E107 [AI-Translated] SaaS Comeback? | Startup Brain Drain | VC Ranking | European Robotics | VCs as CEOs | Adaptyv B

00:00:00: The original podcast was recorded in German.

00:00:03: This podcast was translated using

00:00:05: Artificial

00:00:05: Intelligence, Burnrate the Venture Insider Podcast with Max Meister and Guy Gafredi.

00:00:12: Hello!

00:00:12: And welcome to Burnrate – the VC Insider podcast.

00:00:16: I'm talking here with Guy Gaffredi about a startup scene with focus on venture capital.

00:00:22: Episode one hundred seven is coming up.

00:00:24: We're recording on Friday, August twenty-eighth at eight thirty in the morning.

00:00:29: guy everything good with you.

00:00:31: Absolutely i'm looking forward to an extremely exciting episode as always on friday morning.

00:00:37: it's a good start to the final stretch of the week

00:00:39: Very nice.

00:00:40: So what are the topics?

00:00:42: Today in The News, we're looking at an analysis by STRAN partners on the strengths and weaknesses of the Swiss startup ecosystem.

00:00:49: then as our second news item We have a global pitchbook study On VC rankings.

00:00:55: And to wrap up the news... ...we've also received A very interesting listener question VCs Are suddenly becoming CEOs & operators.

00:01:06: Is that a sign that good investors need to get closer?

00:01:08: the operational side of business or something in VC model isn't working at moment.

00:01:14: Then, to wrap things up will come to transaction week and this time we selected forty million dollar series A of EPFL spin-off adaptive bio.

00:01:24: Very Good!

00:01:25: This podcast is sponsored by our partners Raventures & Wenger Vili.

00:01:30: Before we get to the news, there's one more topic that is currently generating quite a lot of discussion on the stock market.

00:01:38: The question is could the big sauce crisis perhaps be over?

00:01:43: After months in which traditional software stocks suffered from concerns that AI was attacking their business models this week We suddenly saw a strong counter move.

00:01:54: Salesforce jumped twenty three percent in a single day after its quarterly results.

00:02:00: ServiceNow, Figma and Asana also rose significantly.

00:02:05: In cybersecurity some of the moves were even stronger CrowdStrike up twenty percent OCTA even up twenty-nine percent.

00:02:15: The trigger however was not that Salesforce had suddenly returned to extremely fast growth.

00:02:21: Revenue increased by only eleven percent And organically just over six percent.

00:02:28: What was much more decisive, according to our conversations with analysts... ...was the expectation that growth could accelerate somewhat again in the second half of a year.

00:02:39: So the interesting question is are we really seeing a SaaS renaissance right now?

00:02:45: Or simply a counter move after an extreme sell-off will find out over the next few months!

00:02:51: Let's move on to news of the week.

00:02:53: Thirty-two percent of young Swiss startups are considering moving out of Europe.

00:02:57: That's according to a new study by Strand Partners commissioned by AWS, meaning Amazon Web Services.

00:03:04: The survey covered one hundred eighty swiss start ups from various industries that Are no more than two years old.

00:03:11: and what particularly interesting is why these companies are thinking about relocating at the very top is capital.

00:03:19: Sixty percent cite better availability of financing as a reason, that's followed by lower operating costs at fifty-four per cent and faster opportunities for international scaling at fifty one per cent.

00:03:33: Almost half also cite more favourable and predictable regulation And forty seven percent expect better access to global markets outside Europe.

00:03:43: And where would these start-ups go?

00:03:45: They ask that as well, by a large margin of course to the United States.

00:03:49: Around sixty percent of those considering relocation named The United States as their preferred destination.

00:03:56: East Asia follows at nineteen percent and the united Arab Emirates meaning Dubai and Abu Dhabi at fourteen percent.

00:04:05: Now you could say Switzerland isn't doing all this badly within Europe.

00:04:11: According to this study, thirty-eight percent of startups across Europe are even considering relocating.

00:04:17: But it's still interesting for Switzerland in particular because we like see ourselves as a very strong location.

00:04:26: But the study also shows another side that has to be said clearly.

00:04:30: The companies want to stay site their strong integration into a local ecosystem as Switzerland's biggest advantage meaning universities, accelerators and other startups.

00:04:43: more than fifty percent value access to the European market, and just under fifty percent cite the availability of venture-and growth capital as a reason to stay in Switzerland.

00:04:55: So we have a somewhat mixed picture.

00:04:58: for some financing is a reason leave while others it's a reason that stays.

00:05:04: Guy what do you read from these figures?

00:05:06: Is this serious warning sign for Switzerland at start up location?

00:05:10: Or is this kind of mobility, this international mobility simply part of the game for ambitious startups?

