EXCLUSIVE: “Alpha Nirvana” – Andre de Haes, BACKED VC in ‘The Fintech Magazine’

BACKED VC has a maverick approach to investing and the founders it mentors. Managing Partner Andre de Haes shares his wisdom

A highly-strung founder of a would-be billion-dollar fintech startup is sitting cross-legged in the evening glow of the Moroccan sun, breathing to the rhythm of tantra meditation. Around them, leaders of other ambitious, early-stage companies are also trying to achieve enlightenment. It’s not a scene from a Netflix mini-series. This is a real-life strategy for moulding tech tycoons and driving value in the ecosystem.

“Think Davos for the next generation,” says Andre de Haes, co-founder and managing partner of BACKED VC,a European fund that focusses on the brave, the brilliant and – most importantly – the seed stage. Among its disciples are Cloud banking technology company Thought Machine and open banking platform Banked. It’s a fund, yes, but not as most VCs would know it.

“We invest in four sectors: fintech infrastructure, blockchain infrastructure and applications, manufacturing software, and AI-driven biology – all of them multi-trillion dollar industries,” says de Haes.

But BACKED’s approach is in many ways antithetic. Where UK-based VCs are forever looking to the US to understand emerging sectors and high-growth potential technologies in which to invest, BACKED has its head turned the other way. Not only does it seek out the biggest industries in Europe that are ripe for tech disruption, but also where Europe has a unique advantage over the US. Rather than follow investment trends, it doubles down on investment sectors where there is limited VC competition. And when it scans the investment horizon for a paradigm shift in value creation,it’s through a very long lens – because BACKED isn’t looking for an exit within the usual six- to eight-year VC cycle.

It believes in rolling out an extended runway for founders who might otherwise be distracted from building a successful company by the gnawing pain of cash starvation. The fund publicly positions itself as a maverick among traditional venture capitalists, and it’s guided by four key values: ‘Put People First, Be An Apprentice, Push The Limits, And Bring Good Energy’. It might sound like guru-speak, but BACKED’s investment strategy is astute.

The unicorn effect

De Haes founded the London-based fund in 2015 with Alex Brunicki, closing an initial €30million fund, ‘Backed 1’, from Groupe Bruxelles Lambert (GBL) Capital in April 2016. GBL is a leading investor in Europe with a net asset value of €16billion and a market capitalisation of €9billion as of June 2024. BACKED’s first pan-European community fund clearly hit the mark because GBL Capital has committed a total of €90million across that and the VC’s two other funds – early-stage ‘Backed 2’, and later-stage ‘Backed Encore 1’ – to date. That gives de Haes and his co-founders room to flex.

They’re comfortable taking bold bets in relatively unknown sectors where business models, pricing strategies, product and technical risks aren’t yet proven. So far, so strategic. So where do the founder camps fit in?

De Haes’ theory is that if you want to maximise alpha in these high-risk investment environments, you need to focus on the individual who’ll deliver it. Hence, the ‘intimate, multi-day, immersive experiences’ where founders ‘get to know each other and build relationships’.

“If you’re an earlier stage founder and you get to be in the room with unicorn founders who become your mates, that’s worth a lot,” he says.

When they’re not on retreat, their investees can also access masterclasses, tools and service providers through BACKED’s proprietary Seed to Series A Founder Development Platform.

“It’s really about doing things from first principles and not being afraid to be judged or edgy. That applies to both what we invest in, then how we do it,” says de Haes. “We have taken a huge amount of technical risk in sectors that people thought were bonkers, like blockchain gaming where the jury’s still out because there haven’t been huge companies built there yet. Fortunately, we’re in, arguably, the two biggest, with multi-billion dollar valuations.

“Similarly, we’ve bet on certain bits of banking and payments infrastructure very early. But I think where we’re really maverick is in the events we run for founders.”

Whether that’s kayaking down rapids or immersive breathwork, he believes that forcing them into a place of learning and/or discomfort forges a bond between BACKED and founders that most funds just don’t have.

“Being different for the sake of being different, that kind of Dyson approach to difference, is something we care about,” says de Haes. “We’re willing to take much longer bets; to invest in founder archetypes that a lot of other funds will dismiss; to invest in geographies that are often overlooked. We think you have to be a contrarian as well as right.”

