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‘It’s like the software is our colleague’: How one European VC wants to reshape investing

Mattias Ljungman started Atomico in 2006 with Skype’s Niklas Zennström. Now he’s got a new fund that leans heavily on machine learning and software for investment decisions.

‘It’s like the software is our colleague’: How one European VC wants to reshape investing
[Photo: courtesy of Moonfire]
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Mattias Ljungman is bullish on Europe—or at least European entrepreneurs. Ljungman, who cofounded venture fund Atomico in 2006 with Skype founder Niklas Zennström, earlier this month unveiled a $60 million fund to invest in early-stage companies in Europe. Ljungman spoke with Fast Company about why he’s so excited about European founders, and how his new firm, Moonfire, will use data and machine learning to help drive investment decisions. Edited excerpts follow:

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Fast Company: Why focus on Europe and the U.K.?

Mattias Ljungman: We’ve really hit an inflection point where things are really exploding. In Q1, $20 billion was invested in European startups compared to $40 billion last year. We had 21 billion [euros] of exits in Q1, which was more than all of last year. We minted 16 new unicorns in the first quarter. The amount of international interest, and specifically Silicon Valley interest, in Europe is just at another level.

Is this a case of too much money in the U.S. finding too few domestic opportunities, or is there something special happening in Europe that’s attracting this new capital?

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It’s a combination of things. The Valley is expensive on many different levels: recruiting people, cost of living, and the deals themselves. So [investors] have been spreading out, recognizing that everything doesn’t need to be in the Valley. On top of that, Europe has just been breeding better and bigger successes. We’re generating this flywheel effect of great entrepreneurs, creating a new generation of entrepreneurs looking at doing something bigger than the company they just came from.

Europe also has always had a very good, very powerful universities. And every country has really good [engineering] institutions. And in the past, for graduates, the future was working at the local telecom company or going to the U.S. Now they’re saying, “why don’t I create a global business?”

Where do European founders excel?

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Europe is also beginning to show another way of working. You have the U.S. way and you have the Chinese way, and then you have the European way. [Stockholm-based] Spotify brought its maternity and paternity policies to the U.S., their maternity and paternity leave to the to the U.S., and that triggered bigger interest in a very European way of handling [parental leave].

Europeans are really good at dealing with the multicultural and multilingual. We’re all a little bit different, and we quite like our uniqueness. And, and I think that helps us when we’re dealing, let’s say, with companies in India and China and those kinds of places where the world is fundamentally different from ours.

You said in the blog post announcing the new fund that venture will always be a relationship business, but it should be powered by data software and machine learning. Are are you saying that the industry has been doing it wrong since the days of Arthur Rock?

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That worked for that time and I have been part of that. But look at the change that we saw in the hedge-fund industry, going from stock picking to algorithmic trading. That’s a change that’s going to happen in venture. Everybody’s going embrace data and data systems and software in different ways. We want to integrate it in everything that we do.

Do you envision a scenario under which the data tell you something and you go out and find a founder to create a business around a thesis?

That is definitely something that we’re playing around with right now. I like the interplay between video gaming and crypto. There are so many good game developers here in Europe; not all of them are all that interested in crypto. I’m going around trying to convince them to become more interested.

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Are there limitations or shortcomings to being so data driven? I mean, you know, had machine learning been around in the ’30s and ’40s, would it have pointed to semiconductors? How does serendipity fit into your model?

To say you’re going to have an algorithm that tells you when black swans are going to happen doesn’t work. The way we work with software is going to be a sort of augmentation. It will be relationships together with software; it’s like the software is our colleague, they’re just another opinion in the process. And there are things the software can do that we can’t do. So there’s going to be an interplay there where we’re going to come up with a combined best solution

Do you have a specific industry or technology focus?

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So we work on Fintech-related things, e-health, around the software for healthcare. Future of work is something that I’m super excited about. [Human resources software company] Humaans is one of our investments that has done phenomenally well. We’re seeing a total rewriting of how we look at HR.

What did you learn at Atomico that you’re bringing to Moonfire, and what do you want to do differently this time around?

It was amazing building up Atomico. I met some incredible founders. What I learned from all the smart people that I worked with was an understanding of how to build one’s reputation and position in the market. People underestimate the power of that in venture. Brand is extremely important. Founders want to surround themselves with people they feel that they can trust. At Atomico we were really supportive of our founders.

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The differences are: I’d like to focus on a few [investment] themes, and the aim is to integrate software as much as possible to really keep a lean and thoughtful team. It’s really important to sort of ensure that you can have speed by having a small number of people. The European landscape will just become more competitive, and one needs to be thinking about the systems that allow you to react really quickly.