Building the next Generation of VC funds for Europe with Mattias Ljungman (ex-Atomico founder)

By Gwen Salley, Head of Investment and Services at STATION F

We sat down with Mattias Ljungman, Founder and CEO of Moonfire Ventures. He recently announced his departure from Atomico, where he had been Co-Founding Partner for 13 years. The fund amassed $1.25bn assets under management, counting Supercell, Klarna, and LendInvest amongst its key investments. 

In 2019, Mattias founded Moonfire, a European seed fund focused on helping founders at the very start of their journeys to create the right foundations for exponential growth. For the last decade, he has seen how US seed has flourished, driving strong returns with successful funds, such as FirstRound, Felicis, Floodgate, Upfront, Uncork, and True Ventures. The same evolution is accelerating in Europe, as a flood of late-stage capital boosts demand for seed opportunities. Moonfire is perfectly placed to take a leading position in the nascent European seed ecosystem to help the next generation of founders and we got the chance to talk about it with him.

h

Gwen Salley: Could you give us some background about you and it interests me to get your insight as an American arriving here in Europe? Why did you eventually decide to settle here? 

Mattias Ljungman: I have lived in the UK now for almost 20 years but, while I have a Swedish passport, I was born in Washington DC. I moved a lot growing up – Kenya, Montreal, Stockholm – until I settled here in London. London is a very multicultural place where people come from all over the world – France, Russia, Asia, Middle East, South America, Africa. And I like that. This has helped make London a financial centre.

The thing that drives me as an investor, and why I get up every day, is I believe that Europe is the godfather of modern science. It all started here. The thinking around science was built on other knowledge bases, of course, but we took it to a special level in the industrial age. However, post-war, there’s been a sort of crumbling of that raw European ambition. That edge needs to come back and that belief that one is going to build something that is profoundly going to change society and the world. This is what drives me in Europe. 

We have great universities and a strong talent pool in Europe. Universities in every country in Europe have been built with the ambition of being the leader in their field at a global level. We compete across Europe and each country also wants to build the best engineering school in the world. That’s why we have so many highly educated engineers coming out of Europe. We need to develop this ambition and double down on our education system to raise the next generation of successful founders.

I think we should cultivate that belief that we are, in Europe, going to build something that will profoundly change society. 

GS: What do you think is going to bring back that golden age of Europe? What do you think is going to be the trigger? 

ML: For me, most things are additive. There won’t be some single event that changes everything. It’s a momentum that builds things up gradually. I felt there was a downward momentum in Europe, but I now feel there is an upward momentum. 

When I first started Atomico there was only one billion-dollar company in Europe. Back in 2012, we had around 10. Today, we have over 100. That to me is a trajectory people should be staring at and asking “what’s going on here?” 

I think Europe is actually looking pretty healthy. That’s why Sequoia, General Catalyst, Lightspeed, and many other funds are setting up shop here. What’s happening here in Europe may be compared to what we saw in the Valley and also in China a few years back. That’s what people are getting excited about. 

GS: If we go back a little on your journey as an investor. You’ve decided last year to part ways with Atomico. Can you tell us why and also can you tell us a little bit about the ambition behind your new fund Moonfire?

I had an amazing time at Atomico. It was wonderful to be part of building a multi-billion dollar fund. And also to have the opportunity to invest in so many incredible founders that turned out to be multi-billion dollar successes, such as Klarna or Supercell. I really enjoyed running those investments and being involved in their stories. 

The excitement I have for Moonfire is about how we build the next generation VC fund, looking at the problems we can solve here in Europe. And my belief is that the pre-seed/seed stage is underfunded and underdeveloped. So there’s a huge opportunity in building something unique in that space. There are a lot of different players in Europe and I think a lot of them are going to be successful. There are a few that are already successful, but we need more winners. We need more great funds. 

That is my mindset. I think what is very important is also to be known for something clear, to stick to that and work on it year after year. Then it sort of creates its own gravity. That’s the one thing behind the opportunity within seed that I think fits in very well. In Series A and B, we already have loads of capital. 

The other element that we are excited about at Moonfire is our data-driven investment strategy. This is where the concept of a next-generation VC comes in. We are not satisfied with the sort of manual processes that exist in venture. So we’re exploring how we take this to the next level to allow us to make better decisions, become more efficient, and ultimately scale everything that we do. 

GS: How is data going to impact the way you are going to make decisions? 

