This is episode 5 of The OpenVC Podcast. In this episode, Newton Davies, Investment Manager at XPRESS Ventures, shares insights on investing in startups that digitalize traditional industries. He discusses the power of storytelling, leveraging corporate strategic advantages, and key lessons from investing across Europe.
Harrison Faull (00:51.182)
Hi Newton. Welcome to season one of the Open VC podcast. How are you today?
Newton Davis, XPRESS Ventures (00:59.117)
I am doing well. It's a cold day here in Berlin. But I'm doing well. I can't complain.
Harrison Faull (01:09.583)
- Your journey into venture capital has been pretty atypical. You've been in multiple countries, you've been at multiple roles, and you've actually been at a few different players within the ecosystem. So from 500 startups in Mexico to a software engineering consultancy in New York, and now you find yourself over in Germany doing a logistics -focused VC fund. Could you tell us a little bit more about your journey and how it came to be?
Newton Davis, XPRESS Ventures (01:38.445)
Yeah, definitely. So I started my career as many people in the space in consulting, doing a brief stint at one of the consulting firms based in the US. And in that time, I had an opportunity to learn a lot about technology at the time I was working at Accenture and a lot of the...
ways in which we provide a management and strategic consulting services was based on the back of the technology implementations that we did. And I spent a lot of time learning about technology companies who I never heard of that were getting 50, 75, $100 million contracts with the big corporates that we were working with. And I was like, where are these companies coming from? How in the world are this company that I've never heard of before getting $100 million contract?
and doing this huge implementation. And that sort of led me down this path of discovering more about the technology element of it. And in parallel, a lot of my friends at the time were starting to move from the world of investment banking into the world of private equity. And I started to sort of become aware of the fact that there were people who bought and sold businesses. And naturally, this interest in...
technology matched with this interest in sort of understanding people who are buying and selling companies led me to venture capital. It's sort of the intersection of those two. And I was like, whoa, this is great. I get a chance to sort of be involved in the operational excellence and development of these companies to some extent, or at least can try to be, but also get a chance to sort of envision a future that is different than the future or the present that we live in today.
And that got me, yeah, really just kind of fascinated. And so I started doing more research. And oddly enough, I ended up on a project with a big cell phone provider in Mexico as one of my last projects at Accenture. And during that time, I started to look for opportunities, mostly because I wanted to stay in Latin America in terms of sort of a region.
Newton Davis, XPRESS Ventures (03:49.421)
I studied Spanish in university as a minor and was really keen to spend more time there. And throughout the course of my time at Accenture, I had time in Brazil and had projects in Latin America. And this was my first project in Mexico. And so when I got there, I absolutely fell in love with the place and wanted to stick around. And when I made that decision, I said, OK, I know that I want to pursue this path of being at the Inventor Capital. And I wanted to try to find a way to do that.
while still maintaining my geographic place in Mexico. And it's, oddly enough, it dovetailed nicely with the strategy that 500 Startups was having at the time.
500 Global, which was to sort of invest in founders everywhere. And they had a global workforce where they had people sort of stationed in these major cities around the world. And Mexico City was, at the time, the third largest office. And I ended up getting a role there. So my role there was not necessarily an investment role. It was mostly interfacing with investors, although I did help out a little bit with the accelerator programs that we ran there and do some selection and also some mentoring in the Mexico City accelerator program.
But most of my focus was working with high -net -worth individuals and LPs who were interested in employing capital in venture. So I got a chance to really learn about the venture landscape sort of from the standpoint of it being a money management responsibility and less from it being an innovation or a source of development for startups. And that, I think, was sort of the start of my career. Once I had gotten a taste of the world and gotten my foot in the door, then it was only a matter of time before I
myself in an investing role and sort of fast forward through some years of spent time working with different funds to get them both set up and now working at Xpress Ventures in Germany where I am focusing on not only topics related to supply chain and logistics but also topics related to sort of climate, real estate, mobility and enterprise SaaS.
Harrison Faull (05:51.987)
Okay, there's a lot to unpack within that. I think a theme that's probably come across there is that you've been intellectually curious from the beginning and very open to seizing opportunities, which is seeing you move around the world to take advantage of what's available. And I think having that bravery is something that founders can relate to because it is quite scary to leave their day jobs. And it's nice to see an investor that's actually willing to...
Harrison Faull (06:21.49)
take the same sorts of risks with their own career, then you're just more relatable. I think it helps you as an investor be more relatable to founders when they come to the pitch and helps you win investments in those companies.