00:05:18: I mean first of all you have to say that figures like these always have to be taken seriously.

00:05:23: These are the opinions of founders who may actually want to leave Switzerland, but I wouldn't dramatize it either.

00:05:29: A decision like that isn't simply made by saying hey i'm moving to the US tomorrow because its better there.

00:05:34: you first have to rebuild your ecosystem as well accordingly.

00:05:37: theres also a lot thats positive in this report.

00:05:44: Where do I find my customers?

00:05:46: where Do i Find the capital and, where can.

00:05:48: I hire The best people And especially for a company that is supposed to be worth billions one day meaning A real venture case it Is completely legitimate To keep questioning the location not just over the next two years but also in Years Two to four Four to six.

00:06:00: you have to Keep doing That constantly to make sure You're well positioned.

00:06:04: But what does concern me somewhat about the figures?

00:06:06: It's the order of the reasons why someone wants to relocate.

00:06:11: Capital is clearly number one and scaling is number three.

00:06:14: And those are exactly the two things Europe and Switzerland have been complaining about for years, saying that we need to get better here.

00:06:20: but apparently we simply haven't gotten better yet.

00:06:23: I mean Switzerland is excellent at creating technologies in companies ETH EPFL and other universities.

00:06:30: Our research landscape actually works very well.

00:06:33: But the decisive question is if we take this innovation further can we also make these companies big?

00:06:38: If someone founds a startup does their research here, perhaps even receives public co-financing and then moves to the US for the growth phase.

00:06:47: Then we have only retained part of the value creation

00:06:50: here.".

00:06:50: And that obviously hurts the Swiss market enormously in my view.

00:06:54: I always find it extremely unfortunate when companies suddenly just move The founders are gone.

00:07:01: The salaries are paid elsewhere and the exit is then primarily dominated by US investors.

00:07:06: What's interesting?

00:07:07: Is that sixty percent cite a lack of capital as a reason for leaving.

00:07:11: At the same time, forty-five percent of those who stay cite the availability of venture and growth capital as an advantage for Switzerland.

00:07:20: So how does that fit together?

00:07:22: That shows precisely.

00:07:23: you can't simply say there is no capital in Switzerland or sufficient capital.

00:07:28: We have one hundred five per cent of answers here which somehow don't really fit together but I think it strongly depends on what stage and sector your are in.

00:07:40: For a very early-stage startup, there are now many opportunities to get money or finance the business.

00:07:46: I mean... There are many Business Angel clubs!

00:07:48: Our Ventures is our partner.

00:07:50: They regularly hold events.

00:07:52: September fourteenth by the way Is the next event where top startups can pitch again.

00:07:56: Then they're seed funds Family offices and countless funding instruments that provide companies with necessary initial capital.

00:08:03: But when you suddenly start growing well And need fifty one hundred Or two hundred million Swiss francs The situation changes and it changes dramatically.

00:08:13: Then you're no longer competing only with Swiss startups for capital, but with companies from Silicon Valley London or the Middle East as well.

00:08:20: And that's where you have these larger funds some of which even make decisions faster than small swiss funds and investors That are focused on aggressive growth.

00:08:30: Accordingly You Have to Ask Yourself Is Switzerland the right location For Companies To Invest Here As Well?

00:08:37: So for me, the decisive discussion is not only whether Switzerland has enough capital but much more importantly.

00:08:43: Whether it has enough capitol to finance the best companies through the scale up phase and build them into large Swiss companies?

00:08:50: And that's a major difference from how do you see it Maxon?

00:08:52: I

00:08:53: think That's a bit of the core of this story as well.

00:08:55: The figure of thirty two percent does sound a little extreme But the study doesn't say that one-third of Swiss startups are packing their bags tomorrow.

00:09:06: It says a large number young companies are actively questioning Switzerland as location in global competition, which is fair and answers actually show quite clearly where.

00:09:16: problem areas costs and international scaling.

00:09:21: I think that's clear, that's evident.

00:09:23: at the same time Switzerland has very strong arguments for keeping companies here.

00:09:27: i don't need to list them.

00:09:28: we all know them.

00:09:30: so the challenge isn't really founding startups.

00:09:32: i think we're very good at it.

00:09:34: The more demanding task is how do you ensure Swiss start-ups also become Swiss scale ups?

00:09:40: And they don't leave exactly when their becoming big?

00:09:43: I think that's essentially the challenge, and we should actively ask ourselves that question.

00:09:48: And think about it.

00:09:49: good let's move from startups to VCs.

00:09:52: pitchbook has published a new global ranking of the most successful venture capital firms?

00:09:57: Of course The names at the top aren't particularly surprising.

00:10:01: index ventures Accel and Sequoia are among the absolute leaders.

