20VC: Why Price Sensitivity is BS | Why "Portfolios" are Merely a Construct to Make LPs Happy | Why the Best Investment Never Happen in "Fundraising Rounds" | What Europe Needs to do to Become a Superpower Again | Klaus Hommels, Lakestar

Klaus Hommels is one of Europe’s leading start investors of the last decade with a portfolio including the likes of Spotify, Airbnb, Facebook, Coinbase, Revolut and more. Among his many responsibilities, Klaus is the Founder of Lakestar, his own venture fund and chairs the board of directors of the NATO Innovation Fund. In Today’s Episode with Klaus Hommels We Discuss: 1. The Investing Rules that are BS: Why does Klaus totally reject the idea of price sensitivity? Why does Klaus hate the idea of “building portfolios”? Why does Klaus believe the best investments are made when there is not a fundraising round in motion? Why does Klaus believe that capital concentration limits on a per company basis are BS? How concentrated is Klaus happy to be? 2. Europe: What The F*** is Going On: Why is Europe underfinancing innovation by a factor of eight? Why is Europe unable to send satellites into space for six years? What should Europe do to become a global superpower once again? What needs to change? Why should European pension funds be forced to invest in venture capital? 3. The Stories Behind the $BN Returns: How did a dinner with Klaus’ son lead to his investing in Revolut? How did Klaus analysis of Friendster and MySpace lead to his buying Matt Cohler @ Benchmark’s Facebook shares? How did a small investment in a Swedish company, Stardoll, lead to Klaus investing in the seed round of Spotify? How did a conversation with Madonna’s manager lead to Klaus investing in Airbnb?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Venture is not sitting in a nice office with borrowed power of LPs and playing like in old Caesar's times, thumbs up, thumbs down. I'm not so keen of building portfolios. If I find cool companies that make a difference, that is where the beef is. If you have one or two of them, every portfolio looks great. I do believe that if you see the right company, you should take a lot of risk and overproportional risk in those.

• 0:27Harry Stebbings?

  Are you price sensitive, Klaus?

• 0:29Speaker 00

  Absolutely not.

• 0:30Harry Stebbings?

  This is 20VC with me, Harry Stebbings. And listen, I grew up in Europe as one of the biggest venture nerds. And that meant this guest today is one of my OG investing idols that I really looked up to for a long time. He is one of Europe's leading investors with a portfolio including Spotify, Airbnb, Facebook, Coinbase, Revolut and more. He also founded Lakestar and chairs the board of directors of the NATO Innovation Fund. But before we dive in today, we're excited to ignite your curiosity with a journey into the world of transformative ideas. If you're driven by the pursuit of knowledge and personal growth, you'll love exploring the vast collection of insightful book summaries on the Blinkist app.

• 1:10Harry Stebbings?

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• 1:52Harry Stebbings?

  That's B L I N K I S T. Just visit blinkist.com/20vc to claim your discount and transform the way you learn. And while you're optimizing your learning, let's also optimize your finances with Brex, the financial stack founders can bank on. That nearly forty percent of startups fail because they run out of cash. So they built a banking experience that takes every dollar further. It's such a difference from traditional banking options that leave your cash sitting idle while chipping away at it with fees. To help you protect your cash and extend your runway, Brex combined the best things about checking, treasury and FDIC insurance in one powerhouse account. You can send and receive money worldwide at lightning speed.

• 2:37Harry Stebbings?

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• 3:20Harry Stebbings?

  trust Secureframe to expedite their compliance journey for global security and privacy standards such as SOC two, ISO twenty seven thousand and one, HIPAA, GDPR and more. Brought by top tier investors and corporations such as Google and Kleiner Perkins, the company is among Forbes' list of top hundred startup employers for two thousand and twenty three and Business Insider's list of the thirty four most promising AI startups for two thousand and twenty three. Learn more today at secureframe.com. It is a must. You have now arrived at your destination. Klaus, I am so excited for this. I've wanted to make this one happen for quite a few years, so thank you so much for joining me.

• 4:00Speaker 00

  Thank you very much. It's a pleasure. After that long years, the wait was worth it because you have become an icon. So now I'm the underdog here.

• 4:10Harry Stebbings?

  I mean, flashy will get you everywhere, but I want to start with a crucial first question, which is one that I haven't phrased quite like this before, Adidas or Puma? And how did Puma lead to the start of your investing journey?

• 4:22Speaker 00

  Wow, so you obviously did your homework. This is a very crucial question. So not in terms of the sports shoes, obviously, and as a Swiss German, I should say, that is on, but as a life lesson. Yeah, Puma made a very big impact and I guess you always have like two or three of those in your life and Puma was was the halo moment for me. So as you know, I grew up in the German countryside, hence my crazy accent here. It was close to Mönchengladbach and I was the son of a farmer. So at sixteen, seventeen, eighteen, I knew a lot about how to work in the fields and do all this nasty work that nobody ever wants to do in that age. But I was lucky that my grandma wanted me to hate banks.

• 5:07Speaker 00

  And the way she thought about it was, look, I give you 20,000 bucks and you buy stocks. If you gain something, it's yours. If you lose it, I cover it. And she thought I go to the local saving and loan bank, get a bad stock recommendation, lose the money and I'm at the bank. It turns out my affinity to football in Mönchengladbach was that they played in Puma shoes and Puma did the IPO and I said, look, grandma takes the losses so I can go in fully leveraged. And the timer was making 10 bucks pocket money a month. I made a hundred thousand with Puma in three months. So I said, look, two phone calls, hundred years of pocket money, I become an investor.

• 5:47Speaker 00

  So and at that moment, the sale was set for what I wanted to be in the future.

• 5:54Harry Stebbings?

  What did your grandmother say?

• 5:55Speaker 00

  So she obviously was delighted, also for the wrong reasons, so to say. I still did a banking apprenticeship. Yeah, so that she probably disliked, but she thankfully lived long enough to to be able to see how how part of the story develops.

• 6:11Harry Stebbings?

  Did you ever go through a trough of disillusionment, so to speak? And what I mean by that is, as a young investor, make a series of mistakes early in the career that lead you to question whether you are a good investor. I think there's a lot of investors today who are sitting there going, gosh, twenty one was a boom time, my numbers look great, am I still a good investor?

• 6:29Speaker 00

  Well, um, yes, I think that was the other purpose. Of course, I lost the money afterwards and that was probably her her real mission with it, so that you lose the money and make the lessons when you don't have a lot of money. Because when you're young and lose a little bit, which is still everything you have, it's as painful as if you lose a lot when you're you're older. So this has been a very, very thoughtful lesson for me. So I had a rule for long that when I had a exceptional hit, I would stop investing for three months because um success makes you fear that you can walk over water and you needed to to force yourself to have this humbling moments to say, oh, no, no, no, no,

• 7:11Speaker 00

  that was luck, yeah, keep cool, yeah, and don't make silly mistakes now.

• 7:16Harry Stebbings?

  So interesting you say that about kind of when you have success, you pause, because I actually think when you have success, maybe that is the time as an early stage investor to double down more than ever. I often think are richer investors, better investors, because you're not afraid of downside. You see the beauty in Spotify, in Revolut, in Helsing, and you don't see the many reasons that many people say no.