Newton Davis, XPRESS Ventures (06:36.237)
For sure, and I think you hit on two really interesting points there is like intellectual curiosity being one. I have always sort of prided myself on being intellectually curious. Growing up, I was always the kid who was watching the Travel Channel. My mom was always like, why are you begging to go to these like random places that no one has ever heard of? And as a small kid in Saginaw, Michigan, which is my hometown, I was just very curious about the rest of the world, the world outside of what I do.
And when I started looking at universities, I was always thinking about, okay, what were the best places that I can go that will allow me the opportunity to sort of travel and experience a part of the world? And that led me to a place where I studied Spanish and Arabic and Portuguese and had an opportunity to spend a significant amount of time through my college experience there. And so that intellectual curiosity, I think, is something that also dovetailed nicely with...
the work in consulting, but also with the work of VC, which is that you always are sort of learning about new topics. You're always discovering things that were otherwise unknown and trying to make sense of how those things might impact a potential future.
And thinking about what are the levers that could potentially be pulled on both by founders and by the market changing and by governments and by general societal pressures that might create an opportunity or narrow opportunity for a startup to come in and make a big improvement and impact. So that intellectual curiosity, I think, is a driving force in keeping things fresh and keeping things interesting. And.
To the next point, which is around being brave and having confidence, or maybe not even confidence, I guess the resilience, right, is more the element there of being able to put yourself.
Newton Davis, XPRESS Ventures (08:28.429)
intentionally in uncomfortable situations, not necessarily knowing what the outcome might be. Having an opinion and having a perspective with the outcome can be, and using that as sort of the guiding inspiration, but really sort of leaving it to fate to figure out if it really can become what we envision. And so I think in that respect, I do identify a lot with founders.
in that it's an entrepreneurial spirit that I have that I always am sort of keen to put myself in a position where I'm forced to learn, I'm forced to be on the back foot. There's some sort of element that is maybe a little bit foreign that requires me to think about the situation differently or play chess in a more three -dimensional way. And I think, you know, I encourage founders and people who are thinking about founding companies to take on the same approach as they think about businesses, you know.
It is an uncomfortable position to sort of leave safety in any context, right? To leave the safety of a job, to leave the safety of one's hometown, to leave the safety of a relationship, to leave the safety of the familiar. Because that's just how we as human beings are wired, right? To want to have a safe environment and those people who are willing or who will.
willing or for some external circumstances have had to experience or force themselves to be in these unsafe zones, I think are those who are most prized to or most exemplative of the kind of founders that do the best because there's something about that. Yeah, there's something about that.
Newton Davis, XPRESS Ventures (10:09.901)
The best way to say it is there's something about that discomfort that causes growth. And through that growth is an opportunity for a new version of something or a new idea to really emerge. And I think when we look at this conversation, we talk about it from a European perspective, but obviously your viewers can hear that I'm American or from the US, excuse me, a US American.
And when we look at the founders who are successful, when we look at the percentage of founders who come from, who might have immigration backgrounds in the US, or whose parents came from somewhere else, we see a disproportionate amount of people represented there because they've experienced sort of that hardship of being uncomfortable, or their parents experienced that hardship of being uncomfortable, and that put them in a place where they had to feel a little bit.
to feel that discomfort themselves. And through that comes the resilience. And that resilience is really what's needed for startup founders to come from the idea stage, starting with nothing and hopefully turning it into something.
Harrison Faull (11:14.839)
I couldn't agree more. And I think it turns into some advice for people wanting to get into the space is don't be afraid to get out of your comfort zone. Because that's when you supercharge your learning. And the people that have built resilience are the ones that consistently do that on a day to day basis. Like all these, there was a study published about unicorn founders and how many have actually come from migrant backgrounds. I think it was between 30 and 50 % of co -founders of unicorns in the US actually have migrant backgrounds, which is just phenomenal.
to hear and a real proof point in terms of as an investor looking for that resilience within founders, it really does pay dividends.
Newton Davis, XPRESS Ventures (11:52.269)
Yeah, it makes you hungry. It makes you, you know, my father immigrated to the U.S. and all of my family have sort of moved for better economic opportunities. And I've done something similar in my career. And I can imagine that, you know, that kind of resilience that came from generations and has come through is something that, you know, provides me with the ability to be able to work in Mexico and China and now here in Germany.
Harrison Faull (12:27.959)
So what, when you're working at 500 Global and you got to see the investor side of things, high net worth individuals, trying to convince them to write a check into you as a particular fund, what are the sort of lessons that you learned there that you've brought into your day -to -day now Xpress? In terms of generating alpha, in terms of being, having USPs, has it influenced your thinking or the thesis in any way?
