InReach Ventures has just closed a €53m early stage venture capital fund focused on investing in European tech startups. In conjunction with the announcement, Roberto Bonanzinga, one of the three co-founders of the firm and one of the most innovative venture capitalists in the world, joined us to speak about InReach and its pioneering AI approch and strategy, and shared with us some thoughts coming from his deep experience and succesful career of startup investor.
Simply worth reading!
FinSMEs: Roberto, can you tell us a bit more about the genesis of InReach Ventures?
Roberto: When I started thinking about setting up InReach Ventures and choosing my co-founders, I applied the same logic I use when looking at investment opportunities – I have a fixation on the need for the right DNA within a founding team and how it relates to the problem that they are trying to solve.
We are a very atypical founding team for a venture firm. Ben comes from a software engineering background and has built many data platforms and product development teams (most recently at Yammer / Microsoft); John used to be the General Counsel of Balderton Capital (Benchmark Europe); I am a typical investment partner. Technology, Operations and Investing are the three pillars of the firm.
FinSMEs: Let’s speak about InReach. Can you tell us a bit about the firm?
Roberto: We started the firm 3 years ago and these were 3 very intense years, full of important milestones. The uniqueness of our approach is reflected in our organisation: the majority of people at InReach are software engineers. So far we have invested over €3m in developing our own proprietary technology and AI and this is where we will continue to invest.
While we’ve been building the technology, we’ve been using it to source investments. So far we have backed 8 start-ups from our first investment vehicle. It’s still too early to draw conclusions, but it’s fair to say that what we have achieved so far looks very promising. Oberlo (our first investment) was acquired by Shopify. Soldo has attracted a top investor in Accel and we have several companies in the portfolio – such as Shapr3D, Loots and Tutorful – that are getting ready to scale up.
FinSMEs: You just raised a new fund. What’s your overall strategy?
Roberto: Today we announced the first closing of a new fund of €53m, targeted at early stage European technology companies. This first closing surpassed the original fund target of €50m – fairly unusual for a first institutional fund and is another validation that we are on the right track. Geographically our investment focus will be Europe and we will be looking to invest in start-ups primarily in three areas: consumer internet, software as a service (SaaS) and marketplaces.
We are very passionate about the opportunity for European technology entrepreneurship and with InReach we have created a new approach to venture capital, which allows us to discover investment opportunities anywhere in Europe, from Helsinki to Barcelona, from Warsaw to Rome.
Our aim is to be the first institutional investor on the cap table. Our first check in a start-up is usually in the range of €500K to €2m.
FinSMEs: can you tell us a bit more about InReach’s data approach to investing?
Roberto: At InReach we are putting software at the centre of everything we do. We are productising the whole value chain of a traditional venture firm, starting with deal sourcing and qualification. To give you an idea, we currently look at about 2,500 companies per month. In some firms this would be a year’s worth of deal-flow.
From a technology perspective, our logical architecture is based on 3 different layers: data, intelligence and workflow. There are some profound implications that come from our approach:
a) We are often proactive in our outreach to entrepreneurs
b) We are 100% geographically agnostic across Europe
c) We are very efficient in analysing inbound opportunities.
If you look at our website you will see that it is optimised on conversion. We try to convert visitors of our website, often entrepreneurs, to share their start-up with us. We are not concerned with being bombarded by opportunities, because we have developed a scalable workflow that allows us to efficiently manage significant dealflow.
FinSMEs: For an entrepreneur what is the most tangible characteristic of InReach Ventures?
Roberto: Something we hear a lot from entrepreneurs that engage with us is that they have an immediate feeling that they are engaging with a different type of investor. This is, in fact, embedded as one of our key company values: NATIVE. We use and implement many of the same tools and methodologies as our fellow entrepreneurs. We run our firm on OKRs, we implement our own agile development methodology, we maintain a product roadmap, we extol the virtues of continuous delivery, etc… Our organisational structure looks much more like a start-up’s than a venture firm’s and this gives us a unique ability to connect with entrepreneurs and support them during the company building process.
FinSMEs: What do you think about the European tech ecosystem? Is it growing? What does it lack?
Roberto: We are very excited by the opportunity for European technology entrepreneurship. Never has it been more vibrant than today. We are doing a lot of things right, but we need to stay focused and push ourselves to improve. I guess what I am trying to say is that a lot has been achieved, but we all need to do more. We need to recognise that if we look at the biggest tech companies in the world by market capitalisation, European companies are still significantly underrepresented. The world of technology is dominated by US companies, with China bringing the competition.
The European technology ecosystem is on the right track, but we all need to do more. In particular, we need more innovation across the whole industry, from Startups to VCs, from Regulators to Banks. At InReach, we are working hard to push innovation in the European Venture Capital model. As European venture capitalists, we need a new approach that is distinct and tailored to dealing with this geographic fragmentation and economic reality. We believe the only way to achieve this is through a software-based approach, powered by AI. This is why we are in business.
FinSMEs: Personally, what do you like to see in entrepreneurs you partner with?
Roberto: We use machine learning and software to discover investment opportunities and to support our decision making process. However, a lot of our investment decisions are based on assessing the “people factor” of the startup. In the case of co-founders we focus our attention on assessing the overall dynamic within the founding team.
The traits that we like to see in successful entrepreneurs are: unreasonable passion; intellectual curiosity; strong execution capability….and we must enjoy having dinner together. If we can’t enjoy dinner, we can’t invest!
FinSMEs: Which tech trends do you bet on for the next 36 months?
Roberto: We really don’t think in these terms. We do not believe in trends, we believe in outliers. We work hard not to have the answers before asking the questions and we try to keep our brain free from any prior assumptions. Largely, if something has already become a trend, it’s probably too late to be an investment opportunity. We don’t believe in consensus based investment and we think early stage investment is all about seeing what others cannot see.