00:10:05: but what i find much more interesting than the names is the Question how do you actually measure whether a VC Is Good?

00:10:13: For this, Pitchbook analyzed more than thirty seven thousand venture capital firms worldwide and identified the top fifty.

00:10:21: And unlike many rankings This isn't about who has the largest fund?

00:10:25: Who has the best known brand or who lists the most unicorns on their website?

00:10:29: Pitch book looks at three factors first The exit rate meaning what share of investments actually ends in a sale buyout Or IPO.

00:10:39: second The follow-on rate, meaning how many companies managed to raise capital again after a round led by the investor.

00:10:46: and third valuation growth.

00:10:49: So How much does The idea behind it is actually clear.

00:10:58: A good VC shouldn't just have a single Facebook or Google in the portfolio, but should consistently produce good results across many investments.

00:11:07: and at the same time the ranking shows how strongly the venture capital world continues to be dominated by U.S.. Of the global top fifty thirty nine are based Twenty-nine of them in the Bay Area, San Francisco alone.

00:11:22: and In The Global Top Ten There Is Only One Investor From Outside The US.

00:11:27: That is Index Ventures from London Originally From Geneva.

00:11:30: We Swiss Can Be A little Proud Of that As Well Although I know That index Actually Didn't Have That Much To Do With Geneva.

00:11:37: They Were Of Course Operating Out Of london And The u.s.. From The Beginning in Europe Indexes Also in First Place Logically followed by Balderton Capital and Global Founders' Capital from Germany.

00:11:50: A little surprising to me because the latter isn't very active anymore, or at least is not very active publicly any more.

00:11:57: it may be that Global Founder's capital still very active but simply no longer communicates much about what they're doing.

00:12:04: so there are two interesting questions here.

00:12:06: First, whether this ranking actually measures who the best VCs are.

00:12:11: I think that's something we should discuss.

00:12:12: and second why US funds continue to be so dominant despite the growth of the European ecosystem in brackets.

00:12:21: i also think The Chinese vcs Are missing?

00:12:24: I mean there are some very large and successful ones And they don't appear at all.

00:12:28: another big question mark.

00:12:30: But guy let's start with a methodology.

00:12:32: Can you really say Who is a good VC based on exits follow on rounds and valuation increases.

00:12:38: That's an extremely good question, you can say it's definitely better than simply looking at fund size.

00:12:44: that basically tells you whether someone is good at fundraising or counting the number of unicorns AVC investor has invested in.

00:12:52: I mean there are lots of funds especially when it comes to unicorn investments that say hey we simply want to invest in all the unicorns because.

00:13:03: And then suddenly a flywheel emerges because they managed to invest in the unicorns and Then nobody really looks at whether they paid far too much In a secondary just so they could buy a few shares, and what The return actually was.

00:13:16: So I would say this is certainly better than simply looking At only a few metrics.

00:13:20: but um i Would still be very careful with best VC.

00:13:24: Take the follow on rate, if a company raises money again after the round in which you first invested that is positive at first but it doesn't automatically mean That means essentially all of them, maybe one hundred percent or ninety-five percent will receive a follow on investment.

00:13:54: So that is actually somewhat critical metric to monitor.

00:13:58: and the same applies two valuation growth.

00:14:01: I mean especially in twenty twenty and twenty twenty one.

00:14:04: we sometimes saw enormous valuations that were far removed from any logical market sense.

00:14:10: They were simply pushed up drastically, and that doesn't mean the fund ultimately makes a lot of money because perhaps there is then a down-round exit.

00:14:18: And suddenly you sell below the price at which you invested after having shown very nice story on paper for few years.

00:14:27: so valuation growth also has to be treated critically here but it's certainly useful metric to include.

00:14:33: But what was completely missing from me in my ranking are actual fund returns Meaning DPI distributions per interest.

00:14:41: So how much money actually flowed back to investors?

00:14:45: and also over the long term what's the TV PI is?

00:14:49: And The problem of course, Is that with private VC funds you basically can't get these two metrics at all.

00:14:56: There are no public registers or disclosures for them.

00:15:00: Maybe you hear something from an LP in a fund about How it has performed but as an industry we don't have to report That.

00:15:08: Accordingly, it would be extremely difficult to compare and perhaps the best would make some statement about it.

00:15:15: But otherwise basically nobody would... So I would say that ranking measures something relevant namely how successful an investor is at taking companies from one financing stage to next but doesn't fully measure who returns most money to their investors meaning who's actually the best VC.

00:15:35: And second point Thirty-nine of the top fifty come from the US.

00:15:39: Europe has been building a larger VC ecosystem for years, we know that!

00:15:44: Why is the gap still so large guy?