Newton Davis, XPRESS Ventures (12:59.117)
Yeah, I would say... I'll start.
I would say that there were many lessons that were learned as part of my time there. I think specifically because of the context, I was helping to organize and build not only these relationships, but also organizing executive education programs in collaboration with Stanford and Berkeley and INSEAD to be able to teach these principles of venture capital to people who were keen to learn how to deploy capital either directly or indirectly as LPs.
And I think the biggest learning was just the diversity in thought amongst investors. I think we oftentimes have a unilateral view of how people make decisions. And obviously there are frameworks that people can use. And there are.
guidelines that I'm sure everyone applies when they think about investing, but I think for me what was the most interesting was to see just how varied those frameworks and decision making can be. And obviously that impacts the way that I...
Harrison Faull (14:43.576)
Diversity of investment theories, there's a lot of variety.
Newton Davis, XPRESS Ventures (14:48.205)
yeah, so there's a lot of variety. And I think what that has given me is sort of now...
What that has allowed me to think about now is to envision worlds or multiple scenarios in which different kinds of investors would be interested in following around. And so we had Xpress Ventures focus specifically on pre -seed and seed investments. And so we're looking at the earliest stage of the funnel and trying to accompany founders and.
encourage founders at this early stage to develop businesses that are in this sort of digital industry or digitizing these industries that I discussed, real estate, mobility, logistics, kind of old, tired, and a little bit behind the curve in terms of technology. And so I think when I think about the kinds of impact that...
my time dealing with LPs and dealing with individuals who were making decisions about investing at a broad scale is just understanding that there's always people for whom their ears will be perked by new pieces of information or information that might be seen as being counterintuitive. And I know that that's not necessarily helpful for founders to say, OK, there's like no.
Put it this way, I guess to sum that down, when giving that message to founders is that there are many wrong ways to do fundraising, but there are.
Newton Davis, XPRESS Ventures (16:59.469)
That means that aside from having the basics of a very clear and compelling story, there are always going to be small pieces of information that engender investors to you in ways that you couldn't imagine.
And I think the second learning that I always pass along is that it first and foremost is a relationship based business. And, you know, these investments are in the same way that we look at our relationships with our intimate partners, our lovers is very similar. And oftentimes when we as investors are looking to deploy for better or for worse, we're looking for these signals that.
tell us that a person is trustworthy and oftentimes those signals come from our own understanding. And so the more common ground that can be found between an investor and someone who's seeking investment, be it from a founder perspective or even from a VC asking for funding from an LP, the more places for common ground, the more likelihood there is for success in the long term in terms of that person granting them the capital.
And so from my experience working there, I had a chance to sort of see that in real time.
across a portfolio of different investments at the time. There were about 13 or 14 different funds inside the 500 portfolio. And then also with the startups that we interface with both in terms of the work that we did in Mexico City, but also in terms of our global accelerator programs that were happening at that time in San Francisco and Mountain View. And so seeing it sort of happening at both levels helped me realize that as a VC, we sort of play in this space in a double way, in the first way.
Newton Davis, XPRESS Ventures (18:47.181)
led me to see that as a VC, we play in the space on two sides. First and foremost, we have our relationship with our LPs, where we're asking money and we're telling stories about our ability to scout the best founders. And then on the other side, we're sitting on the other side of the table, sort of evaluating our founders and trying to get a better understanding. And one of the best learnings that I had is that the VCs are the best storytellers.
Right, better than founders. I know that sounds crazy to tell, but, you know, in my time, they're really seeing, seeing VCs sort of pitch, pitch LPs, pitch high net worth individuals for, for, for investments in their fund. And also seeing the same thing happened, you know, from founders, I just saw, you know, how, how important that storytelling is for VC and being able to tell the story, but also to be able to evaluate how well the story is being told.
Harrison Faull (19:43.9)
I think that's very insightful and accurate. A lot of founders, when they're applying to different funds, they'll get rejected. And sometimes they'll never hear back from a fund. But actually, what they might not fully be aware of is that the VCs are pitching just as hard all the time to raise their own investment for the fund. And they're getting just as many rejections, if not more, and harder questions from limited partners that really want to understand what's going to make their fund unique.
So there's a lot of synergies between being a VC and being a founder, especially when it comes to the fundraising process. And I think it's not the most fun for either party, but it's a necessary evil for the ecosystem.