• 7:36Speaker 00

  Well, not sure. So I think there's a difference between a lot of different genre of investors, yeah? So there are people that have a lot of money that if they have successes and think there's a momentum market, they pour a lot of money in the market, but for very different reasons. I'm always intrigued by the technology or by the founder, and this doesn't scale with money so much. So and it has to be that. Final moment, yeah, and a special moment because I do want to fall in love with the founder and the business because at the end I look at myself as an outsourced business development guy and so I do spend a lot of time, so I do need to like everything with it.

• 8:17Harry Stebbings?

  Why are you an outsourced business development guy, Klaus?

• 8:20Speaker 00

  Because that's what venture is. Venture is not, yeah, sitting in a nice office with borrowed power of LPs and playing like in old Caesar's times, thumbs up, thumbs down. So now I think the entrepreneur is the star because he has a single asset risk and he is super passionate for one idea and for with this idea, yeah, advancing society and I'm just a feature to increase the odds that he succeeds.

• 8:50Harry Stebbings?

  When you get a pick on an entrepreneur wrong, what is it that you don't see?

• 8:55Speaker 00

  Good question. I don't know. It is always very different. So what I really, really despise is vanity. So there is a high correlation between people that post a lot or tweet a lot or whatever, using social media a lot and efficiency. Always been, I think this for VCs similar than for entrepreneurs themselves. But it's implicit sometimes, yeah. So it's also mistakes aren't bad by design. You just need to understand and find a rule that you can avoid the same mistakes. So if you, if I wasn't set up to have certain mistakes, I would also not get into the companies that finally make it.

• 9:38Harry Stebbings?

  Klaus, for me, these shows are like why I love what I do because to me you're in most respectful way like a wise elder of venture that I can learn from and.

• 9:47Speaker 00

  Methuselah.

• 9:49Harry Stebbings?

  The challenge that I have though is on the founder side, we've seen the industry so transactionalized where founders say, Klaus, I want Lake Star, thank you, but I'm deciding on Friday and you have a much shorter time to build a relationship, to build conviction in a founder. How do you embrace and feel about that transactionalization?

• 10:07Speaker 00

  So first of all, I do not get involved in a lot of companies, yeah. And I'm totally fine if a founder rejects it.

• 10:18Speaker 00

  For for some reason, because there's young and in in most cases young and there are a lot of new things coming to him at the same time and it's very difficult to get them into a certain chronology. At the end, I made a might have also made a bad job in in promoting what what I can contribute. So on the flip side, for me, this way more satisfying to see that those top entrepreneurs that I've backed, I've always, when they did the second, the second business, I was always allowed to be one of the leading investors, be it with the sum up of with Nico or with with other businesses.

• 10:54Harry Stebbings?

  The other question I had is that you mentioned that like the frequency of tweeting and posting and how that correlates. Venture has become a marketing business above everything else, with venture investors tweeting, writing, doing podcasts, believe it or not, doing video series. We've all become content creators. How do you feel about the evolution of venture, where we all have to bluntly sell our wares being our cash?

• 11:19Speaker 00

  There's several questions. So so if you have a certain mission and the mission requires you to be a little bit more outspoken and to reach a broader audience, then I think this is a perfect methodology to do this. Yeah, so then because you cannot achieve that aim in a different way. But what you are alluding to and what I'm despising is the the self-promotion stuff. Yeah, so thinking, oh, look, I'm a cool entrepreneur. And for them, entrepreneur means sitting in Soho House in Berlin with an avocado toast and a cappuccino and thinking we rule the world. Yeah, and then just in the afternoon, thinking of some random entrepreneur say, hey, great,

• 12:03Speaker 00

  thankful to be part of the journey. So this is something where I say, look, jeez, there's so much more urgent things to do for a VC than doing those kind of things.

• 12:13Harry Stebbings?

  Can I ask, on a macro level, how do you think venture is more misunderstood today? If that's on a micro where it's like, it's not about avocado toast and cappuccinos and thrilled tobacco, you know, Klaus. On a macro level, how is it misunderstood?

• 12:26Speaker 00

  It's pretty simple. For me, the progress of a society is the way how they can handle risk. And entire Europe has had societal and economical progress, especially in the 50s, 60s and 70s. And we were basically very good at financing innovation at the magnitude of 4% of GDP. So the banks financed it because they were in a regulatory framework where they were allowed to do this kind of investments. And the innovation at that time was Bosch, Siemens, Porsche, you name it. So today, the regulation has changed. Banks do not finance innovation and startups anymore. So and today, the only regulatorily compliant

• 13:10Speaker 00

  way of financing innovation is venture. And in Europe, we had 0.5% of GDP. So we are under financing innovation by factor eight in comparison to the levels that made us wealthy in the 50s, 60s, 70s.

• 13:25Harry Stebbings?

  Two kind of spin offs there. One, do you think then that we should have banks and government institutions filling that hole and doing the 3.5% to meet us at the 4%?

• 13:35Speaker 00

  Look, at the earlier stages, that doesn't work. So if you discuss with banks, this is a rather complex discussion always. So I think they have not been trained and experienced in this kind of financing. And the banking side is the wrong one, but we should get our equations straight, meaning we cannot expect to create wells in the way we have created if we are under financing the reasons why we created that wells by factor eight. So this will probably not work.

• 14:06Harry Stebbings?

  I don't feel like we are under financing innovation in Europe. When you look at deal cycles, when you look at deal pricing, when you look at quality of deals, I think we have dramatically too few good companies for the amount of cash that we have, which is why we're seeing the exorbitant prices that we are in Europe. Am I wrong?

• 14:26Speaker 00

  Yeah, look, that's not how I look at it. So this, what you're describing is a cyclical element to it. And there is no doubt that we do need to finance innovation. And there will always be phases of more liquidity, of exuberated pricing. And the pendulum always swings between the left and the right. If you think about the fact that from a start where we accompany a company until we exited this easy eight to 10 years, if you really want to make sure you get all the value creation, all of the phenomenons that you would be describing will happen at least once, yeah, in the lifetime of that company. So this is something where I'm not concerned.

• 15:11Speaker 00

  Structurally, there is a lot of signs that the world has changed a lot. If you think about 2000 and early 2010s, there were no technical founders. So that, and I thought lengthy about the fact, why is that? Because we had the copycat nations where the Samba Barzas built the machine rocket internet. But this was basically an absence of technical innovation. And the reason was an interesting one is that at that time, in continental Europe, very few people that had an affinity to technology, they had economics at school. So they were basically really afraid of becoming self-employed. So and if you see the first, yeah, German value added tax declaration that you need

• 15:56Speaker 00

  to do as an entrepreneur, that can be pretty intimidating. So basically, I even have sympathy for that. So this has thankfully all changed. If you now look at ETH or the Technical University Munich or the KTH in Stockholm, the quality of the founders is very, very different. You barely have any copycats anymore. You really have genuine technological innovation and ideas.

• 16:21Harry Stebbings?

