important bits that I forget in between.

Highlights from the livestream.

One of the  payoffs of going to Omaha and observing how Warren and Charlie make it through six hours of live Q&A: You get an understanding that the power of your brain does not diminish as long as you exercise it.

The meetings are now being streamed live: Yahoo Finance. The full coverage is seven hours. Few people will make it through, here are a couple of highlights.

16:00 mins: the Prerecorded interview with Warren, talking about bitcoin, and wanting to be remembered as a teacher. More than his track record, his desire to teach makes listening to Warren much more valuable than listening to the many self-proclaimed value investors and often imitators.

50:00 min: Warren gives one of his great lectures on investing. Worth watching the newspaper clippings and then how he explains what would have become out of 10,000 $ invested in the S&P in 1942, when bad news was at its peak, as opposed to buying gold.

Key takeaways from this year

In content, I did not get as much out of it as in some previous ones after the financial crises. This time, I noted some long-term optimism about China as a system. Also notable: a surprising absence of any political agenda, even when pushed by questions from the audience. Buffett insisted on separating his personal views from the business.

It is worth to invert: What did not happen at this meeting nor at any other: Warren Buffett does not talk about succession plans. More generally, as I started digging deeper into this in recent and earlier interviews and speeches, I noted the many references how much he enjoys painting his own painting. But also references to people who never stop working like the CEO of flight safety, who ran the company at age 85, or his anecdotes about Rose Blumkin, who died at age 104, after stopping to work for Nebraska Furniture Mart at 103. You can also see the reference in the “Berkshire System” as laid out in Charlie’s letter to Berkshire shareholders here: There is no age limit for managers.

As now there is way too much about Buffett and Munger (any news outlet do their own ill reflected click baits, there are more than 100 books about Munger), let me list some of my top references:

The best Interviews and speeches:

The essence of Charlie Munger and Warren Buffett  in writing:

Many of the books about Buffett and Munger obscure more than they reveal: As both are very good communicators, it is always a good idea to read the source:

  • The essence of Berkshire Hathaway:
    Special Letters to the Shareholders, the present, the past and the future As they’ve written both their versions, you get two very different approaches.
  • The essence of Charlie Munger. Charlie has been quoted and quoted again, and I think his unique approach to critical thinking is the consistent theme. This is best visible in his 1995 speech The psychology of human misjudgement, which is also the centrepiece of his own book “Poor Charlie’s Almanack”.
  • The essence of Warren Buffett is more difficult to pin down into one core piece. But in his original writing: The Superinvestors of Graham and Doddsville from 1984. Buffett essentially proves that value investing works. This was before value investing became super hyped. Since then Buffett has evolved many times over.

Some of the blogs that I enjoy most:

  • Farnam Street Shane Parrish fs.blog
  • 25iq by Tren Griffin: 25iq.com

Apr 18

Investing in AI & deep tech in Toronto

For two years now, I have been involved in the startup scene in Toronto, centred around but not limited to Creative Destruction Lab (CDL). Toronto, together with Waterloo is an amazing technology hub, which is super successful in AI but also other deep tech endeavours, ranging material science to biotechnology.

My experience as a mentor at CDL is so far amazing, and I remain humbled to be in such an impressive group of advisors. CDL is unique in its approach: Minimizing the time it takes up from founders and maximizing value add by bringing them together with a broad range of experienced entrepreneurs, scientist and investors. CDL gives startups regular exposure to the most prominent VCs from Silicon Valley including Data Collective, Highland Capital, Khosla Ventures and Google Ventures.

After two years now, I am surprised that I have invested in approximately 12 early stage tech startups in the AI and deep tech space. This contrasts strongly with the number of investments in Europe: Where I invested, it was purely because I believed in exceptional founders.The founders I work in Canada with are absolutely stellar. Being sector agnostic helps: My sectors include now health, industrial, infrastructure. Being able to share my experience in hyper-competitive markets, working with venture capital, scaling sales, growing internationally, while at the same time learning from a group of amazing entrepreneurs is very rewarding. What is more, I believe that the returns of these investments will be very good. Early stage investing is always risky, but at least half of my very young early-stage companies already have received follow-on investments from much larger funds, a very good indicator for me.