Newton Davis, XPRESS Ventures (20:27.309)
I was at Super Returns last week and Super Ventures. And if you want to see sharks in the water, go to an event like that where you see VCs hunting LPs down. And you, as a founder, I think can get a lot, as you said, a lot of inspiration from seeing just how hard many of the VCs work to acquire the funds. And essentially, unless you're on an established fund, you know,
fund manager who's in their first, second, even third fund sometimes are still emerging fund managers and are working just as hard as founders are to get people to buy into their vision and to demonstrate themselves and to prove that they're able to make bets in companies and in founders that are gonna return capital. And you'd be surprised like how difficult that is, that storytelling is. And founders, I think,
would be aware to understand that element and understand that VC is really, despite not getting back to you, despite sort of the challenges of having the conversations, oftentimes know very well the challenges of fundraising.
Harrison Faull (21:37.786)
In terms of where you are now then, Xpress Ventures based in Germany, Berlin, could you give us a bit of an oversight for a founder that's looking for funding, they've never heard of Xpress Ventures before, what do you guys do, what's your thesis, what stage, yeah, could you just give us a bit of an oversight, thank you.
Newton Davis, XPRESS Ventures (21:58.381)
Yeah, happy to. We love clarity at Xpress Ventures and champion it very much so. So we try to be super transparent as to the way that we work. So yeah, I'm happy to give sort of the quick level introduction of Xpress Ventures. We are, as I said before, a pre -seed and seed fund focused on digitizing older industry.
We ourselves come from a supply chain and logistics background, but invest broadly in the spaces of climate, in real estate and property technology, as well as mobility. And we also look deeply at enterprise SaaS.
We are a CVC affiliated with an organization called Fiege. And I think it's important to mention Fiege because it plays quite a bit into our investment thesis and that we try to find ways to leverage the strategic advantage of our parent company, Fiege, when we make investments. So a little bit about Fiege just so that those who are listening and potential founders are aware of what.
what Fiege is. It is a contract logistics provider based in Western Germany with a focus on warehousing. Obviously, there is also the element of...
Newton Davis, XPRESS Ventures (23:28.685)
just because I don't want the Fiege guys to be mad at me. I don't want to say obviously, but I'll say this. So Figa Fiege a contract logistics operator based in Western Germany with a focus on warehousing and transport, although warehousing being the central function of the organization or the central core competency of the organization, I should say.
Newton Davis, XPRESS Ventures (23:54.893)
Fiege is roughly 20 ,000 employees operating across central Europe, around 13 or 14 countries, and manages relationships for thousands of clients for the logistics needs, both in terms of, like I said, warehousing, also transport, a number of digital services, and then there's also ventures, of which Xpress Ventures is part of the Ventures Unit.
Fiege itself is family -run business and it's fifth generation of leadership. It's 151 years old, I think, of this year. Last year celebrating 150 years and has always been an organization interested in the evolution of...
Its business, starting off with Horsem Buggy, it was one of the first organizations in Germany to adopt the truck, one of the first companies in the 60s and 70s to do parcel automation in the warehouses, and in the last 20 years have been very much on the cusp of the cutting edge, excuse me, of the transition to e -commerce and providing...
housing needed to support that and so the business of Fiege has always been one that's focused on innovation of which the Ventures Unit is trying to push that even further. And so when we look at from Xpress Ventures how we find ways to collaborate with our parent company when we make investments we want to look for the strategic benefit and we sort of define that in three ways.
One, is there a way for us to leverage Fiege as a sort of customer of the product? Is there a way for us to leverage? Two, is there a way for us to leverage Fiege as a business development partner? And three, is there a way for us to leverage Fiege as an enablement process?
Newton Davis, XPRESS Ventures (25:45.453)
Three, is there a way for us to leverage Fiege as an enablement partner, meaning is there a way for the logistics or transport or warehousing elements to be useful for startup as they are growing from the early phase? To the end of us talking about sort of deal size, sorry, to the end of us talking about deal size.
Newton Davis, XPRESS Ventures (26:11.053)
Around our deal size, we, as I said, focus on pre -seed deals. We look at ourselves as sort of an institutional angel, deploying anywhere between 50 and 150 in early stage companies. And on the seed, we try to...
look at investing between 50, sorry, between 500 and 1.5 million in companies with strict ownership targets of roughly 10%. And yeah, we seek to partner with teams as early as possible when we look at pre -seed deals. We've looked at things that are pre -revenue, pre -product, but really looking at strong teams, first and foremost, that have knowledge of...
particular domain and who are really thinking about the ways in which technology can be impactful in digitizing or creating more operational efficiency in the organizations that they seek to target.
