Be very hungry and confident about your business – Interview with Shmuel Chafets, General Partner at Target Global

Target Global

Target Global is a pan-European venture capital firm based in Berlin, with €700 million in assets under management. Its portfolio contains some of Europe’s most successful scale-ups, including Omio, Badi, TravelPerk, Auto1, Delivery Hero, and Dreamlines. The firm has three funds from which it invests anywhere from €500k to €30 million per deal, and is always looking for the “next big thing”.

Shmuel Chafets is one of the four general partners at Target Global. Below, he talks about the development of the European startup ecosystem, his most notable investments, why Spain is the hottest new market, and how to stand out as a founder seeking capital.

Tell us more about yourself, what is your background, where are you from? What do you do at Target Global?

I’m a general partner at Target Global, a pan-European investment firm investing in fast-growing tech companies at all stages.

I started my career as a political consultant, working in the Israeli government, on campaigns and doing crisis management for corporate clients. I’ve been an entrepreneur and investor for more than a decade. I got my start in the tech world at Giza Ventures, one of Israel’s oldest ventures firms, and later co-founded GPV, a joint venture targeting the Polish market. I was fortunate to get my start in the venture business during the great recession, which was a life lesson. I’m a co-founder of LocalLoco, a gaming company focused on South-East Asia, and SAM, a cybersecurity for smart home company, where I still serve as vice chairman.

After leaving Giza, I joined my longtime friend and partner, Yaron Valler, at Hasson Plattner Ventures, investing in the nascent Berlin ecosystem. In 2015 we teamed up with Alex and Mike at Target.

Tell us more about Target Global. When were you founded, how have you grown, what stages do you invest in, what are your “target” markets, and what sets you apart from other VCs?

Target Global was founded in 2012 in Berlin and has grown significantly since then.
We now have a strong presence across the key tech hubs in Europe and beyond – with offices e.g. in London and Tel Aviv, a strong presence in Barcelona as well as a growing team at our HQ in Berlin.

Uniquely, Target Global takes a multi-fund approach to the businesses we back, with three funds dedicated to taking entrepreneurs from seed through scale up. Typically, we’ll invest anywhere between €500k and €30 million per deal, but there are of course exceptions.

The four general partners of the firm – myself included – are entrepreneurs and operators, meaning that we can easily dive back into that mindset and be trusted advisors for our portfolios throughout the whole process of scaling a business.

We focus on investing in large segments where digital disruption has yet to happened fully and where Europe has a natural or historic advantage. Insurance is a great example; mobility is another.  While we don’t confine ourselves to only investing in particular sectors, we’ve had a lot of success investing in SaaS marketplaces, fintech (especially insurtech) and, of course, mobility.

What are some of your portfolio companies, and how and why did you choose them?

We have many great companies in our portfolio. I think that the main reasons for each investment are pretty similar, we’re looking for companies that can be “the next big thing” in their field – with a big market, great team, and founders that have proven that they know how to build a business.

Here are a few examples:

In Auto1, which is becoming the dominant player in the used car market in Europe. It is already a substantial business, but there is still plenty of scope for growth. Hakan Koç and Christian Bertermann, are amazing founders and have proven that they can run a small startup out of a parking lot in Berlin and scale to a 28 country multibillion euro operation in a short time.

TravelPerk is well positioned to dominate the business travel space in Europe with a product that makes business travel as seamless and easy as personal travel, thereby winning a highly fragmented trillion-dollar market. Avi Meir, the CEO of the company, is an experienced entrepreneur with a strong track record in the travel space, who already sold a company to Booking.com.

Badi is an example of a company which connects traditional industries, such as real estate, with an innovative business model that suits our day-to-day lives and solves a pressing issue. By 2050, the total population living in cities will increase to 65-70%. There will likely be a shortage of homes for people looking to live in cities and as a result, this will lead to an increase in smaller living units or rooms. This is where Badi comes in.

What are some of the most promising emerging trends that you’re seeing in the European startup ecosystem, and what kinds of startups are you and Target Global looking to invest in right now?

We see a few developments in the market. The EU market is no longer confined to the traditional hubs of Berlin, London, and Paris – cities such as Barcelona, Madrid, Stockholm, as well as Warsaw and Bratislava are developing local ecosystems and we are seeing great deal flow from across Europe.

In addition, we see more companies that aim to be innovators and less copycats of US startups. We are also seeing more well-known global funds in European companies bringing in capital, expertise and expectation of more significant outcomes.

We look across business models and try to think of industry segments, so you will not hear us talk about AI or SaaS. Currently, I think insurance, property management and real estate, digital health and transportation and logistics are places where we will spend real time this coming year. Of course, in addition to fintech, where huge European companies have already been created.

What kind of support do you offer to your portfolio companies after investing in them?

I think a good investor pushes you when you are doing well and props you up when times are difficult. We spend a lot of effort on supporting our portfolio via building a good fundraising network, business development, HR, and also having access to the right type of advisors. But mostly I think that the work between a founder and a VC partner is a highly personal and ever-changing relationship. Its starts with the Hippocratic oath, to do no harm. Sometimes founders need a physiologist, sometimes a friend, an investment banker, and sometimes, a swift but friendly kick in the ass.

Which European country’s startup ecosystem would you consider “the hottest” right now?

I think that there is no doubt that Spain is one of the most promising ecosystems for the next few years, in particular, Madrid and Barcelona. Madrid is the largest metropolitan in Southern Europe and the center for research and technology for the country – they have the seventh-highest number of computer developers in Europe.

Barcelona reminds me of Berlin five years ago – it’s affordable, which makes it a better location for young companies to start, salaries are lower, but the pool of talent is just the same as in other cities. Rent costs are not even comparable with cities like London or Paris. Apart from lower living costs, the lifestyle of Barcelona is one of the reasons as well as why entrepreneurs want to move there.

This year Barcelona ranked number 6 in the top 10 startups & innovation hubs in Europe.

It’s exciting for us to now have a presence in Barcelona, as we have been keeping a close eye on the Spanish tech community for a while.

We’ve made a number of investments already, such as TravelPerk, Badi and MediQuo, and we’re really excited by what this emerging ecosystem has to offer.

What advice would you give to startup founders looking to raise funds in Europe?

Be a pro. Its simple and should be obvious, but when a founder comes to me I want to know that he understands his market, competition and generally the business he wants to be in.   

And if a startup founder is looking for investment specifically from Target Global, what should they do? How can they contact you, and what will make them stand out?

They need to be very hungry and confident about their business – hard workers, very modest and open to listening. If there is more than one founder, I prefer to see founders who have different strengths. For Spanish founders, we have our Investment Director Lina Chong, who spends more of her time in Barcelona and is looking for the next great thing.