Meeting European VC Champions: Investing in Mission-Driven and Diverse Founders

In the 7th episode of The European VC, we chatted with Andrés Dancausa.

Some of the things we chatted about:

  • Why diversity is imperative for generating Limited Partner (LP) returns;
  • How Andrés and The Venture City (TVC) build with an operator mindset;
  • How TVC, as a truly globally diverse and mission-driven VC firm, adds value to founders;
  • What product-led growth is and why it’s part of TVC’s secret sauce.

If you’d like to listen to more of these meetings with European VC champions, follow the EUVC podcast.

A little bit about Andrés Dancausa

Andrés Dancausa is the EMEA Partner at The Venture City. Based in Madrid (Spain), TVC helps founders achieve global impact.

They do it through a unique model that brings together a global product-led acceleration program and an early-stage Venture Capital (VC) fund.

Andrés is a true operator turned investor & a friend of founders for his constant readiness and good advice.

“Symbiosing” an accelerator and a fund while betting on diverse founders and geographies. 

TVC was founded by Laura González-Estéfani and Clara Bullrich, after realising that not all the best founders were getting the best support. It was hard for great founders without the right network to build the tech success companies they envisioned.

Clara helped setting up the firm internationally, and that led to the current geographical dispersion, having people in places like San Francisco, São Paulo, Miami, Madrid and Barcelona. Their approach helps startups grow globally and brings diversity into the ecosystem.

TVC also boasts a great team made of experienced operators – usually hard to attract to VC – with either an entrepreneurial background or experience working for tech giants. It has also built two vehicles to support the team: an accelerator to invest in the early stages of a startup and a VC capital firm that invests in seed or series A startups.

These two vehicles work in symbiosis, having the fund and the accelerator combine their influence over a larger period of the startups’ life. This allows TVC to provide the startups access to a combination of each vehicle and their teams’ skills.

Andrés highlights three main value adds for LPs:

  • A 50 Million € fund that has experienced operating partners without the increase in the management fees usually associated with that. 
  • That structure attracts the best entrepreneurs, as they want capital and access to a highly skilled team.
  • Deal flow is reinforced through the accelerator, by investing in around 40 companies per year. Some startups get investment from the fund after the accelerator, being a de-risking factor for investors.

How diverse and purpose-driven entrepreneurs are embedded in the investment strategy 

Andrés believes TVC is naturally directed towards diversity from its inception. It was founded by two immigrant women and, in three years, the accelerator and the fund have invested in 80 companies, in three different geographies (US, Latin America and Europe). TVC prefers to take entrepreneurs on their team, instead of bankers or M&A consultants.

TVC invests in purpose-driven and diverse founders not only because they want to change the world, but because it’s a good strategy. Diversity helps build stronger companies that face challenges with broader skillsets, especially when expanding globally.

Nowadays I think it is almost impossible to build a global business without a multicultural and diverse team, capable of understanding different angles of the same issue. So, if you want to conquer the world you need a global team. 

Andrés Dancausa

TVC’s team is aligned with this purpose, so this mindset is transversal to their investments and also present within the company and its team. That’s why, in TVC, you’ll find Americans, Spaniards, Brazilians, Russians, Venezuelans, British, just to name a few.

Doing good and making a profit doesn’t imply a trade-off

Andrés believes that, in the long term, there’s no conflict between doing good and making a profit, and that’s what he states to LPs.

As an example, in the same way, that diversity brings a wealth of ideas and creates stronger companies, looking out for the environment plays an important role.

Cabify, one of TVC’s portfolio companies, went carbon neutral back in 2018 and it’s doing great.

It’s not unusual for some very early-stage startups to struggle with some of those principles in the beginning, but all startups in TVC’s portfolio aim to operate under the Environmental, Social and Governance (ESG) principles.

Some numbers from TVC’s investments, corroborating their beliefs:

  • Have invested in multicultural founders from more than 20 countries;
  • 50% of founders are from minorities;
  • Portfolio companies employ people from more than 50 countries;
  • 11% of the portfolio companies have female founders – about 10 times the industry average – TVC is working to drive the previous number up to 50%;
  • Constantly pushing founders to involve women in the management.

The first conversations with founders tend to reveal their thinking towards ESG principles. Andrés also emphasised that it’s not that a team is bad for not being diverse, he believes that diversity helps the teams in being even stronger.

Investing in product-led growth and predicting the future of Profit and Loss (P&L)

Product-led growth companies use their product as the main weapon to grow, instead of marketing campaigns. They find growth opportunities by looking at data, their product users.

The best way to identify if you are looking at a product-level growth company is by stopping the marketing investment and see if they still grow without spending any single penny next.

Andrés Dancausa

To the investors, this approach is beneficial by helping create capital-efficient companies. Instead of companies addicted to finance to pay for those marketing investments, product-led growth companies are better at protecting the investors against frequent dilution, preserving the equity value for everyone throughout the years. Some renowned companies using this strategy are Facebook, LinkedIn, Slack and Airbnb. 

To pursue this approach, TVC looks at the data behind growth, especially regarding engagement, such as retention and virality. Also, looking at the Quick Ratio or the retention rate helps determine the growth’s sustainability and the ability to keep the user base in subsequent product phases.

We can anticipate what is going to happen to the P&L in the future by understanding what is happening to the product today.

Andrés Dancausa

How TVC stands out from 95% of the funds in Europe and helped Andrés transition from Founder to Investor. as a strategy to see globally.

Andrés shared that TVC’s positioning gives them access to the best deal flow. Founders of early-stage companies need three things: capital, talent and growth. Founders pick TVC for access to the knowledge and expertise of their partners. These services are offered by less than 5% of the funds in Europe.

We are in the top quartile in terms of net IRR competing with other more experienced funds.

Andrés Dancausa

According to Andrés, the more you give, the more you get, and operational experience is something TVC wants to give to the community.

Andrés believes in passion. Despite that seeming a cliché in the area, he discovered that it is a hard thing to find in an entrepreneur.

The Covid-19 crisis helped separate the wheat from the chaff, showing the founders who are passionate about their dreams and their companies, and distinguishing their “do whatever it takes” attitude from the crowd. That attitude allowed their companies to become stronger now than one year ago.

Tech, product and all of those things are, obviously necessary, but in Andrés’ perspective, these are not enough if there isn’t any passion there. His experience as a founder is one of the things Andrés finds useful in assessing how passionate founders are.

The first thing that we analyse in our portfolio companies is the founder-market fit. This is key for us! Even more important than the product-market fit. A founder market fit company has a lot of opportunities with the product-market fit but not the other way around.

Andrés Dancausa

Quickfire round:

  • The VC ecosystem needs more operational experience and fewer decision-making processes based just on P&L analysis;
  • If the ESG principles are an essential piece of your firm’s mindset, then they will flourish in every conversation with your portfolio companies;
  • Andrés joined TVC to help build unicorns but found out that TVC is looking for iguanacorns – unicorns from emerging tech hubs. Look out for them, TVC is helping build them as we speak!

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