Harrison Faull (27:02.689)
Awesome. Thank you. So for the listeners on the podcast that don't quite know, a CVC is a corporate venture capital fund. So it's where a large entity, normally a really successful one that's actually at the peak of innovation, has scale, but it doesn't necessarily have the ideas. So they'll create a venture division that goes and makes strategic investments in startups that could create a lot of value, but not just for them, but for also similar players in this space.
And it's a core differentiator then for that VC fund because you can instantly give a large amount of scale to the people that you're investing into, which are the VC funds that don't have that affiliation with a large corporate. They might be connected to someone in that organization, but they're not actually embedded within it. And so is there an example of a portfolio company that's taken advantage of this strategic partnership that you could give us that would demonstrate why this affiliation with FIGA
It's a valuable.
Newton Davis, XPRESS Ventures (28:39.661)
So one portfolio company that comes to mind to answer your question is Zen Fulfillment. And they are a...
sort of growth partner for e -commerce brands, helping them better understand and take advantage of fulfillment options by creating a standardized onboarding for fulfillment partners that leverages like warehouse spacing, warehouse space, excuse me, that.
the Zenfulfilment team has sort of organized. And so one way I think that we have been able to provide value there is just through our operational excellence and knowledge of warehousing to be able to give them both access to space, but also give them access to sort of the knowledge and expertise of how warehouses are run that was really helpful for them to get started in their early eight.
That was really helpful for them to get started in their early stages and helped, I think, accelerate their growth when the first initial investment was made.
Harrison Faull (29:58.338)
The investment thesis is quite broad. For founders thinking of applying, does there have to be a direct value that they can give to Fiege with their product? For founders looking to apply to Xpress, should there be a direct value for Fiege or for warehousing? Or should they apply to if they're more broadly sitting in this space?
Newton Davis, XPRESS Ventures (30:24.845)
Yeah, we look at, to answer your question, it's okay if they're not directly solving an issue that is relevant for supply chain and logistics companies. That's our core, but we really lean into this idea of looking at ourselves as a development partner.
business development partner and that means that we as a logistics provider have contracts and clients in many fields. You know from industrials to fast -moving consumer goods to fashion and lifestyle and if we find ways or opportunity where we think a product.
or a service that's being developed can be useful to our client base or the client base of Fiege then it's also relevant. It doesn't always have to be something that is directly relevant. I mean, the last deals that we have been doing have been enterprise SaaS deals that are thinking about AI integration, right? And using AI products to optimize things, not only in the supply chain, but also in the operational efficiency of an organization. And it's not necessarily that, you know.
HR software, this is just an example, we haven't invested in this space, but HR software is not something that's directly relevant for a supply chain logistics company when you think about off the top end. But if you have a company with 20 ,000 employees, you have HR practices, you have a team, you have someone who's responsible there, so that kind of technology.
is also applicable for us. So I think that's why these three pillars, can organization be a customer? We're happy to be a consumer of a product if.
Newton Davis, XPRESS Ventures (32:07.469)
Fiege is happy to be a consumer of a product or a service that is being offered in the same way they're happy to be a development or a business development partner with that product as we go out and sell to our own clients. And so it doesn't have to be supply chain and logistics. It just has to fall into these things that I talk about, which I'll list again. Property technology, we have a lot of real estate within the portfolio of Fiege and a lot of ops.
in terms of climate change initiatives on the warehousing and the space that we have. So anything related to that around energy management, around sort of the transition to clean energy, both from a warehousing, the real estate element, but also from a transportation perspective. We deal a lot with these climate topics as a result of that. The property technology.
Fiege are always building something. And so thinking about the ways in which technology might be relevant there. Enterprise SaaS, again, it's a giant company that uses a lot of different software products. Are there things that can be helpful for optimization inside a corporation? Those are things that are also relevant for us to look at. We just want to find a way.
that we can be helpful to the startups in addition to cash. We want to provide some additional push that's going to help them get to that next round faster, quicker, and in a place where they're better poised to take advantage of the opportunity in the market.
Harrison Faull (33:38.053)
You're selling me and I'm not currently a founder looking to raise funding. So I'm sure it's working on others too. The founders thinking of applying at the pre -seed stage. What are some green flags that you're looking for? Do you have any tips? I know you've mentioned earlier that storytelling is actually extremely important. So maybe if we think about any other things that you guys particularly like to look for, because at the pre -seed you don't have much traction often, there isn't much commercialization.
Harrison Faull (34:06.853)
It's very much a bit earlier than that.
