Today, we have with us Stephan Heller, Founding Partner at AlphaQ Venture Capital. AQVC is an innovative, evergreen VC fund of funds focused on small VCs globally and democratizing diversified access to venture capital.

Stephan is a seasoned tech entrepreneur and investor passionate about nurturing the next generation of innovative companies, developing robust platforms, and cultivating thriving ecosystems. Over the past 15 years, he has been deeply involved in the entrepreneurial landscape.

Stephan also co-founded five companies, including a leading deep-tech startup accelerator for one of the largest high-tech corporates in the world and establishing a successful and innovative VC fund of funds.

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This episode is part of the State of European VC Fundraising Report 👀

Together with our good friends at Isomer Capital and Floww, we’ve made a report filled with graphs, beautiful narratives, and video interviews, providing an entirely new and engaging experience on the topic that has us all traveling across the world ✈️

Chapters:

* 00:13 Diving Deep into AQVC's Approach

* 00:35 Stefan's Unique Framework for Evaluating Funds

* 03:24 The Criteria for Evaluating Emerging Managers

* 03:38 Alignment and Uniqueness in Funds

* 04:14 Evaluating First-Time Funds: Challenges and Strategies

* 05:09 The Hustler Mentality in Venture Capital

* 05:59 Building a Firm with a Vision

* 06:37 Technical Aspects of Fund Evaluation

* 08:26 The Journey from First to Second Time Funds

* 09:03 The Role of Reference Calls in Due Diligence

* 10:46 Deep Dive into Track Record Validation

* 11:27 The Challenge of Investing in First-Time Investors

* 18:39 Evaluating Fund Performance and Strategy Execution

* 21:18 Understanding DPI Creation in Third Time Funds

* 24:04 Closing Thoughts and Future Plans

Key learnings from the conversation

Alignment with thematic mega trendsStephan Heller emphasises the importance of aligning with AQVC’s identified mega trends, ensuring that the emerging managers they consider investing in are working within these long-term trends and not short-term hypes.

Portfolio construction and geographical fitAQVC seeks to avoid overlap with their current investments, meaning a new fund manager must offer something different either in terms of thesis or geographic focus.

Uniqueness and expertiseThere is a significant focus on the uniqueness of a fund’s thesis and strategy, with a preference for those that truly understand their sector, such as climate tech, rather than simply following a trend.

Hustler mentality and long-term commitmentStephan highlights the necessity for fund managers to possess a hustler mentality and a long-term view, underscoring that venture investments often take longer to mature than the average marriage.

Firm-building visionAQVC is interested in managers with the vision to build a lasting firm, not just a one-time fund. This indicates a commitment to growth and evolution in the venture space.

Fund modeling and ownershipFor first-time funds, Heller looks for evidence of strategic discipline, such as maintaining ownership percentages and leading or co-leading investments, as opposed to following big names into deals.

Appropriate fund sizingStarting with a right-sized fund is crucial for new managers, with AQVC preferring those who demonstrate the discipline not to overextend on their first fund.

Execution on promisesFor second-time funds, AQVC pays close attention to whether managers have executed on what they promised, both in terms of investments and firm-building efforts.

Liquidity creation capabilityBy the time a manager is raising a third fund, Heller expects to see some capability for liquidity creation, suggesting that successful fund managers should engage in intelligent capital velocity practices like partial secondaries or early M&A.

Deep due diligence with referencesAQVC conducts thorough due diligence, including detailed reference checks, to validate track records and understand the real impact the manager had on successful deals.

For first-time managers without track recordHeller states that AQVC does not invest in first-time investors and suggests that aspiring managers build their track record within an existing VC firm.

Expectation managementFor third-time funds, Stephan explains that while a 1x DPI towards the end of the fund’s life cycle would be acceptable, a complete lack of DPI might raise concerns, particularly if the underlying assets are heavily hyped with complex financial structures.

🎓 Upcoming Academy Sessions

🌍 Virtual | 📅 Thursday, May 16 | 🕰️ 11:00 AM - 1:00 PM CET

An advanced session on creating a VC fund model assumptions sheet, focusing on defining Core Assumptions, Asset Development, and Equity Valuation Dynamics. Attendants will receive a template and work with this based on their own fund and learn how adjusting assumptions influence fund performance.

👋 Upcoming in-person events we’re hosting

There’s nothing we like better than getting Europe’s best and brightest together with good food, drinks, and conversations that go truly deep.

Fund Modelling Workshop & Mixer | 5th of June | 🌍 Berlin, Germany | Join waitlist.

European VC Awards | 4th of June | 🌍 Berlin, Germany | Get tickets.

📅 Upcoming virtual events

From time to time, a podcast is just not enough. Check out our roundtables and live events below.

🏆 Firesides with the winners of the European VC Awards

Fireside with the Newcomer of the Year Winner | 13/6, 12-1:30 PM | Register here. Hundreds of new VC funds come to market every year. But only ONE will win Newcomer of The Year. This is your chance to meet the winner firsthand.

Fireside chat with the Winner of the Hall of Fame | 25/6, 12-1 PM | Register here.Hear firsthand from a true giant upon whose shoulders the European tech ecosystem stands tall.

🗓️ The VC Conferences You Can’t Miss

There are some events that just have to be on the calendar. Here’s our list, hit us up if you’re going, we’d love to meet!

0100 Conference CEE 2024 | 📆 14 - 16 May | 🌍 Prague, Czech Republic

Iceland Innovation Week | 📆 15 - 16 May | Reykjavik, Iceland

EBAN Congress Tallinn 2024 | 📆 20-22 May | 🌍 Tallinn, Estonia

SuperVenture | 📆 4 - 6 June | 🌍 Berlin, Germany

Nordic LP Forum & TechBBQ | 📆 September | 🌍 Copenhagen, Denmark

North Star & GITEX Global | 📆 14 - 18 Oct | 🌍 Dubai, UAE

GITEX Europe 2025 | 📆 23 - 25 May 2025 | 🌍 Berlin, Germany

Trying to get in front of European VCs and LPs? The 2024 EUVC Media Kit is out - check it out here, and let’s talk. 💌

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