  The quality of technical talent is there. The quality of local liquidity markets has gone through the floor. Like the LSE, I mean, I didn't actually ever remember it being good, bluntly, I'm too young, but I mean, now it's terrible. You know, I don't think, you know, the German stock market is hugely better. I don't think Amsterdam is hugely better either. I mean, Bill Ackman is running away faster than anyone from, you know, whatever it is, EuroNext. How much of a problem is the lack of liquidity markets in Europe?

• 16:47Speaker 00

  You can answer it in a little broader scope. How much is especially continental Europe, the financial illiteracy a problem? So basically, you see that politicians, you see it in a lot of instances. We are not thinking the how the same way, what can you do with money that the US does it? And also, so my weirdest moment, it's a funny anecdote also, is when we had the spec and we listed it in Frankfurt. So and then we were speaking, I was speaking to the CEO of Frankfurt Stock Exchange, he said, look, this is cool, can we have this photo? Because the founders are really, really proud and this is the culmination of their journey so far. He said, yeah, yeah, we can do that, but there's a price list for that.

• 17:32Speaker 00

  And I said, what do you mean there's a price list? Yeah, we are doing sort of an advertisement that this IPO is happening at the Frankfurt Stock Exchange. He said, no, no, no, the price list is, make a guess, for the photo.

• 17:44Harry Stebbings?

  Four hundred years?

• 17:45Speaker 00

  Four hundred thousand euros, just for the photo. And what we did, we did a CGI of the interior of the Deutsche Börse and put it on a tapestry in our office. And then we stood there, had our own bell and rang it, and it looked hundred percent authentically, but we did really not pay one to pay the four hundred thousand bucks. And I spoke to the Deutsche Börse, said, guys, you can find a business model, so find to take a certain margin over lifetime of a quotation, but don't text people at the highest emotional moment when they are so proud to go to the stock exchange. So this is what I mean with culture.

• 18:22Harry Stebbings?

  You said there, we don't get financial literacy like the US does, we don't do it the way the US does. What does Europe not do that the US does?

• 18:30Speaker 00

  First of all, we do suffer the different aspects of the heterogeneity of our continent. Yeah, so there is no point in having three stock exchanges, because at the end liquidity is everything and we should basically say-

• 18:45Harry Stebbings?

  So we should have a European stock exchange?

• 18:46Speaker 00

  Yes, we should, yeah. So there was an attempt, but it was blocked by politicians. It's still a little bit like a regional egoism, yeah, so which, which is part of the problem. So the second one is, we do not have deep, deep capital pool. So I mean, when you think about, a huge step was in 1974 when you had the ERISA Act. Yeah, so that pension funds in the US- We were to invest in in venture funds. So this made a big difference. And we don't do, we don't do this in in Europe. So in, I think the most pension funds invest according to the endowment model in the US.

• 19:27Speaker 00

  Meaning you get basically a venture allocation of ten to thirteen percent plus. And the European pension funds invest 0.02% in venture. First of all, it's already shocking because the numbers in the US, it's not that the risk has risen. It is that also the return is over proportionally risen. And if you think about it in a different way, if you forced, I'm very careful with the word forced. You have to force pension funds to do it. Because then A, you would get a way higher return, which makes a huge difference for the pension and the buying power pensioner has.

• 20:06Speaker 00

  So for example, if you have a normal worker that pays in a thousand euro a month at the age of twenty twenty something. And when he is sixty four, with a German pension fund, he has seven hundred fifty thousand bucks. In an American one, three point five million, just because of compounding of higher yielding assets. So meaning we all say we have problems with the retirement system. So this is a very easy fix. We are just in two conservative asset classes. But at the same time, this money being unlocked from the pension schemes would solve the entire problem of financing innovation. And the best, you would solve two problems and nobody had to pay for that.

• 20:46Speaker 00

  Except one politician needed to tackle this problem and they all are very afraid to touch anything that has to do with retirement.

• 20:55Harry Stebbings?

  You mentioned that kind of the inclusion of pension funds being more active in venture funds. My worry, and then I promise we will get back to schedule. My worry is that respectfully, they need to write such large checks, a hundred million plus in the US's case for some of the largest pension funds. They are investing respectfully in immensely large funds that everyone in the business knows will do at best two X, at best. Bluntly, they're not very good, they're not great assets.

• 21:21Speaker 00

  I think yes and no, but it's still a luxury problem because we're coming from a world where the life insurers are discussing that they could not even provide the two, three percent minimum yield, yeah, for the pension, yes. So, I mean, even if you're a mediocre fund, you're into two X, this is on a logarithmic scale in a different orbit to what we currently have.

• 21:44Harry Stebbings?

  Are you worried by the lack of liquidity in venture state on a more broad scale? We've seen M and A and IPO at its lowest level since last 20 years.

• 21:53Speaker 00

  No, so it's always better if we have it, but it will come back at some point. And good companies are always worth something and there are always a lot of people be willing to engage with them. There's always an exit market for them. I'm relaxed because at the end, everything boils down to the qualities of the assets and then you mitigate a lot of these risks.

• 22:15Harry Stebbings?

  I want to dive into the quality of the assets element there and the assets themselves, being in this case, defense. Specifically, when we spoke before and when I had a founder actually of Anduril on the show before, he was fascinating. He was like, no, no, no, defense is not a category. You can't build a portfolio around defense. Really, the Anduril of X is just Anduril. Do you agree that it is not a large enough category to build a venture portfolio around?

• 22:39Speaker 00

  No, I don't. It's not it is, it will become anyways. Yeah. So, a famous quote always is, when Uber started in San Francisco, people said, but the taxi market is only 250 million. And today Uber's revenue in San Francisco is 600 million. So, and if you do the math on defense, which we can do a little bit later, you will see that's massive money coming into it, creating this market and creating a lot of opportunities there. But at the same time, I'm not so keen of building portfolios. If I find cool companies that make a difference, that is where the beef is. And if you have one or two of them, every portfolio looks great. There's a lot of things you don't know about the market and we have to work very much in

• 23:24Speaker 00

  building the ecosystem. Hence, my willingness and drive to serve as a chairman of the NATO Innovation Fund to exactly build this ecosystem.

• 23:32Harry Stebbings?

  Why do you not like the idea of portfolios? For many people brought up in the last 10 years, it's what venture is built around. And in early stage, you're told 20 to 40 is the right number for the right levels of diversification. And there's the standard portfolio tropes. Why do you?

• 23:47Speaker 00

  It is a mean to an end. Yeah, you have to build portfolios in order to get money from institutional investors. But on the way there, you make a lot of concessions. So you have to think about how much do I reserve per company? Am I at some point shot out? Or can I reuse proceeds to get to a pretty high investment grade? Because if you do three times the money, but if you have a hundred minus twenty percent over ten years management fee, that's eighty times three is two hundred and forty. But if you have a hundred percent investment grade, because you can use proceeds, then three times is three hundred. So you see, this has nothing to do with any company. That's just trying to please the framework around the rules of deployment, so to say.

• 24:32Speaker 00

  I think this is something we need to obey too, because we are, we do need this money. But this is for me, something that has nothing to do with investing. So and if you find the cool companies, this is basically what what I'm intrigued by.

• 24:45Harry Stebbings?