00:15:46: VCE... We keep talking about this.

00:15:48: VCE has a flywheel and it's an extreme flywheel business.

00:15:52: The best funds get access to the best founders.

00:15:55: The best founders generate the best returns And those return then attract the best limited partners Even more capital into next fund And with that, these funds that have already been in the market for a long time can once again use the next fund to invest in the next generation of top companies.

00:16:12: Sequoia, Axel and other large US funds have been building this cycle for decades.

00:16:17: in some cases The U.S is massively ahead of us.

00:16:19: there VC emerged and became professionalized their several decades before Europe... ...and then they have another major advantage the domestic market in the US is simply huge.

00:16:31: We're talking about hundreds of millions of people, whereas if we perhaps take Germany that's almost ninety million people.

00:16:38: it's a smaller market than in the

00:16:41: U.S.,

00:16:41: and then they have to internationalize.

00:16:43: so there are already major advantages.

00:16:46: Another thing worth saying is that a Swiss or Persian founder thinks different countries and languages much earlier.

00:16:53: And then there are also the regulations and markets that they have to analyze very carefully.

00:16:58: That's why I find INDEX very interesting, They show an originally European investor can absolutely compete at the top globally but to do so INDEx had to think globally early and move strongly into

00:17:11: U.S.,

00:17:12: maybe a bigger lesson for European VCs.

00:17:15: If you want global returns, then at some point you can't simply remain active as a regional investor.

00:17:20: You have to orient yourself strongly internationally and internationalize your companies as well.

00:17:25: Max let's turn this around a little and look at it from the founder perspective that you have two term sheets in front of view.

00:17:31: one comes form VC in this Global Top League lets say The Top Fifty And It Has Somewhat Founder Unfriendly Terms Meaning Investor Friendly Term With Lots Of Veto Rights.

00:17:43: The other comes from a small, perhaps less well-known fund where you get

00:18:13: twenty customers, the smaller extremely committed investor may be more valuable.

00:18:18: But if I'm entering a global market and need one hundred million dollar round in twelve months then a name like Index, Accel or Sequoia can of course make an important difference.

00:18:30: Brand has real value in VC.

00:18:32: that's clear.

00:18:33: it helps with recruiting customers media but offcourse also.

00:18:39: You hear that again and again from startups that were funded by Sequoia.

00:18:43: So as a founder, I wouldn't ask who ranks higher but which investor increases the probability.

00:18:50: two or three critical milestones.

00:18:52: And sometimes that may indeed be the big brand, but sometimes it maybe exactly the smaller

00:18:58: investor.".

00:18:59: I would support that exactly as you explained it and i think the right takeaway from this pitch book ranking is that Index, Axel & Sequoia rank very highly.

00:19:09: first of all That confirms what the market already assumes anyway.

00:19:13: What's more interesting is that Pitchbook is also trying to define VC quality, not only through reputation and fund size but through measurable investment outcomes.

00:19:22: Good let's move on the third news item.

00:19:25: we were sent a sifted study.

00:19:27: they looked at the investment data for European robotic startups from first half of the year.

00:19:33: around two point seven billion euros was raised by robotics start-ups.

00:19:37: thats money than in previous two full years combined.

00:19:41: Of course, part of that is concentrated in a few very large rounds.

00:19:45: But the number of deals has also increased.

00:19:47: so it's not just a single outlier driving the figure but the breadth is very positive.

00:19:53: what I find even more interesting who suddenly investing?

00:19:58: It isn't only traditional VCs and increasingly large companies meaning corporate venture capital firms getting involved.

00:20:06: According to SIFTED, thirty-one corporate investors were active in European robotics deals in the first half of the year.

00:20:14: That's the highest figure since SIFтED began tracking this data and seven corporate investors that had previously invested in European Robotics invested again.

00:20:26: Twenty four participated for the first time.

00:20:29: companies from the chip and AI infrastructure world are particularly noticeable.

00:20:35: And actually it's logical.

00:20:37: if I really moves out of this screen, and into machines factories cars drones and humanoid robots then these systems need chips compute, sensors and a huge amount of infrastructure.

00:20:49: We've also reported on this in recent podcasts.

00:20:52: And companies that provide the infrastructure for generative AI today may therefore want to be involved early in the next platform.

00:21:00: hence these investments.

00:21:02: Europe suddenly has an interesting starting position Germany strong robotics and industrial sectors, excellent technical universities.

00:21:13: And real exciting industrial customers?

00:21:16: That's why Sifted asked the question a few months ago could robotics actually be technology sector in which Europe becomes global leader?

00:21:25: yes guy Why are we seeing this run on robotics right now?

00:21:29: is physical AI actually next big wave after generative AI or have investors simply discovered the next

00:21:39: buzzword.

