A Burger Story

People sometimes ask me whether Xavier’s humility, approachability, attention are genuine or staged. My impressions are subjectives, but facts don’t lie, so let me tell you a true story, how it answers that question without a doubt and what lesson we can extract from that.

A pandemic ago, we flew with Xavier from Paris to San Francisco for a couple of days. I must admit that flying private from Europe to the United-States was very pleasant. We had different journeys and were supposed to meet at the airport the day after in the afternoon.

I arrived first and quickly made my way to the plane. There, I received a text from Xavier : “we’re going to In-N-Out, want something ?”

Half an hour later, when he arrived, he handed over to me a warm Double-Double. I noticed it was warm and made a comment about it like : “cool, it’s still warm !”

He didn’t say a word but the person who was with him told me “It is still warm because Xavier waited to finish his burger before lining up to get yours”

I think this short story says a lot about his genuine intentions. Beyond his attention, he delivered it in the most caring and humble way.

I like to remember this story, it reminds me how much humility and kindness are the currency of the greatest.

Our attitude determines our altitude :)

2020 was just a test...

Chance favours only the prepared mind

My twitter feed is full of mega rounds, tremendous returns, realised performance. hype, energy, velocity hit everyday an all time high.

We’re going through a tech prime time. The amounts invested are growing faster than companies can absorb them, bank accounts are full, the valuations are without a doubt two to three times higher due to the pre-emptive behaviours that are ruling this massive influx of cash.

With abondance comes extremes, in terms of expectations, velocity, hiring rates, burn rates, living rates... It all inflates. Unfortunately, extremes aren’t sustainable, scarcity always ends up hitting hard to balance the pace of humanity.

This being said, I believe that our fundamentals are strong. Tech companies are growing fast, building real solutions, delighting customers and bringing real money home. Trillions going into high valued, fast growing, yet cash-burning tech companies are ten times better invested than trillions going into leveraged derived assets.

However, when casino night will be over, there won’t be only winners. Investors won’t be able to commit everywhere anymore, they will fill their rescue boats with the top quartiles and leave the rest behind. Sharks will come around and eat them. I am even wondering if some limited partners (investors of funds) will default ?

It always gets ugly. Remember that chance favours only the prepared mind. 2020 was a relatively short full-scale test, followed by a great rebound, an opportunity to touch bottom, explore our boundaries and test our ability to act upon a disastrous event.

We should not rest and take this opportunity to reflect on our ability to get really prepared when it will really hit ! Here are a couple of takes, happy to read yours in the comment :

  1. If you act like the party is already over, you will look like either a coward or a walking dead and you will be left behind when it will hit the fan and that triage will start. Keep investing, keep pushing.

  2. Priority number one is always a very strong product market fit. If you feel like you’re working on a vitamin pill, your product will disappear from your customers’ shopping list by the time they cut their costs. Build something people really need and want.

  3. Cash is a luxury that tends to impact negatively the ratios between the number of people, their costs and their results. Make sure you get the most out of your team.

  4. Burn cash, save cash. Companies get ultra-capitalised. Be mindful of using the cash wisely. It doesn’t mean to save it all, neither to burn it all. Invest to hit your goals in due time, be prepared for a change of plan.

When I engage with founders at the moment, beyond their talent, ambition and work ethic, I am a lot more diligent on assessing their grounded approach of things, their self-awareness and their pro-active resilience. I believe those qualities will allow them to thrive through both the noise and the turmoil that will eventually hit us someday…

What’s your take?

Mechanics over Mindset

The English version of Human Machine to download

You can download a rough version of Human Machine here.

It is winter holidays, 7.30am and we’re waking up the kids. Every Monday, they attend their Chinese class, and todays it starts at 8am. They are turning 11, 9 & 7 this year. I am amazed by their motivation, their good mood, their willingness to be good students.

I find the contrast with my young self fascinating. I have never been that kid. Our education, alongside my brother and my sister, was a lot more loose, even though it’s been filled with truth, love and values. I couldn’t picture myself with a smile on my face, learning Chinese or doing my homework with such diligence.

Looking backwards, it’s easy to draw the path. I have reflected on the remarkable events of my life, on the things that drive my actions and reactions. It allowed me to know myself better, to understand my emotions, my triggers, my mindset.

To get to know yourself is like to understand the mechanics of a machine. A machine is tangible, it’s rational, it’s mostly logical. A mindset is intangible, it’s emotional, it’s irrational. Yet, both are linked to one another and if you ask me, it’s easier to work with the dynamics of the machine first, rather than the mindset.

