Articles Dragos Novac

Twitter wanted to buy Clubhouse for $4 billion.

CH is still adding new users like crazy but doesn't have any stickiness and real reason for people to return to it since the content discovery experience is just horrible.

Last week it announced launching a marketplace feature allowing sponsorships for creators - aka people hosting events being able to get payments from followers. Next step is hosts selling event tickets - not implemented yet as I suspect it has something to do with Apple not letting them handle in-app payments without getting the 30% we-are-not-a-monopoly cut.

But the move seems right - creating an economy on top of a consumer tech is a smart play and this should be at least a temporary user retention fix that could transfer the stickiness problem to event organisers, aligning them with a revenue model.

This direction is what’s most interesting at Clubhouse from a TAM perspective - the ad-hoc opportunity of organising an audio meeting which you can charge for on the spot. It is the low end market for small events, launches, conferences, workshops, trainings, social media influencers, AMAs and even replaces the traditional VC cold pitching sessions. No or low setup costs and no tech knowledge required to be part for a low friction marketplace.

As for the $4bn valuation - that simply reflects a new paradigm shift in the social media, with the hope of a first mover being able to reap sizeable returns from what will be a huge ecosystem in 3 to 5 years.

Meanwhile, CH’s core proposition will soon be commoditised by all the big tech working to launch their own version of it. But they will simply grow the pie, not take from CH’ share.

And when/if this marketplace takes off, expect VC investments in CH-based projects - that’s when CH will become a platform and a16z can call it another home run.

Also note that a16z is very early investor in two of the most interesting consumer trends this years: text (Substack - valued at only $650M) and audio (CH), both marketplace driven. Both will become fundamental social media pillars, at odds with dinosaurs like Facebook and Linkedin.

Chesterman, the canny deal maker

FT profiled Alex Chesterman, one of Europe’s best entrepreneurs who, in three years, raised money, built a SH car marketplace business and now flipped it on the US stock exchange via a SPAC.

This is not his first rodeo - he also did Lovefilm, a DVD rental biz he built in the 2000s, backed by VCs and sold to Amazon for £200m and Zoopla, a real estate service flipped in 5 years to private equity for £2.2bn.

The dude is that good also because it is rare to find a founder in Europe mastering the entire cycle from taking an idea over a cup of coffee to a business that he is then capable to structure into a multi billion exit.

That is hard to do and not too many people can pull it off. Three times!

I mean, just look at Deliveroo’s Will Shu, he will not put on the resume his IPO exit skills, will he?

Chesterman is also a very active angel investor, likely one of those guys who does business because it’s in his DNA, regardless of the context.

Do you think that a guy like him would ever complain about the VC value-add? :-)

Was the Deliveroo IPO really a flop?

It is dubbed as one of the worst European IPO tech in history.

It does not indeed look good because high expectations were met by a public market pricing them at almost 30% off from the initial ask ($6bn market cap at Friday close) and $1bn less than the pre-IPO $7bn valuation in February.

Money was lost and the market consensus is that the whole IPO process was badly timed and mis-priced.

Which is not false. However.

Make no mistake, what we see now is not a true reflection of the company’s fundamentals (which is a PR-fed media refrain). It’s rather a simple result of a manly dispute involving money and egos that took place when negotiations were held during the listing process.

That fight still did not get a resolution.

On one side, we have the people with market power, aka the buy side on the public markets, which btw don’t have to explain not buying a particular stock - they need justifying the buying. As long as their portfolios make money they owe no justifications for their no-trades to their shareholders or anybody else.

On the other, we have a few investors which didn’t make as much money as they expected at the liquidity event. The largest ones are Amazon (which doesn’t really matter in this), 3 American hedge funds (T Rowe Price, Fidelity and Greenoaks) and 3 VC funds (Index Ventures, DST Global and General Catalyst).

And in between - Will Shu, the founder, who apparently caused all this since he wanted some involvement in the matter.

Why did he do that? Likely because he is an entrepreneur first and not an investor first. He trusts the fundamentals of his company and he probably didn’t want to play some old dudes’ games, who have been making and breaking the local stock exchange since, umm, the period before internet was invented?

One other detail: Will Shu is American not Brit. So he, by default, doesn't belong to the cool London boys club either. Which is an old known issue in the City.

And this equation brings us to the main problem, which is structural.

The truth is, later stage investment, pre-IPO, is still very much underdeveloped in Europe.

There is a missing link from series B or C, let’s say, to IPO, that you can easily see in the US market, for example - namely round series D, E or F which mainly involve pension funds and other large asset managers, which also have vested interests in the public markets dealers.

Their later stage involvement is a de-risking process, a validation that a company will smoothly sail towards an IPO, with no surprises, where everybody will make money and be happy.

