Ariadne Capital

Ariadne Capital In Berlin we meet Julie Meyer, a great networker, serial entrepreneur and now venture capitalist.She gave us some insights about her entrepreneurial background and the hardships of entrepreneurship, what Ariadne Venture Capital is and what she looks for in a great investment. Lastly, Julie shares some great advice with other first time entrepreneurs.Interviewer: Hi. Today we’re in Berlin with Ariadne Capital. Julie, who are you and what do you do?Julie: I’m Julie Meyer and I’m the CEO of Ariadne Capital, and also the founder of Entrepreneur Country, that’s our discovery platform helping corporates and startups discover themselves. And Ariadne Capital is a venture fund investing in B2B SaaS companies.Interviewer: When did you start this fund and what did you do before you started this?Julie: I’m very old actually. I came to Europe in 1988 when I was right out of university, and I went to INSEAD in ’97, and following INSEAD â€"I’d always worked with technology companies b ut on the marketing side, I basically started doing internet deals. I am getting companies funded, and then I set up a network of entrepreneurs called ‘First Tuesday’, which went pan-European and we helped a lot of companies get funded in 1999 to 2000. Then I set up Ariadne Capital, still with this idea that European entrepreneurs did not have a gold standard for the financing of entrepreneurship, that they deserved world class financing, and to do that across Europe is actually quite tickly, because Europe is federated. So you have to think differently. You can’t just do the same thing and say, “Well it works in Palo Alto, so therefore it’s going to work in Berlin.” You actually have to think deeply about how to build the proper venture capital business in Europe, which is what we’ve done.Interviewer: Can you tell us a little bit about Ariadne Capital. How was the fund structured, how big is it, and what kind of investment spheres are you targeting?Julie: We were the very first people in Europe in 2000 to create this model of entrepreneurs backing entrepreneurs, which is highly à la mode today but nobody was doing that at the founding of a venture capital firm to have leading entrepreneurs, like the founders of Betfair, Hotmail, Worldpay, Qualcomm, so forth, plus myself, as the founding shareholders. So that’s very unique about our business that our DNA is about entrepreneurs helping other entrepreneurs. On top of that we’ve done more than £350 million of investments over thirteen and a half years. We have our own venture capital firm which is at £50 million, so that is about €70 million.And then co-invest, so people can co-invest with us, very low fees, lot of it is my money. And basically we’re looking for entrepreneurs that have just that ability to not give up. They’re just not going to give up, they are persistent as hell. And B2B SaaS. So we think there is a lot of focus on these digital disrupters, everybody is talking about Airbnb, Uber and so forth, but most of the world is not ever going to be Airbnb and Uber, so what do you do if you are a retailer or bank or an insurance company, what’s you’re strategy? Well, you’re going to have to open yourselves up and become a platform by engaging with digital enablers or B2B SaaS companies. So those digital Davids are going to have to hop on the back of Goliath, put those digital cars on the highway to acquire customers. We think that that’s what’s going to happen in 99% of the cases. Nobody thinks that’s particularly sexy, but that’s what’s going to happen if we fast-forward ten years and look backwards. It’s not as if I’m going to create the next Airbnb or Uber â€" much as I would like to â€" but I will build or help to build a lot of B2B SaaS companies and then help them find the partners that they need to go to market with.Interviewer: So did I get it right that for Ariadne Capital you have a two-sided model, on the one hand you have so me kind of a business angel network, and on the other hand you have your own VC fund?Julie: That’s correct.Interviewer: How is the investment process working? How do you find, make due diligence, and decide on which companies you invest?Julie: Because of the Entrepreneur Country network, we have people all of Europe, from Poland to Greece and Dublin to Helsinki, so we have people that will be bringing opportunities in. We see more than one hundred easily, more than one hundred new opportunities to invest every single month. In the month of July we’re actually closing three deals, we invested in a Bitcoin company last Friday.The investment process is fairly quick. We do quite a lot of due diligence, but we do it fast, we do it through our network, and we set up what we refer to as a ‘positive architecture’. So we really believe that the foundations of the building need to be solid. So we do put in a gentle preferential investor rights, so we don’t just wing cash over to peo