ML: There needs to be a very important balance between the more traditional approach and the evaluative approach because I think we cannot be too programmatic. We want to find something in companies that is unique, innovative, and remarkably different, which is hard to do with an algorithm. But what we can do is be more structured in our approach and evaluate more companies to then filter out the ones that fit our thesis. That framework will allow us to make better decisions at a faster pace. 

GS: I think you mentioned in a previous interview that the European seed-stage ecosystem was too fragmented, immature, underfunded. How are you going to very concretely address that? 

ML: I think we are going to see a dramatic shift in this seed part of the market, where there is going to be an increase of capital and resources to help the next generation of founders. I believe success breeds success. With a hundred or more billion-dollar companies, we have a larger pool of talent than ever. I really see it as a starting point for the next generation of those global winners. I think the transition that seed is going through right now is very similar to what we saw seven to ten years ago in the US, when we suddenly saw a flourishing in this part of the market. 

We, at Moonfire, are going to be doing the thing that we do best, which is supporting the founders at the beginning of their journey. We also believe that we can use the angel network to then further power the ecosystem across Europe. If we can help do that then we’re actually solving a lot of the problems of those earliest stages of funding. 

GS: You touched upon the Business Angel (BA) ecosystem. What’s your perspective on the current state of the BA ecosystem in Europe vs. in the US? And how do you think it’s going to evolve? 

ML: I believe that the angel community is extremely important for any ecosystem. And if we think that seed is overlooked and undercapitalised, the angel ecosystem is even more so. There is a lot of work to be done there. But there are some amazing new firms being created with smaller GPs, smaller sizes that are kind of superangels, which are starting to address that question. Angel networks provide an enormous amount of value in building up our tech infrastructure. I don’t think it’s just about giving people capital, it’s actually about helping them and making them bionic. This helps us with seed too. Because what we want to do is work with angels across the sectors that we are looking at across Europe, and so this helps us to build that multi-regional footprint and find and invest in the next generation of founders here. 

Having a pan-European coverage will help us work with angels from all the different markets. We have to remember that those 100 plus billion-dollar companies are coming from 16 different countries. We saw that series A went from regional to pan-European. We are going to see the same thing happening in the angel and seed spaces. 

GS: We saw Daniel Ek from Spotify pledging 1 billion dollars to support European founders. How do you think the European ecosystem should differentiate itself in the coming years? 

ML: I love that question. I think it’s a really good question that most people don’t ask. Usually, people ask: how could we become more like something else. The fact that we talk about doing things better shows we are now having confidence in Europe. I think we need to be building out this uniqueness. 

At a macro level, Europe is multilingual, bringing together loads of different cultures and countries, which created fragmentation in the past. I believe digital is taking away many of these hurdles because geography is becoming less and less important. It’s also becoming a strength for us because if you’re already dealing from day one with many cultures and mindsets you are probably going to be better at working in a global world, which has all of these facets. 

I think what Daniel is doing is really bold. He thinks big, both in terms of what he is pledging but also the kind of innovation he wants to have. He wants to take those big bets and really think long term and we need more of this attitude in Europe. So, I think somebody like him, particularly in his position can really inspire that next generation. Hats off to him for starting that initiative and the timing is really good. 

GS: When I look at Europe I also see different tech hubs that seem a little bit fragmented and don’t seem to communicate so much with each other. How do you think we could strengthen those links within our own ecosystems to be better off overall? 

ML: I think it is going to happen naturally. It’s just something we need to work on. The Moonfire model leans on working closely with people across Europe and the idea is for me to help the next generation of angel investors on the investment side. This is not just a collaboration offer but also how we can be working together and learning from each other to make better decisions. 

GS: You mentioned you are in London, do you think it’s the place to be in the European market to launch the new generation of funds and what do you think of other European places for venture capital? 

ML: I think it’s horses for courses. You do what you think is best for yourself. I think we are seeing a destruction of geographies so I think it’s becoming less meaningful to be in hubs. These super hubs, which were once so important in defining our strong ecosystems, are now living in the new immersive virtual world. As we move towards this virtual world, maybe being outside of these hubs can actually make you a deeper and better thinker and allow you to access different ideas and different people. I don’t think you necessarily need to be in a specific geographical region to be successful. 

At the same time, you need to do what inspires you! And I still think the big cities have a lot to offer in terms of diversity. 

GS: If we focus on Moonfire, do you know already how much capital you’ll be deploying next year? Do you already have a team in place? How does it look from a structural point? 