BACKED has a ‘checklist of traits’ before investment decisions on founders are made. Among these, priority is given to a ‘high pain tolerance, incredible resilience, and grit’. This is based on the rationale that during the earliest stages of a startup, the experience and tenacity of the founding team, its human capital, could be considered a company’s most important – and sometimes only – asset.

Particular attention is also given to a founder’s ‘right to win’, or founder/market fit. In other words, whether they have ‘an insight – a secret – that allows them to build something that no one else could’, says de Haes. In case you were wondering, it is definitely not exclusively focussed on Gen-Zs. It wants innovative thinkers, yes – but they must be able to implement ideas while navigating an ever-shifting set of skills and priorities.

“The problem with fintech in Europe is there are not many specialist VC funds… A lot of seed funding came from generalist funds that have partially retreated”

And that often comes with experience and maturity.

“It is just so hard being a founder,” says de Haes. “Everyone glamorises it and talks of Bezos, Zuckerberg and Musk as idols, but people forget just how hard they struggled along the way. Dyson made over 5,000 prototypes.

“We look for that kind of grit, then for execution speed. You can be intellectually brilliant and know a space intimately but unless you get stuff done unbelievably quickly and you’re willing to make mistakes and rapid decisions, you’re not going to go anywhere. You have to move so fast to win. Finally, you have to be both a storyteller and commercial to be able to sell a vision; persuade people to work for you for way less money than elsewhere; persuade investors to part with cash; persuade customers to trial your product. At the same time, do you have a strong set of values and the humanity to be a kind and thoughtful manager?

“To go all the way and build a multi-billion dollar company, you have to have a very special type of brilliance, a special type of resilience.”

Paul Taylor, the founder and CEO of Thought Machine might be that kind of guy. The London-based fintech’s £160million Series D saw its post-money valuation rise to $2.7billion in May 2022. It joined 17 fellow fintechs, including Monzo, Revolut, Wise, and Starling Bank, in the exclusive club of 43 UK private companies to have achieved unicorn status.

BACKED VC welcomed Thought Machine to its founder community in 2016 after joining the CAP table in one of the company’s earliest funding rounds. Thought Machine’s $160million Series D saw the post-money valuation rise to $2.7billion in May 2022. The company is currently eyeing an IPO within the next two years.

The go-big-or-home approach BACKED encourages among its founders appears to pay off. Thought Machine is the latest of three companies in its portfolio to have reached unicorn status. Immutable, based in Australia, whose product Immutable X is the first scaling system for carbon-neutral NFTs, reached a $2.5billion valuation after a $200million Series C round in 2022. Meanwhile, Singapore based online crypto game developer, Sky Mavis, was valued at $3billion after a $150million Series B, led by Andreessen Horowitz in 2021.

BACKED has certainly made some shrewd investments, but like every VC, it can’t escape the Power Law: the principle that a small number of investments will yield the majority of a portfolio’s returns, while the remainder will break even or fail. BACKED’s portfolio company, UK-based ticketing platform Pollen, made headlines in 2022 after reaching a valuation of more than £450million and fell into administration four months later.

The fund has nevertheless enjoyed a total of seven reported successful exits since 2015. Most recently, Foundries.io was acquired by Qualcomm in March 2024. When it comes to investing in seed stage fintech infrastructure, BACKED is a decent-sized fish swimming in a small pond.

“The problem with fintech in Europe is that there aren’t that many specialist fintech VC funds,” says de Haes. “And a lot of the seed funding came from generalist funds that have partially retreated following the revaluations we’ve seen of later-stage companies like Klarna. Revolut’s recent $45billion valuation secondary deal re-injected some enthusiasm and other later-stage rounds have also buoyed the mood, but we’ve seen a big distinction between companies operating in spaces that most investors deem attractive and others in spaces like credit where it’s gone cold. Investor appetite at seed is now very market-specific.

“There are a few areas commanding interest like securitization of assets that weren’t previously securitized and certain products in the transaction flow.”

The maverick investor’s hottest tip in fintech right now is blockchain.

“Widespread adoption will largely be invisible,” he says. “With a lot of the best applications, people won’t even know they’re leveraging blockchain infrastructure – in things like gaming where some of the applications are hyper-interesting”

This article was published in The Fintech Magazine Issue 33, Page 22-21