"Never fall in love with a deal"

Olaf Jacobi is Managing Partner at Capnamic Ventures, one of Germany's largest early-stage investors. In an interview with Startbase, he explains what he looks out for in up-and-coming companies and why he is never annoyed by a missed opportunity.

Olaf Jacobi can only be met for an interview via video conference these days. The Managing Partner of Capnamic Ventures is under stress, a follow-up appointment beckons. Nevertheless, he takes a good hour to explain how one of Germany's largest early-stage investors makes its decisions.

Mr. Jacobi, Capnamic invests in very young companies, most of which still have little track record. How do you recognize which companies have a promising future ahead of them?

We have a credo that we have been true to for years, and it encompasses three things: team, timing and technology. Specifically: the technology must be scalable and defensible, I think that's self-explanatory. The founding team in particular must be top-notch, because it depends on them whether the startup can recruit further top talent and put the company on course for growth. Timing, in turn, depends a lot on the markets. Good teams find the right entry point.

Isn't a good business idea always a good business idea?

The right timing is crucial to whether a business idea will fly or not. Let me give you an example: the market for drone-related products exploded six or seven years ago. That's why I got involved with my previous find in Dedrone, which deals with drone defense using sensors. We wouldn't have got in a few years earlier, and neither would we today. If you are too early, a startup needs a lot of capital to hold out until the market explodes. If you are too late, you also pay more money to catch up.

Capnamic is invested in startups from a wide range of sectors, from software-as-a-service to expense management to insurtechs. Be honest: do you always understand what the founders are telling you?

As a VC, you have to be incredibly curious and you always have to be prepared to familiarize yourself with new fields. I don't make my decisions alone, we always make our decisions as a team with very different backgrounds. Successful VCs come from all areas: Lawyers, physicists or business graduates, it's all there.

"VCs also have to be tough and strive for distance."

But surely it takes more than curiosity...

VCs also have to be tough and try to keep their distance. "Never fall in love with a deal" is a saying in our industry. I often see this with young colleagues in particular, who think almost everything is great at the beginning. After a while, it tips in the other direction and they become overly critical, which is of course not ideal either. But it usually settles down to a good level in the long term, between honest enthusiasm and healthy skepticism.

How many pitches do you have to hold back from laughing out loud?

Sometimes we do, but these are special cases. Sure, we say no very often. We read or hear thousands of cases a year and invest in maybe four to ten on average. But that doesn't mean that all the rest are bad cases. We have our clear requirements profile, our clear investment strategy, and that's the only one we invest in.

How is this investment strategy defined?

First of all, it is in the nature of early-stage investment that we are primarily looking for highly scalable start-ups. Some founders have a very good business plan and will probably also be profitable. But we are only interested in those that have the potential to become really big. Venture capital is the search for so-called outliers.

At Capnamic, we also focus primarily on B2B solutions. This is the area in which we know our way around and in which we can best assess the prospects of success.

Even the best VCs sometimes make a bad investment. When do you think the time has come to write off a start-up?

If you look at the portfolio of many successful VCs, you can see that only two or three companies per fund become real high-flyers and make up the success of the fund. It is often not clear for many years which company this will be in the end. That's why we don't give up quickly on our investments, even in tough times. Our founders also appreciate that about us. We help, advise and try to mediate in disputes. The latter is particularly important, because if a start-up fails, it is also because the founders are at odds with each other.

In addition to failed investments, there are also those that were once turned down but would have liked to have been made in retrospect. Do you do that too?

Of course, it happens to every VC. For example, Talon.One from Lieferando founder Christoph Gerber, a platform for organizing advertising campaigns with vouchers or discounts. I had that on the table and didn't do it. There are many other examples of companies that I turned down and that were later worth billions. Of course it hurts every time, but it's part of a VC's job. A good anti-portfolio is even important for an investor. It shows that you have seen a lot of good deals, formed an opinion, which can of course be wrong, and that some of the rejected deals later become big and successful.

Are you jealous?

Not at all. I'm happy about every successful startup because it helps our tech ecosystem here in Germany. I was also a founder myself, so I know exactly how great a successful exit can be. I wish that on every startup, founder and investor.

Personal details: Olaf Jacobi is Managing Partner at Capnamic Ventures, an early-stage investor focused on B2B business models with offices in Cologne and Berlin. He has more than 20 years of experience as a manager, entrepreneur and investor. Between 2007 and 2015, he was a partner and co-owner of the VC Target Partners. From 1999 to 2007, he founded and established several start-ups that led to successful exits. Jacobi studied business administration in Hamburg.