ML: Just a few days ago, I announced that Mike Arpaia is joining us. He is actually working on the engineering side of things, so I’m really excited about what he is going to bring to the table. The conversations I have had with him so far have been extremely stimulating and interesting. 

His approach is unique. The fact that he’s worked at some of the big tech companies like Facebook and Workday, but also started his own company, Kollide, and worked both in machine learning and in distributed systems and security is super exciting. We are also in active conversation with other people. The team is coming together nicely. 

The idea for us is to invest at the very beginning. We want to help founders build the right trajectory from day one and become very successful businesses. I think it is super important at that early stage to set the right foundation and principles. We will have two parts: one where we are putting between $1 and 1.5 million and another for smaller $100 to 500K tickets. We are looking to make 8 to 12 investments per year per bucket, so the pace will be pretty high. 

GS: Can you tell us about specific verticals that you’re looking at? 

ML: The four different areas that we are looking at are healthcare, fintech or “capital and finance”, future of work, and gaming. Within these areas, there are three core principles in our thesis: access, efficiency, and service quality. This means building up access to knowledge, capital, and well-being; building more efficient systems that are cheaper, better, and quicker; and creating a better quality of product. Those are the three parts of what we call the Golden Triangle.

GS: I find the industries you’re looking at very interesting because they’re very different, have very different dynamics, and the way you assess those industries are very different. How did you decide on those 4 very different industries to be focused on? 

ML: Across all the industries, we are focusing on the systems and tools to help build out the digital infrastructure. We believe there’s a lot of overlap, for example between gaming and healthcare. There are a lot of gaming solutions now helping people with health disorders. We are interested in the broader concept of deeply immersive gaming content, which is increasingly touching a broad part of society. I think games are going to change the way stories are told. They can help people with mental health disorders, build awareness of diversity issues and cultural problems, and even perhaps play a role in education. We think about these four industries very broadly in terms of access and we selected them because many things are happening in these fields. 

GS: You started raising your fund back in 2019 and we went through a very interesting year. Can you tell us about how hard that year has been, maybe as a fundraising perspective for Moonfire? 

ML: I can tell you that building a firm in a crisis is something I have done before. I started my career in the dot-com crisis. And we built up Atomico in the financial crisis. So it’s only fitting for me to be building Moonfire at a time of crisis. Crises can make it difficult to build things, but the European ecosystem is strong and the interest in tech is higher than ever. So, despite the difficulty, I think we should feel pretty hopeful about the state of tech. 

GS: Does Brexit add a layer of complexity to being a VC in Europe? 

I think it’s a shame we have ended up with Brexit. I don’t think it’s necessarily the perfect outcome, but I don’t think it’s necessarily going to be that hard. I think it will be possible to move forward with the right attitude both from people in the ecosystem but also from the political leaders and so on. I think it’s amazing that French leadership seems to have so completely embraced technology. I believe the French ecosystem is one to watch and I think others have probably underestimated it for a long time. 

GS: We see there are a lot of movements in the tech world to bring more inclusion and diversity. How are you guys approaching that question at Moonfire and what are you gonna do about it? 

ML: Diversity is really not controversial to me, it’s simply common sense. Research has repeatedly shown that companies with diverse senior leadership have significantly outperformed others. If you have diversity, you are going to be better at understanding your customers. I think diversity becomes a critical component if you are in the business of innovation. We are still in the very early phase of building up our portfolio, but we have already seen some impressive female founders, founders from different socioeconomic

backgrounds, different age groups… We are looking at accessing people all around the world from whatever background, whatever age, and so on. Having a diverse pipeline of deals creates diverse outcomes, and we are actively involved in building our network in diverse areas to make sure that we are also at the cutting edge of this. 

GS: Is there any specific fund or investor that you particularly look up to? 

There are numerous. You can’t not be impressed with Paul Graham and Jessica Livingston at Y Combinator. They are world-class and they define the early stage globally, so they’re an international inspiration. I also admire the FirstRound guys and their unbelievable performance. There are loads in Europe as well. Some funds that have done incredibly well, such as Index, Accel, and of course Atomico. It’s going to be exciting to have Luciana now driving Sequoia in Europe. I think she’s an excellent investor and she is going to do great things for our ecosystem. What is exciting also is STATION F in terms of your engagement. I think Xavier Niel and Kima again are very inspirational.