August 24, 2022

Simon Schneider: Investing in young ventures

37 minutes

On this episode of Scouting for Growth, Sabine VdL talks to Simon Schneider, founding partner of Neoteq Ventures. They cover three areas:

Simon’s path in VC Land,

Great minds think alike, and

Startup tips to engage with large companies while ensuring they don't get side-lined when the corporation’s strategy changes.

KEY TAKEAWAYS

It’s a fortunate coincidence that I entered the VC market in 2001. I’d studied to be a lawyer but decided not to become a lawyer because a friend suggested VCs needed someone like me who knew what contracts should look like and who understood people. From the first day of my VC career, I was fascinated by all these founders and their teams with their great game-changing ideas and technologies.

Neoteq invests not just in InsurTechs, we concentrate on early-stage investments which are pre-seed, seed, and Series A. We do not have a specific sector focus, but we look for technology-based startups. The most relevant question for us is which customer problem does the startup solve? It sounds like an easy question, but often when you meet founders and you ask them that very question they have difficulty describing their proposition, and if you can’t describe what the customer’s problem is, why would someone be willing to buy your product? Market, team, and technology, these three key parts, are used constantly to perform our due diligence and decide if the startup is an interesting investment target for us.

Not every startup in our business is successful. There are always failures. Of course, investors have expectations and you have to fulfill them as a team when you get the trust of your investors, but not everything can be handled by the team, there are some things your team can handle, and some things in the market that you do not have a handle on. You always have to look at why each case wasn’t successful in the end when it looked promising in the beginning. There are a lot of things going on in the world right now that are impacting startups. I expect that access to capital, especially in later-stage financing rounds will be tougher and tougher than in past years which means valuations will go down a little bit. I expect the rounds will get a bit smaller and that has an impact on the M&A market, perhaps exiting will take more time than you’ve been used to, but if you’re an experienced VC you know it takes time (5-7 years or more) until you can exit your companies from your portfolio. The VC scene won’t freeze though. It will continue to find winners to yield high returns.

We are financially driven. Each startup, from our point of view, needs to have the potential to pay back our complete fund. If we do not see this potential it’s unlikely we will invest. Strategic returns are often combined with financial returns, at least from my point of view. But of course, CVCs often try to get some kind of extra deals with the teams to get earlier access to the product. This is something I would highly recommend startups not to accept, in the end, it’s always unhelpful, especially when corporations change their strategy – which can happen from one day to another – you are no longer relevant to them and the baseline premise of the engagement is over. Startups that want to cooperate with a CVC need to set up evaluation meetings and workshops where they can really create the goals on which they will want to work on. If you don’t find common grounds then stop the conversations because it won’t be a successful partnership. Alignment is key.

BEST MOMENTS

‘Over the last 20 years as a VC, I’ve seen a lot of things. My fascination with the VC business and the chance I have every day to work with special people are still there. I still love my job.’

‘The fundraising process, especially during Covid was not easy. Meetings are no longer possible and investors have to make choices through Zoom calls as to whether they would want to invest in a venture.’

‘Companies working on climate tech and sustainability are really interesting and I see a lot of potential in this sector because it’s relevant for all of us and the better the solutions are the more they will help our planet to survive, hopefully.’

‘Startups that started in previous crises often were more successful than companies that start in normal times. The big question is: Do we have normal times at the moment? I would say, definitely not.’

ABOUT THE GUEST

Simon Schneider has more than 15 years of experience as an Investment Professional in sourcing, negotiation, financing, and the support & sale of technology start-ups in the fields of B2B/Cloud-Software, Digital Media, eCommerce, Insurtech & Clean-Tech. Simon has years of M&A experience through the trade sales of several portfolio companies. He also serves as a board member for various companies.

Neoteq Ventures is an early-stage venture capital firm based in Cologne, Germany, that invests in outstanding teams and exceptional technology-based companies.

ABOUT THE HOST

Sabine VanderLinden is a corporate strategist turned entrepreneur and the CEO of Alchemy Crew Ventures. She leads venture-client labs that help Fortune 500 companies adopt and scale cutting-edge technologies from global tech ventures. A builder of accelerators, investor, and co-editor of the bestseller The INSURTECH Book, Sabine is known for asking the uncomfortable questions—about AI governance, risk, and trust. On Scouting for Growth, she decodes how real growth happens—where capital, collaboration, and courage meet.

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