Cavalry Ventures, a Berlin, Germany-based venture capital firm, has just launched its €160m third fund. In conjunction with the announcement, Managing Partner Rouven Dresselhaus joined us and answered our questions about the firm, the new investment vehicle, their modus operandi and the European tech arena.
FinSMEs: What do you think about the European tech ecosystem? Is it growing? What does it lack?
Rouven: As a matter of fact, I believe that Europe offers more potential for tech than hurdles. Europe has a strong economic area and highly educated talent. In addition, we see an increasing interconnectedness between the various tech hubs, it is also exciting and encouraging to see how ecosystems such as Eastern Europe and the Baltics are maturing. This strengthens Europe in every respect. We also believe that European values such as freedom of speech, the rule of law and associated certainty of doing business perfectly equip Europe to take the lead in topics such as artificial intelligence and cybersecurity and to set clear standards in these areas.
FinSMEs: Let’s speak about Cavalry Ventures. Can you tell us a bit about the firm?
Rouven: Cavalry was founded in 2016 by seasoned founders and investors. We wanted to be an investor that we would have benefited from early on when we were still founding companies ourselves. Our goal is to be the first investor on board of a promising young company, which is why we invest in the pre-seed and seed-stages. Often times pre-product and pre-revenue. We want to support these founders in the best possible way with our offerings in building sustainable companies and ideally work together for 7 to 10 years.
FinSMEs: What’s unique about Cavalry’s strategy?
Rouven: Our client is the founder, our product is early stage capital, we try to build the best product for our target audience, all tailor-made for the entrepreneur. Our product is basically called “capital+”. Meaning, we supply the founders with whom we partner up with capital on the one hand and additional offerings that are crucially important for them on the other hand. Those include sparring on business development, talent acquisition and retention, legal, finance and communications and marketing. In addition, with over 220 individual investors founders have access to a broad (and incentivised) network of experienced entrepreneurs, operators or industry experts so that founders always have the perfect person with the right expertise for their challenge by their side.
As a product-centric firm, we are constantly assessing how we can improve. We have seen that our companies need advice on team building and retention. So we added a strategic talent acquisition manager to the team. We have seen that there is always a need in the areas of communication and marketing – we have also strengthened the team here accordingly. Like any product-centric company, we also measure the satisfaction of our customers – meaning our founders. We simply do this with an NPS that is up to 92%.
FinSMEs: Which trends do you follow with particular attention?
Rouven: We invest in across different sectors and industries. For our third fund, we have defined three areas that we believe will particularly drive technological progress and thus secure global prosperity.
For example, the technological advancements of the last few years have led us – and by that I mean both the new and the traditional economy – to store everything in the cloud. This holds a lot of potential for new products around cybersecurity, data processing, etc.
We also believe that a business can only succeed in the long run if it is run sustainably. It will become the new gold standard. This of course includes the ecological footprint. But also transparency of the supply chain, governance, or areas such as circular economy.
And finally, there is still a lot to discover in the B2C sector. This begins with products tailored to the specific needs of an age group or gender (as one example of a focussed product offering). But it can also be products for people with certain social backgrounds. Or hobbies. Or health aspects.
However, all in all we are interested in any sector and business model – as long as it is a European software business in its very early stages.
FinSMEs: Can you tell us a bit more about your approach to investing?
Rouven: We invest in around 12 investments a year – and that will remain the case. Every investment is pursued with a high level of conviction. We have done very well with this strategy so far. It enables us to work closely and intensively with our portfolio companies. This is important to us as it is the most important pillar of our approach. And it is also well received by the founding teams.
FinSMEs: Personally, what do you like to see in entrepreneurs you partner with?
Rouven: With entrepreneurs, too, their own conviction comes first for us. We appreciate it when founders believe in themselves and their idea and want to pursue their goal in the long term. We also like to see complementary founding teams. No one is able to do everything themselves. We therefore welcome it when the individual members of a founding team are self-aware, can assess their respective strengths and weaknesses well and complement each other, for example jointly as a product expert and as a commercial expert.
FinSMEs: Have you already started investing out of the new fund?
Rouven: Yes, in fact we have already made the first investment out of the fund, which was not yet disclosed. The fund is already operating and running at full speed. And we are looking forward to getting in touch with many new founders and discussing collaboration!