¶ Introduction to Andy's journey from IBM to VC
Hello and welcome, everybody. This is Joe from StartupBrate.io, your trusted source on the German, Swiss and Austrian startup scene, now reaching a global tech audience. Today, we're speaking to Andy Goldstein, admittedly a former colleague of mine at Deloitte, even though we never worked directly together. He's a serial entrepreneur, co-founder of the German Axel Reinter, former colleague of mine at Deloitte, and manager director at VU Venture Partners Europe.
We'll dive into how he's reshaping investor education, why Europe needs to think bigger, and what it takes to bridge the Atlantic in startup investing. Andy, welcome.
Great to be here, Jorn. Thanks for your time.
Totally my pleasure. How would you summarize your, admittedly, a little bit unconventional journey from launching companies to building platforms like the German Accelerator and now VU with a, I would say, extensive stint at Deloitte in between?
Yeah, absolutely. So I think I would describe it as in two big buckets, one which is reinvention and the other is fascination with what's missing. So reinvention in the sense of, you know, I moved over to Germany when I was just beginning in my 20s as the IBM PC was launching.
I spent 20 years building a business and exiting, really learning it the hard way in the market, and then started into building the Entrepreneurship Center at the LMU, which gave me access to great technology and lots and lots of founders with a big brand behind it. We saw then that there was not enough and we had to reinvent that. And that's where the German accelerator came in and really finding category leaders and taking them out.
And also starting my own angel funds was a reinvention where I started to say, you know, I need to also get involved in helping startups to start to get the money. And now actually becoming a VC and and really trying to change the way investors think in Europe. And all of those things, when I say fascination with what's missing, At the time when I began them, it wasn't clear that somebody needed to step up and do it. And now it is, of course, clear that there should be accelerators.
But back when the LMU accelerator started, it wasn't necessarily. And I think probably in five years from now, it'll be clear that we need to train our investor community much more as well.
We may add for our audience most people are from the dach area but lmu means ludwig maximilian university yes it's one of the premier um universities in bavaria and i would say also very good one in germany yes of course um they also work together with a technical university tum in unternehmertum right yes.
When i that was also one of the things when i first came on it was It's not so common that the universities work together, and I pulled together the LMU, the TU, the Hochschule Munich, so the University of Applied Sciences, and the Bundeswehr, which is the Army University, and pulled everyone together and started a global summer school, which is still running. So kind of thinking out of the box and getting people inside the country to work closer together.
For everybody who's interested down here in the show notes, we will, of course, link our interview with Unternehmertum. I was wondering what personal experience made you realize Europe had a gap in investor education?
I think the real experience of that is when I started my two angel funds and realized that every time we wanted to have a major expansion, we ended up looking for U.S. Investors. So simply, it's not to say that there aren't European investors, and it's definitely growing. It just seemed that there's a real gap in it. There's a lot of startup capital. There's a lot of government support, which you don't have sometimes even in the United States here, which is definitely impressive.
But then once you get much past your A round, you're pretty much looking outside of Germany and hoping that you can find a growth capital partner as well that's from Europe or from Germany. But clearly, they're in the U.S. And clearly, they're in Asia. So that was what really – it was the reality that made me realize it.
What I had in mind when you've been talking about that, like the bigger rounds, I've always heard it. Usually, rule of thumb, Series A is $1 million annual recurring revenue. And if you want to go bigger, like $10 million, so you're talking about Series B. What comes into mind is like Tiger Global, Insight Partners, Sequoia, but also from China. We had, for example, Tencent as a big investor here or SoftBank, also pretty big investors, but all from abroad.
I was wondering from our audience, what do you think Europe needs more? Better startups or better investors? Drop us an answer in the comment or tag us on LinkedIn or post with hashtag StartupRadioDebate.
¶ What's broken in European VC mindsets
So let's get a little bit into VU Venture Partners, a fund that actually trains VCs. Can you tell us a little bit about what this exactly is and how is it disrupting the traditional VC model?