Should they have existed in Deliveroo’s cap table, it is likely that we wouldn’t have had a CEO situation and unhappy people doing bad things to each other.

That is why I think this whole situation is an indicative image of an old European financial market doing business in the 21st century - sure, it is evolving, but it takes time until dinosaurs are replaced by the new blood.

As for Deliveroo - apart from a group of investors losing money (some amateurs included), the company is fine.

The fundamentals didn’t change over night because of unhappy traders sentiments. Yes, there may be concerns, there always are - they’re called risks and addressing them is part of the journey.

Deliveroo still raised some $2.1bn from the IPO, so they have the financial resources to execute, giving it firepower to take on rivals such as Uber and Just Eat

The opportunity in front of them is still sizeable, part of it validated by a bunch of early stage investors, and it is still up to them to grow revenue, become profitable and pay dividends, the only fundamental that makes shareholders happy and can fix the traders concerns.

a look into Klarna's valuation and business model

It’s hard to review what happened this week in the Euro startup land without at least mentioning Klarna raising $1 billion at a 6X valuation since 2019. It now stands at $31 billion.

If you take a step back and look at the big picture, you have to wonder what all this means and what the trajectory looks like in the next 3 to 5 to 10 years.

What is Klarna trying to accomplish and what did the investors see in the company’s plans so that they made their equity bets accordingly?

In other words, is the 31 billion valuation really worth it?

When trying to find answers, the first thing you look at is sizeable markets the company can attack in order to command growth rates on sustainable basis. Hyper growth!

They are leaders in the Euro BNPL sector and started to get legs in US but is that ambitious enough? Is being a BNPL market leader the end game here?

I don’t think so, those are just natural baby steps, market-getting moves, which are a mean to an end. The big picture is different, and this is a chess game, not backgammon.

The low hanging fruit, of course, is attacking more of the financial services sector, a natural horizontal play across segments after Klarna established itself vertically as a significant payment processor. It is a good bet to cross-sell more types of products to the same consumers, on the infrastructure Klarna already built.

However, there is another move in play, a ballsy step that could be a game changing power move.

Klarna built a virtuous loop between the merchants and the consumers and it stands exactly in the middle of it. And this makes you wonder - do they extract all the economic value from this loop? What pieces is the puzzle missing for being a dominant player?

This is the position where you at least diligently think about becoming a market maker in the e-commerce space. Needless to say that e-commerce is a huge market, as sizeable as the financial sector.

If you look closer at those two pillars and at the business fundamentals, you will realise that Klarna’s label as a BNPL company is simply mis-representing what they do and the huge opportunity ahead.

And so, that makes the 31 billion simply peanuts now if you understand Klarna’s big picture in the future. As always though, the devil is in the execution but the upside is certainly there.

Since this is already a too long for an argument, I put all this thinking into a more detailed report analysing Klarna’s future. Got numbers and pictures too.

The conclusion: long Klarna!

Getting a job offer from Americans vs from Europeans - signs of hyper growth.

What do you do when you are one of the better American companies and want to grow quickly in Europe?

You simply hire top people from Europe to do it for you. Makes sense, right?

How do you make sure of that? You make an offer that cannot be refused.

The offer is based on an analysis of the opportunity ahead and the compounded growth the prospective employee would contribute to in 3-5 years. The analysis also includes a look at the market and job competition.

And if Americans really want to get that person, they would make an offer at 1.5-2X+ above the market rate, compounded with performance-based incentives, usually a cut of the future value created.

That last part is very important. Americans will want to make sure you say yes because that is the best offer you can get. The offer is about the employee first and getting them committed.

Europeans usually hiring other Europeans look at the local market and if they really want you badly they will offer 1.1-1.2X. They will probably tell you about the number of the holiday days and that you get free coffee at the office, usually with not too much sharing of the future value created.

The last part is not that important. Europeans will want to make sure they are not out of the market and this is the best offer they can make. The offer is about them first.

It is also true that the risk is also correlated - the better the offer, the higher the risk.

European employees usually think in terms of job security whereas American employees think in terms of maximising the money they can make in a year. That is why you hear frequently about stories of American companies letting people go on the spot when they do not perform or when the shit hits the fan.

One final point - this reasoning applies much better to hyper growth situations, when it is extremely important to have strong functional leaders steering the ship and executing against a sizeable opportunity that needs to be won over.


Anecdotes and generalisations aside - after Sequoia recruited Luciana Lixandru from Accel last year, Lighspeed hired Paul Murphy from Northzone.

American VCs really want to do business in Europe - we’ve got a hyper growth situation here, don’t we?

