Nicolas Brand is Partner at Lakestar, one of Europe’s leading venture capital firms managing an aggregated €1 billion of capital. Unless locked down, he floats between Zurich, Paris and Barcelona and is frequently in Berlin and London. Gwen Salley, Head of Investment & Services at STATION F, interviewed him to learn more about Lakestar is managing the crisis and his vision on the ecosystem in the coming months.
What is the concrete impact you are seeing on your portfolio companies?
We have been seeing a wide spectrum of effects. In Berlin, our company Scoutbee has been pointing their AI procurement technology to help governments and healthcare providers source critical supplies. Nebenan, a neighbourhood community platform, has been helping local shops and restaurants stay afloat with vouchers systems and has generally seen a surge in activity on the platform. Neighbours have been growing closer together and helping each other out across generations.
Through Barcelona based Glovo, a global delivery business, we have observed a new generation of users emerging. Senior citizens that have never ordered online have been shopping for groceries and food through apps and webshops. We are seeing a whole new demographic being onboarded into the digital world.
We are working through challenging situations as well. Our investments in the travel and mobility segments have been impacted the most. We have been working with the founding teams to prepare them for a prolonged period of hardship that extends well into the next year. This includes interim financing rounds where we have unlocked additional investment for our companies.
What advice are you giving to your founders facing a massive slowdown in their operations?
There has been a hyperinflation of advice given in recent weeks, so I want to be mindful of that. A combination of empathy and determination is what I have come to admire in recent weeks. The best founders show great sensitivity to the needs of their employees and customers, are very visible internally and externally and are embracing this period, including the tough choices sometimes that might lead to jobs being cut.
A slowdown in operations also means to me that NOW is the time to be creative, to experiment. Catch-up on the product roadmap and selectively accelerate. Use this crisis for the unusual, perhaps refresh product pricing, bring forward new features, MVP launches, potentially things that you wouldn’t have dared to do in normal times. The entrepreneurial teams that can switch the fastest from stabilising their companies to seizing opportunities will perform well throughout the rest of the crisis and beyond.
Lots of funds are saying they are “open for business”, what’s your take on this and what is the situation for Lakestar?
We have extended a term sheet last week and one this morning. We have been very fortunate in having announced our latest Early Stage and Growth Stage Funds in February. This is a privilege and we deeply appreciate our LPs who have backed us. While we are continuing to invest, the lion’s share of our time has gone to existing portfolio companies. The portfolio entrepreneurs are the superstars, not us, hence we are fighting alongside them to navigate this crisis.
Also, I firmly believe reputation gest forged in these current times. I’ll give you one example: we had signed a term sheet with a Paris based company in February, just before Covid-19 broke out properly over here. I am proud to say that we have not changed a single deal term since. We had given our word and it was important to us that we stick with it. We’re here for the long run and won’t get nervous just because revenue might be delayed by a couple of quarters.
How do you foresee the VC ecosystem to evolve in the coming months? Are you already seeing impacts on investments in the market?
We have been seeing a closer interconnectedness in the system. France has been a remarkable forerunner in that regard. The connectivity between the government, La French Tech, STATION F’s leadership, the tech community as a whole is impressive. Other geographies can learn in that regard. In the background we continue to bring together the various communities, e.g. we have helped connect the French efforts with the German Startup Association for example, which is the key ecosystem outfit in Berlin.
Let’s be honest, we need to get our act together in Europe. The tech ecosystems need to grow closer together. An increasing connection between Paris, London, Berlin, Stockholm, Zurich, Barcelona, Milan and beyond is very dear to our heart. The future of Europe rests on our ability within the tech community to build out the next generation of companies and technologies.
What are the industries you expect to be the most impacted in the long term outside of travel / events etc.. ?
Covid-19 will be with us for some time, probably years if you include the ripple effects in our economies. Next to the healthcare system, the millions of small and micro entrepreneurs are feeling it the most right now. The biggest impact I anticipate to be for those no-tech or low-tech companies that were just perceived technology companies in the boom times. Warren Buffet’s brilliant quote summarises it well: ‘Only when the tide goes out do you discover who’s been swimming naked’.
We are seeing a lot of business also booming! What type of business and industries you think will see sustainable growth in the future as a result of this virus episode?
The lockdown has brought about a shift away from the physical and global instead to the digital and local. We are likely to see supply chains being recut and some of the manufacturing offshoring being reversed back into Europe. Automation technology will play a key role in that regard. The rollout of horizontal, enabling technologies such as AI tooling and digital financial infrastructures I expect to accelerate. Sectors such as remote work solutions, new ways to offer healthcare, and digital entertainment specifically gaming are already booming. Interesting also: whatever governments wanted to achieve in digitising education and classrooms over the next five years has potentially just happened in its entirety over the last three weeks. This is great!
What would you say to: An entrepreneur who’s thinking of starting a business in this context and to an entrepreneur who’s looking at raising funds in this context?
This terrible crisis, in a way, might be the best thing to have happened to the planet in the long term. I hope we can translate this impact into a positive and lasting effect on the environment. Did we really need to travel as much? Also, we have all gone through a period of rethinking what might be most important to us, and values such as family, friendships, freedom to move around we have come to appreciate much more again.
The next decade I firmly believe will be a great period for entrepreneurs with ample opportunity all across technology. Hence to those that are wondering if they should start now: go at it, full steam!