An Optimistic Venture Prose
|Mar 22, 2018|
Spoiler Alert: gossips ahead… And I share our performances.
Last week, we were talking with a fellow VC. In France, just like everywhere else, investors love talking to each others, it’s reassuring…
Nothing too original came out of our discussion: a sprinkling of gossip and a raft of clichés: “madness is taking over the market,” “the bubble is about to burst,” or even “there are good and bad VCs, but the difference is that the bad ones invest while the good ones invest… but, you know, are a good VC….”
Our “ecosystem” has always been one of platitudes, no matter the season. We love talking about huge fundings and huge flops (even though we are lightweights compared to Theranos, Fab or Jawbone), describing distress sales to industrials as if Google had just gone public, and lamenting how we could have done better after a buyout for a few hundred million euros.
While we are gloating, complaining, and changing the world without putting any skin in the game, thankfully there are entrepreneurs out there making real progress, focused on their mission to provide exceptional solutions to their clients.
And then there are the rest of them… flocking to competitions, artificial intelligence conferences, and telling journalists the story of their POC with the Compagnie Générale Des Eaux (very odd company for those who read this post from abroad)…
On the investor side, it’s exactly the same thing. We’re in an industry that has been backwards since the beginning due to the lack of meritocracy, which you would think it would be championing. So the weak signals multiply and, in an example of stunning hypocrisy, whisper that…
Idinvest doesn’t know what to do with all of its money
Partech is having problems of reputation and carried interest
360 capital partners is now investing in robots only
Daphni is making odd/crazy deals
Serena fancies itself value added VC
Balderton lost out to Accel on yet another SaaS deal
EQT and Atomico are struggling to get their piece of the pie (EQT not so much anymore… Right Bartosz?)
Elaia, Ventech and Isai paint themselves as responsible VCs
Index jumps the gun and Martin has disappeared
Kima? (let us have it in the comments :) )
Alven has no girls on the team?!
Newfund is trying to buy itself a new reputation
There’s a guy launching Karot capital and everyone is having a good laugh except that it isn’t a joke…
Otium pays too much but everyone wants their deals
And sorry to those I’ve forgotten…
Whoooaaaaa! Did he really just write all of that? These aren’t secrets. I was actually being nice, since this was just an appetizer…
In investment, the only two things that count are reputation and performance, and usually one encourages the other and vice versa, as long as you’re disciplined and consistent in your work… and you have a bit of talent.
History isn’t written until the end, and you need at least 10 years to start balancing the books…
▓▓▓▓░░░░░░░░░░░ 25% complete
In the meantime, urban legends, subterfuges and unrealized gains fill the empty space, alongside a few dishonest memos intended for potential LPs (those who invest in funds).
I’ll take this opportunity to give you our performance (in €) for 2015, 2016 and 2017 with Kima Ventures. Figures as of Q4 2017.
Year: Sum Invested / IRR / NAV / Unrealized Gains / Realized Gains
2015: 8,627,993 / 32.02 % / 15,056,372 / 6,428,379 / 1,272,870
2016: 13,373,687 / 23.41 % / 16,672,556 / 3,298,869 / 1,274,383
2017: 13,778,533 / 28.30 % / 15,451,654 / 1,673,121 / 22,982
On the biggest deals (Zenly, Payfit, Side, Ibanfirst, Sourced, Doctrine, Forest, Alan, Openclassrooms, Dice), IRR is more than 75% and realized performance is higher than the amount invested.
Thank you, Zenly. And stay focused, Xavier and the rest of us are super proud :)
Kima Ventures is a formidable operation with natural momentum thanks to the 30 to 50 deals we see every day and the 100 new startups we invest in each year. In addition to the 600 we have in our portfolio.
We try to be efficient and benevolent, a joker that founders will always be happy to have in their hand and that they will potentially/hopefully be able to play with by using our network, resources and common sense.
But since the true calling to Venture Capitalism comes from a deep desire to create singular and intimate relationships with those founders who we find to be exceptional in their clarity of vision (or clairvoyance, say this with a french accent please), their capacity for learning and the quality of their execution, we have taken a more major role in the few deals I mentioned above, with the sincere hope that we can contribute to these entrepreneurs’ accomplishments.
Our thesis when investing in these start-ups is to take a real risk (through a major position) post-adoption but pre-acceleration, when everything could still go either way. The goal of these bold moves is to unleash the exceptional operating potential of these entrepreneurs and their teams. We have a few assumptions tied to this investment theory:
The future isn’t simply an extrapolation of the past. Supporting a valuation method based on the fact that the average venture capital exit in France is €25M is being pessimistic about the future. But Venture Capital is funding the future, with clear-sighted optimism. And we are downright optimists!
You can’t turn a toothpick into Excalibur. Trying to fund a start-up by seeking capital efficiency at all costs is forgetting that venture capital isn’t meant to meet a need for working capital, but to give the powers of clairvoyance, momentum and excellence to the best entrepreneurs, to make choices guided by strategy and not by money in the bank.
An investor shouldn’t optimize his or her position, but instead maximize talent while keeping a cool head. It’s easy to become intoxicated by success and overwhelmed by failure. But clairvoyance and benevolence should always take priority over fear or euphoria, along with desire, ambition and intelligibility. Once the questions have been asked and the doubts raised, it is up to the entrepreneur to take responsibility for leading the business down the right path. Only the entrepreneur can decide to optimize conditions and minimize risks.
Investing in a start-up means understanding that the probability for failure is considerable but limited to one time the amount of the investment, whereas success, though it is less certain, can generate incredible returns beyond those of any other asset class.
The best start-ups aren’t the result of consensus. Choices that seem counter-intuitive initially can later become strategically obvious after the fact, and the degree of uncertainty is incredibly high in the first years.
Maybe I’ve watched The Never Ending Story too many times, and my optimism or craziness in wanting to support entrepreneurs as they create incredible/beautiful empires that extend beyond the confines of Paris can seem arrogant or unreasonable, but if I’m going to play the game, I would prefer trying to win over the risk of losing.
Think For Yourself.
And please share :)
French Version of this post: