How involved should an investor be in the startups they are investing in? Aside from the much-needed financial investment, how else can investors support entrepreneurs? How should founders (and startups themselves) prepare for fundraising?
We explored these questions and more in our interview with Robin Godenrath, Founding Partner and Managing Director of Picus Capital, an international, privately financed venture capital company with headquarters in Munich and offices in Berlin, London and New York.
Picus Capital predominantly invests in pre-seed, seed and Series A rounds and focuses on technology companies in the real estate, finance and insurance, HR, renewable energy, mobility, e-commerce and healthcare sectors. The firm pursues a long-term investment philosophy and supports founders from the ideation phase to the IPO and beyond, such as startups like Personio, Enpal and finn.auto.
In this interview Robin shares Picus Capital’s investment criteria, their priorities and plans for this year, the challenges they have encountered as a firm, and their views on the European VC landscape. Here’s our complete interview with Robin:
Hello Robin, thank you for joining us. What first got you into investing? What is your story?
I have always been interested in entrepreneurship. I started my first company with a couple of fellow students during my studies which was an anti-hangover drink back in the days. From the very first day of starting Picus together with Alex and Jeremias, I saw what we are building not as an investment firm, but instead as an investment startup. I had a lot of friends working in investment banking or private equity and I always felt that the structure, professionalism and thoroughness of these institutions were on a very different level compared to early-stage venture capital. Considering this as a market opportunity we tried to set Picus up in a very scalable and efficient way which in theory should be able to identify, analyse and support the most promising technology ventures around the globe while leveraging scalable & consistent processes throughout the entire organization. Having Alex and Jeremias as founding partners was a huge privilege for me as I felt, from day one, that their experience and skill sets were highly complementary to my own.
What sets Picus Capital apart from other VC’s?
Our privately funded structure allows us to not only think like an entrepreneur, but also to invest like one, for the long term and without any investment restrictions or mandates. With this structure, we are able to focus on the most promising ventures and founders regardless of geography, industry or business model. As we do not have any fund life cycles or exit horizons, we feel that this structure strongly aligns us with the perspective of the founders we back. When we invest we typically intend to support the venture from day one, all the way to the IPO and beyond. Therefore, our aim is to always enable the founding team to build a successful and a sustainable category leader with a long-term horizon.
Picus also takes a very holistic approach when it comes to early-stage investing. For us entrepreneurship does not start with fundraising but with entrepreneurial thoughts around solving meaningful problems. In an entrepreneurial sparring process, we support promising founders with key strategic decisions such as devising go-to-market strategy, acquiring first customers, recruiting key employees, assisting with debt fundraising and much more. We sometimes even begin this process before a company is actually founded – and with no constraints or conditions at such an early stage. By providing strong value-add early-on in a founder’s entrepreneurial journey, we hope that the founders will recognize our value proposition and will continue working together with us once there is an actual investment opportunity. Therefore, we often make early investment offers, but unlike an incubator or company builder, we exclusively invest in independent founding teams.
What are your investment criteria at Picus Capital? What will make you pursue a startup for investment?
Consistent with our vision we invest in founders that have the ambition to challenge the status quo by reimagining the way we live and work today. That means we like it when founders tackle massive markets or solve inefficiencies that create entire new markets. It is crucial for us to see that the founding team has the drive, passion and persistence to solve a meaningful problem while having a strong analytical and structured skill set to execute on it. In general, we partner with founders that have a similar vision as we do – to build significant and sustainable businesses long-term rather than aiming for a quick exit. It’s also important to us that the business models we invest in actually have a positive contribution to the society beyond a pure financial gain. This does not mean that we are only investing in green energy startups but industries such as online gambling would probably not be a preferred investment area for us.
How should founders (and startups themselves) prepare for fundraising? What are the dos and don’ts when approaching Picus Capital for investment?
As part of our early-stage investment philosophy, we strongly believe that it is valuable to talk to founders even before they start their company or consider external financing. We are more than happy to connect with founding teams before considering an actual investment to support them along the process. Our sweet spot for an initial investment lies in the Pre-Seed, Seed and Series A stages. After initially partnering with a venture, we remain a strategic partner over the whole lifecycle of a firm and keep investing continuously.
To prepare for a fundraising process, entrepreneurs should always thoroughly think about the key make-or-break points of their business and have thoughtful answers to emerging questions. I would also encourage founders to define what the key takeaways for each potential investor should be, and to anticipate the questions that might come up. As a founder, I would not rely on the investors to ask the right questions in order to showcase the magnitude and importance of the business that I am about to build; instead, I would proactively communicate my vision.
Startup founders are always asking how to get face time with investors. How do they get to meet Picus Capital?
We strongly believe in the power of our network. The best way to get in contact with us is therefore via a common contact. Nevertheless, we are also more than happy to extend our network by meeting new and ambitious founding teams. Founders can meet us at industry and university events, contact us via e-mail or reach out via LinkedIn. When doing so, it is important for us that we see tangible evidence of a foundering team’s ambition and a match with our investment philosophy.
What has been your greatest achievement at Picus Capital so far?
I definitely see my personal biggest achievement in the talents I was able to bring together at Picus and simultaneously see this as the biggest asset of the firm. I am very proud to say that we managed to build a top of the class team here at Picus. This team, of course, serves as our basis to find and invest in the most promising founders and startups out there. I think we really did a great job in finding, convincing and developing talented people with diverse skill sets and mindsets and continuing to nurture that will be my absolute number one priority for all the years to come. This is not only a crucial area for Picus but for any startup. When we look at our most successful portfolio companies they all share one thing in common – they are great at hiring.
What has been Picus Capital’s biggest challenges and the lessons learned from overcoming these challenges?