Yeah, absolutely. So when I was on to my next step recently, I started really looking deeply into why VC doesn't perform that well. And what I mean by that is around 75% of venture capital funds, as a total number of funds, don't ever produce a carry, don't pay profit, and therefore you know, don't pay their LPs back more than the money that they invested.
That's just a huge number. And one of the main reasons, if you talk to VCs, a lot of them will say the same thing, which is that it's the most expensive training program of all. And that's the reason that people are, the reason for that is that people are learning by doing with the money of their LPs. And what really is different about VU is that VU is a fund that allows you to do real investing by actually doing it. So every quarter, the name of the fund, VU Venture Partners, we accept.
It's a real program. We call it an investor accelerator. We accept between 40 and 60 investors globally into the program. And those people attend, they're treated as partners. They attend every partner meeting. They come to every deal flow meeting. They're in every investment committee meeting. They are driving deals. They are each looking at around 100 deals each during, let's say, a three-month period.
So what you have is you have a situation where if you have 50 people in the cohort, then each looking at 100 deals, we're looking at 5,000 deals a quarter. So 20,000 a year, that's about 10 times the amount that most VCs are able to look at. And the, you know, what's also very disruptive about it is that the people who are signing up are really on an extremely high level. So whereas most VCs, when they go into a specialist area, they need to go hire expert witnesses and things like that.
And people who are specialized in a specific area with VU, we now have VU stands for venture university. And we have now over 800 graduates, 800 venture fellows, which means that we have a huge network of people and we always have an expert that we can call on. And the people who are in the cohort itself are also tremendously talented. So when you're talking about our health tech investments, we have three medical doctors that are in the cohort this time.
We have professors when you're talking about deep tech. So it really is a group of people that are able to analyze deals at a level that is quite uncommon in BC.
You've already hinted at it. You let the participants of Venture University who gets trained there, who get trained there, ask real investors to join the real investment committees. What kind of impact does this have?
So it has massive impact because the venture partners are actually driving the process. So everything is remarkably well templated out. You get help on all of your due diligence. You get coaching from the general partners and weekly meetings, two of them where they go through and make sure you understand what topics might be missing in order to get through the investment committee. But in the end, you learn how to build conviction for a deal that you're absolutely behind it.
And unless there's a couple of venture partners that are absolutely committed to getting a deal done, it probably is not going to come to the investment committee because the venture partners are the ones that are saying we're ready to come to the IC. And because everybody is invited to every IC, so the program runs global online, California time. So the key meetings are like, you know, 6 p.m. to 8 p.m. European time.
When there's an investment committee, even if it's a deal that you're not leading, you're on the investment committee and you start to see how you're in the meeting. You still have to pass through the two general partners, but actually that's the way every single venture capital fund works, right? You always have to get the general partners to approve the deal. And last quarter, as an example, we did six investments and had eight investment committee meetings.
So there's a very large percentage of the deals that are actually getting done. And that's one of the big learnings is you come out of the program being an investor. You've done four to six deals in a quarter. If you stay for a full year and you do all four quarters, you've done 16 to 25 investments, right? And you become much more proficient as you go along. And you're also in the cohort with people who have been in already.
So you're learning from each other, and you're getting strong coaching from two general partners that together have over 50 years of VC experience and remarkable track records of actual paid back investment.
You already hinted that you came over to Germany in your early 20s. For everybody who's watching this, they can tell that you're not in your early 20s anymore. Actually, we had a conversation at the Business Angel Day and I know very well how mature you are, how senior you are. But you've seen over this time quite a lot in the U.S. And in Europe, and VU is, as you said, also based in California.
So what do you see as the main difference in mindset between the European and the American investors, and how does VU address them?
