VC investment thesis: Earlybird

This is the Earlybird investment thesis.

Established in 1997, Earlybird currently manages over €700 million ($900 million) in assets. It has backed more than 100 companies, some of which have sparked significant innovations in business and technology and resulted in large-scale IPOs and trade sales.

Earlybird backs European companies with global ambitions and its active portfolio currently includes 33 companies across the consumer internet and enterprise services space.

In the words of the team:

As we announced earlier this year, the teams of Earlybird and Heilemann Ventures have joined forces for a brand new Early Stage Digital West Fund. With our joint investment and operational experience, we are looking to back the most inspiring and ambitious entrepreneurs in the Nordics, DACH, Benelux and Southern Europe. Coming together as two teams with a similar investment approach and a number of shared investments, we took the chance to refine our investment strategy and put forward our thinking about the disruptive companies we are excited about.

In this post, we want to share the pillars of our investment strategy, which reflects our long term vision on how technology is changing the status quo of the industries.

Earlybird has always invested in companies within a broad range of industries. With investments ranging from cloud-based engineering simulation solutions to mobile-first banking solutions, we are keen to fund business models and technologies with the potential to disrupt B2C and B2B markets. We are backing early stage companies in Seed, Series A and B with a potential for later follow on investments. Our typical investments range from EUR 200k to 5M, with an opportunity to invest total of EUR 10–15M into one company over its lifetime.

Earlybird investment thesis

We are looking for global category leaders

What we always need to understand about the company is whether it has the potential to be the global leader. We do not optimize on the downside and are only looking for uncapped upside opportunities due to the economics of the fund. Two business dynamics that can spur this process is the capability of business to keep their existing customers (backward looking lock-in) and at the same time grow the value proposition for the potential ones (forward looking lock in). In the end it is the people who drive the business and that’s why we back the strongest and most complimentary teams with excellent execution.

In the following, we have expressed an overview of topics that particularly excite us. However, this is not to be seen as exhaustive, but rather as a reflection of what creates a stir within our team:

Financial Technology. While there have been great advancements in digital banking solutions, lending, money transfer, digital currencies, personal finance and others, we are expecting to see even more B2B oriented solutions solving such pain points as unstructured data analysis and mining and further expansion of digitalized retail banking on B2C side. We are active investors in this space, having backed Cashboard, Fintec Systems, Number26, Smava and Traxpay. Interhyp, online platform for mortgages, was our most successful exit so far.

Insurance. We think this is an industry where most of the innovation is yet to come. Our investment in Oneshield is an example of the investment in property and casualty insurance space and we are closely following the other parts of the insurance value chain.

Enterprise Productivity. We have done several investments in this area in the past, and are looking for more interesting businesses to come. B2X, nfon, Rapidminer, Voyat, Secucloud, SuitePad, Eyeota, Divimove, RhodeCode, Test.io are the companies that we have backed and believe that there are still more ways for startups to disrupt the status quo efficiency of business and bring it to another level of smartness.

Vertical Integration. We have seen several vertically integrated companies that transform large and often fragmented offline industries by digitally re-designing and subsequently owning large parts of the value chain without owning the relevant physical assets. We were in particular excited to invest in Service Partner One, Vitraum, Miflora, Movinga and McMakler. Combined technology-first approach and data utilization allows these companies to create superior and optimized experience for their clients and to build a sustainable relationship.

Data, analytics and AI. We believe that the exponential growth of data generation, computing power and storage capacity will continue to spark the growth of powerful businesses, that can make use of this data. This includes technologies in the broad field of artificial intelligence, with its many sub-fields such as (predictive) data analytics and machine learning. In our existing portfolio, the companies creating intelligence solutions based on data and analytics are SimScale, CrossEngage, Seerene, Carto, SocialBakers and LiquidM.

Mobility and Logistics. We also believe that there is even more development coming in the mobility sector and in parallel in supply chain and logistics. This sector affects economic activities almost like no other and still has a lot of room for disruption. We have backed Ubitricity with the forward outlook of electric vehicles.

IoT. Connected devices are bringing significant insights into both industrial and consumer applications. We have backed Azeti that enables a range of M2M industrial applications and Enevo with the light of optimization in waste management and are eager to discover new use cases where connectivity can create superior level of efficiency to slow adapting industries.

Marketplaces/Communities/Social Networks. We are strong believers that the companies that can create strong ties between the users of its service are also likely to have a scalable path to building a sustainable competitive advantage. Marketplaces, communities and social networks exercise strong user network effects. With the underlying reasoning we have backed Auctionata, Bonagora, Videdressing and Klara among marketplaces, communities such as EyeEm, Onefootball, Inkitt and Versus, and also social networks like Tapstack.

Decentralisation and Blockchain — We are convinced of heading into a new era of technology driven by the web of trust and decentralization. Applications built on distributed networks will be transparent, immutable and irrevocable, tapping their full potential in industries particularly dominated by powerful intermediaries such as Banks, energy companies or Governments. Given the relatively young age of Blockchain Technology we are very eager to invest into the infrastructure and protocol layer followed by middleware and services as well as blockchain applications. We proudly backed BigchainDB/Ascribe.

BACK TO THE VC THESIS COLLECTION