Sebastian Wossagk

Sebastian Wossagk

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How do you find the start-ups that wind up in your port­folio? By what criteria do you choose them and how long does the deci­sion process last?

Acton is a growth inve­stor targe­ting compa­nies with a proven revenue-gene­ra­ting busi­ness model. We often know compa­nies and their respec­tive foun­ding teams for years before we actually invest. A company might have a convin­cing busi­ness model and a great foun­ding team but still miss proof of concept. In this case we ask them to keep us posted. Should the company develop according to plan and match our invest­ment criteria later on, an invest­ment deci­sion can often be made quickly. A typical invest­ment process takes four to eight weeks. Our key criteria for an invest­ment are a strong entre­pre­neu­rial team, a unique value propo­si­tion, the poten­tial for market leadership coupled with a func­tio­ning, scalable busi­ness model, and strong entry barriers.

Venture capital is a rela­ti­onship busi­ness. Poten­tial compa­nies are often intro­duced to us by our network, in many cases early stage inve­stors that have already inve­sted in previous finan­cing rounds. In addi­tion to that, we frequently meet foun­ders at global indu­stry events or when travel­ling to start-up hotspots like Berlin or Stock­holm. Of course we also evaluate cold pitches, however, an intro­duc­tion via personal network always makes a stronger case. We evaluate hund­reds of compa­nies per year, but ulti­mately only invest in a handful. The selec­tion process is very rigo­rous.

What is more important – the idea or the team?

A capable team is the foun­da­tion of a successful company. There is a saying “Better invest into a good team with a bad idea than in a bad team with a good idea.” My invest­ment deci­sions are based on a strong belief in both team and idea. It’s hard to compro­mise on one of these cornerstones. We believe in entre­pre­neu­rial founder teams who combine gene­ra­list skills and indu­stry exper­tise. The ideal founder is driven to build a great company and possesses a deep under­stan­ding of clients and product as well as opera­tional expe­ri­ence and stra­tegic fore­sight. At the same time we look for highly scalable internet busi­ness models with a clear value propo­si­tion for the customer, thus solving a real problem with a tech-enabled approach.

You meet so many young entre­pre­neurs, hear about their hopes and dreams – is it diffi­cult to hand them a rejec­tion? Has it ever happened that you follow an initial ‘no’ with a ‘yes’?

One of the most inspi­ring parts of being a VC is the oppor­tu­nity to meet enthu­si­astic entre­pre­neurs. I have great respect for foun­ders thus always try to be open and trans­pa­rent in the commu­ni­ca­tion, even when decli­ning an invest­ment proposal. I always try to explain the ratio­nale and main reasons for not moving forward, so that the entre­pre­neur gets honest feed­back and may draw his own conclu­sions. There are many diffe­rent factors that need to come toge­ther in order to decide posi­tively on an invest­ment, so decli­ning is just part of the busi­ness. And yes, we had cases where an initial “No” turned into an invest­ment at a later stage.

You’ve been through a lot of pitches and presen­ta­tions and your port­folio contains start-ups from many coun­tries. What cultural diffe­rences have you encoun­tered hearing pitches?

It is always diffi­cult to gene­ra­lise, but of course there are diffe­rences across coun­tries. German pitches tend to be longer covering all rele­vant aspects of the busi­ness in great detail supported by a lot of facts and numbers. US pitches tend to be much shorter focu­sing more on the overall story and the “big picture”. Inte­re­stingly, Scan­di­na­vian pitches are actually often a good mix of both – a clear story under­pinned with the rele­vant numbers.

When a start-up makes it into the Acton port­folio, it receives advice, contacts, etc. in addi­tion to finan­cial support. What do you expect from the foun­ders in return?

A good inve­stor always provides more than funding. We see ourselves as an active spar­ring partner in all rele­vant busi­ness issues, span­ning from stra­tegic guid­ance all the way to opera­tional questions such as “how to imple­ment a loyalty system”. In return, we expect the foun­ders to be trans­pa­rent and open-minded for discus­sions. This requires the courage to be honest and upfront about diffi­cul­ties. You need some­thing or support? Ask for it and tell us about the hard things as well! In fact we expect that things don’t go right all the time. A trusted rela­ti­onship is key for jointly maste­ring chal­lenges ahead. We expect our foun­ders to excel in buil­ding and scaling their company. It’s crucial that they manage to find their role within the company and grow with it.

Growth. Driven by Reason’ is your motto. Can you elabo­rate on that?

Acton is not a momentum inve­stor. It is at the core of our invest­ment philo­sophy to invest in compa­nies that succeed in demon­stra­ting a strong and sustain­able busi­ness model early on. Gaining a deep under­stan­ding of customer needs, value propo­si­tion, value chain, and mone­ti­sa­tion stra­tegy of a company allows us to sync our expec­ta­tions with the foun­ders’ expec­ta­tions. Exten­sive due dili­gence sets the stage for an active board membership and opens up oppor­tu­nity to be a good spar­ring partner for company and CEO. Ulti­mately we don’t believe in growth by all means. That’s why we invest in compa­nies that not only scale quickly, but over time also achieve sustain­able profi­ta­bi­lity. We are most inte­re­sted in compa­nies that are able to grow at a good pace and have the poten­tial to become profi­table in the mid-to long­term to capture a leading market posi­tion.

Expec­ta­tions and expec­ta­tion manage­ment are a part of your daily work. What role do you most often take: the realist that brings the entre­pre­neur down to earth or the moti­vator who pushes a vision?

This depends very much on the founder’s perso­na­lity and also the current stage a company is in. I see myself as a spar­ring partner and coach, this
entails func­tio­ning both as a moti­vator as well as a groun­ding force. Regular board meetings, a well­st­ruc­tured KPI-reporting as well as ad-hoc phone calls and work­shops ground the dialogue between start-up and inve­stor.

You yourself have a consul­ting back­ground at McKinsey & Co. In your opinion, how will the consul­ting market develop in the next 5 years? What busi­ness models can you imagine or would you like to see in the consul­ting market?

Manging expec­ta­tions is crucial when it comes to navi­ga­ting the choppy waters of a start-up busi­ness. It sounds cliché, but the key for a solid rela­ti­onship between start-up and inve­stor is commu­ni­ca­tion. Both sides have to know how to orga­nise and direct conver­sa­tions around things getting done. Tech­no­logy is in the process of disrupting all indu­stries, even tradi­tional indu­stries like auto-motive or finance undergo dramatic changes. I think that the increa­sing pace in all busi­nesses created by this radical tech­no­lo­gical change will require much more flexible struc­tures. There will be an increased need for precisely defined, shorter projects sta›ed with ad-hoc teams that develop recom­men­da­tions that may be imple­mented quickly. Cross-border topics will become more important and provi­ding deep func­tional exper­tise will be key for success. Increa­singly, smaller compa­nies need to touch into external exper­tise in order to remain compe­ti­tive in a global envi­ron­ment. This opens up huge oppor­tu­nities for smaller, specia­lised consul­tan­cies that may operate much more cost e£ciently as they do not need to charge back large over­head costs to their clients. And of course great for plat­forms like COMATCH.

Where do you see COMATCH in five years?

I have a big vision for COMATCH. Five years from now COMATCH will be a leading European consul­ting plat­form, placing inde­pen­dent manage­ment consul­tants and indu­stry experts, provi­ding services for consul­tants and enab­ling them to build their indi­vi­dual consul­ting career path under the COMATCH roof. The COMATCH brand will stand for quality and exper­tise as well as a strong value system.

Sebastian Wossagk

Sebastian Wossagk

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