(above: view from Toronto’s Billy Bishop Airport, returning from a day trip to Montréal.)


Jan 18

“Businessman & Investor” – Buffett.

“I am a better investor because I am a businessman, and I am a better businessman because I am an investor” – Warren Buffett

I don’t aspire to compare myself to the man. But his view does match my personal experience. As a founder, I’ve sometimes been criticized by VCs that I regard my time in startups too much as an investment. I am proud of this. And I am happy with the fact that I can support founders with my operational experience.  Both have worked so well for me. I am an entrepreneur and an investor. Interacting with new founders has been amazingly productive also for my own “flagship” business, now FLIO.

The difficulty lies in one word: focus.

2015: Active involvement in 3 companies I have founded.

In 2015, I was a happy shareholder in 9flats, which I had founded, in avocadostore, which I had co-founded, and FLIO, experts in digital airport experience, which I founded in 2015.  Fortunately, the 2 companies that I did not run myself were in very capable hands. This was a key component in a happy life back then (Thank you Mimi & Roman).

2017: Focus on FLIO, and “other bets”

At the end of 2016, I had divested of my shares in 9flats when we had acquired Wimdu which we later sold to Wyndham hotels. Early 2017, more much more reluctantly, I sold my shares in the growing eco market-place avocadostore. This enabled me to focus much more on FLIO.

FLIO is a very big bet, which can yield phenomenal results for all stakeholders if it pays off: Passengers value guidance through airports, and if we work directly with many airports, we will be able to give them a better passenger experience.  In October 2017 we announced that we have agreed to funding from Avi Alliance, an investor in airports. (Update April 2018, FLIO was accepted to Plug and Play Silicon Valley).

In early 2017, I started to invest more broadly in early stage deep tech through my vehicle Density Ventures. While I had only invested in 3 startups in the past 10 years, I have invested in 6 companies in 2017 alone. Why I started to do this and how it evolves, I hope to detail here in my next post. For now, focusing on one major bet, while adding several small bets seems to work better for me than spreading myself across three major shareholdings.

Feb 15

Introducing Density Ventures and a new Startup.

Too many people have asked me over the past couple of weeks: “What are you working on right now”. Time for some communication – and a rebrand.

Over the past year I have worked with several startups that I advised or invested in. I’ve learned that I am most efficient when I can leverage my own preferences and my own experience into the future.

So far, I’ve done “local” quite successfully with Qype. I’ve done marketplaces with 9flats (large) and Avocadostore (small). Before that I did a lot of media, ranging from the small GEO.de to the extremely large Bild.de. I’ve advised or worked for companies in Fintech, in eCommerce, in Pharmaceuticals (DocMorris). I’ve had a lot of exposure to the travel scene with travelchannel, lastminute.com and again 9flats.

And I’ve always shied away from gaming, gambling and payday loans. I only want to do meaningful stuff. This has worked really well for me during the past 10 years.

In summary here is the common ground in

  1. Businesses I have a reasonable competitive advantage in
  2. Fields that have a great future and are not too narrowly defined
  3. Areas of interest that I love

Enter Density Ventures. I think there is a common ground between local, marketplaces, smart cities. I enjoy discussing strategy with my friends at yell.ru (a Russian Qype, funded by Kinnevik), or expansion with wundercar as well as micro location with BeaconInside. It all seems to work well together. Here is a link to the Density Ventures website and my current portfolio.

A new startup: FLIO. As part of Density Ventures, I am currently working with several people on a new “focus venture”, which I hope will be much bigger than Qype. I can’t say too much about it at the moment, but it will be an app that every one can use at airports, register here to see when it will be launched: Getflio.com.

My Role?

Last week, my friend David Rowan called me a “one person accelerator”. But in reality, I just enjoy doing two things at the same time, being an investor – selecting and supporting future startup successes and also being a businessman or an entrepreneur. Hopefully I can continue to alternate between these roles. I certainly can confirm what Warren Buffet is claiming: Doing both makes you better at both.