00:21:42: and the next step is already somewhat logical.

00:21:58: Can a model not only understand but also act in the real world?

00:22:02: And that brings us to robotics, and at the same time several other things have come together.

00:22:06: sensors has become better and also cheaper.

00:22:09: compute as becomes more powerful.

00:22:10: models can generalize much better.

00:22:14: Companies are under enormous pressure to automate processes and increase efficiency.

00:22:19: And especially in Europe, there's also the labor shortage that practically every industry complains about... ...and our economy is struggling under.

00:22:26: So if you can build a robot that actually works reliably in factory or warehouse on construction site then There is very clear business case with an easily defined ROI.

00:22:38: That why I think it quite clear this as exciting area.

00:22:42: Another interesting point is that there are also corporate investors investing here now.

00:22:47: NVIDIA, Amazon, Samsung and industrial companies are now also investing relatively heavily in physical AI not necessarily only because they're looking for a good financial return.

00:22:59: these companies are asking hey where will this technology be needed?

00:23:04: And if a chip and infrastructure company repeatedly invests in robotics, that is the signal to me this market has taken seriously from strategic perspective.

00:23:14: Exactly!

00:23:15: But I'm also skeptical... Is it really only positive?

00:23:18: for European robotic startups if more and more large corporates invest?

00:23:23: Or is there eventually also a risk that the start-ups become dependent on the corporates, whether technologically commercially or even strategically.

00:23:32: That risk definitely exists.

00:23:34: I mean we recently discussed seven miles robotics or river A Swiss robotic startup where Amazon invested early And then acquired it relatively quickly Certainly a good deal for the founders.

00:23:47: Perhaps for the ecosystem, the company could have gone much further and achieved a massively better exit if it had remained independent from the beginning.

00:23:55: But you also have to say that corporate investor can be incredibly valuable.

00:24:01: It can bring new customers give you access to supply chains provide hardware help with production or integrate your product into an existing sales organization.

00:24:11: They've already built all of that so they can, of course simply press two or three buttons and then it works for the startup as well especially with hardware that can sometimes be even more valuable than just a large check without any idea of how to actually solve the challenges of our hardware start-up.

00:24:28: but has mentioned earlier corporate investor often also have second agenda.

00:24:33: It wants early access to technology.

00:24:38: Perhaps at some point it wants to enter into a strategic partnership or acquire the company.

00:24:45: and for the start-up, It can become problematic if one investor becomes too dominant.

00:24:50: If For example A large chip provider invests The question is Can I work just as well with a competitor afterwards?

00:24:57: Or do i have strong lock in With Nvidia or another player?

00:25:02: So if Large industrial group like ABB Invest Does that scare off potential customers from the same industry because they suddenly have insights into the business and into the interests of their competitors?

00:25:17: That's why as a founder, I would always make sure that our corporate investor brings strategic advantages but doesn't create strategic dependency.

00:25:28: Ideally you probably have a good mix of VC plus strategic investors.

00:25:33: And perhaps one more addition here I would never grant a strategic investor any kind of veto right when they invest because then you suddenly really make yourself dependent on an investor that does not have exactly the same agenda, meaning building the company into something large and selling it for the highest possible price.

00:25:52: Max let's take the big European question.

00:25:54: in software companies In robotics we have industry mechanical engineering eth epfl technical university of munich and many potential customers right on our doorstep.

00:26:08: is this one of the few categories in which europe.

00:26:11: could actually have a structural advantage over Silicon Valley?

00:26:14: Well, I can't give you an answer.

00:26:17: Europe certainly has a good hand here especially compared with other topics but it still takes a lot to become a category leader here.

00:26:24: You need mechanical engineering electrical engineering production sensor technology and huge amount of know-how about how physical processes work And we are very good at that in Europe.

00:26:37: This engineering driven way of working naturally suits us, I mean with ETH and EPFL in Switzerland.

00:26:44: We have world leading research and that has also produced companies such as antibiotics, gravis robotics or river As you mentioned.

00:26:53: At the same time Germany has a huge industrial customer market advantage or at least not a location disadvantage, but we know the European problem.

00:27:04: We've already discussed it today scaling and if the company eventually needs billions for production expansion an infrastructure that capital has to be available And It Has To Be Available Very Quickly At A High Cadence.

00:27:17: That's Where I Have A Big Question Mark When i Look At The Speed Of Capital In The US.

00:27:22: Also In China Thats A Different League.

00:27:24: So in That Sense Its Actually A Shame.

00:27:27: I had a long conversation this week with the major LP and he was a little frustrated because he simply said, actually we have very good starting position in Europe.

00:27:36: We're not doing anything with

00:27:37: it.".

