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The Founders Q&A

Aurore Falque-Pierrotin
March 16, 2022

As we strive for transparency at Samaipata, we want to shed some light on our investment thesis and on some of the key questions entrepreneurs often ask us. If the answers laid out below fit with what you’re looking for from a potential VC investor, please send us your deck! We review all opportunities sent to us.

Disclaimer: This set of answers are relevant for our second Fund. We strive to improve & grow as investors on a continuous basis, hence our investment thesis might evolve for subsequent funds in the future.

Let’s go then!

What is Samaipata in 3 sentences? Time to reverse the dreaded elevator pitch.

Samaipata is an pre-Series A pan-European VC fund.

We are a Founders’ fund, created by two entrepreneurs — José del Barrio, co-founder of the leading food-delivery platform in Spain, sold to Rocket Internet for $100 million and Eduardo Díez-Hochleitner, founder of a 3D sound system sold to Dolby, former APAX partner, and Chairman at MásMóvil, sold for $5B in 2020.

We invest in early stage digital platforms with network effects across Europe.

From which fund are you investing from?

In 2020 we started deploying our second fund (€110M): the fund has a 10 to 12 year expected lifetime. We closed the portfolio “building” period of our first fund (€30M) in 2019, which we raised back in 2016. We have thus approx. €150M of assets under management (including some smaller SPVs).

How is the team structured?

On the investment side, we have:

  • Our two co-Founders & General Partners, Eduardo and José.
  • Our 3 Associates Inigo, Cyprien, and Stephanie, covering respectively Southern Europe & Germany, France, and the UK.
  • And myself, Partner leading France.

On the operations side, we have our CFO, Pablo, and our Head of Legal, Ramiro, who all do a million things but one important task they lead is the investment process post term sheet until money-in-the-bank.

You might also meet Alberto our Venture Partner leading Founder Success or Marcia our Head of Platform, who looks after our portfolio and is dedicated to our very own platform “The Hive”, and Daniel, our Head of Growth, who spearheads our growth efforts. And last but not least, Judit, our legendary Operations Assistant.

We also work closely with a network of Operating Partners who support the portfolio. More on this below.

Which companies have you invested in?

We have been lucky enough to invest in 28 great companies over Fund I and II, across Spain, France, the UK, Germany and Italy, and spanning across many different industries in B2B and B2C. We have >85% graduation from Seed to Series A. Not bragging, but the industry average sits at c. 20% (DealRoom)!

Our portfolio has raised over €400m post our entry. Tier 1 later stage VCs from the US and Europe such as Atomico, KPCG, Index Ventures, Northzone and Bessemer have invested in our portfolio companies after us. We have also had 2 successful exits already — Deporvillage & FoodChéri.

By the way, where does the name Samaipata come from? Why the hell did you pick the most-difficult-to-pronounce VC name on earth?

Samaipata is a word in Quechua. It’s a valley in the middle of the Bolivian jungle. It’s known for being a micro world, home to more than 25 nationalities that lived in peace and harmony for centuries. For us, it’s the ultimate example of diversity and team work, two values that are at the core of what we stand for. It’s also a nice analogy of the way we perceive Europe as a Tech hub.

What’s your mission?

We’re a Seed investor. Our mission is to support Founders who build tech-enabled solutions that empower People. One of our key goals is to help our startups reach the Series A milestone: our involvement is strongest in the first 18 months and usually goes down gradually afterwards if the right follow-on partner has been onboarded. Above all, we want to be a travel companion who provides inputs & frameworks, but who never takes the wheel at the place of the founders.

On your investment thesis

You say you only invest in “early stage platforms with network effects”. But what does “early stage” really mean?

For us, “early stage” mainly refers to pre-Series A rounds — namely Seed rounds. A “Seed” round would be:

  • A round typically between €1.5m-€5m.
  • In a company with a live Minimal Viable Product (MVP), typically post commercial launch, with (very) early signs of product-market fit — that being said, we can invest pre-monetisation as long as there is a strong engagement with the product and a strong team behind the business.
  • Where we enter as first-institutional money in (typically after or at the same time as Business Angels).

As mentioned, we generally don’t invest at the pre-Seed stage (pre-product & commercial launch) — although we make some exceptions.

Ok, clear on “early stage”. But what is a “digital platform”?

At Samaipata, the word “platform” refers to software-based businesses with network effects. Those network effects are typically generated by “many-to-many” connections.

Our definition of “platform” is fairly broad and includes many business models beyond standard 2-sided transactional marketplaces that merely connect buyers and sellers of goods & services.

More on the way we understand platforms here.

What do you mean by “network effects (nfx)”?

