It’s at all times attention-grabbing when a brand new VC agency with a recent group of companions emerge. And with Yellow, it’s attention-grabbing 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 speculate on the earliest stage doable (that’s $32 million at immediately’s alternate fee).
Along with this distinctive founding group, the VC agency’s focus can also be fairly completely different. Whereas most VC companies working in Europe give attention to the U.Ok., France, Germany and the Nordics, Yellow needs to place extra emphasis on Southern Europe — and particularly some key markets within the space, equivalent 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 give attention to a vertical particularly. The agency will put money into each B2B and B2C startups throughout completely different industries.
“Over time, I’ve had increasingly more entry to early stage deal circulate. Typically, I might speak to firms whereas at Atomico that had been within the ideation stage, by which we couldn’t make investments,” Lasri informed me. “And I discovered that irritating, as a result of a number of months later, you might have Index or others making investments, whereas it wasn’t a part of our thesis to speculate on the seed degree.”
He additionally added later within the dialog that he doesn’t have harsh emotions for his former group. He simply needs to speculate 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 speculate €200,000 to €500,000 per deal. As a substitute, it thinks it may be the primary believer, carry different buyers and supply recommendation at scale. “We’re by no means leaders, simply collaborators,” Lasri stated. Based on him, many early stage firms face the identical points — easy methods to arrange a group, easy methods to format a pitch deck, easy methods to navigate the VC ecosystem, and so on.
And, after all, 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 stated. This might be the explanation why Atomico, which was based by Skype founder Niklas Zennström, has been so profitable.
“Oscar, who’s the CEO [of Glovo], spent loads of his time with entrepreneurs. He didn’t know easy methods to scale that point he spent with them, however each time he invested in an organization, he would discuss all these elements — easy methods to go from 0 to 1, easy methods to scale your group, how to consider hiring, all that,” Lasri stated.
“Final 12 months, they bought their firm to Supply Hero for just a little over €2 billion on the time. And so they had been desirous about easy methods to professionalize their funding enterprise. I used to be already desirous about my subsequent steps, and so we began speaking loads,” 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, equivalent to expertise assist, regulatory hurdles and introductions with massive enterprises.
Yellow’s group shall be break up between Paris and Barcelona with Oscar Pierre and Sacha Michaud remaining in Barcelona. They are going to maintain 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 buyers. Yellow is only a technique 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 Ok 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 just some months. They began their fundraising effort in June and managed to achieve their aim 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. Certain, in Spain alone there are many funds, equivalent to Ok Fund, Nauta Capital, Kibo Ventures, Seaya Ventures and Inveready — this checklist is just not exhaustive.
But when we take a look at the numbers, a latest report from Dealroom highlights the discrepancies between the highest three European international locations in the case of startup funding — and the remaining. Throughout the first half of 2023, startups based mostly within the U.Ok. raised a complete of $11 billion. Germany and France adopted go well with 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 international locations.
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 reveals that worldwide VC companies are more and more taking a look at alternatives in Spain. In 2022, Spanish funds invested a complete of $430 million in native startups (€400 million) whereas international buyers poured $1.7 billion in Spanish firms (€1.6 billion).
Some international buyers might be taking a look at alternatives in underserved markets as their native market is likely to be overheating with too many VC companies combating for a similar offers. And this distortion between native buyers and international buyers might clarify why household places of work from Southern Europe are keen 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.