00:27:38: And unfortunately, He's Not Entirely Wrong!

00:27:41: Good will continue to watch all of these.

00:27:43: an interesting study from Sifted.

00:27:45: Thank you very much.

00:27:46: i think It is very insightful.

00:27:48: Now it depends on future what we make.

00:27:51: This episode is presented by Ari Ventures The Burn-Based Business Angel Club.

00:27:56: Ari Ventures brings ambitious Swiss startups together with experienced investors who offer more than just capital.

00:28:02: A strong network, real expertise and hands-on support for the critical early steps!

00:28:07: If you want to grow as a startup or gain access as an investor to the most exciting early stage deals then apply our next event at www.areventures.ch.

00:28:18: Venga & Vieli your partner law firm for start ups Whether it's incorporation, a financing round or an exit.

00:28:25: startups face complex legal challenges.

00:28:28: Wenger and Vieli supports founders at every stage of their company with tailored advice on corporate law, financing tax matters and IP

00:28:36: protection.".

00:28:36: Wenger & Vieli Your Legal Counsel for Startups.

00:28:40: Good we have a listener question from Janis in Lucerne.

00:28:43: he writes I've noticed that VCs are suddenly becoming CEOs and operators.

00:28:48: Is that a sign, good investors need to get closer the operational side of business or something in VC model isn't working?

00:28:58: I think background is an interesting trend in Europe and we have indeed seen it few times recent weeks where VCs are switching sides.

00:29:06: They take on operational roles but still remain investors.

00:29:12: so they remain invested In some cases.

00:29:14: don't leave their VC firms.

00:29:17: A prominent example is Judith Dada from Visionaries, who's becoming co-CEO at Langdoc while continuing to invest as a senior partner.

00:29:28: She has known Langdoc since the pre-seed round.

00:29:31: Carmen Alfonso Rico, founder of Angel Investor Cocoa has also joined her portfolio company Fractile as VP Business Operations and remains an investor.

00:29:41: Guy is this the next evolutionary stage for a good VC or actually a warning sign?

00:29:47: I'll look at it through positive lens now to say that's more evolution than a warning signal.

00:29:53: The traditional VC model especially in Europe was heavily focused on capital.

00:29:59: Maybe we take a board seat, open up our networks a little and then let the founders get on with it.

00:30:05: But especially with AI We're seeing how quickly markets change.

00:30:09: And if you really want to understand today what product distribution hiring or enterprise sales mean Then sometimes It's simply not enough to sit on the board.

00:30:17: You also have to work operationally and be hands-on every day Every week and an investor who has personally worked operationally in these companies suddenly understands completely different things How difficult it is today to hire someone how brutal poor PMF, meaning product market fit is and how little a beautiful strategy can be worth if its simply doesn't work operationally.

00:30:39: And isn't executed well.

00:30:41: so this development in VC Can make VCs better investors.

00:30:45: but I would make a clear distinction an operational VC like project A which has been doing this for years and as a large team of specialists four portfolio companies is something different from individual partners like Judith and Carmen, you mentioned suddenly becoming co-CEO or VP at a portfolio company.

00:31:05: With the second model things suddenly become much more

00:31:07: complicated.".

00:31:08: You can certainly say that?

00:31:10: So where is The Lion Guy if my investor is suddenly also the CEO of A Portfolio Company?

00:31:17: Can he or she still make neutral decisions about where capital attention?

00:31:24: That's exactly where I was going with the cliffhanger, that is precisely the critical point you've picked up here.

00:31:30: AVC has a very clear portfolio logic.

00:31:34: we invest in ten-fifteen twenty companies and then deploy to capital wherever we see best opportunities at any given time And somehow... You need framework which allows you assess the company in similar way.

00:31:47: A CEO have exact opposite logic.

00:31:50: For them, there is only one company.

00:31:53: They have to fight a hundred percent for that company and also make sure every investor who has ever invested in the company invests again and allocates more capital because it's simply the best company with the best opportunities.

00:32:06: And when this same person does both questions around conflicts of interest among partners automatically arise.

00:32:14: Does the company where a partner is actively involved suddenly receive much more attention, better access to their network and does they follow on financing still assessed objectively?

00:32:24: or are there lots of subjectivity involved?

00:32:27: And what happens if another portfolio company suddenly becomes a competitor?

00:32:30: I think we discussed that in the last episode, where we addressed exactly this issue.

00:32:35: How do you deal with it as partner of fund and why is temporary role or strong conviction that will simply become best company in world then can work if an individual partner becomes operationally involved.

00:32:52: But if that becomes the standard model i'm rather skeptical and then I would question the industry a little more.

00:32:59: Because then you can genuinely ask hey, it's the investor has to become the CEO to create enough value.