It all goes back to the idea of “increasing returns to scale”: in today’s digital economy, output increases proportionally more than changes in input levels. The player that is ahead gets further ahead, and conversely the player that is behind is further disadvantaged. It thus becomes possible to build defensibility in a sustainable fashion, and businesses can protect long term profits in a competitive environment, with those increasing returns powering winner-takes-all markets.

There are different ways to generate these increasing returns but we believe network effects to be one of the most powerful drivers of defensibility and long term value creation. They are typically enabled by “many-to-many” connections built into a network and they materialise when a company’s product or service becomes more valuable as i) more users join the network or ii) when usage/engagement between users in the network increases.

More on this here.

Any no-gos in terms of business models?

We only invest in tech-based, asset-light type of models, so no pure Hardware /iOT models, pure Deeptech, Biotech, vertical ecom etc.

As mentioned, we also need to see some kind of network effect built into the model, generating increasing returns in the medium term. So for instance, Enterprise SaaS with a value proposition siloed to the company without strong data network effects involved and/or plans to “platformise” the offering, or “1-to-many” developer tools are typically off scope.

Cool, gotcha. What industries & verticals do you cover?

We are sector agnostic, and we invest across all industries in B2B and B2C. As with most VCs, the only companies in which we cannot invest in are “unethical” and/or non-ESG compliant businesses.

By the way, why are you specialised? And why in early stage & nfx specifically?

We really believe that being specialised as a VC helps you become a better investor. First, it allows you to be a better “picker” as you have access to more qualified dealflow and can become more efficient at analysing the same type of models; then it allows you to be a better “deal maker” as you’re building credibility and expertise in the industry, and hopefully a better board member as most platforms often face similar operational & strategic challenges. Finally, we believe that a portfolio made of companies similar in nature can generate powerful network effects, i.e synergies related to knowledge.

And why platforms & nfx? We are all convinced in the team by the “Power of Platforms” as we see them as highly scalable and defensible business models that typically have strong network effects. We have been lucky to experience this first hand as entrepreneurs and investors: José’s initial company, la Nevera Roja, was a platform in the Food delivery space and Eduardo IPO’ed a wedding platform as well.

Which countries are you investing in? I am a US Inc. yet most of my customer base is located in Europe and the team… well… is remote now and split all over the world. Does this work for you?

We only invest in Europe. Ideally the founding team and the main customer markets need to be located there for us to be able to add value. That being said, in a world becoming more remote, we are increasingly flexible with team location.

Ok! Any other stuff you look at?

Once we validate that you fit our “strict” investment criteria, we then strive to understand (amongst other things):

  • Is the market you’re operating into suited for a “platform” type of model? e.g. Is your demand & supply side fragmented? Is there a “polygamous relationship” going on between your demand & supply? Is there structurally a high risk of bypass in the industry? etc.
  • Can you really build a €100M+ in annual gross margin / net revenues business in this space? At the point of investment, we need to believe that businesses we invest in can potentially be a “fund returner” (aka generates >€1bn in Enterprise Value at exit given our typical stake exposition). Taking into account typical multiples, this usually translates to a minimum of €100M in yearly gross margin or net revenues. That is why it’s key for us to understand your real Total Addressable Market (TAM), as well as your ability to scale rapidly in this TAM.
  • Can you achieve sound unit economics (Long Time Value / Customer Acquisition Costs) on your value proposition?
  • How does your cap table look? At our stage of investment and given subsequent round dilution, it is important for us to have operational founders properly incentivised, typically in control of > 80% of the equity at Seed.

On the type of deals you focus on

What’s your average ticket size?

We typically invest tickets ranging from €500k to €2m, with an average sitting at €1.5m. At the end of the day, it really depends on the stage of development of the business.

Do you lead deals? How open are you to co-investment? Do you have a minimum ownership stake?

We typically lead deals. We strive to be fairly hands-on and when we invest in a company, we are fully in. The “Spray and Pray” mentality can prove successful; but it’s definitely not in our DNA. For Fund II, we are planning to invest in a maximum of 30–35 companies, which is a fairly concentrated portfolio.

That being said, we are very collaborative in our approach and we often co-invest with value-added Business Angels and/or VCs who can provide an alternative expertise, such as industry knowledge, to what we bring to the table.

However, we strive to reach double digits %. This is a consequence of our investment thesis. We’re a Seed investor, not a Series A investor, which means that the Seed stage is the only time where we can build our stake.

Do you follow-on?

Once again, we’re a Seed investor. We do not “lead” any subsequent rounds beyond the one we enter. However, we can invest up to €15M per company and we typically do follow-on provided our Investment Committee approves the deal and a new investor decides to lead the next round, validating the company’s new valuation. In that case the general rule is to follow-on with our pro-rata (but our ticket will depend on our stake in relation to the size of the round).

How many companies do you invest per year?