At Picus, we measure our success based on the success of the founders we partner with. The biggest challenge for us is therefore to provide the best possible sparring and support to the ventures we invest in from the early days to later stages and beyond. In fast-paced markets this means constantly staying ahead of the curve, identifying promising trends and building a supporting platform that enables our portfolio firms to create remarkable outcomes in an efficient way. For instance, to identify key trends and exciting ventures early on, we established a global Venture Scout Program that includes top-performing students as well as seasoned serial entrepreneurs. We also built a tech-driven sourcing process that allows us to identify interesting ventures efficiently. We established a network of expert partners as a resource of expertise for our portfolio companies and we are in the progress of building a strong community amongst the ventures that we have partnered with.
What I learned over time is that overcoming such a challenge is a true journey and that we at Picus have to embody similar values that we expect from our ambitious founder – the constant quest to challenge the status quo.
What are Picus Capital priorities/plans this year?
After setting up and scaling our New York office last year to strengthen our presence and support our investments in the US and in South America we are now planning to further strengthen our presence in Asia as well. Therefore, we are launching our Chinese office mid this year with a local, full-time partner and team on the ground. We are fascinated by the pace at which the Chinese economy is developing and see great potential, in particular, in the fintech and healthtech sectors. Although, I have to admit, we are well aware that European and American market dynamics are very different compared to what we see in China.
Additionally, our privately funded structure allows us to re-invest exit proceeds directly. We are excited that we will be able to increase our annual investment amounts much more exponentially than traditional investment funds throughout the upcoming years. Therefore, we are planning to further broaden our investment focus areas adding sectors such as robotics or medtech and including industry-agnostic business models such as no-code developer tools or cryptocurrency infrastructure. Furthermore, we are also planning to selectively look at promising special situation private or public equity investment opportunities in later stages as long as we still see a strong fit with our investment criteria and philosophy. Our investment in Home24 last year was a first but consequent step in this direction.
It is common knowledge that startups’ failure rate is very high (over 70% according to some studies). Top 3 reasons cited: no market need, run out of cash and not the right team. What is your take on this? Do you think that having VC’s/investors involved early on can improve the success rate of startups?
We believe that hurdles and risks can be substantially reduced and controlled if founders receive the right entrepreneurial support and strategic mentoring in the early days of their entrepreneurial journey. Without intervening in day-to-day operations, investors should be involved as sparring partners and make use of their strategic know-how, past experience and broad network. What is the go-to-market strategy? What is the marketability of the concept or product? What are the current trends? What are the possible first customers and how can a high-performance team setup succeed? Such questions should be discussed as early as possible. Based on our experience, one great skill of strong entrepreneurs that I want to highlight is the ability to quickly adapt a business model to changing market conditions. This skill is truly key in maximizing chances of success.
Could you tell us your impression of the current VC landscape in Europe? How have you seen it change in the last 5 years?
The venture capital industry is becoming increasingly competitive in Europe. On the one hand, more and more local VC firms are established and there is simply more capital in the market. On the other hand, we see an increasing interest of US VC firms in European ventures, also as a result of the competitive funding environment in the US. The increase in competition is present in both ends of the spectrum – early and growth stage financing. The competitive dynamics are leading to larger financing rounds, are accelerating the pace at which investment decisions have to be made and make it more important than ever to have a clear value proposition as a VC firm that goes beyond pure capital.
We closely follow, predict and drive changes in the entrepreneurial ecosystem in Europe but globally as well. Everyone at Picus has a strongly entrepreneurial mindset and our firms’ structure allows us to be very agile when it comes to adapting our own investment business model to changing circumstances. We therefore see great potential in such changes and find ourselves to be in an attractive position.
What practical actions do you think need to be carried out to shift the funding landscape in the next 5-10 years, and by who?
At Picus we have the quest to make entrepreneurship accessible for more and more people. With our pre-seed efforts we want to encourage aspiring founders to become entrepreneurs by discussing meaningful problems, potential solutions and market trends from the very early days to reduce the perceived risk and the threshold to start a technology venture. Especially in Europe we see that there is still lots of potential unused. We want to bring entrepreneurial thinking to the top of the mind of people and to further facilitate the first steps of becoming an entrepreneur. While there are certainly many more forces that drive change in the European funding landscape, Picus takes an active role in facilitating entrepreneurship.
From a broader perspective we still think we need more programs comparable to the CDTM in Munich across Europe bringing together the business and the product perspectives in a clear way, allowing founders to build businesses with a stronger technology USP. In our opinion the US is already a couple of steps ahead when it comes to strong product founders which results in more complex and defensible technology products.
Diversity quota in investment firms, yes or no? Why?
Diversity can naturally bring enormous advantages to a firm’s investment decisions and internal processes – our discussions and decisions are only as good as the diversity of viewpoints we have around the table. Yet, to improve diversity in investment firms we have to focus on the foundational reasons for which it is lacking in the first place.
We believe that a top-down diversity quota can function to be more of a band-aid at times, instead we believe in taking active steps to diversify candidate pools, to build inclusive work environments, and to express our differences.
We are certainly not where we want to be when it comes to diversity, but we have been taking active steps to change that. We introduced a diversity initiative in our firm last year, and we started with a focus on women. We participated in a discussion panel with Johns Hopkins Smart Woman Securities late last year and hosted a workshop with the UC Berkeley Women in Business Society,just to name a few. We brought on board some of the most inspiring European women founders and business leaders in the context of our Venture Scout Program and will continue to do so. We are now planning long-term partnerships with women business societies both in Europe and in the US.
We are already seeing the results – our female intern ratio increased from ca. 10% to 40% from late last to this year. 30% of our hired investment professionals in the last 6 months have been female.
We are extremely motivated by what we have been able to achieve, and it only gives us more courage in doing a lot more in the years to come – and to also broaden our initiatives beyond gender diversity.