¶ How VU trains VCs through real investments
Yeah. Just for clarity, by the way, we are – the main office is in San Francisco, but we have offices here in Munich and Europe. We're in Hong Kong and we opened Brazil recently. So about 65% of the deals come out of the US in 35, which is also not a bad representation of the number of startups that are really hitting the market. So, you know, the main difference that I see between the American and the European investors, and anytime you generalize, it's already wrong.
But let me say that the Americans tend to be much, much more stage agnostic and It's here in Europe, you get a lot of no's because you hear it's too early for us or it's too late for us. And you don't hear that so much in the States. You see that even the big VCs are coming in very early and they're staying very late.
Here it's much more what stage are we doing and you're kind of i don't want to say stuck but you're more limited uh in the stage that you're investing and i think that and the americans are definitely more agnostic because they're return focused the key focus is not you know what stage it is it's do i believe that there's going to be a return on this we for example at we invested about six months ago in open AI, which you say, well, you know, what is that about?
But it's doubled since then, right? And so, you know, we get into those kinds of deals because we have access to them via our alumni, but we really are focused on what's the return gonna be. The other thing we focus on is how transformative is it? Like, do we genuinely believe that it is transformative? And I think that there's a certain Belief and experience in the U.S. That shows that actually, yes, startups can completely transform industries.
And we see that again and again, you know, whether it's from Google to you name it, Venmo and on and on. It's always been startups that have been cutting edge over the last 50 years. And so we're looking for those truly transformative companies. And the other thing I think is that we're still a bit more, the American funds are a little more marketing focused. So trying to really understand what is it that's going to allow a startup to break into a massive market? What's the hack that they have?
So it's great to have a big market, but how are you going to get it?
When I look into some of the investments there, WeGrow, HealX, Cellbricks, Arquid Robotics, Isaac Health, AOA, Insight, and so on and so forth. Pretty interesting. And as you already mentioned, also stage agnostic more or less, right?
Yes.
Yes, yes. Especially given the valuation of OpenAI, I would say it was a big later stage deal.
Later stage deal, absolutely. And it was opportunistic as well, because we had a chance to come in.
We've been talking a little bit about the mindset already. I would even go as far as fixing Europe's investment mindset a little bit. And I've seen a lot of material about you where you also mentioned, for example, what I found pretty interesting, born global advantage of Israeli startups. Where does Germany hesitate to internationalize?
I think, I mean, Israel has the, there's nothing like necessity, right? You know, the old saying, necessity is the mother of invention. When your company is born in a market of six or seven million people, there's no question for you that you have to be international. Germany does have the, somewhat the disadvantage that the market is massive in Germany, right?
So you don't have to go outside Germany because you could build a successful business, a very successful business first in Germany and then internationalize elsewhere. You have the challenge in Germany as well that you don't have the advantage of, let's say, the UK or of France, where as long as you're in Paris, you've covered the whole country. As long as you're in London, you've covered the whole country. It's not enough to be in Munich. You have to be in Munich. You have to do business
in Berlin. You have to do business in Dusseldorf. There's eight different places. So I think that the complexity of the German market combined with the size and the potential of it very often stops startups from internationalizing soon enough.
So you would say they should think a little bit early about it? I have to admit most startups that are pitching startup radio, they already think internationally because they want to be in an English speaking podcast here. How can they think more globally from day one?
I think that it has to do with a combination of thinking and doing. And that was also very much the impetus when we started the German accelerator program was, you know, let's not just think about being global. Let's let's go global. Let's get people over into other countries and do that. So I think it's I think it one of the big things is to have partners on the ground, you know, from inside your business as soon as possible.
Who are building the market just like you're building the market in the local country that you're from you know just like you have a team in germany you want to really try and find people in the other markets as quickly as possible and not and not wait you know because the longer you wait the more entrenched you become and the more the problems in your local market become aware you become aware of them whereas when you're
dealing with them in multiple countries at the same time you just deal with them
For our audience i was wondering if you would join a fund, if it trained you and lady cole invest in real deals why or why not um as always leave uh the leave comment here down in the show notes andy we will be back after a short ad break then we will be talking about scaling startups and sales in europe, Andy, welcome back to Scaling Startups and Sales in Europe. You said Europe has a sales problem in one of the interviews, one of the publications found.