  I remember Brian Singman at Founders Fund, it's a friend of mine, and he once told me that Founders Fund's great performance lies in the truth. Fundamentally, they do not have capital constraints on a per company basis, which means they can concentrate huge amounts of money into the same company. How do you feel about capital constraints on a per company basis?

• 25:03Speaker 00

  I I don't know if I should pride myself for that, but at least I am regularly asking my very understanding investment advisory board to be a little bit more generous on these rules. Yeah, so I do believe that if you see the right company, you should take yeah, a lot of risk and overproportional risk in those.

• 25:22Harry Stebbings?

  Part of a venture portfolio, whether we like it or not, is and building it is kind of an element of why now? Why is a company more exciting today than it was in prior years? Specifically around defence, I want to dive into, in what ways is the perceived risk from Russia worsening? And how is support for joint defence in NATO changing?

• 25:40Speaker 00

  Look, so there's a variety of things here. So first of all, I would not necessarily categorize it as defence investing. At the end, it is all deep tech and one customer emerges and that are the MODs. There's a very good reason for that, because suddenly you are forced to think a little bit more about the technical sovereignty, about a capacity to defend yourself. And the limitations are in the classical equipment, you cannot you build it or buy it so quickly because there are limitations in that. And secondly, the efficiency works on the different technology versus established equipment is very, very different.

• 26:23Speaker 00

  You have a thousand euro drone that takes out a 10 million tank. You have a 500,000 submarine unmanned, which can take out a 500 million submarine, the classical one. And the same for basically every category. So there is a huge shift and the Ministry of Defence need to see where do I allocate? And deep tech can make a big difference in these kind of mechanics. And so that's why, yeah, we are very committed at NATO level to invest in technologies and enhance the defence capacity of the NATO member states.

• 26:57Harry Stebbings?

  When we think about enhancing defence capacity, when we chatted before, you said, when it comes to defence, we need to make the electorate understand how bad the situation is. What do you think we most need to understand that we don't understand?

• 27:10Speaker 00

  There has been a long time of the peace dividend, so to say. Yeah, I mean, me included, I had never thought that we would get to this kind of situation where we are at, we have, we see a war on Europe territory. And if it then comes to the fact that we seriously need to think about being able to self-defend ourselves, then you start to make up the mess. So what has, what has been achieved? What did we do with, with the, in the Ministries of Defence? And some numbers are very misleading. So for example, everybody says, yeah, but Russia has the capacity or the economic power of something between Portugal and Spain. But in terms of purchase power parity, they're spending more on defence than the entire NATO member states.

• 27:54Speaker 00

  There are, for me, these kind of things happen gradually, more with facts of observation. So for me, it was not, or still very difficult to see that an entire continent is depending on availability of internet. If Elon Musk with Stalin has a good day and if he has a bad day, shuts it down. And this is what, what defines the availability of a certain technology. I think for a continent, this is too poor. There needs to be a consistent strategy, how we basically level ourselves up in terms of, of our capacity there.

• 28:27Harry Stebbings?

  Does Germany and the UK have significant munitions to defend itself today?

• 28:32Speaker 00

  The ammunition is a cruel one. The numbers I have from the military is like four days in Germany and UK and five in France, which is 25% more, but it doesn't make a difference. There are other facts which are mind-boggling. So for example, with the new hypersonics, if they have a warhead, the reaction time of any US president is 12 minutes. Before, when the rockets weren't that fast, you had a way higher reaction time. So basically, there's a new reality that forces us to think more technologically about it. The other example, which I found very, very surprising to say the least, is even if you

• 29:13Speaker 00

  buy US fighter jets, the way how it works is you are the owner, it stands somewhere in the hunger and you want to start flying, you have to put in the way where you want to fly. And then this data is sent to the US and if they like it, the machine starts, if not, it doesn't start. So this is not exactly how a sovereign, how a sovereign spirit works, I would guess.

• 29:35Harry Stebbings?

  Will we have nationalized or kind of continentalized security winners? And what I mean by that is Andrell wins the US, Helsing wins Europe, because you have this sovereignty of provider. Is that what will happen?

• 29:49Speaker 00

  This will have a very big influence. So that's why I, for example, also believe that some player like an ESA Aerospace is a perfect situation for sovereignty investing.

• 29:59Harry Stebbings?

  Unpack that one for me, sorry, I don't understand.

• 30:02Speaker 00

  The space will be a very, very big opportunity and a very crucial technology ecosystem to co-own, so to say. Think about it like the Starlink. So Starlink, if it can connect to a mobile device like an Apple, theoretically, the entire European telecom industry would be obsolete. So and if suddenly the self-driving cars are more dependent on low-orbit satellites, do you think that in the competition between Tesla and the European car industry, we would have easy access to the Starlinks? And even if we wanted to have our own constellation, would we have easy priority on the transport on SpaceX into low orbit? So these are very, very fundamental technologies where we either left out or we have a very

• 30:47Speaker 00

  stringent plan how we get into those.

• 30:49Harry Stebbings?

  Talk to me about our ability to launch satellites.

• 30:52Speaker 00

  Yeah, currently we either we get a slot in a SpaceX. There's all the restrictions that there are, or we have Ariane. But Ariane basically lastly sold a hundred percent of their defense transport capacity to Amazon. So basically, as Europeans, we are for the time being not able to send own satellites at our own discretion whenever we want to.

• 31:16Harry Stebbings?

  For how many years?

• 31:17Speaker 00

  Six years.

• 31:18Harry Stebbings?

  Six years? So do we just wait?

• 31:21Speaker 00

  Or speed up and build the next champions that guarantee us this technical sovereignty that we need in many fields.

• 31:29Harry Stebbings?

  It's not exactly chirpy listening, is it? What worries you most?

• 31:33Speaker 00

  So what bothers me most is that at some point we need a European unanimous view on what is important to us. And then we need to act on it and then we need to support this. But this doesn't happen.

• 31:46Harry Stebbings?

  Do you think we know what's important to us? You know, Trump is consistently saying we need to spend a significantly higher proportion of GDP on defense and we need to start paying for defense ourselves. And we're going, wow, wow, wow, wow, you.

• 31:58Speaker 00

  Yeah, well, that's what I mean. That's what I mean. And you're perfectly right with this. And I think also, in this case, I think Trump has a point. Because it's pretty naive to think that everybody else pays and we don't need to pay. Yeah. And it's even worse. So look, if you think about the German budget, not only didn't we pay two percent, but whatever we paid on the one point four, sixty percent of that is salaries and pensions. It's not that you buy equipment and become more able to defend yourself. It is conceptually wrong. Coming back to the question, what worries me most is a very, very clear view. What do we need and execute on it? So because.

• 32:39Harry Stebbings?

  Can you just help me understand? I always try and understand the other side of the argument. I always try and put myself in their shoes. Why are they thinking, no, we are right to limit defense spending and it is in the best interests of the budget to prevent this expenditure?

• 32:54Speaker 00

  Because the electorate doesn't give them benefit of the doubt. So the politicians fear they cannot win by doing. Doing that historical, which was probably they have some sympathy because if everybody thinks you never have a war. Then all the inhabitants of a country probably say like, why do we invest in that if we will never have a war? But if they knew this is the ammunition level, this is the constant threat that we have. Then you will have probably a very, very different view.