00:33:05: what is actually still the role of the VC?

00:33:08: Shouldn't they be doing PE instead, acquiring the company outright and developing it further?

00:33:13: Max if you look at this from an entrepreneurial perspective or from the companies' perspective would you actually want your investor suddenly sitting next to you operationally inside the company.

00:33:24: I'm not sure.

00:33:25: maybe yes i think so.

00:33:27: um i know a few who would create a lot of value of course but the roles have to be very clearly defined.

00:33:33: I mean, as a founder you want investors who know what operational reality feels like.

00:34:03: Exactly, so you do have to be a little careful.

00:34:06: Of course I don't agree with Travis.

00:34:08: obviously it's not one percent its two-percent no jokes aside It is significantly more than that.

00:34:14: But You Do Have To Be Careful About How You Approach Something Like This.

00:34:18: Good VCs Certainly Need To Be Closer To The Operational Side of the Business.

00:34:22: That Is Clear.

00:34:23: but i Don'T Think They Should Confuse Their Role With The Founders Role.

00:34:27: And You Also Have To Say That Capital Alone Is Hardly A Differentiator.

00:34:31: Anymore Today I think that's relatively clear because capital is available in abundance.

00:34:37: What is much more important, experience access and operational credibility?

00:34:45: So for me the question isn't investor versus operator.

00:34:48: but how close can or should an investor get to the company without losing their independence as an investor?

00:34:55: Exactly.

00:34:56: That's what I actually find interesting.

00:34:58: Yanis, thank you very much for your question.

00:35:00: so our short answer is that VCs becoming operational not automatically assigns a model isn't working.

00:35:09: on the contrary it could make investors better if they are closer.

00:35:18: How operational is the VC and for how long are they really actively involved?

00:35:23: And it becomes critical exactly where the roles start to blur.

00:35:26: The investor should have operational understanding, but at the same time also the necessary distance to make independent decisions and provide the company with strategic direction without interfering too heavily in that strategy

00:35:39: operationally.".

00:35:40: That's my view.

00:35:42: Very good.

00:35:43: Let's move on to the transaction of The Week, we have adaptive biosystems on the agenda.

00:35:49: This is one of the exciting Swiss AI biotech cases Adaptive Biosystem from the Biopole near Lausanne has completed a forty million dollar series A round.

00:35:59: The Round was led by Highland Europe and existing investors such as Ace Ventures By Founders & Y Combinator invested again At its core.

00:36:08: adaptive is building an automated wet lab for protein engineering.

00:36:12: That means they are creating infrastructure that allows new proteins not only to be designed on a computer but also to be physically tested and synthesized very quickly, for biology and protein design.

00:36:30: And these models can propose new antibodies, enzymes or protein candidates faster and faster.

00:36:35: but in the end it isn't the model that decides whether a protein actually works or whether its simply looked good on the screen.

00:36:42: The experiment in the lab decides that That's exactly where the bottleneck lies.

00:36:46: Digital Design is getting faster But biological validation meaning synthesis remains slow expensive and manual.

00:36:55: And Adaptive is trying to automate this bottleneck.

00:36:57: Customers upload protein sequences, Adaptive produces them and tests them in an automated laboratory... ...and then returns structured experimental data faster than the companies could do themselves.

00:37:08: To Do This The company combines synthetic biology, nanofluidics lab automation & machine learning.. ..And if this scales, Adaptiv won't simply be a service provider but central infrastructure platform for AI-driven Biology Max!

00:37:22: How would you categorize the case?

00:37:24: I find this interesting because Adaptive isn't simply another AI drug discovery company that wants to build its own drug pipeline.

00:37:32: Adaptive operates one level below as a so-called enabling technology for it, they are building infrastructure for other protein designers.

00:37:43: pharma companies, and also biotech startups.

00:37:46: And many teams today can use generative AI to design new protein sequences very quickly.

00:37:52: but then come the decisive questions that are really important here Does the protein work?

00:37:57: does it bind to the right target.

00:38:00: That's always very interesting here, can you continue experimenting with is stable as well Very important.

00:38:07: and I think this experimental validation Is very expensive and slow And often fragmented.

00:38:13: so You have different data formats, long waiting times A lot still manual and adaptive wants to turn that into a repeatable digital process.

00:38:26: And, that is very interesting!

00:38:28: And from a VC perspective, it's interesting because the market doesn't stand or fall with a single drug candidate.

00:38:35: Instead there is broad trend of AI in biology generating more and more candidates that still need to be tested.

00:38:43: You've looked into this case so you did deep dive?

00:38:46: What do we know about adaptive customers?

00:38:49: According to company more than one hundred customer were onboarded over past year.