P.S. What gives, what won’t be part of Density Ventures?

Media. I still love media, but I’d rather do this in a different context. I would love to see a news app that actually makes money. Or an advertising model that pays for great journalism. Media won’t be a part of Density Ventures. And eCommerce. I love eCommerce, but at the moment it seems like a game of losing money today for market share in the future, which I don’t know how to win.

Apr 14

The Venture Gap in Europe.

European startup ecosystems have matured over the past three years. Most of the discussion was: which cities – London or Berlin – have most startups? Who has exits or lack thereof? My personal view: After an explosion in numbers of startups, I recently see a significant uptick in quality of startups in Europe.

I see better teams and better strategies. With companies like Criteo from France and Zalando from Germany and potentally Soundcloud, there are now the first “Billion Dollar exits” on the horizon. The best indicator of European success according to the EU is that app revenue in Apple’s app store are equally divided equally between US and Europe.

But what about the quality of venture capital firms in Europe? Turning the attention to VCs instead of startups should help entrepreneurs to separate the wheat from the chaff. It also shows that there is still a huge gap in the market for more US-style VCs in Europe.

1. Some basics about Venture Capital

(Experts in the field will want to scroll down to the next heading) 

While many companies have “venture” in their name, most are too small to be considered real venture capital firms. In my view, the minimum size to be able to have a diversified portfolio of early stage investments is 25 M US$. For a reasonable Series A size fund we look at a of 100 M US$ fund size. At my last count there were are acutally less than 10 funds in Germany who fit that criteria. To mind spring eVenture, T-Venture (corporate), Earlybird, Target Partners, Wellingon (Happy to amend if I missed someone). UK has a bit of VC history and larger fund sizes into 500 MUS$, but many of these are focused on non-internet industries. In France there are also several of the 100 MUS$ size. In most other European markets fund sizes peak at about 40 MUS$. In summary: There is simply very little European money in venture capital, paticularly in contintental Europe.

Venture Capital as an investment is on average a terrible asset class. This is not because 60% of funded companies are being written off – that is actually a good thing. It is because on average, the return is just 2%. And for that meagre reward, an investo – a limited partner or LP – is locked in for up to 10 years. And this average return includes the stellar returns of stars like Peter Thiel who seems to turn everything he touches into gold (Paypal, linkedin, facebook and a scary CIA funded beast called Palantir which he recently mentioned in Berlin as his best return). So if you take the stellar returns out, average returns are probably less than zero. Fees are high and often criticised. For a really good general update on what is broken in the VC industry, read the excellent report by the Kauffmann foundation. Regarding Europe: Returns are even a bit worse than US, but again that could change quickly once larger exits do come.

VC as an industry is in danger of being disrupted as well: Angellist built a platform that creates virtual VCs – syndicates – which will broaden the base of investors into super Angels and blurrs the lines to a professional VC.

2. Differences between European and US Style VCs

in the past ten years and across four companies, I have been working closely with more than ten US and European VC firms. I must have pitched close to 100. Two of the funds I worked with had US origins and then partially moved to Europe: Partech in France, the lead investor in Qype, was started by a French guy in San Francisco, and similarly eVenture, the lead investor in 9flats, was started by Germans in San Francisco 12 years before they opened office in Europe. Later I worked with Redpoint in Menlo Park and Greycroft. I have also worked with the larger German funds, Wellington and T-Venture as well as with some UK firms.

Longer History

The most obvious difference between European VCs and US is how old the US industry is. When I pitched Venrock three years ago, I was struck by the pictures in the lobby of aircraft that had been funded in the 1940s. Several of the large US venture funds were founded in the 80s. Very few in Europe were founded before 2000. With many VCs in the US you get an impression that people are very exprienced. Particularly with the principals you often get the impression – once you get to talk to them – that they have seen many cycles and are not easily thrown off. With experience and size comes a sometimes a fantastic network. When you talk to Alan Patricof, who prior to running his VC firm Greycroft was the founder of APAX, you get the impression that there is nobody in US media who is not in his Rolodex. Also with other US funds I was often impressed with how quickly they had access to a stellar expert on any given subject.