Newton Davis, XPRESS Ventures (34:09.645)
Yeah, I say that what is important is, to your point, a strong story, but I want to break down into that, the story, a little bit. I think it's important to understand why a particular founder at a particular moment. And I think oftentimes founders are saying like,
What I don't want to hear, and that's always negative to come with sort of the negative version of what you want to, but what is not compelling is everyone is investing in AI right now. Everyone's building AI, and so I thought I might build AI.
That's not a compelling story. A compelling story is I have been dealing or working on these topics demonstrated through my CV, through the past companies that I've worked at or things that I've done that have always led me to have an interest in AI. And I have also been working or have tangentially worked in this other area that I saw this acute problem. And now I'm trying to bring together these two things. Like that is a compelling story. And I think the founders oftentimes think that it's really just about
telling something that you think is going to perk up an ear, but rather it's really about telling a story that makes sense. So that's the first point. We'll push that out of the way. I think a clear understanding of a go -to -market strategy, which is oftentimes lacking, and it doesn't have to be, you know, come in with pretty slides where you understand the customer, the customer acquisition cost, the total lifetime value, you know.
We don't have to have all the calculations together of what metrics you want to use, but having a clear understanding to say, hey, I'm developing a B2B software that is about process enablement for X. We plan to attract this title at a company, and we are going to go after them hard. And we have a plan to start with these kinds of company in.
Newton Davis, XPRESS Ventures (36:04.205)
X region or within X vertical as our beachhead and then we plan to move on to these three or four different kinds of variations on the ideal customer profile to start with. I think oftentimes founders don't have a very clear...
go to market strategy, which makes it very hard for us as VCs to evaluate their thinking. And I think this goes back to the point that we were talking earlier. It's really about finding commonality. And what we're trying to do is evaluate whether or not someone has many factors. Do they have the resilience? Do they have the knowledge? Do they have the expertise? Do they have the right network? Do they have the right capacities? There are so many things that we're trying to evaluate, whether or not a founder has the capabilities of.
or to execute on those. And I think oftentimes one of the things that we're missing is just like the business acumen. And I think it's good to be able to talk about the tech, to have the technology.
background or to have, you know, the information from sort of the industry, but it is a delicate balance of all of those things, right? You don't, you know, just because you have a superior product doesn't mean you have a great business. Just because you have great salespeople doesn't mean you have a good product. You know, being able to think about holistically what an organization needs for growth and to be successful, not necessarily in the long term, but at least until, you know, if you're starting at pre -seed, you know, what are the things that are going to be necessary for you to
you to be able to make it to the next round, which is your seed or to your series A? Like what sort of, what do you want to demonstrate? Is it a product? Is it, you know, product market fit in terms of the kinds of consumers that you want to have or the buyers of your product? Is it, you know, some sort of reach? Is it, there's so many different things, right? There's no wrong answer. There's no right answer. It's just what we're looking for is that people have a very clear understanding of what that go to mark.
Newton Davis, XPRESS Ventures (37:56.397)
a strategy will be and how they will hold themselves accountable for it being measured over time. I would say that's one thing.
The other thing is just sort of a clear understanding of the use of funds. This is just something that I have been dealing with a lot in the last weeks and I think it's important to throw out there. We know that in the very early stage you're not necessarily in a place where you can clearly articulate all the needs that you have. And part of the journey of being a founder and being in this space is that whatever you envision is going to change anyway. But...
I always say that we have to think about these things as like a hypothesis, right, as a scientist. And that, I'll start that over. I always say that we need to look at these things as we look at things in a science experiment. We have to create a hypothesis for what we believe might happen. And part of the work of doing entrepreneurship and even being in venture capital is being a venture capitalist is to prove whether or not that hypothesis was correct.
Generally, you know if you can make an assumption as a VC and you say hey I think x y and z will happen in the future Therefore I'm willing to put my money where I believe my hypothesis is you make that bet? and I think founders oftentimes have to present that hypothesis or the hypothetical view of the world in a way that allows for us to be able to go on their journey with them and I think one way that oftentimes We're taking out of the fantasy or taking out of that that belief is that when we look at like how do people plan to use money? You know you you say hey?
I'm raising a million bucks and then you look into the numbers and 900 ,000 of it is for sales and marketing. And you're like, well, you don't have a product and you don't really have a sales team. What is all this marketing that you have being used for? There's not a real way to build a business in that way. So I just think a little bit of.
Newton Davis, XPRESS Ventures (39:53.869)
encourage founders to always take a little bit of time to envision what they might need and to be open to the feedback that comes from conversations with both.
VCs and to angel investors when they're in these early stage to say, okay, you think that you might need this, but from my past experience, it could be helpful to think about this, right? You know, you've calculated this, but did you know that you should probably add 20 % of, you know, whatever the cost of an employee is, because that's how much you're going to have to pay in additional services and taxes, right? These are all kinds of things that are, I think, sometimes missing from founders or when they start this process and kind of.