What's behind that and how can founders overcome it?
So I'm going to be very direct and say that at least in Germany, many people don't like sales. They literally don't. They really don't like it. And so.
I actually have to admit, when I was starting out by myself, January 1st, 2021, one of the hardest things that I had to learn over time is doing sales, getting out there, getting active. And I kind of know what you mean here.
Yes. I mean, there's a YouTube video of mine, which has been out for well over 10 years. It's called Entrepreneurial Thinking. And in that lecture, which I've done for hundreds and hundreds of people, I always ask the question, you know, who wants to be a salesperson? And almost nobody raises their hand. And it's because, and this is, I think, the way to fix it, is people have the
¶ Sales culture differences: Germany vs. U.S.
wrong conversation going on in their head about sales. The conversation is salespeople are annoying people who sell you crap that you don't need. That's not true. That's a thought. That's not true. And I think that as soon as people are able to understand that the conversation, if you don't like to call it sales, then go right ahead and call it business development, whatever the word is that makes you feel better. But sales is nothing more than speaking your commitment.
That's what it is. What are you committed to? What really, what are you? And that's the thing. Startups, you know, the thing most impressive about startups, they commit their life to something that is really hard to do. And it's impressive for other people to see startups and people see people just giving it all. Right. But they need to talk about that. You just talk about what you're why are you giving your life for this?
Why are you so behind this? And not to get concerned about what's my picture of what a salesperson is, but really to think of yourself as committed. I often relate sales to marriage. Yeah. And I say to people, you know, it's like you don't want to walk in and say, hey, listen, you've you know, you're not so terrific, but I'm pretty good. You want to get married and see how it goes? No, that's not a good sales pitch.
You know, a good sales pitch is I love you madly and I don't want to spend another day without you. I want you in my life. Absolutely. And I'm going to be true to you. Well, it's the same thing with sales for anyone. This is why I want you to be my client. This is what you're going to get. And you can count on me. And I think that conversation we need to push out into the market.
And actually, I also learned that marriage and raising children is always done better if you do have a certain marketing mindset there.
There you go. There you go.
Yeah, we've been talking about sales here and more and more popping up in my mailbox first were offer for AI sales tools. And now I do have a few suspects who really bombard my inbox with pitches for podcast guests. Do you think those AI sales tools are a game changer for founders with limited sales experience?
I think they can be. And the way in which they can be is when they're used for focusing on product market fit. So what I mean is helping you to find the right buyers. I think that the reality of sales is you spend 80% of your time talking to people that probably will not do 20% of your sales. And if you could change that, if you could flip that model and spend 80% of your time talking to the people who are going to really make the sales, that can be a real game changer.
And I do think that AI tools hold out that possibility. And I also think that they hold out the possibility of dramatic increase in productivity, meaning that you don't necessarily need to hire the same number of salespeople. And so I think those two things put together, if you're able to achieve that, then yes, they can really be a game changer.
I actually even had or have still an AI tool that is replying to my landline phone, to my office phone. And actually, it turns out this is also a pretty great thing because every time somebody wants to buy something, I get a message instantly to my phone and everything else is put in a queue. So that's working out pretty well for me. What do you think is the single biggest mistake when a startup, for example, from Germany is scaling to and in the US?
And maybe you'll mention the German accelerator because that's the next topic we're talking about here.
I think it really is the mistake of not being local fast enough and long enough. So I think that people wait too long to get into the other markets and markets are always developing. So this idea that I'm going to conquer one market and then I'm going to go to another doesn't really work very well. And so I think that it's, you know, it's that idea of getting in. And I think that probably they underestimate the power of partners that are in the market.
