It’s all the time fascinating when a brand new VC agency with a recent group of companions emerge. And with Yellow, it’s fascinating in a number of methods. Based by Oscar Pierre and Sacha Michaud, the founders of Glovo, in addition to Adam Lasri, a former investor for VC big Atomico, Yellow is a brand new €30 million pre-seed fund that desires to take a position on the earliest stage potential (that’s $32 million at immediately’s trade fee).
Along with this distinctive founding group, the VC agency’s focus can also be fairly totally different. Whereas most VC corporations working in Europe deal with the U.Okay., France, Germany and the Nordics, Yellow needs to place extra emphasis on Southern Europe — and particularly some key markets within the space, corresponding to Spain, Italy and Portugal.
Final week, I talked with Adam Lasri concerning the new fund and the group’s funding thesis. Yellow goes to be an opportunistic tech fund, that means that it doesn’t plan to deal with a vertical particularly. The agency will put money into each B2B and B2C startups throughout totally different industries.
“Through the years, I’ve had increasingly more entry to early stage deal move. Typically, I might discuss to firms whereas at Atomico that have been within the ideation stage, by which we couldn’t make investments,” Lasri advised me. “And I discovered that irritating, as a result of just a few months later, you may have Index or others making investments, whereas it wasn’t a part of our thesis to take a position on the seed stage.”
He additionally added later within the dialog that he doesn’t have harsh emotions for his former group. He simply needs to take a position on the seed (or pre-seed) stage.
“Founders love to speak to a different founder who has efficiently bought his firm” Adam Lasri
And but, Yellow isn’t going to be the lead investor because it plans to take a position €200,000 to €500,000 per deal. As a substitute, it thinks it may be the primary believer, deliver different traders and supply recommendation at scale. “We’re by no means leaders, simply collaborators,” Lasri mentioned. In keeping with him, many early stage firms face the identical points — find out how to arrange a group, find out how to format a pitch deck, find out how to navigate the VC ecosystem, and so on.
And, in fact, the founders of Glovo additionally know a factor or two about making a startup. “Founders love to speak to a different founder who has efficiently bought his firm,” Lasri mentioned. This could possibly be the rationale why Atomico, which was based by Skype founder Niklas Zennström, has been so profitable.
“Oscar, who’s the CEO [of Glovo], spent numerous his time with entrepreneurs. He didn’t know find out how to scale that point he spent with them, however each time he invested in an organization, he would discuss all these elements — find out how to go from 0 to 1, find out how to scale your group, how to consider hiring, all that,” Lasri mentioned.
“Final 12 months, they bought their firm to Supply Hero for somewhat over €2 billion on the time. They usually have been fascinated with find out how to professionalize their funding enterprise. I used to be already fascinated with my subsequent steps, and so we began speaking so much,” he added.
Whereas Yellow plans to put money into startups based mostly in France and Southern Europe, it additionally plans to put money into firms that need to shortly broaden to Spain, Italy and Portugal. In that case, Yellow can act as a strategic investor and unlock a bunch of issues that entrepreneurs might face in these new markets, corresponding to expertise help, regulatory hurdles and introductions with massive enterprises.
Yellow’s group shall be cut up between Paris and Barcelona with Oscar Pierre and Sacha Michaud remaining in Barcelona. They are going to hold their government roles at Glovo, the on-demand supply firm that was acquired by Supply Hero. However Pierre and Michaud have already been fairly lively as angel traders. Yellow is only a strategy to take this exercise one step additional.
Adam Lasri shall be based mostly primarily in Paris with one other group member becoming a member of the fund quickly. Victor Navarro, a VC investor that was working for Okay Fund, can also be becoming a member of the Yellow group in Barcelona.
From €0 to €30 million in 5 months
Curiously, the Yellow founding group managed to shut this preliminary fund in only a few months. They began their fundraising effort in June and managed to achieve their objective in lower than 5 months.
Behind the scenes, greater than a dozen European unicorn founders are investing in Yellow in addition to a dozen household places of work from Spain, Italy and Portugal. Among the richest people from Southern Europe are restricted companions in Yellow’s first fund. The agency didn’t obtain any public cash for this fund.
It appears to point that there’s some urge for food for extra VC funds in Southern Europe. Positive, in Spain alone there are many funds, corresponding to Okay Fund, Nauta Capital, Kibo Ventures, Seaya Ventures and Inveready — this record shouldn’t be exhaustive.
But when we have a look at the numbers, a latest report from Dealroom highlights the discrepancies between the highest three European nations in relation to startup funding — and the remaining. In the course of the first half of 2023, startups based mostly within the U.Okay. raised a complete of $11 billion. Germany and France adopted swimsuit with $6 billion and $5 billion respectively.
In Italy and Spain, startups “solely” raised $1 billion and $744 million respectively throughout the identical interval. Portugal isn’t even a part of the highest 15 nations.
Does it imply that there are fewer startups in Southern Europe? Or does it imply that there’s nonetheless untapped potential within the area?
Spaincap’s annual report exhibits that worldwide VC corporations are more and more alternatives in Spain. In 2022, Spanish funds invested a complete of $430 million in native startups (€400 million) whereas overseas traders poured $1.7 billion in Spanish firms (€1.6 billion).
Some overseas traders could possibly be alternatives in underserved markets as their native market is likely to be overheating with too many VC corporations preventing for a similar offers. And this distortion between native traders and overseas traders might clarify why household places of work from Southern Europe are prepared to again a brand new native fund.
This VC hole validates Yellow’s positioning. Now, let’s see if the VC agency can deploy this capital into profitable startups and switch a thesis into returns on funding.
Natasha Lomas contributed reporting.