VCs are always looking for a reason to say no, right? We're always trying to find a hole in a hypothesis that we can exploit to make a decision to say no quickly. And so the more that you can come with a mesh network that is impenetrable in terms of being able to poke holes in, or that the holes are so tiny that the holes that are being poked don't really matter.
the better it is for opportunities for you to get that funding.
Newton Davis, XPRESS Ventures (41:08.173)
Was that too much of a rant? Hopefully it was.
Harrison Faull (41:09.867)
I actually really like that get about the employee salary bit. I think that shows that you add value straight away and you guys know what you're doing and you can add value straight from the get go. So I like that a lot.
Newton Davis, XPRESS Ventures (41:32.109)
Yeah, we deal with the corporate controlling team. So we're always aware of what corporates are looking at when they're balancing their sheets. And so we encourage, not to say we encourage startups to take that on, right? We don't want to burden startups unnecessarily with.
controlling and accounting that's not really relevant for them. But we want people to be aware of the realities of what it's like to run a business, especially for those founders who have not run businesses before, who are starting their first ventures. There's just so many things, these unknown unknowns, so many things that you don't know that you don't know until you're faced with that issue, which is like, what? You mean I have to pay, you know?
X, Y, and Z taxes or X, Y, and Z in terms of additional funds for my employees did not know that. I thought the flat rate salary that I gave them was a flat rate salary, which, I mean, this is a very, very basic example. But there are lots of things like that that come up in the process.
Harrison Faull (42:27.563)
I like it. I like it. And in your VCs, you get the benefit of seeing all of your portfolio companies hit these brick walls and seeing how they attempt to solve it and the solutions that work and the ones that are less effective. And so you're able to give good advice to the next guy that comes against the same problem in the future and add a lot of value back to your portfolio companies in that way. Have there been any standout successes that Xpress liked to brag about?
Has anyone, have you seen any positions actually exit yet?
Newton Davis, XPRESS Ventures (43:03.757)
We haven't been fortunate enough to see exits. We're still quite new in our journey. I would say roughly two and a half years old. So we're still very much a startup ourselves and our processes and our thesis have been a work in progress as well over these last two and a half years. But we have some exciting, hopefully M&A activity coming on in a short amount of time. And we're looking forward to helping the companies that we haven't been investing in.
this year to sort of hit the market running and also to support the companies that have been in our portfolio for the last two and a half, three years.
Harrison Faull (43:38.732)
Well, okay, that was an unfair question because two and a half, three years, you probably shouldn't have had an exit, but it sounds like something might be in the works and that could be very exciting. You personally expressed, do you have remit over particular sectors, over particular industries, or is it, how does it work? Give us an insight into the inner workings of decision -making and who has, who specializes in what.
Newton Davis, XPRESS Ventures (44:03.565)
Yeah, there's not really clear distinctions in specialization. I would say that I have the most sort of mobility focused. I have a teammate who has a background and a lot of experience working directly with logistics organizations. We have another team member who has a lot of experience with B2B SaaS. But in general, we try to take a collaborative approach to evaluating companies that come through our pipeline and that we reach out to such that we're able to take a
Yeah, the best of all of our knowledge and apply it. So I would say that generally we're talking and discussing deals on a daily basis, but definitely through our weekly meetings that we have when we go through our Deal Flow pipeline. I like to look at things like I said, mobility. I'm really sort of interested in movement of people and goods in general. So anything that's related to sort of movement is interesting. Also,
I'm really, really interested in sort of AI applications, specifically those that are very much targeted on a particular vertical or a very specific problem. I think that, you know, obviously there's a lot of hype around AI right now and fair, they spend a lot of money on probably upwards of a trillion USD spent on it by big players and by, you know, the rest of the market. And so we haven't quite seen the...
outputs of that labor. If you listen to people at the All In podcast, they talk a little bit about how we're very much in the MySpace Friendster era for AI, which I totally agree with. And I think that...
we will see in the next sort of 18 to 24 months the emergence of, or this is my prediction, my hypothesis, the emergence of more companies that fit that Facebook, Instagram, WhatsApp element of the business cycle with respect to AI. And I think that those things are gonna be, like I said, super focused in terms of a specific vertical and very much targeted towards a particular workflow. And so I'm keen to look at those things as they intersect with...
Newton Davis, XPRESS Ventures (46:16.685)
you know, large corporate businesses.