ple for them to say fantastic. We set up a proper company with them. What people tend to do is to get their minimum viable product done with their own money or friends and family, then they get some market traction, then they want Ariadne to come in and to be their partner to anticipate the series A where somebody could really put a five million, ten million Euro check in, and by that time the series A investor is going to really redo your corporate architecture. So it’s better to anticipate that with a group like Ariadne.Interviewer: So are you a seed or series A investor?Julie: We refer to it as ‘later stage seed’. So seed would be what we would refer as to get the minimum viable product done. So we’re after the minimum viable product but we’re probably not going to put in a five million pound check ourselves.Interviewer: What is a typical ticket size?Julie: £500,000, so probably €700,000. And we are looking for entrepreneurs that can demonstrate market traction, but they don’t understand the complete operating model. So they say, “I still have a couple of assumptions that I’m working on, but I definitely have people who are buying what I am selling.”Interviewer: What are the major KPIs that you are looking for estimating the traction of a startup?Julie: Typically it’s revenue, typically it’s that somebody is buying what you’re selling. So it’s 250,000 of revenue and so forth. It could be a big partnership deal, it could be user adoption, but typically it’s revenue. I think that it’s all very exciting to get people to use your product, but we’re very business model focused. As I spoke about today here at Tech Open Air Berlin, people get very focused on technology, and we actually think the people who are organizing the economics for the ecosystem are the winners. If you look at how did Apple move the music industry to Macworld, or what Google did with advertising, or Amazon with books, they own the operating model, they own the business model. So if you’re just focused on technology and you’re not thinking about long-term, how does the business model work in the industry, it’s not very interesting to us.Interviewer: From how I think you need to be the spider in the net or in the ecosystems so that everybody else is trying to depend on you, then you can monetize them.Julie: Absolutely. That’s very good. Yeah.Interviewer: We always try to give some advice to first-time entrepreneurs. I would be very interested in what advice can you give, what mistakes you have seen and how the entrepreneurs can avoid them.Julie: I would say don’t be an entrepreneur if at all possible. Only become an entrepreneur if you feel you’re not going to be okay unless you are. It’s a very difficult life. It is, it really is. It blows through your personal life, it’s very difficult. I see a lot of entrepreneurs get fat, they don’t take care of their health. So if you can be happy working for someone, being part of a startup, be part of a startup, but to found your own business, to put your capital at risk, to make it the priority, and your partner figures out what the priority is in your life, believe me. So you put a lot in jeopardy when you become an entrepreneur. Don’t do it â€" unless you have to.I’m the daughter of an entrepreneur and that’s in my blood, and for me I can’t do anything else. I feel obsessed by my work, and I think that great entrepreneurs â€" I’m not saying that I’m a great entrepreneur â€" but the great ones are obsessed with what they do. And so that’s really my advice, there’s a lot of people who think it’s very glamorous to run your own business, it’s not, it’s a lot of lost nights of sleep, and it’s a lot of explaining to your mother why you are not home at Christmas, and it’s a lot of explaining to your boyfriend I’m sorry I have to go to dinner with that person, and yes you’re important but he’s kind of important tonight. So it’ s difficult, it’s not easy. That’s the first thing I would say.But if you are an entrepreneur, and if you are going to build it, then what I would say is you have to be open. You’ll have a vision, but you have to be smart enough to listen to people. And I see a lot of entrepreneurs who say “I am just going to… I know what it is,” and so forth, and they don’t listen. Not everybody who gives you advice is going to be right, it’s still good to know what the market is thinking, it’s good to know what people think about you, it’s good to know and so forth, and you let it just wash right through you. It’s not as if if somebody says something negative about your business don’t take it personally, they’re trying simply to say I don’t understand. You’ve got to be open. And I see a lot of entrepreneurs that it is such a deeply personal thing, “It’s my vision of the future. My venture capital firm is this.” And then somebody says, “Not really working Juliu s.” So just let it roll.Interviewer: Thank you very much Julie.Julie: You’re very welcome.