Who is Lightspeed Venture Partners:

Lightspeed is one of the four American investment giants, sitting next to Tiger, NEA and A16Z.

It was founded in 2000 and had 2020 LP commitments announced at $4bn across three funds, covering all stages, geographies and verticals.

In Europe, they have had a partner active in London since 2019 - Lithuanian Rytis Vitkauskas - backed by two other US-based partners - Brad Twohig and Nicole Quinn.

This is the Lightspeed excerpt from a report about the American investors from Europe.

the online grocery market from Europe

Are you even in the online grocery business if you don’t deliver in 10 or 15 minutes?

Let me get this straight: this promise is not a competitive advantage, not even for a consumer who needs to buy cigarettes or who ran out of toilet paper. Nobody is that guy.

However, whatever grocery startup gets covered in the media these days feels the need to emphasise speed. Not any speed, but super speed, the 15 minute speed.

Delivery is a hard business to build and speed is important, of course, but reliability, for example, is a much more important factor than speed.

Saying that you will deliver at a certain moment and keeping that promise over and over again in any circumstance, is more important than a general 15-minute commitment, which will make your implementation hard to start with.

If those startups were really serious about it they would say “15 minutes OR you get your money back”. That would show they mean it.

Bref, the 15 minute delivery is just a PR flick, a silly sort.

Anyways. The grocery sector is hoooot in Europe - with four o’s, as many as the number of the sizeable fundraising deals announced only this week.

I found it fitting to dig a bit into it - made a list with startups that raised in the last 12 months or so and threw them in a spreadsheet.

By no means a complete one, but comprehensive and relevant to getting an idea about what is going on in the sector.

It looks like this, sorted by the total raised:


So there’s four tiers, at least. The big-pocketed global guys, the locally established, the well funded wannabes and the wannabes.

1. The top 3 bunch operating big are the gorillas to poke, or rather to avoid.
2. The middle tier that raised some money and which needs to put together a quick and dirty model that can be scalable fast. They need significant share to be in competitive position against the top tier.
3. There’s also some local players which raised big amounts and preferred to get deep locally rather that expand horizontally on different geographies.
4. The below 20 category is either focusing on small local market or will upgrade one level up by raising more very soon.

Not listed above but worth mentioning - the traditional players who are not passive at the online opportunity. They have bigger inertia but cannot be neglected.

It’s still a lot of blue ocean in the online supermarket delivery market so competing against each other is not really a zero sum game. Yet.

How will this market configuration look like in one year? How about in 3 to 5?

The fragmentation is big and the value is created in disparate ways, where is the consolidation going to happen? What is the inflection point?

How do you play your cards and how do you define your end game? Do you go deep in one country or region, or expand quick and dirty in selected metropoles?

Will the big cities be enough? Will the small cities be worth marginally for doing business?

How important is the cultural factor? The buying groceries behaviour is different in Madrid versus in Stockholm.

So many questions, variables and strategic moves - it is an interesting strategy exercise, and a bet which a handful of select European and American VCs already made.

The screenshot from above is from a report profiling 21 startups from the on-demand grocery business from Europe and that raised money in the past year.

In the same report you will also find the downloadable excel, including the names of the startups, their profiles and their investors.

do you really need a brand identity when doing a VC investment business?

Imagine for a second you are a founder at the beginning of a journey.

You want to build a new business, something that makes impact and that should be durable, at least 10 years down the road.

You think hard about the need and how your product fits that need, about the target customers and about the market segment.

You figure you can create that unique value proposition that makes you special, with a GTM that gives you a good rep and credentials - people on the street will know who you are, if all this works out.

You see it through and it makes sense, you’re onto something. You work your ass off to put together all this research into a product reflecting your vision, and get it business ready in order to launch it.

Before you make it public, there’s one more thing: you need to choose an identity reflecting all this special work you’ve been doing.

That identity is something that people know you by. The packaging is as important as the value the product provides - you want to choose something that is unique and undoubtedly associating your work with your name and your rep. It’s a whole, and everything needs to be consistent.

The professional way to do this is to work with a brand agency, whose job is to give you an identity and make you look good. If you ever worked with a brand agency you know that the deliverable of those guys is simply a reflection of who you are, your values and of what you and your product stand for.

But you decide not to do that. Maybe you think you already got it, or don’t think it’s that important, or worth it, or maybe you are too busy for this anyways. You settle for a name, create a fancy website, write that Medium piece your peers will judge you by, you activate your journalist friends to get you a bit of PR momentum and you finally come out in the world.

And then you get this random screenshot from social media:

Which one are you and who will your customers think you will be? Are you Adidas or Adibas? Are you Gucci or Guci?