One of the best universal example, is what many parents tell their kids during their young age sometimes around the dinner table: “Do what you love, you’ll be great at it”. It couldn’t be more wrong. Love is a feeling, and it can sometimes be a fantasy. There are lots of things we believe we love and that we’re quite mediocre at. That’s why I always give the opposite advice to students, young professionals, and my kids… “Do what you’re great at, you will love it”. It probably sounds a bit less inspirational but it’s definitely closer to the truth.

When we ask our kids to wake up early during holidays in order to attend their Chinese class, or whenever we insist on the fact that a smile, a nice word and genuine intentions win over a behaviour of domination, rudeness, resentment, we push them to act on a certain way. if gratitude and rewards result from these efforts, it provides satisfaction, completing a loop where by working on mechanical aspects, we gain satisfaction throughout certain actions, impacting meaningfully our mindset.

While my diligence and patience towards helping my kids grow-up with the right aptitudes is questionable, my wife on the contrary is a force of commitment in that regard. And we all know how much patience it takes to help a young individual achieve meaningfully their potential.

Amusing twist to conclude, today they learnt the word “calm” as peace, tranquility, a sign represented by a woman under a roof, the solid chief of a home, a family in Chinese.

What is true for kids is also true for adults. To adjust your mindset, get to know yourself better and then act on the mechanical elements that will make your machine work towards achievements and satisfaction. From there your mindset will evolve.

Back in 2018, I wrote a book called Human Machine, based on that same principle. Initially, it was written in English and then translated into proper French; The original version hasn’t been corrected but it’s quite authentic nonetheless and you can download it for free here: https://docsend.com/view/rujs8hr6nrsxzr9p

The Trillion Dollar Question

more demand = more supply = more demand ... until no more.

Demand can only be served if there is Supply.

A market implodes when there is no more supply or when the supply were artificially created to please the demand for too long and can’t be absorbed anymore.

I’ve done some back of the enveloppe calculations based on quick searches this morning. My assumptions might be completely stupid… But I was wondering how much capital would venture capital backed companies need in the coming years to sustain their non-profitable growth rate.

I’ve only looked at the numbers in the US. They were easy to find and seem highly relevant in this market.

In 2020, Seed Rounds in the US exceeded $7B;

During Q3 2020 only, 90 companies raised rounds beyond $100M;

More than 400 companies got listed in the US last year, raising approximately $140B;

In the meantime, the non-profitable technology index published by Goldman Sachs jumped to the roof from 100 to 400 in 2020 only.

Many tech companies must keep raising money to live (survive)

Some back of the enveloppe calculations…

Extrapolating Q3 2020, there were 400 companies in 2020 that raised somewhere around 70B total in their venture-growth stage rounds beyond $100M, which is approximately 10x the amount raised by seed companies during the same period by roughly 1600 companies. During the same period, 450 companies went public in the US, raising a total of $140B.

Also, in 2020, a total of 10 000 VC-backed startups have raised around $150B in the US. It excludes tech IPOs.

Making sense of those numbers…

Taking some rough assumptions about dilution and revenue multiples…

Seed deals were valued at a total of $50B in 2020, Venture-Growth stage deals at about $700B and newly listed tech companies at about $2000B, we’re talking about $3000B of value creation combined. 3 TRILLION.

If we take into account that those companies raise at average revenue multiples of 100x for seed deals (who cares really…), 30x for venture growth stage deals and 20x for listed tech companies, those companies must have generated around $124B in revenue in 2020.

Is this real ?

My first question is… Did those companies really generate more than $100B in revenue. If not, it raises a frightening question around the artificial value created by the market.

Can we sustain this pace ?

A fair amount of those companies are still burning quite a lot of cash and will need to be capitalised again, including the listed ones.

If their revenues increase by 50% within the next 12 to 18 months, reaching about $200B and they decide to raise on a 20x multiple for 5-7% of dilution, they will need an additional $200-250B, on top of the $150B already needed by the rest of the venture capital market and the $100B to $200B needed by newly listed tech companies.

Can the market absorb a cash requirement of $400B to $600B for all those US tech companies ? This is my trillion dollar question !

Join New Wave

We are expanding our team :)

New Wave is a seed fund for European founders. Our ambition is to become a reference point, alongside the best venture capital investors out there.

I remember an occasion in early summer 2016 when Pia, then an associate at Accel, wanted the firm to lead the Seed round of Payfit. At the time, the company was at 20k of monthly recurring revenue. Eventually, they ended up investing just nine months later, when the company had reached 100k of MRR, with Accel’s Philippe Botteri joining the board. But it already demonstrated her attraction for Seed rather than Series A deals.