We’re planning to invest in a total of 30–35 companies over our fund lifetime, hence we will do 6–8 deals a year across our key geographies.

Do you do a Due Diligence (DD) for all the companies you invest in?

Yes, we do — a financial one and a technical one. First, we have a fiduciary duty to our Limited Partners to do so (after all it’s not our own money that we’re investing!). But, more importantly, we believe a well-executed DD can actually be very valuable to the business itself as it can shed light on key improvement areas when it comes to internal processes and reporting. And we only work with highly pragmatic DD providers across our geographies, who focus only on the most important items and very much respect the time of founders.

On your investment process

What does your typical investment process look like?

We’re fairly quick in our decision making process. When the timing is right, from 1st interaction to term sheet it takes approximately 3 weeks — yet we could move faster if required.

There are 2 touch points with our investment team (i.e. fairly informal Q&A sessions held on Zoom), corresponding to 2 distinct “Investment Committees”. Additionally, if you’re based in one of our key hubs, we like to meet Founders face to face. It’s key for us to understand whether there is a high fit (on both sides of the fence!)

We are also fairly analytical in our analysis: we spend quite some time looking at the business’ data (both financial & operational metrics), on understanding overall market dynamics, the competitive landscape etc.

What type of KPIs do you look at during the analysis process?

We’re data driven at Samaipata, hence even if we invest super early, we spend quite a bit of time looking at your data (if available) analysing historical traction, cohorts, demand & supply concentration etc. We can help you a lot on this as we’ve built some interesting analysis tools over the years.

By the way, what is most important for us is not necessarily your top line, but the retention and the engagement of your user base, and any indications of strong “customer love”. We prefer a business with fewer, but passionate users, that consistently come back to the product, than a wider user base less engaged. “Liquidity quality” is key for us.

Finally, we are also obsessed with Unit Economics as a function of Cost of Acquiring Customers (CAC) and LifeTime Value (LTV). It’s obviously not a prerequisite for you to have sound unit economics when we invest; yet it’s key to show us that you think of your business in those terms and that you have a plan to make those unit economics work in the medium to long term.

How does your Term Sheet look?

Our term sheet holds no surprises and our terms are 100% plain vanilla: standard information rights & governance, Founders’ vesting, drag along & tag along clauses, 1x non-participating liquidation preference (with a carve-out) etc.

On the way you actually work post-investment

How do you differentiate yourself from other VCs in what you bring to the table?

In a world where competition is increasing between VCs, we like to think that we are different on 4 different points:

  • We give you full access to our platform designed to support portfolio teams, which we like to call the Hive. We are committed to support our founders on Fundraising, Talent and Growth.
  • We have a specialised focus on digital platforms with network effects. We have extensive knowledge in these defensible models, which enables us to better understand key success factors of long-term value creation.
  • We are laser focus on Pre Series A Stage. We master the Seed to Series A journey, with an operational support framework dedicated to this stage and strong synergies within our portfolio of companies.
  • We have a unique pan-European footprint, allowing our portfolio companies to tap into a Europe-wide network when it comes to fundraising, talent or sales. We strongly support internationalisation.

What is “the Hive”?

The Hive is our Founders’ support platform.

Our Operating Partners network currently comprises 9 great advisors spamming all key pillars of early-stage companies (e.g. B2B sales, Talent Acquisition, GTM definition etc.). We keep building our team.

What are your requirements when it comes to reporting?

Our job is to help our businesses grow. In order to achieve this, on top of capital, we strive to add value as much as we can. Without information it’s very difficult for us to add value, as otherwise it’s hard for us to truly understand the business and to have actual insights.

As such, we see boards, monthly calls and reporting documents not as a way to ensure “legal compliance” but as a way to ensure information alignment between you and us: they are basically communication channels.

Also, we see reporting as a way to help you become better decision makers. What you send us each month should be a subset of your internal reporting tool that we can help you build and that should be a lever to pilot your business on a daily basis. Our view is that if you’re not close to the data of the business, you’re almost blind!

More pragmatically, we’re fairly flexible with format & length of reporting (we’ve banned ppt slides internally!), as long as we have enough info to be able to help you.

Do you always take a board seat?

We usually take a board seat as we are hands-on and once again, we strive to add value to the companies we invest in. Disclaimer: we are on call 24/7 but we don’t get into the day-to-day operations of the business — that’s founder territory. However, we can also be flexible if required.

More on this here.

**

At Samaipata, we are always looking for ways to improve. Do not hesitate to send us your thoughts. We strive to partner with early-stage founders and to support them in taking their business to the next level. Check out more ways in which we can help here or for all our other content here.

And as always, if you’re a European digital business founder looking for Seed funding, please send us your deck here or subscribe to our Quarterly updates here.

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