I can only imagine board discussions where founders ask their investors advice about marketing.

the times we live in

In Finland, returnees and foreigners say they struggle to find work with foreign qualifications and experience due to recruitment bias.

It is a recession, I guess, and this happens more often than not in many other European countries.

A Swedish friend who’s a headhunter told me that if your name doesn’t resemble Swedish it will automatically be disqualified to further screening. It is what it is.

Shitty situations don’t get the best out of people and the Covid context accentuated the nationalism, which lately seems to prevail to reason and common sense. And you cannot only blame it on politicians, it’s just how things are and people feel, we’re on that cycle of the history now.

Otoh, the same Covid made it much easier for tech startups and corporates alike to hire from a larger pool of candidates regardless of their locations.

A barrier has been crossed - this is a huge irreversible trend and, sooner or later, we will increasingly see only particular cases of local jobs remain subject to local recruitment discriminations, it is just a matter of time.

These are the times we live in.

the new Nordic 9

Last week we put online a new version of Nordic 9.

For those who don’t know, N9 is a project tracking the European startup deals and putting on top a data platform interface for making it easy to understand the intel.

I did N9 for two reasons: i) I consume an unhealthy amount of intel data every day and I tend to forget it (getting old, I know), so an aggregated source to find something in a few clicks comes in handy and ii) I hate bad software, and I find most of the market providers borderline unusable, be them data, intel or media.

And so I was lucky enough to have a strong tech partner who built for me a little toy 4 years ago, covering the Nordic market, iterating and learning along the way. We started it as a hack and built on top of it until it became unscalable so we had to make a decision to build a new one last summer. It took us a bit of time to re-create a new product that has wider scope and can be SAAS scalable and here we are.

We are also lucky to have a handful of customers who gave us great feedback along the way, some of them going quite deep in methodologies or business cases, which we learnt a lot from.

The data now covers the entire European landscape and is becoming quite sizable, we track the activity of more than a 1000 active investors every month, and the whole social graph is coming along pretty nicely.

So who is it for?

For once, it is for people like me who want to take the pulse of what is going on in a vertical or in a country. And I mean now - this month or this quarter - not sometimes last year based on some big macro numbers which mean a lot for very few people from the market. Take fintech, for example. Or health or food and so on.

Then, a great number of our customers are startups, since I work anyway with startup people looking to either get funded or to grow their operation to get fundable. It is a case that can be a standalone business by itself.

Another one we notice is investors looking for local deal flow and granular intel - we track a considerable number of deals under $5 million and have a decent data coverage of angels/early stage investors active in Europe.

We also added cheat sheet reports on top of the data (have more than 50 reports to date) - snackable market intel with actionable insights or valuable pieces of information - all for people who usually need just to learn the essentials from a sea of noise. (who has time for a 1000-words report or a 50-slide deck nowadays anyway?)

The product is still in beta and we’re still rolling stuff out - I’m actually quite excited about what we can build on top of what we have, one of the reasons for taking the time to re-construct the whole product in a proper way.

Just like Nordic 9, the ecosystem we provide value for is also very young and growing. The European startup landscape is in early emerging stages, and I believe our timing as also a startup helping other startups is fitting.

And I also believe that a laser-focused product, with good data, useful intel and great UX should be a good value proposition for anybody part of the ecosystem. And that is my bet with N9.

Good European VC business

Northzone cashed out its entire equity position in Kahoot for exactly $153.2 million. This is a last tranche in an offload process started after getting Softbank involved in the company 4 months ago.

Northzone were investors in Kahoot early on, circa 2015, sold some of the holding when Kahoot went public on the local market from Oslo in 2019(-ish) and then re-upped their position in a $62 million worth of stock deal early last year.

Not a bad return, huh?

It is not a coincidence, here’s some other selected Northzone’s portfolio companies:

  • Trustpilot - last valued at $1bn, NZ entered via a $4.5M series A in 2011.
  • Klarna - last valued at $10bn, NZ entered via a $80M secondary in 2015 at $2.2bn valuation.
  • Personio - last valued at $1.7bn, NZ entered via $12M series A in 2017
  • fuboTV - last valued at $4bn, NZ entered via $55M series C in 2017 (led)
  • Tier - last valued at $1bn, NZ entered via €25M series A in 2018 (led)
  • Hopin - last valued at $2bn, NZ entered via a £5M seed round in 2020.

FuboTV is the only non-European from the stack.

Also important - the funds they invested from:

  • 2010 - Northzone VI €130M
  • 2014 - Northzone VII €250M
  • 2016 - Northzone VIII €350M
  • 2019 - Northzone IX $500M

The returns of each of the above deals covers the size of a fund, more or less. This is what good VC business looks like, we actually made a detailed profile those guys about a year ago.