A few years later, Pia decided to pursue something she felt was closer to her true self as an investor and joined Stride, a new seed fund launched by two prominent figures in the VC world, Fred Destin and Harry Stebbings. There, she chased and led several seed rounds. Among them were non-obvious, non-consensual deals, like Impala - A travel hospitality tech platform - which we co-led together. She also managed to spot companies like Sorare - A digital collectibles experience for sport fans - pretty early on!

I feel very lucky to work with Pia. She always had this sixth sense with founders and early opportunities. She has got this unique duality being a structured mind with real conviction. Instinct is her strength, diligence is her secret ingredient. Despite her impressions, she always manages to keep her head cool and pursue a process of market understanding and founders' analysis with a remarkable discipline.

New Wave is the result of an organic path.

When she decided to join Stride, we discussed the move extensively together. It felt and was the best move at the time, the natural step towards someday launching her own firm. To understand the elements that led to New Wave, a couple of thing should be put into perspective.

1) Seed is the new Series A and vice versa

Back in 2015, when I joined Xavier Niel, we were mainly investing through Kima Ventures (100 deals per year, 150k per deal, a small team of three people, now composed of Jeanne, the Jedi of asking the right questions and spotting deals before everyone else, and Alexis, the European non bullshit master of all things tech in venture… Among other things :)

We started to invest in larger deals with Xavier, an attempt to spot the most incredible companies and get more skin in the game. Over the past five years we invested in about three larger deals a year, including Zenly, Payfit, Alan... The average amount started at €2m to €3m, we were co-leading Series A deals. Over the past two years, in order to co-lead Series A deals, we noticed that the average ticket was more in the €4m-€6m range. Also, ambitious seed entrepreneurs raised higher amounts.

We realised that with the same amount of capital, we preferred to lead more deals, earlier. Instead of leading around three deals a year for a total close to €12m-€15m, why not lead seven or more deals a years for the same amount?

But this changes the dynamic as the approach to sourcing must be a lot more robust because the number of seed opportunities is incredibly high, especially if you target Europe. And therefore you can’t do this as a single investor if you want to be a generalist. A note about single-investor funds : It doesn’t scale. So either you’re a specialist à la Adjacent, à la Gelt, or a generalist follower with a network à la 20VC or à la Kima Ventures…

Therefore it was becoming clear that we had to partner to win.

2) The rise of angel investors and operators

The number of investing entrepreneurs and operators has increased tremendously over the past years, in the US as much as in Europe. If you want to build the most ambitious seed fund in Europe, it only works if you find a truly collaborative way to do it with them.

New Wave is founder-centric. It is not only about the entrepreneurs we fund, but also about the entrepreneurs we partner with as limited partners, co-investors or advisors.

When Pia and I discussed with Alex Yazdi, Antoine Martin and Xavier Niel about the kinds of people we wanted to partner with, we set a simple rule: are we comfortable adding them in the same group on Telegram or having them all together in a room?

We aim to foster a group of like-minded people who are incredibly ambitious yet humble, and it starts with a partnership that shares those values.

3) Alone we go fast, together we go far

Pia and I started to talk early summer 2020 about her new initiative and how we could support her.

It’s not new for us, we have supported quite a few other first time funds. Except that this time, on top of being close to Alex and Antoine, the first anchor investors of the fund, the purpose was closer if not identical to our own shift. And we had worked with Pia on many deals together as co-investors or board members.

We felt very complementary and therefore started to define whether New Wave was compatible with my role as managing director at Kima Ventures. As Xavier once told me: It’s ok to launch new initiatives as long as we don’t stop what we’re already doing and that it doesn’t impact them negatively. Even better if a new project can positively affect our other initiatives.

And so we teamed up, the five of us, to start New Wave.

Adding a new member to the team

We’re now in the process of hiring one or more new members to the team. We have started discussions with amazing candidates and we have highly appreciated their proactive approach. At the same time, we still want to run a thorough recruiting process, not too rigid, but very disciplined nonetheless.

We’re looking for people with three sets of attributes:

The ability to search, filter, run through a pretty high volume of data/information and see quickly and clearly through them to spot the best teams and companies; analytical mind with an ability to cut through the noise and synthesise.

The ability to form opinions, express and defend them with awareness, not stubbornness; To follow the signals but equally to remain immune to them.

The ability to create and maintain strong relationships with people. How do we spot you among ten other people? What makes people want to work with you?

We could list dozens of additional attributes… You’re curious, you’re a hard worker, you’re hungry, you play to win, you’re honest, you think long term, you’re humble…

Get in touch with us, join@ newwave.vc

PS: Venture Capital is about founders, market fit, timing. We will leave you with that thought.

Loading more posts…