Investor spotlight: Partech’s Gabriel Matuschka – “The VC model has to be improved”2012-12-12 3
Gabriel Matuschka is Partech International’s new senior associate in Berlin. Before that, he did the pitch rounds with a fair number of Europe’s VCs as the founder of TripHunter, followed by stints at solar power startup Changers and as a private consultant.
Here, he speaks his mind about the state of venture capital, the Berlin internet industry’s walled gardens, hype, arrogance and why selling shoes isn’t enough to get him excited.
How do Partech’s three offices work together? Where’s the main base?
The epicentre of it is now Paris. It’s going to be a plus €120 million fund – we’re still in the process of final closing. Of that, we invest 80 per cent in Europe, meaning that the one other European office that existed before Berlin is the epicentre. However, and this is something the guys have always done, long before I joined, the goal is really making use of the fact we have a San Fran office and a Paris office and now a Berlin office.
If you look at significant exits, the most significant exists in Europe are all from US buyers. For us, it’s really important to be able to show companies that we’re capable of helping companies get acquired by US buyers. For that, it also helps to be present in the US and have more visibility than those European dudes who fly in occasionally. Frankly, the US people just don’t care.
Any deals in Berlin coming up?
There’s always stuff we’re intensely working on. Nothing we can announce yet.
Even “x” deals by the end of – ?
No… The beauty of doing this across Europe – you know, being in Berlin doesn’t mean we only look at companies with a Berlin postal code. It means we can look east, and we can look north. There are some exciting companies in the Nordics that I’m looking at, just as I’m looking at other things that geographically are in the other direction.
How did you come to join Partech?
As always, in this – I think – quite odd industry, friends of friends tell somebody that they’re looking to do more in Europe. I was fortunate enough to spend some time with a really, really good VC in New York last year. Not working with them, they were just good enough to let me sit with them and a portfolio company. These guys were investors in Twitter, Foursquare, Zynga. That, for me, was a learning experience, at which level you can do VC.
During Triphunter, I pitched to probably all VCs in Europe. So I’ve been on the other side of the table quite a bit. I really feel like this model can and has to be improved in continental Europe and in Germany. The quality, frankly, of the people you face: You can ask any entrepreneur here and they’ll tell you there’s great variety in the quality you get on the other side of the table.
I really felt like this is something that has to be done. I guess there was an intrinsic motivation of, if something has to be done, you really want to do it, then you could.
What do you think has to change?
There are some things that could and some things that have to change. Simple things. Not everyone has to be an operator or has to have done stuff like that before, but it helps to have some of these kinds of people in your funds. Looking back, there were not that many typically in a VC fund. You will have a lot of former bankers in Germany, former consultants. I’m not sure this is the best setup for a VC. Why? Because in the end, it’s not a consulting business. You can’t over-analyse.
The other thing is, quite frankly, I think for a long, long time there used to be an arrogance level among people investing in Europe, in Germany. My sample is not – I haven’t pitched to them 100 times each, but from what I saw, I think this is true.
A lot of VCs in Europe and continental Europe and Germany are actually dying – the performance of VCs is actually really bad. The kinds of questions we ask entrepreneurs about being numbers-driven and all that, we should probably be that too right? I mean, we are, but as a whole industry – for the risks you take, you have to return significant amounts of money. The 20 per cent IRR (internal rate of return) that you’re aiming for, where you have to be, this is just not what the funds on average return. So it’s something that has to change. The funds that do not change, they disappear, and it’s happening right now… We need more successful VCs to back more successful companies.
You came from Munich. How long have you been in Berlin now?
Are you still involved in the Berlin Tech Meetup?
Yes, absolutely. Florian Hübner, who’s the CTO of favor.it, and for myself; it’s really pure fun and passion that we’re doing that. I did this quite a bit before the idea of becoming a VC. Again, I feel it’s just something that needs to be done.
Here, where a lot of the large success stories are based on shipping shoes to people, we felt like the best way to get more people to start cool amazing companies is to show them things that are fun and amazing. That’s the whole objective.
Any observations over the last year in Berlin that might be different to what we typically hear?
It’s funny because a lot of people from the outside are asking these questions… Everybody gets this Berlin hype but nobody really knows what’s actually going on.
It came to my mind, it almost feels like it’s an industry that’s a little bit like the Brandenburg Gate. It’s built on different columns… Maybe that’s a bit different from what you see in the Valley. It feels like closed ecosystems that live by themselves. So there’s the Rocket world, there’s [Amen founder] Felix Petersen et al, the people who are celebrating themselves quite extensively. Actually, only one company out of this circle has become very successful and that’s SoundCloud. Then there’s another scene that does really amazing things… People tend to ignore them because they don’t hop around events and celebrate themselves on Twitter but there’s immense value being created.
Any clear area of focus for Partech?
We look for companies with substantial technology leverage, both in consumer internet and information technology. We seek entrepreneurs with the ambition of disrupting the structure of their addressed market.
In Europe, we do more consumer web, consumer internet-related things and in the US, it’s more cloud, big data, analytics stuff, which is usually more difficult to do out of Europe. There are a couple of reasons for that. It’s much harder to get a Deutsche Bank to use product from a young company than it is to get a bank in the US to do that.
And, frankly, we don’t have the fund size to do the large consumer web stuff in the US. So we do more consumer-focused things in Europe. I think in the past, this meant doing a lot of eCommerce. We have a very, very strong eCommerce history and experience and actually nice exits, and there’s still some very, very nice companies in the portfolio.
We do think about what comes after standard eCommerce and look for people solving some of the major problems in this space. Also for mobile companies or anybody else in need of an audience. How do you make people go to and come back to your service? This can be a layer on top of eCommerce as with companies like TheFancy or interesting mobile ad solutions like Trademob.
Finding companies that disrupt the structure of a market applies just as much to the payment industry, new forms of organising work and labour, the internet of things (Sigfox being one of our hottest investments in this space)…
In consumer-orientated companies, we usually invest after a product has achieved considerable user uptake. We may get involved earlier, if we know the entrepreneur very well. I do think it makes a lot of sense for us to talk to [founders of consumer-oriented startups] really early on. For me, a good investor will be able to add value long before he invests. An entrepreneur is probably best advised to talk to people like us and others early and see if they can help them along the journey long before they invest. If somebody is able to do that, then most likely this is going to be, post-investment, a good partnership.
Last question. Obviously, you think we’ll see more major success stories out of Berlin. The next SoundCloud, Wooga, Sponsorpay?
Right. There has to be more. Over a timeframe of five years, there will be two, three, four outlying companies. Of these, preferably I catch two.
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