After our first stop in London, we continued our Campfire tour of Europe and headed to the land of beer and bratwurst: Berlin.
The one-night event brought together industry-leading dealmakers and speakers from firms across Germany. They discussed the critical role of relationship intelligence in sourcing, managing, and closing high quality deals.
For a better understanding of how dealmakers are adjusting their strategies and plans for 2023, we spoke to four panelists:
- Maciej Lehmann, Investment Analyst at Future Energy Ventures, a firm that invests in technologies and business models that aim to redefine the future energy landscape.
- Said Alib Haschemi, Investment Manager at HV Capital, one of Germany’s biggest and oldest VC funds.
- Andre Retterath, Partner at Earlybird, a pan-European firm that provides early-stage companies with financial resources and strategic support.
- Leo Walde, Partner at Armira, a holding group focused on direct investments in privately-held medium-sized businesses in Germany, Austria, and Switzerland.
Here are three key takeaways from their conversation.
Takeaway #1: Many firms are shifting focus to nurturing portfolio companies
The past three years have been a whirlwind for dealmakers. For firms to stay competitive, deals had to be identified, sourced, and qualified as quickly as possible. However, this approach then took a near 180-degree turn as macroeconomic pressures caused dealmaking activity to slow in the latter half of 2022—a deceleration still being felt today.
Firms are now approaching the deals they pursue more cautiously. They’re taking safer bets on opportunities that are able to prove steady rates of return.
But the breakneck sourcing speed of the past few years has proved useful in some respects. For Said Alib Haschemi’s team at HV Capital, it gave them good grounding to adapt to the current landscape.
“I think the last three years definitely helped us to craft our skills in winning deals,” he said, adding that success in today’s market means providing support and help for a firm’s portfolio companies.
While many European investors will have weathered stormy economic waters before, this will be the first for many young founders. An investor’s firsthand knowledge and experience can become critical to a company’s survival.
“In the short term, [...] we get more rewarded for helping existing portfolio companies get through, rather than just doing new deals. Whereas two years ago, I think, if you were doing deals, you were going to get rewarded from the market,” Alib Haschemi said.
Maciej Lehmann from Future Energy Ventures concurred, saying that he has worked on more follow-ups than on new investments recently.
“I think, now more than ever, you can actually support the portfolio company on the top line—[like] for example, growth,” Lehmann said. “Having the strategic alignment on how you actually want to grow your business makes you want to double down your portfolio awareness.”
Takeaway #2: Data is key to setting teams up for success
According to Affinity’s 2023 Investment Predictions report, dealmakers spend an average of 34 hours researching potential deals. Such a large amount of time spent on information gathering makes it clear that data plays a crucial role in finding and pursuing the right deals.
However, data can also be pivotal for VCs as they shift gears to run more efficiently. Earlybird’s Andre Retterath used data to gain a full understanding of his team’s deal process and areas where they could improve.
Retterath categorized the two data sets he relied on to optimize workflows as “input” and “output” data. Input data referred to the ways in which teams allocated their time across different tools and websites, which Retterath discovered was very fragmented.
Dealmakers jumped from platforms like LinkedIn to Twitter to ProductHunt to find relevant information that would help them build a funnel, often further siloing data and losing valuable time.
Output data revealed where people spent the most time across the value chain, and where more support or help was needed for team members to keep processes moving forward.
As revealing as all this information was, the real insights came when Retterath brought the data sets together.
“We started [to] connect this data on the input side of how [...] the team spent a time across the stack, then across stages, and then we calculated on the output side, really tracking with the help of Affinity as well, how many deals are in which stage of our process to see how the input side converted into the output side,” he said.
Connecting input and output data has enabled Retterath’s team at Earlybird to be more data-driven when it comes to steering the business. It has also helped them to specialize roles and responsibilities to better fit the needs of the team and its portfolio.
“Ultimately, you need to own the end-to-end process,” he said. “As a partner, you need to know fundraising as much as you know [about] deal sourcing and screening and winning portfolio value creation. So we try to be very data-driven about it and really see how we need to become more productive, how we need to hire, what's the miss rate and a specific geography, [and if] we need to hire more people on the ground.”
Takeaway #3: Top firms are managing their large networks with the help of tech
Deal teams rely on data and other technological tools to optimize their processes and workflows. But tech alone won’t find the best deals. Dealmakers need access and insight into their firm’s full collective network—and the strength of each relationship within it.
“I believe for us, the most important thing is to actually have offline relationships with earlier stage investors, founders, incubators, accelerators, and [more],” Future Energy’s Lehmann said.
It’s all about striking the right balance between human connection and technology. This is what Retterath called the ‘augmented VC’: “I'm a strong believer in [the] augmented VC, where we should leverage technology as much as possible to scale, [...] but at the same time, we still need this human component,” Retterth said.
Retterath explained this means having a dual focus. On the one hand teams need to be empowered with the right tech to make data-driven decisions and move fast. On the other, they should be spending time on the ground nurturing relationships.
Software like Affinity can help dealmakers achieve the title of ‘augmented VC’ by giving them visibility into their network and the potential opportunities that it presents.
Armira’s Leo Walde shared how his team uses Affinity to determine the right connections and contacts for deals: “We're using Affinity, and we have a way better [...] view of our network and of who we know; and what, when, why do we know people; and when do we know that from, because previously, we didn't really. [...] And now, we have a way better and way more effective method of engaging with the people we know, and getting productivity out of that.”