Olaf Jacobi is Managing Partner at Capnamic Ventures, one of the largest German early-stage investors. In an interview with Startbase, he explains what he pays attention to in up-and-coming companies and why he does not resent a missed opportunity.
For the interview, you can also meet Olaf Jacobi these days only via video conference. The Managing Partner of Capnamic Ventures is under stress, a follow-up appointment is in the pipeline. Nevertheless, he takes a good hour to explain how one of the largest German early stage investors makes his 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 involves 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's on them that it depends whether the start-up can recruit further top talent and get the company on course for growth. The timing, in turn, depends a lot on the markets. Good teams find the right entry point.
Isn't a good business idea a good business idea at all times?
The right timing is crucial to whether a business idea will fly or not. Let me give you an example: The market for products based on drones exploded six or seven years ago. That's why my previous discovery brought me into Dedrone, which deals with drone defense using sensors. A few years earlier we wouldn't have gone in, and we wouldn't have today. If you're early, a start-up needs a lot of capital to last until the market explosion. If you're late, you pay more money to catch up.
Capnamic is invested in start-ups from a variety of areas, from Software-as-a-Service to spend management and 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 willing to learn new things. I don't make my decisions alone, but we always make our decisions as a team with very different backgrounds. Successful VCs come from all areas: Lawyers, physicists or business economists, they come from all areas.
"VCs also have to be tough and try to keep their distance."
I'm sure it takes more than just curiosity...
VCs must also be tough and strive for distance. "Never fall in love with a deal," that's a saying in our business. Especially with young colleagues I often observe this, they think almost everything is great at the beginning. After a while it tilts in the other direction and they become supercritical, which is of course not ideal. But in the long term, it usually settles down at a good level, between honest enthusiasm and healthy scepticism.
At how many pitches do you have to hold back so as not to laugh out loud?
Sometimes there are, but these are special cases. Sure, we say no very often. We read or hear thousands of cases a year, and on average invest in maybe four to ten of them. But that doesn't mean that all the rest are bad cases. We have our clear requirement profile, our clear investment strategy, and that is 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 look primarily for highly scalable start-ups. Some founders bring a very good business plan with them and are likely to be profitable. But for us, only those that have the potential to become really big are interesting. Venture capital is the search for so-called outliers.
In addition, we at Capnamic primarily focus on B2B solutions. This is the area in which we know our way around and in which we can best assess the chances of success.
Even with the best VCs, an investment can go wrong. When is the right time for you to write off a start-up?
If you look at the portfolios of many successful VCs, you can see that only two or three companies per fund become real high-flyers and account for the success of the fund. It is often not clear for many years which company that will end up being. That is why we do not give up our investments quickly, even in hard times. Our founders also appreciate that about us. We help, advise, try to mediate in disputes. Especially the latter is important, because if a start-up fails, it is also because the founders fall out.
Apart from failed investments, there are also those that were once cancelled, but which one would have liked to do afterwards. Also with you?
Of course, that happens to every VC. For example Talon.One by Lieferando founder Christoph Gerber, a platform for organising 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 rejected and which 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 of course can be wrong, and that some of the cancelled deals later become big and successful.
Is one jealous?
Not at all. I am happy about every successful start-up, 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 begrudge every start-up, founder and investor that from the bottom of my heart.
Olaf Jacobiis 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 manager, entrepreneur and investor. Between 2007 and 2015 he was a partner and co-owner of VCs Target Partners. From 1999 to 2007 he founded and established several start-ups, which led to successful exits. Jacobi studied business administration in Hamburg.
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