Investor Talk #6

In our latest investor talk, we sat down with Björn Loose, Principal at Cavalry Ventures, an early-stage VC investor from Berlin. With their focus on software business, the firm has contributed to a considerable number of success stories such as McMakler, Forto, Bryter, Planetly und PlanRadar.

Niklas: Björn, please tell us more about your personal background. Why did you choose to become an investment manager in the VC business?

Björn: I am an engineer by training but have always been curious about topics that went beyond Thermodynamics or Applied Mechanics. I looked for interdisciplinary challenges and knew that I enjoyed working in small, nimble teams so that I started my career in Product Management and Emerging Business Development before I helped get multiple projects off the ground. The latest one is Cavalry. :)

I really enjoy the long-term impact of early-stage VC. After over five years at Cavalry we are only starting to see how opportunities fully unfold and how some of our early portfolio companies impact the market dynamics in their respective industries. I admire founders who foresee these developments. Working alongside them and being able to support them is one of the greatest pleasures of our work.

Niklas: The website of Cavalry is “special”, you have a track record with an 80%+ Series A follow-on quota. Please tell us: What differentiates Cavalry Ventures from other VCs?

Björn: Cavalry.vc is built with Notion. We like the pragmatism that comes with the solution as it resembles our way of doing business. We focus on topics that actually make a difference. Founders appreciate that.

When we set up Cavalry in 2016, having legitimate founding experience as investors was not as prevalent in Europe as it is today. In the following years we took the idea a step further, institutionalised the approach and are meanwhile backed by over 160 individuals who have either built their own companies or have considerable operational experience themselves. This experience and the understanding of today’s challenges at a pre-seed and seed stage make us a strong sparring partner for founders who like to build a solid foundation for future success.

Niklas: As an investor, what makes start-ups with a software business special and which key factors are important to receive funding from Cavalry?

Björn: Teams make companies special. We are certainly not the only ones that are after outstanding founding teams. Now, what differentiates stellar teams from others? My experience is that stellar founders have a very explicit and opinionated view on a certain industry and its market dynamics. They question the status quo and they understand incredibly well how to position a company in the most attractive way possible. They foresee developments that may even be contrary to conventional wisdom. If we find that our view is well aligned with that, we are fairly bullish on an opportunity.

Niklas: With your experience, how can software-driven start-ups prevent common mistakes in the funding process which often lead to rejections?

Björn: For the vast majority of fundraising processes, rejections are not caused by mistakes of founders. Most of the time, we (or other funds) do not go into more detailed discussions because we do not see a good fit to our experience, thus value-add would be difficult to provide, to our fund model, etc. This has little to do with the quality of an opportunity. As a general advice though: Getting the basic things right certainly helps to keep the process as lean as possible - which is oftentimes in the best interest of the founders themselves. For example: Prepare fundraising materials prior to kicking off the process, research the investors that are best suited to you and your business. I believe this holds true regardless of the product or service you are selling.

Niklas: Do you expect that the share of software-based start-ups in the entrepreneurial ecosystem will increase? Or is there a bubble that is about to burst?

Björn: Marc Andreessen famously wrote almost ten years ago: “Software is eating the world”. The sentence is as relevant today as it was back in 2011. Every single industry is going through a fundamental change in the way it operates. Just look at how the pandemic highlighted the need for the healthcare industry to digitise in order to tackle today’s challenges. When you look at it this way, there is no industry called ‘technology’ or ‘software’. Technology serves as an enabler, as a catalyst of future progress for each and every industry.

Niklas: How will the “New Normal” after the COVID-19 crisis change your investment and collaboration mode with start-ups?

Björn: Cavalry moved fully-remote in March 2020 and we saw a fundamental change in how deals were made from that point onwards. Investing without having met founding teams in person was unthought of prior to the pandemic and has become the standard today. Once travel restrictions ease, it will be interesting to see how the ‘tool’ of personal meetings will be used by investors. In the end it comes down to building meaningful relationships with the founding teams. While the past months have shown that that is possible via zoom meetings - at least to a certain extent - nothing can replace personal interactions. I believe that we will move into more of a hybrid setup in future.

Are you a founder who is planning to fundraise over the coming months? RWTH Entrepreneurship Center’s investor network comprises some of Europe’s leading venture capital firms and business angels. Our dedicated team of start-up coaches can help you leverage this network.

Get in touch with us here.