00:38:54: That's already a very, very large number.

00:38:56: They include bio-AI labs such as Chai Discovery or Bolts but also major pharmaceutical companies like Roche and Novo Nordisk as well many younger drug discovery startups.

00:39:08: That is certainly a strong signal because the platform is apparently relevant to very different customer groups.

00:39:15: And I think, The first clear use case is binding meaning the question of whether a protein can bind To a desired target.

00:39:22: but beyond that it's also about expression thermostability and much more complex workflows.

00:39:28: an adaptive Also talks about designed antibodies.

00:39:31: they talk about new enzymes for research industry and also alternative materials.

00:39:37: So the market isn't just traditional pharma, that's important.

00:39:41: Protein engineering can also involve industrial biotech material science and new production processes.

00:39:47: good let's briefly come to the round a. forty million dollar series A for a swiss tech bio company.

00:39:54: That's quite substantial correct?

00:39:56: You can certainly say that.

00:39:57: Let's briefly look back before we get.

00:40:02: Adaptive was built in twenty-twenty one by Julian Englert and his team.

00:40:06: As mentioned, it is based at the Biopole Life Science campus near Lausanne.

00:40:10: In Twenty-Twenty One they were also accepted into Y Combinator And in Twenty-twirty Two They raised a pre seed round of two and half million.

00:40:18: Founderful led the Round At The Time And Y Combonator Of Course Also Invested!

00:40:24: At the end of Twenty Four They Raised An Eight Million Dollar Seed Round Led By Ace Ventures.

00:40:30: And now comes the forty million dollar series A and that is clearly a step into scaling.

00:40:35: It's also interesting who invested here?

00:40:38: Highland Europe took the lead, this isn't small life sciences specialist but one of major European growth investors based in London & Geneva.

00:40:47: That already shows adaptive isn't simply becoming or being perceived as biotech service provider But it was able to convince investors in pitch As scalable technology platform.

00:40:58: Another positive point is that existing investors such as Ace Ventures, Bifounders and Y Combinator are investing again.

00:41:06: That's usually a good sign when the existing investors continue investing because they see hey!

00:41:13: The executionist right?

00:41:14: They have essentially executed their plan since the seed or pre-seed round

00:41:20: was able to speak with Highland just before the show.

00:41:28: Adaptive is the only laboratory specifically developed for AI-supported protein engineering, and by solving The Bottleneck, adaptive has become the trusted partner of the world's best teams in protein design.

00:41:42: So many thanks to Highland at this point for their valuable feedback!

00:41:46: It's always fascinating to look inside the mind of a

00:41:49: VC.".

00:41:50: And now that big question – forty million in the bank isn't small amount?

00:41:54: What will Adaptive do with it Max?

00:41:56: Two things.

00:41:57: More capacity and more sophisticated workflows.

00:42:01: First, Adaptive wants to significantly increase lab throughput Once a workflow has been automated the company can build additional work cells And thereby run more experiments in parallel And Lab Capacity is expected To roughly triple by the end of twenty-six and expand further In twenty-twenty seven.

00:42:20: In addition, Adaptive is opening a new laboratory and office in London in the fourth quarter of twenty-twenty six.

00:42:27: And wants to expand the team from around twenty five To approximately sixty employees.

00:42:33: that's quite substantial.

00:42:35: The second part Is the expansion Of what they can do.

00:42:39: adaptive doesn't just want to test whether A protein basically works but step by Step also tests more complex properties That will later be critical for drugs enzymes or industrial applications.

00:42:53: And where do you see it going?

00:42:54: Where is the company headed, what's your assessment...

00:42:57: It could become big but I do have a few question marks.

00:43:00: Execution remains challenging.

00:43:02: if AI biology labs continue to grow The need for fast reliable validation will increase massively and adaptive Could then become a central infrastructure platform for protein engineering.

00:43:14: Absolutely.

00:43:15: But for that to happen data quality has to remain high, the cost per protein has to continue falling and the platform has be able handle increasingly complex biology.

00:43:29: To wrap up guy what does that deal mean for Swiss ecosystem?

00:43:34: Personally, as a chemist I naturally find this deal extremely exciting.

00:43:39: We're combining life sciences with AI and engineering here And Switzerland is enormously strong in all three areas.

00:43:46: It would be great if we could leave footprint And I mean, with Adaptive.

00:43:50: we're not simply creating individual drug programs.

00:43:54: We have plenty of pharmaceutical companies in Switzerland for that.

00:43:58: instead were creating platforms that help other biotechs and AI biology teams develop faster.

00:44:05: With its headquarters at the Biopoll near Lausanne now followed by the expansion into London This is good evidence that infrastructure plays like this can become globally relevant from

00:44:44: Switzerland.