• 33:24Harry Stebbings?

  We have that now. We we have Israel Gaza, we have Russia, Ukraine. The ability for Putin to bluntly move into Lithuania, Belarus, surrounding nations is very real. Now is the time when the electorate would say, sure, let's increase defence spending, no?

• 33:41Speaker 00

  Yes, and you still need to explain a little bit more. So funnily, as you see, Rheinmetall has become sponsor of Borussia Dortmund. So this is also done, this deal in in sync with the politicians. To bring this topic in the midst of the population and make it visible to everybody. So I think there there is this explanation that is currently happening.

• 34:02Harry Stebbings?

  Are the ministries of defence incentivized in the right way to purchase military equipment for best performance? What I mean by that is if you try something new from Helsing, you could get fired if it doesn't work. But if you try something from Lockheed.

• 34:18Speaker 00

  Yes, so you always have that. So you never get fired for buying IBM, right? This this is the mental thing. There are some advantages as facts because you you cannot get the the equipment. We bought enough numbers and the efficiency in Ukraine shows that you have to buy other stuff. So there is a very clear way so that that people need to understand. We we need to get into a very different, let's say, asset class of defence equipment.

• 34:46Harry Stebbings?

  Can I ask, do you think it is realistic for us to move our percent spend of GDP? From two percent, I believe it is now, to three and a half. Is that a realistic ask?

• 34:57Speaker 00

  There's an overview, I commissioned a study, in which I analyzed all this kind of stuff. And clearly came out that in terms of threat, historically, most of the European countries have spent in the vicinity of three and a half percent. Poland is at six or seven, the Baltics are even higher, and Finland is also way higher. So this is actually not a crazy number. So I tried to understand what are the repercussions if we went in as a German to three and a half percent. Basically, that meant we had to spend a hundred billion extra, roughly. So with all the economic theories, if you drop a hundred billion into an economy, provided

• 35:41Speaker 00

  you can spend a lot of it in the home base, so let's say Germany or even Europe, then you immediately basically get back eighty to one hundred and ten percent of GDP effect. You would get twenty five, thirty percent of immediate tax effect, and you had something like forty percent of household income. So for a period of four, five years, the net effect on Germany, to put it a little bit polemically, if you asked the German electorate, do you want to be indebted with sixty three percent of GDP and not able to defend yourself? Or with sixty eight, sixty nine percent after the five years, and you would be able to defend yourself?

• 36:22Speaker 00

  I think that's the ultimate question that we have to ask and the choice that will be made in the next months.

• 36:29Harry Stebbings?

  If Trump says, hey, I'm not going to continue subsidizing your defense, good luck. What happens then?

• 36:35Speaker 00

  What I described, we do have to come up with our own sovereignty. So that means investing now. If we can provide it fast enough, that's fine. If we can, probably there will have to be other options that...

• 36:47Harry Stebbings?

  On the one hundred and fifty billion that we need to spend, the additional one hundred billion, say we have that, say we move to that three and a half percent, what's the right allocation of the extra one hundred billion? How do we do that effectively?

• 36:59Speaker 00

  Constraints, capacity constraints is the one, but you still need to have some of those. So that will be a fight for the scarce resources. And the others basically is along the efficiency. So you do have drones, and if you extrapolate the... Development, what will be happening there? You so you had like one drones, yeah, that got flight by one so soldier. And then you have the next development will be swarms and then you will have be attacking swarms and defending swarms. And so there is so much going on here that there has to be a little bit of foresight. Where does electronic warfare go? And then we have to equip ourselves to be efficient in that field.

• 37:39Speaker 00

  So this will probably be in the technical part of the equipment. And that is also why I do believe the chances for deep tech investors that have the good ties into the MODs have a fantastic chance now. If we think about two percent investment in defense of GDP and five percent of that in basically in tech buys us fifty billion demand from NATO member states in Europe. So if you think it's a three times revenue multiple, we're talking hundred fifty billion market cap. If we do the same with three and a half percent GDP and ten percent, then we had hundred fifty,

• 38:20Speaker 00

  hundred sixty billion, yeah, and for more like four hundred, five hundred billion market cap a year. So this is the the chance here where you would say from economic understanding, the reason why this is a very attractive field as investors to go into that.

• 38:35Harry Stebbings?

  How many investors in Europe do you feel are closely tied to MODs in the way that you mentioned there?

• 38:41Speaker 00

  Currently, very few.

• 38:42Harry Stebbings?

  Yeah. Do you have to change your mindset as an investor when investing in such a different category? This is fundamentally different from enterprise SaaS investing.

• 38:53Speaker 00

  Look, it's not that different. So technically, you have deep tech companies that have a superior sensor, that have a software instead of managing the operating system of an Android phone, it manages like Oterian, the operating system of a drone. You have very similar traits. You have one customer, one different customer, and who has a very special procurement process, which probably you have to learn a little bit. That's basically at the beginning what is not so much the difference.

• 39:24Harry Stebbings?

  What do you find the hardest thing that we have to embrace as we think about spending the hundred billion effectively?

• 39:31Speaker 00

  Well, you have to reinvent an ecosystem and an ecosystem that basically hasn't ever worked together. So there are very few startups that ever worked with pri- primes. There are very, very few startups that have worked with the MODs and vice versa. So this has all to be reinvented. Everybody has to get to know each other. Everybody has to develop a certain level of trust. And the interesting way, what I'm currently thinking is how does this ecosystem develop? What is the mature market? Is it a little bit like the pharma industry? Because the pharma industry, if you think about it, Novartis, they are basically a gigantic organization. If it comes to distribution and regulation, but not invention.

• 40:17Speaker 00

  So a big prime is Moloch in distributing because they have years and years of lobbying into the MODs. And they're pretty good at regulation because if you want to sell something, you have to fill out eight hundred pages of what do I know? And they all have that and startups will never have that to some extent. Only the big ones like the Helsing and the Androids. So the question is, how many of the startups become sizable companies and become a prime in their own sense? Or will we have a market like a pharma market where you have basically a lot of innovation? That gets accelerated through the cooperation with with primes?

• 40:59Harry Stebbings?

  How do you think that plays out? And do you think there will be a new generation of primes where there are ten Helsing style companies of the world?

• 41:07Speaker 00

  Too early to tell for me, yeah, because we are so early in the process that it still has to come.

• 41:13Harry Stebbings?

  Do the capital requirements fundamentally change? And does venture as a product need to change to fit this changing landscape? If you think about Helsing's first round or Angel's first round, I don't have the data. But I would imagine it is significantly more than a traditional seed or pre-seed round.

• 41:28Speaker 00

  Look, of course, and not only if it's a proceed or pre-seed round, it's also if you think the process through has to be to some extent also at the gross capital stage, because if the gross capital is always provided from the US, then basically you are abolishing your own sovereignty at that stage already again. Then you have the influence in the boards, which then comes from the big investors, which might have at some point a different interest than as if it was a European one. So it's interesting to see the examples we have in the USA might not be hundred percent transferable to Europe, because the US defence budget has like fourteen percent R and D,

• 42:09Speaker 00

  which translates into ninety four billion own R and D a year, which is a lot and which is proprietary findings that then finds its way. In Europe, it's four percent, and so nine billion. So the necessity, I mean, comes to embracing innovation to cooperate with the VC world and VC-financed innovation is way, way higher in Europe than it is in the US.