So yeah, that kind of stuff. I'm also acutely him. I'm like the team member who is most into sort of distributed ledger technology, blockchain technology, Web3. So I like to look at those deals, even though we have not made a bet in that space yet. I'm always keen to talk about them, especially as they intersect with the supply chain logistics world, because I do think that there are a lot of opportunities for that technology to be really relevant.
in the industry and we haven't just figured out the right use case yet. So always keen to see those kinds of cases. Yeah. And then a little bit of real estate and sort of optimization for property developers that for me is also quite interesting to take a look at.
Harrison Faull (47:07.822)
I mean, you've got a really fortunate position where there is a broad spectrum of innovation that can be really valuable and applicable to where you guys sit and your partnership with Fiege Just, I suppose, two questions to follow on from that. Your investment, what geographies do you guys target for investment and is Fiege the only LP in your fund or are there other LPs?
Newton Davis, XPRESS Ventures (47:37.133)
So we invest off balance sheet from Fiege. So we are a single LP fund, I guess, if you wanted to call us, although we don't have a typical fund structure. And then in terms of our geography, we invest pan -European, so across Europe, which includes the UK. And we have done a few deals of European -based founders who have some...
US based or US domiciled businesses, but are addressing markets in Europe. And we do that because we recognize that like capital pools are quite easy there and much easier to be exploited sometimes than in Europe. And so, you know, we don't want to prevent founders from...
building a business because of where the core company is domiciled. We're flexible in that space. But what we don't invest in generally is companies that are just investing in the US, addressing the US market.
Harrison Faull (48:40.591)
Okay, that makes sense. You look for where you can add the most value and yeah, that's a good thesis to have. In terms of questions from me, I think we've really covered a lot of good content there. I wanted to maybe pass it back to you and think, is there anything we might not have covered that you might want to share with potential, with founders or potential investors?
I've actually just thought of one for myself, but I'm going to give you a few moments if there is anything, any stories perhaps that might show you guys in a good light of how you've had a bandit to your portfolio companies or nightmares even. Sometimes the bad ones are quite interesting and they can be anonymous as well.
Newton Davis, XPRESS Ventures (49:32.973)
No, I'll pass on my particular story right now, because I didn't check in with the team before and I don't want to say some stuff that doesn't go over well.
Harrison Faull (49:39.983)
That's fine.
Do you have an anti -portfolio? Anything big in there?
Newton Davis, XPRESS Ventures (49:46.925)
You know, we just started.
Newton Davis, XPRESS Ventures (50:28.845)
let's put it that way, yeah. In terms of an anti -portfolio, we do have some things that we like. There's some space that we like, but it's a little bit too early for us to say whether or not those deals are gonna pan out in the way that we thought they would.
Harrison Faull (50:43.152)
So I think just the last thing is where can people find you? Where should they go to apply? Yeah.
Newton Davis, XPRESS Ventures (50:49.773)
Yeah, people can reach out to us via our website, which is Xpress.ventures. They can get in touch with me via LinkedIn. I'm very, very happy to receive any messages there. Please don't hesitate to ping me. Just if you do reach out, make sure that you give a little bit of context. I don't really respond to people who don't give me any context in an outreach request. So if you're a founder looking for funds, just let it be known that.
maybe saw me here, and yeah, those are the best places to get in touch with me.
Harrison Faull (51:25.267)
Guys, please use ChatGPT. You only get 300 characters on LinkedIn if you don't know someone, so give it your business deck, your pitch deck, give it your summary. And it's incredible what it can do. It can explain your idea in two or three sentences, and that's all we need to see to actually understand whether we can help you and whether it's worth connecting and having a meeting.
But yeah, look, thank you. Thank you very much for your time today, Newton. I really appreciate it. There's loads of really good insights in there. Hopefully you can do this again soon, a few years down the line, and you can be telling us all about these massive exits that have come from Fund One.
Newton Davis, XPRESS Ventures (52:00.557)
Inshallah. We'll be waiting for it. Thanks for the time. Really appreciate it.
Harrison Faull (54:48.788)
Is there anything you'd like to share with other VC funds in terms of the quality of the deal flow that comes off the platform? Have you seen anything interesting or potentially made any investments off of what you've seen from us?
Newton Davis, XPRESS Ventures (55:00.845)
We haven't made any investments yet, but we have seen some interesting deal flow come through. So we are keen to continue to take a look and hopefully we'll be able to say that we've used the platform to make some investments in the future.
Harrison Faull (55:16.308)
We're looking forward to seeing that happen. And yeah, thank you again for your time Newton, really appreciate it. Have a good day.
