Despite the misleading non-Deutsch name, Wellington Partners is one of the oldest and largest VCs in Germany, with previous investments including Xing, ImmobilienScout and the Samwer brothers’ Alando.
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Now, the firm is broadening its reach to become a pan-European VC for Internet and digital startups. We caught up with Christian Thaler-Wolski, Principal at Wellington Partners, to talk Berlin, bubbles of hype and the perfect prep for becoming a VC.
VV: Hi Christian, when did Wellington Partners raise its last fund?
CTW: Our most recent fund is from 2008 – it’s a €265m fund. In addition to early stage investments, we’ve also done a few growth investments out of that fund– that is, investments of €10-15m.
We have over $1bn under management and are actively investing, predominantly in early-stage companies.
About seven years ago, we internationalised the partnership and opened an office in London. We are a pan-European VC now and investors in Spotify, Hailo, YPlan, EyeEm and other great companies. We like to invest in startups that come out of Europe and have global ambitions.
What’s your background?
I know it’s not the usual path for a VC, but it’s been really helpful to have this experience, as I’m able to advise our portfolio companies on things like structuring pricing models, building sales teams, integrating sales channels as well as developing sales strategies, methodologies, and metrics.
My first taste of startup life was when I joined CareerConcept, a student loan vendor, as the director of business development. Working at CareerConcept gave me my first exposure to VC, which I found exciting. I joined Target Partners briefly and then moved to Wellington Partners three and a half years ago.
What is your most recent investment?
Import.io – an API marketplace. It allows data owners and users to create a marketplace and trade data, instead of scraping data. A lot of traffic on the internet is scraped data and our hypothesis is that you don’t need to scrape anymore because you can get better quality data by buying it from whoever made it.
What areas are you most excited about investing in the future?
I’ve spent a lot of time with consumer-centric or app-centric startups that we have invested in. But if you look at the people involved in Wellington, some of them, including myself, have a background in software. So I spend a lot of time looking at startups in SaaS, and I help them with making decisions on pricing, sales channels etc. Software is big for us.
Have you seen big changes in the VC ecosystem in Europe?
There is more competition. The fallout from the 2000-2001 bubble meant everything went into hibernation for a few years. Then it rebounded and now you have a situation where you can create better startups with less money. In fact, you can create much better startups with much less money. And that is probably the biggest disruptor that is also changing the investment landscape.
Now, you basically just put your apps on Github, deploy to Heroku, and run on Amazon Web Service – it costs at most €50,000 to build an app and see how it’s going. Then, when you have some traction, you raise money from a VC. This is hugely different from five or ten years ago because you can very quickly iterate on the product market fit and can be in an entirely different negotiation position vis-a-vis the VC when you raise that first round.
That development also means there are more micro-funds and angel groups to fund the very early stage. Bigger funds like Wellington like to do pre-launch seed investments because it gives us access to early-stage high growth opportunities. We want to get a foot in the door early.
There is also competition from the US that didn’t exist before – US investors are looking to Europe for deals, because they have a lot of money and are chasing fewer deals in the US with sky-high valuations. They wouldn’t have done direct investments in Europe five years ago.
There have been some controversial comments on the Berlin startup scene lately – including Lars Hinrichs questioning whether startups in the city are internationally relevant. What’s your opinion on this, considering Wellington Partners has invested in a number of Berlin startups?
That’s a discussion that will keep happening until there is a string of serious exits from Berlin to international acquirers. And this will have a huge impact, not only by creating a few more millionaires and therefore angels, but will also have an impact on the US and their perception of Europe and its potential. This will, in turn, lead to more acquisitions.
When I look at our recent Berlin portfolio – EyeEm, Readmill, Bonusbox, HowDo – I’m very confident that with the global user base they have had from the start, they can have that kind of impact.
How many investments are you hoping to make this year?
Last year, we did five new investments. This year it’s probably going to be six to eight new investments – and we’ve already done two.
We also did 12 follow-on investments in our existing portfolio, which is different from other investors. Some investors do one investment and that’s it. We invest initially, and then are prepared to invest a lot more over the lifetime of the company.
What areas of Europe do you think are most exciting for upcoming investments?
We’re huge fans of Central Eastern Europe. We’re looking at three software companies there right now that we’d love to invest in. There is a lot happening in CEE and that’s because the ecosystem is maturing. It has taken a bit longer for money to start flowing back through exits and business angels. I’m planning to be in Zagreb and Tallinn this summer and am really looking forward to meeting companies in both cities.
Little-known fact: I lived in Budapest for three years. I go back every chance I get – I see a lot of potential there.
We’re also keen on the Nordics – we have invested in four companies with Swedish founders. We’re increasing the amount of time we spend there scouting companies, and I will be in Stockholm this weekend at Startup Day to discover more of the scene, get to know people and speak on a panel. We’re looking for reasons to get to Helsinki and Copenhagen, too, so please, if you’re a startup, get in touch!
What do you think of crowdfunding platforms?
In my opinion, the best crowdfunding platforms will be the best online marketing platforms. Because they need to acquire customers – ie crowd investors – and they need to retain them and make them come back.
One reason crowdfunding has been so successful so far is because there hasn’t been a massive public failure yet. No company has gone down; there have been no cases of embezzlement or other kinds of problems yet. The platforms need to be prepared for that (and of course be diligent in the first place).
Top image credit: Thinkstock