• 42:33Harry Stebbings?

  What are the biggest ways that we could make mistakes?

• 42:36Speaker 00

  The biggest mistakes, this is a trust thing. There's a very fragile situation now that you have to sell into the MODs, you have to break the procurement processes as they are. And if protagonists get into the game that just do it because it's easy or they perceive it's easy to raise a fund in defence and then become active, yeah, there might be a risk that this fragile trust level there is jeopardized. So it's very important at the beginning, we are very serious, yeah, and very sober and honest players in that field, so that we do not lose that this beginning trust thing.

• 43:14Harry Stebbings?

  I remember speaking to Trey at Anduril, and I said, what did Anduril have that made you successful? And he said, oh, well, I know how to sell to governments. Palmer's a product genius, Matt Grimm's an operations expert, and then Brian Shimpf is a phenomenal CEO. And he's like, it's the unique combination of our team which makes us successful. And I've met many defence companies today as an investor, and they're a product expert, but they've got no idea how to sell to MODs, and they've got no CEO ability, and they don't have the skill. My question being, do you agree with me that the biggest challenge is the unique skill set of founders to sell into this market effectively?

• 43:49Speaker 00

  Oh yes, of course. And basically, it is their gift and they're fast-tracking the development of the ecosystem. So basically, when I started with AOL in nineteen ninety-five, I was responsible for online banking, right? So to bring online banking to the German banking landscape. There was nobody in German banks that wanted to do online banking. There was no way how to sell online services into banks. So it is all a process. So as much as it's a process to do that now in MOD. So that is why the mission of the NATO Innovation Fund is bringing this trust levels. Now people say, oh, we get financed, so we can start a dual-use company, which wasn't the case before.

• 44:33Speaker 00

  The entrepreneurs basically were left alone. And then, oh, with NATO, yeah, there are some people in the MODs that now are responsible to embrace early innovation and adopt it. So these processes need to be accelerated and this is how the ecosystem will be developed.

• 44:51Harry Stebbings?

  Can I ask you, we've spoken a lot about defence. Defence is one huge area of expenditure for governments and for people. And then there is health. And you actually led the investment in NECO. I've spoke to Shaq obviously before and Daniel before. Can you talk to me, why did you have such conviction on NECO? Because I remember when you did that deal, actually, Klaus, and you moved so fast. Just talk to me about that and how you came to move so fast on it when other people didn't.

• 45:18Speaker 00

  I think this is the entrepreneurial spirit, yeah. And basically, it's a little bit the spirit that, yeah, we can take very fast decisions in the organisation. But I was on my way to Munich at that day and I was discussing with Daniel for long, if he ever wanted to open it up and so if he felt like he wanted to open it to investors. And at that moment then, okay, he said, Klaus, I think I should open it up. I contemplated, he said, all good, all good. So I changed the direction and didn't fly to Munich. I flew to Stockholm. I was two hours later in Stockholm. Had my scan, went through everything and I issued the term sheet the same evening.

• 45:59Speaker 00

  Sometimes this has to do with total uncorrelated experiences you have. So I'm regularly going to Lanzarhof, which is a clinic in Germany where you have like precautionary examinations. And they talk with you about how important it is to have it in certain intervals. So not only have you all the parameters of your blood, but you also have it over the period of time. So you can see it. So I basically was subconsciously trained for a situation like with Neco where you had the same phenomenon with with the the moles, the skin examination also with the blood, so that you have it over a certain period of time. And everything that I thought was very cool with the Lanzarhof, yeah, that you get like a report where they say this is your number.

• 46:43Speaker 00

  This is the interval in which your number should be moved for a certain parameter. And then an explanation what too high and too low has a cause and effects. So all this I thought was very, very cool for way more people than than we think. And people become more health sensitive. That's why I personally felt there's a very, very big market. And as I'm always been a product guy, starting from AOL, and I fell in love with the product. And that was a very quick consideration. Are you price sensitive, Klaus? Absolutely not. Why not? Because the good things, I would still do them. The good companies I've invested in, even if they were thirty percent more expensive. And the shit, I don't want to have it, but it's worth thirty percent cheaper.

• 47:26Speaker 00

  So the beauty is, I'm not in the buyout where buying makes a difference. I'm in the business where right judgment makes a difference, yeah. And even if you misprice it at the beginning at twenty, twenty-five percent, it doesn't make a big difference at the end. People are always stuck on this valuation thing. And valuation is for me a hygienic thing. The first of all, the first hygiene factor is if the founder tells me a decent price. And a decent price is interesting. If it's too expensive, I think what the heck did you smelt? Yeah. And if it's too cheap, then he said, look, you don't understand what it is. Because at the end, it is a pact that we both do, which honors everything.

• 48:09Speaker 00

  I've done in my life as an entrepreneur, the aspiration and the perceived execution skills. And this is the result of that is a price. And this is you can have a confidence interval around it, but that's not not rocket science.

• 48:23Harry Stebbings?

  Did you care about ownership or is it percent of cash deployed from you?

• 48:27Speaker 00

  This is a typical fund question. I do think that you need to have ownership in that sense that some of the crypto funds that I'm seeing, they invest many, many, many companies, very, very small sums, so it never makes a difference if you're right. So you need to make sure that it makes a difference if you're right. The reason why I sometimes argue this is I feel I'm an outsourced business development guy. So I have a certain number of hours available to help you. And I need to make sure that the compensation level as it should be right on your side must be right on on our side as well. So and that's basically how you come up with finding a common sensitivity to agree on.

• 49:08Harry Stebbings?

  Can I dive into a couple of companies? We mentioned Daniel calling you and you find Stockholm. How did you come to be an early investor in Spotify?

• 49:15Speaker 00

  So I was lucky to be investor in Stadol, which was led by Matthias Bickser, a great entrepreneur in Stockholm. And Daniel was CTO there and we got to know each other. Obviously, there was for sure a unilateral appreciation for him, but obviously also a reciprocal one. So and then at some point when he started Spotify, he asked me whether I would be willing to to be on board again.

• 49:44Harry Stebbings?

  Was it an easy yes? It was not an obvious company at the point. It was dealing with music rights, intense IP challenges. This was not like an obviously easy company to build.

• 49:54Speaker 00

  But look, I mean, all the big ones I invested in were not obvious ones. So you could say when when the time I was looking at Spotify, it was, I'm not sure, I wouldn't say it's illegal, but we had music and we didn't have the rights. Yeah, so at the time when I invested in Skype, there was no business model. Because Skype out wasn't even invented. Yeah, at the time when I I invested in Airbnb. It was also very, very early. So.

• 50:23Harry Stebbings?

  How did you come to be in Airbnb? You're in Germany, in Europe. How did that come to be?