So you don't necessarily need to conquer the whole market you just need to look and see who's already asking you and wants to be you know is a client already and you all most of them have clients very very early on you know really leveraging people in the local countries from a client perspective as well that are already using the product and building that out so building from a uh from a base of strength rather than trying to go out and and you know do everything all at once i
See and personally i've had the experience um it's a lot of people are doing very very early on those first like uh testing the waters in different markets with um with co-working spaces and just go from frankfurt to new york and go there stay there for some time work, beat people, get to know the park and so on and so forth very, very early on. And that's something I see here. We already hinted about the German accelerator.
I actually did a few interviews when I was in New York, but it's now seven years ago. There is a very nice co-working location where the German accelerator is located. And they do have an awesome rooftop from which you can see in the background the New York skyline, as well as the One World Trade Center. Having this picture in mind, can you go a little bit back how this all built up at the origins of the German accelerator and what sparked all of that?
Yeah, absolutely. So it's great that you're talking about the New York location because that was actually the second location. And the first location was Silicon Valley. So originally it was called the German Silicon Valley accelerator. Right.
And the real spark was Professor Dietmar Harhoff, who went over on one of his trips and walked into plug and play and saw that there were countries that were sending startups over and said, this is absolutely, you know, something that Germany has to be doing. So and the other thing I think that sparked it was that when the German government was convinced that they needed to be in the other country, we needed to have a German presence.
And that was supplied by German entrepreneurship, which was a company I co-founded in Germany.
¶ Startup internationalization: Why Germany lags
And so we really had people on the ground who were able to convince the German startups, explain to them what they were doing, and could send them over there as well and then really train them. So that was really the initial spark for the whole program.
We may also add that you have now way more locations. For example, Boston comes to mind. But also in Asia, you do have offices in Singapore, Tokyo, Shanghai, in Latin America, in Buenos Aires and Sao Paulo. So basically, you can get out into the whole world with this program. We've been already talking about that you now support expansion into nine plus global markets. How did the program evolve from being first in a plug of play in Silicon Valley
and then adding locations? Was it like a need-based request from the entrepreneurs?
It was a combination. Yes, there was definitely a request from the market side. And there was also, I have to give a lot of credit to the German government, regardless of the administration. There's various people. Johannes Felling is a name that I think you can't think about the German accelerator without him. He was really the person who brought it through in the very beginning. Stefan Dreves from the ministry has been and still is one of the driving forces behind the German Accelerator.
And it really has a lot to do with the ambition of the government to be in and support market leaders from Germany to become global. And so it was very much done hand in hand with where entrepreneurs were asking, but also where the government itself said, this is a priority for us. And that also, I think, shows the power of, you know, that's what I meant before. Sometimes when you have one really great client can actually take you very, very far.
And I think that's something we also try and teach people in the U.S. And when they go to different, whether it's Singapore, wherever they go, get a great client and expand along with them.
That usually makes a lot of sense. It's also a recommendation I've heard pretty early on, and it's kind of stuck with me over time. To wrap this a little bit up, because I know you're not currently actively involved with the German accelerator anymore, I would still be interested to pick a little bit your head about your framework for deciding when a startup should expand beyond Europe.
Yeah, so I think that the important thing is that it's not about our frameworks. Yeah, it's really one of the things I like to say is passion not included. Yeah, it's not about the it's not about a framework that says you're ready to do this. It's are you passionate about being in the country? Are you committed to doing that? Is it something that's absolutely on your roadmap? And it's not. And when we see that kind of passion. Yeah. And it's this another saying I like to use is mission possible.
Like, I believe I can do it. And when we see the passion for doing it and we see that the startup really believes that they're able to do it, those are the kinds of companies that we really want to support. And I think that that's worked quite well when you actually look at the results of the German Accelerator program.
Yeah, I have to totally agree. I think I'll dig deep in YouTube and maybe link the interviews that I did in almost almost seven years ago in May 2018 in New York. OK, for the last piece, let's talk a little about the view venture partners, the portfolio and investment strategy. Are there any sectors and technologies you are particularly excited about right now?