Different attitude to risk: Fail fast and back your winners

The most important difference between the good and the not so great funds is: The good funds will let companies fail quickly and reserve their cash for the winners. Companies are much more encouraged to pivot and start fresh. With quite a few European VCs having a background in corporate structures, there seems to be a bigger tendency to keep companies on the balance sheet as long as possible. Also there seems to be a slightly longer hesitation until a company will be allowed to pivot as this also has an effect on how to put the company on the balance sheet. In Europe I still often see a tendency to nudge all starters across some kind of finish line.

Boldness and ability that comes from past success

It is my observation that all investors become bolder when their past invesments were a success. This may be a simplification, but it seems to work. Unfortunately, past successes are still slightly more likely in the US. So later stage funds are rare in Europe, although some are being raised at the moment. Until now, nearly all large B, C, D rounds originate from US funds.

We have some fantastic VCs in Europe. Personally, I think the portfolio of Index is admirable. But Index in my view is very much a US style VC. And again with Index, you can see here that boldness comes from past success.

The effect of quick flips versus thesis driven investments

Experience does shape industries. In Germany, we see an amazing and long lasting success story of the Samwer brothers, who have not been innovating but have been extremely successful in globalising concepts. Sometimes this has lead to ultra fast exits (Alando to ebay in less than four months after launching, Citydeal to Groupon in less than a year and potentially a billion Euro IPO for Zalando in less than five years). In the same way that some American players have been shaped by their past of betting big on risky ideas, some very successful funds have been shaped with their experience of getting fantastic returns by backing the Samwers or similar outfits in clone stories. This of course leads to a predisposition for quick turnarounds with perceived low risk and may leave many more innovative companies waiting for investments.

I personally believe very much in the opposite model: Thesis driven investments. The most famous example of this are for example Union Square Ventures who with an exremely small team managed to fund nearly a fantastic roast of companies in a very short time (Twitter, Tumblr, Etsy, Foursquare etc.) – based on their thesis to focus on companies that can generate huge network effects.

In a more competitive environment for VCs, another extremely lucrative approach is specialization: One European example I like very much is Point Nine Capital. The portfolio looks quite mixed, but there is a clear knowledge in “software as a service” that helps the team to stand out for founders.

The role of limited partners

In the same way as there is a lack of experience in VCs, of course there is a lack of experience with limited partners in Europe. The asset class “venture capital” faces some severy challenges in Europe as many vehicles like pension funds or insurance companies often simply are not allowed to invest. But also the experience of the bolder limited partners in Europe who have tried VC in the past, has been mixed at best. Hence it is not easy to raise capital. Also in my observation if someone has made the family’s fortune with mechanical engineering, he is unlikely to be a bold investor in software afterwards. Again, a different past, inhibits a massive inflow of capital in the future.

3. How active are US style VCs  in Europe?

With all those differences and the notion that capital is free to roam globally: How active are US style funds in Europe? There are of course real statistics somewhere. From my point of view, I see some of later stage funds like Insight (Series B onwards) beeing very active. Particularly in Berlin, it is great to see how thought leaders like Union Square (Soundcloud, Auxmoney), and also Peter Thiels Founders Fund are investing. Blumberg Capital has also been very active in Germany in the past couple of years. But the majority of US funds I speak to, are still very reluctant to invest that far away.

4. Conclusion: A huge gap means a huge opportunity.

Given what I see in the startup market and the lack of venture capital and experience, I am convinced that there is ample room for new venture funds with the following criteria:

  1. Entrepreneurial approach of risk taking and letting companies fail if necessary.
  2. Thesis driven approach or niche specialists.
  3. Fund size between 25 and 100 M US$.
  4. European focus, as the number of sucesses per square mile is not big enough in any European eco system.

Given the pivotal role that venture capital has in generating innovations and future industries, it is vital that these funds get started. I also believe that right now is the time where new companies are being founded in Europe that justify these investments. The challenge remains to convince investors into these funds.