• 50:29Speaker 00

  So it's a lot of luck. So in these situations. So in the case of Airbnb, it was a discussion I had with Guy Oziri, who was the manager of Madonna. We were chatting and he basically was advertising it so heavily and was trying to convince me. I think at the end I followed his logic and luckily I made that decision.

• 50:49Harry Stebbings?

  Okay, so we have that. What about Revolut?

• 50:52Speaker 00

  Yes, Revolut is, I think it's the biggest blessing that we have in the European ecosystem currently as a company. And we basically, we missed it in the UK team at the time. I still remember then my son came along and said, look, I found this cool app. Yeah. And he was raving about it with his friends at the dinner table. Yeah. And I looked at it and with my product affinity, I said, wow, is this cool? And then I just ordered, yeah, literally I ordered the team to get into that cap table. And this was a very short one.

• 51:25Harry Stebbings?

  Well done, team. It's impressive. Okay, so we have that. Another one. Got into Meta or Facebook at the time. How did that happen? And when we were chatting before, you walked me through kind of why it was exciting for you. Talk to me about getting into Facebook when you did.

• 51:40Speaker 00

  I was following the social media stuff as there was a company called Xing in Germany. And there was like Friendster and then you had like MySpace. It was fascinating that Friendster being like the sort of first social media. Yeah, the only thing they basically invented is I could see through whom I know somebody else. The six or seven degrees of what knowing each other. So and then suddenly MySpace came and they just added music to it. And the whole herd moved away from Friendster to MySpace. And suddenly MySpace was the hottest thing on earth. And then Facebook came along and suddenly introduced like clear names, so voyeurism. And then everybody moved there.

• 52:21Speaker 00

  And so until then, I did not feel that there was one single argument why the value was captured. And then they they announced that they were willing to do introduce the API. And at that moment, I said, Jesus, if that's the API, then all the music or the innovation is easier to happen within Facebook because you take advantage of the network and don't need to build the network again. And then the the value will stay. And at that time, I needed to figure out how I get into it. And then I for two months called everybody I knew in the valley. And I ended up with Matt Cohler, like a little coincidence, because I was at Benchmark, the SWC, and he was with Benchmark. And so that was the established the connection.

• 53:04Speaker 00

  And then I bought some some some shares that he could organize. And thanks, Matt, by the way.

• 53:09Harry Stebbings?

  The commonality amongst these, when I hear them, is these are not rounds happening. This is in between, in a lot of cases, very serendipitous events. Is that the commonality when you reflect on the winners that you've had? They are all tween rounds, making something happen when a round does not exist?

• 53:27Speaker 00

  Yeah, so look, I mean, also, it's a little bit like a personality. So if I want to have it, I want to have it now. Yeah, so and then you try to preempt it. So and in these times, what the examples I was saying that was the market was not in the same professional state as it is now. So there was always room for like cowboys like me that tried to get into some situations in a different way.

• 53:49Harry Stebbings?

  You did cred in India, not a very similar market at all, completely different really to the European and the US market. Why and how?

• 53:58Speaker 00

  Fintech is good. Yeah, I like fintech. I was always working with Shailandra from Sequoia in in the Indian market. So and we looked at it together and he was so kind to help me getting into it. Very early innings and I backed also Kunal Shah's company he had before. And so he was happy to to have me again on his steps, Kep Tava.

• 54:23Harry Stebbings?

  Amazing companies there. Sadly, it can't be all winners. Sometimes we make the wrong decision. When you think about your biggest loss, what was your biggest loss? How did that shape your mindset?

• 54:34Speaker 00

  It's also mentality thing, yeah. So I come from that area in Germany called Cologne, Bonn and Düsseldorf, who are very easygoing people, yeah. So they have like a little bit like, I would say they're like the Dalai Lama. Sometimes it's good if you get what you want and something is good when you don't get what you, what you want. I have felt that lot of, lot of cases, even if you don't get what you want, it turns out well and it's for a good reason, yeah. So I still remember, yeah, being son of a farmer, I didn't have a clue about anything what I wanted to do in life and that didn't so much change after my studies. So I thought, low, that'd be cool to be Goldman or McKinsey or BCG or Monstelly. And I applied

• 55:16Speaker 00

  several times everywhere, but they never wanted to give me a job. So kudos to their smart HR departments because I would have been a terrible employee. It was clearly not what I wanted, but in hindsight, it was, yeah, the savior of my life, yeah. So otherwise it would have been way worse. And it's the same with, with companies. So my, my biggest nightmare, I wouldn't say, but boy, at that time it was a pretty nightmare, was a company called Wunderloop, where basically I worked with a friend of mine like three, three and a half years, just to lose sixty percent of my wells. The market wasn't mature enough for it. I was a little bit too early. It was a cookie-based advertising platform. It was probably like one to two years too early. But

• 55:57Speaker 00

  I, during the process, I got to know somebody, uh, who wanted to buy this company, but at the end didn't. I then heard it off and we decided to found Macafoni together, a company in Turkey that we sold for a hundred fifty million several years, two years later, two and a half years later to Nespa. So it overcompensated the loss of, of that one company. So I'm a big believer, if you are ethical in the things you do and you're friendly, then luck comes to you and you, you can make a positive thing also from a lot of losses.

• 56:29Harry Stebbings?

  When you look back at winners that became losses, how do you think about when to sell? So for example, I was in Clubhouse, I was in Hoppin, I was in BeReal, Klaus, all of these, I could have sold for twenty, thirty X.

• 56:43Speaker 00

  Look, everybody has that. So be cool, everybody has that. There's a common trade with all the entrepreneurs and investors. So, um, I, I got in at King.com at two and a half million and sold something at a hundred and I could have sold it five billion. So I didn't do it, obviously. So I basically the-

• 57:00Harry Stebbings?

  Is that the one you think about most?

• 57:02Speaker 00

  No, I don't think about it. Yeah. So I think it is, I think at the time this was still an arguable call because Candy Crush didn't even exist. It was a very different company at the time. But it's a fantastic team and they deserve very much to be so successful as they were. So I'm totally relaxed. It is a little bit like a certain number of criticism that you get. If you don't get it, you're not there.

• 57:25Harry Stebbings?

  Final one before we do a quick fire, and I hope it's okay for me to ask personal, but you have incredibly hardworking, ambitious children. And respectfully, it is quite hard to bring up children in affluent families to have that hunger, ambition, work ethic. What's the secret?

• 57:42Speaker 00

  At the beginning, it hasn't been like that, very affluent. So the beginnings weren't that glorious. It was a long journey to to get where where we are now. We had a very normal and very tight family life. So I very consciously decided to be basically during the 2000s at home at at fiveish six. Yeah. And then we had supper, then we did homework, and then I brought them to bed. And then at nine, I sat down at the at the desk again. So this was a very conscious decision. Yeah. If it is unilaterally explains, yeah, this is the outcome now. I think there has been a lot of very valuable input my then wife

• 58:23Speaker 00

  was giving to the kids and the love and the the home that that she created. So this is probably everything working together there.

• 58:30Harry Stebbings?

  You talk about work a lot with them.

• 58:32Speaker 00

  Yeah.

• 58:33Harry Stebbings?

  Is that important?