So we are a generalist fund. We invest out of six different verticals, fintech, prop tech, health tech, consumer enterprise, and what we call pioneer, which would be deep tech and space. I would say we're probably like anyone today, not even just funds. Very excited about AI, you know, but AI goes across everything. AI is really not in any way a vertical in our opinion.
And I would have to say that the two sectors that we're probably most active in right now and most excited about are health and space. So I think that the breakthroughs, especially in health, which are coming specifically through AI are just remarkable. And if we could get regulation to keep up with the breakthroughs of technology, I think we would be saving a lot more lives today.
And then I think that what's happening in space is just, yeah, it goes without saying the cost of putting something up into space is just coming down dramatically. And as that happens, the possibilities increase dramatically as well. You know, we're looking into everything from, you know, setting up more real estate in space to how you do charging in space. And so those are two areas that we're definitely excited about.
I vividly remember even a few years back, you already had companies that were doing a lot of interesting analytic stuff with data they gotten from pictures of the Earth's surface. Was it building radar that did like tracking of large building projects to, I remember, a company that was tracking that were forecasting a Black Friday sales based on the occupation of the parking lots and stuff like that. So that is already pretty interesting. Yeah.
Getting a little bit back to VU, how does your program's deal flow differ from a traditional VC?
Yeah, I think that is really a very big differentiating factor. And it continues to grow, right? Every quarter, we're graduating 40 to 60 additional investors. All of those people are incentivized for their entire career to bring deals in. We share any deal that you bring in as a venture fellow alumni,
¶ Traits of the top 1% of founders
you're going to get a very significant profit sharing on that deal. So we have remarkable access to deals that other people are already doing, where we get allocations in deals where you would wonder, you know, how would a fund that's, you know, making ticket sizes between 200K to 1 million and can go up to maybe three or four and follow on getting into deals which have, you know, are raising 400 million, right? And it's coming in from our alumni.
So I think that that's one of the very key factors that I just don't see any other fund having.
I think that's maybe a little bit understatement that you've worked with dozens of founders, maybe hundreds. What do you think are the three traits that separate the top 1%? You talked about passion already. You talked about sales already. Would you include them?
No doubt I would include them, for sure. I wouldn't have said it before. I didn't think that was important. But I do think that if I had to really say what are the three key traits, one is that the startup has a massive impact. Differently better solution for handling the problem than the status quo does. Massively better. So it's a magnitude of improvement that is just completely has the potential for transformation. So that massiveness of the difference to the status quo is one very big thing.
The second very thing is clearly the market size. You know, are they targeting something that if it were to actually, if they were to be successful, would it be transformative, right? So I think that's a very, very important thing. And the other thing is something that people often miss, which is that there's a certain genius in simplicity of the way they market, right? And so let me give you a real-life example. One of our general partners, Andrew Salison and Sky Fernandez,
are the two general partners inside of BU. Definitely look them up. Andrew wrote the first check to Venmo, the payment company, which everybody – in America, people don't say transfer me the money. They say Venmo me, right? It's a verb. When that investment was made, I'm going to guess there were probably 100 companies out there doing payment transfers. So the size of the market was obvious, right?
So what was the marketing hack? And the thing that the marketing hack was that Venmo was really the first company that said, all you need to transfer money is a mobile phone number. That blew the market open with an incredibly interesting and simple interface. So I think those sort of three things together are really what separate the 1%.
Andy, we are now recording, I do believe, for almost, yeah, for quite a bit. And I do believe it was very interesting and insightful for our audience. Thank you for sharing these insights and for giving us a window into how you're transforming both startups and the people who invest in them to our listeners. If you enjoyed today's episode, of course, give us a five-star review and follow us wherever you're listening and check out our exclusive subscriber segment for more.
And remember, this isn't just a podcast. It's a global startup intelligence network. Andy, thank you very much. It was a pleasure having you as a guest.
Jordan, thank you so much.