• 58:34Speaker 00

  Oh, yes. So they all got the same, the grandma test. So they have some exposure and that's the best way to see if they like what they what they can experience. So now look, it's a very open discussion I have with them.

• 58:47Harry Stebbings?

  Listen, I want to move into a quick fire round. So I say a short statement and you give me your immediate thoughts. Does that sound okay?

• 58:53Speaker 00

  Yes.

• 58:53Harry Stebbings?

  Okay. So which venture investor do you most respect and learn from and why?

• 58:59Speaker 00

  I think Lee Fixer is a very cool guy. When he was at Tiger, he was in MercadoLibre, he was in Yandex, he was in Flipkart. And it basically, it was a one man show on the plane, starting there with twenty eight, twenty nine. This is an amazing achievement. Also, the way he applied thoughts to conquering markets, very, very impressive.

• 59:22Harry Stebbings?

  He is also an LPN 20 VC, a lovely, fantastic guy. Biggest lesson from working with Daniel Eck for many years?

• 59:29Speaker 00

  Crazy persistence and patience, thinks at least two levels more profound than others. It's very logical and is always a very friendly and well-rounded character. And he has uncompromising ethics in everything he does. Very important to me.

• 59:45Harry Stebbings?

  Single best performing investment by multiple?

• 59:48Speaker 00

  Investment defined as the returns delivered and I would say every single cent I invested in any of my four kids, multiple is not measurable. Yeah, but if you want to, as I said, I have a different coordinate system with that. If for what it's worth, if you insist, I have something like six, seven investments more than a hundred times money, one even thousand times, and some more like six or so in the range of thirty to sixty times money. But this is not the currency then. Very nice currency I have to tell you is I have some very, very crazy, cool thank you emails from the best founders worldwide that say, "Thank you for your help. You kept your promise and made an impact on my journey." So this is what makes you proud. This is when you sit, when you are eighty, you sit

• 1:00:32Speaker 00

  in front of the chimney and with a glass of wine. Yeah, and then you say, "This is what you have lived for. You didn't live for six or eight percentage numbers of funds. That doesn't matter at the end. It is more like the impact that you made for people."

• 1:00:46Harry Stebbings?

  The happiest things in life are not iron or gold, but unmade decisions. Which unmade decision weighs on your mind most?

• 1:00:54Speaker 00

  That's not how I think about it. It's a little bit what we just discussed with the Dalai Lama thing. I'm fatalistic about it. So everything that I thought was bad, well, a lot of things that I thought were bad turned out to be good, and a lot of things that I thought were good turned out to be bad. So time will tell. I'm easy on that.

• 1:01:13Harry Stebbings?

  If you are an ambitious entrepreneur wanting to build a company, do you build it in Europe today?

• 1:01:18Speaker 00

  Um, you still can, I would say. Also because, yes, you are an ambitious entrepreneur, but it's not everything in life, yeah? So you are also a human being. You have friends, you have family. I think it is sometimes an equilibrium in life and not a, a single parameter that needs to be optimized, yeah?

• 1:01:38Harry Stebbings?

  The Americans, the Americans say like, "Oh, the Europeans, they just don't work very hard. Morons." Not true? Or you're like, "Actually, our work ethic is generally much lower."

• 1:01:46Speaker 00

  I think it is more nuanced. So I think on the very top of the pyramid, it's exactly the same. You will, people fight like maniacs and there is everything that you do in order to get somewhere. But I think the broader base under the bell curve is more complacent, more entitled. Yeah, you have more discussions on this crazy woke shit and on ESG and what do I know? This is not that sounds that you see it in different geos.

• 1:02:20Harry Stebbings?

  That's too funny. I love the crazy woke shit. I also love here. And I said to you, which investor would you swap portfolios with today? Your comment. What's your comment, Klaus?

• 1:02:34Speaker 00

  I said, if you saw my portfolio, you would have asked that question.

• 1:02:40Harry Stebbings?

  I mean, to be fair, I didn't see the portfolio before, so I'm happy to put a pin in that one. I do want to ask the incredibly successful angel turned venture investor. What element of being an angel do you miss out most? That's from Shaq.

• 1:02:56Speaker 00

  See, I know I would have guessed this from Shaq because we have this discussion very often. And there are clear advantages of being an angel. You're very free. You do not need to do fundraising. The decision takes as long as you want to. But you always die one death. So meaning a platform is also something interesting. And you can achieve something with a platform that you cannot achieve as an angel. There is a right time for being the one or the other. So I think Mark Evans, whom I admire a lot, he was spectacular good at Benchmark. But afterwards now even better as an angel. So I think maybe everything has its time.

• 1:03:37Harry Stebbings?

  Mark is incredibly special, also incredibly behind the scenes. The man does not even have LinkedIn.

• 1:03:43Speaker 00

  That's what I mean with social media.

• 1:03:45Harry Stebbings?

  Will NACO be bigger than Spotify?

• 1:03:48Speaker 00

  I believe that there's a very, very high chance it becomes super big for very reasons. So you have the execution skills that are unparalleled and proven. And the markets are so much bigger if it comes to health. So at the end, music is not a big market. It's an okay market, but it's not a monster big market. And as Daniel said last, that the pay, the sum of what the US spends on heart diseases and medication, all that kind of stuff in the US is in the vicinity of Apple's revenue worldwide. So that means if you are moderately successful, the size is so much bigger.

• 1:04:30Speaker 00

  And I do think that with the product we have currently at NACO, with the ideas that Daniel, Yalma and the team have, there is a very high chance that they will absolutely smack it.

• 1:04:42Harry Stebbings?

  Final one for you. What question are you not often asked that you think you should be asked more, Klaus?

• 1:04:48Speaker 00

  That's an interesting one because everybody asks me very factual things and geared short term. There are very few people that sit down and say, yeah, you're basically, I'm doing a journey for like 10 years. What makes me happy over a period of 10 years? Because there will be some fatigue moments from the normal work or what did you make in, what do you individually make out of it? Because happiness can have many facets and just being successful and eight times divorced is also not the ideal dream of happiness, right? So it is not only factual things, it's a lot of things of what makes you proud, what were the moments, what should, how should I design my life? Yeah, so this is things that I always ask.

• 1:05:33Speaker 00

  So it's a very great luxury if I can have some, some friends that are 10, 15 years older that have mastered the next 10 year period in terms of prioritizing the pros and cons and the important ones.

• 1:05:48Harry Stebbings?

  A weird one. Everyone always does that, I'll be happy when, I'll be happy when I have X or when I do Y or when something is achieved. You know, for, say, say for me, I'll be happy when I have a personal track record like this.

• 1:06:01Speaker 00

  There are two things that would make me happy and that's the final word then. I need to be proud, proud of my eight-year-old me, what I have achieved and what I've dreamt of, and proud of my eighty-year-old me when I look back and say, oh, how have I been, have I shown integrity with the people I've worked with, integrity with my partner, with my family. These are the two things that are the north stars for making me happy.

• 1:06:30Harry Stebbings?

  Klaus, listen, I so appreciate the incredible discussion today. Thank you for joining me and it's so good to do it in person.

• 1:06:36Speaker 00

  Thank you.

• 1:06:38Harry Stebbings?

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