On Multiple III & How emerging managers can demonstrate performance from Fund I - III with Ertan Can, Founding GP of Multiple Capital

Join us for a great conversation on the raise of Multiple Fund III, Ertan's continued bet on micro VCs, and he evaluates emerging managers from Fund I to III.

Patricia Borlovan

and

Andreas Munk Holm✌️

Apr 16, 2024

Transcript

No transcript...

Today, we are meeting with Ertan Can, the Founding General Partner of Multiple Capital, a venture capital fund based in Luxembourg.

Ertan has just closed his third fund with a target of $50M after investing already in companies like NP-Hard, Angular, Airstreet (1), Lunar, Fly, Inflection, Foreword by Declan, and Remote First Capital by Andi Klinger, Nomad by Marc McCabe.

Watch it here or add it to your episodes on Apple or Spotify 🎧

Table of Contents | Scroll ⏬ for all guest show notes ✍️

Episode chapters.
Ertan’s journey into venture.
Deep dive on the role of micro VCs.
Shout-out.
Advice for your 10 year younger self.
Top tips for emerging VCs who are fundraising.
Most counterintuitive learning.

This episode is part of the State of European VC Fundraising Report 👀

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Chapters:

00:54 Deep Dive into Ertan Can's Third Fund and Investment Strategy
04:07 Ertan's Journey from Family Office to Micro VC
06:04 Challenges and Learnings from Raising Fund III
08:13 Navigating the European Fundraising Landscape
13:47 Strategic Shifts in LP Engagement and Fundraising Realities
21:29 Understanding the Micro VC Ecosystem and Fund Size Dynamics
35:42 Evaluating Emerging Managers and Fund Performance
37:50 The Role of Randomness in Fund Success and Investment Strategy
39:55 Evaluating Investment Consistency and Strategy
40:34 The Importance of Building a Strong Network
41:07 Performance Metrics: Beyond Early Success
43:14 Assessing Portfolio Company Progress and Entry Valuations
53:23 The Rise of Fund of Funds in Europe
54:03 The Role of LPs in the Venture Ecosystem
01:03:02 Advice for Emerging Managers and Fundraising Challenges
01:13:42 Personal Reflections and Future Directions

✍️ Show notes

Key Learnings from the episode

Acceptance of Power Law
One must acknowledge that not all VC funds, especially first-time funds, will be outperformers. Ertan works from an expectation that a minority, perhaps 10 to 20 percent, will become outlier funds, with the remainder performing average or below average.
Role of Randomness
Ertan Can notes the randomness in fund success, citing that outliers in his experience have come from unexpected places, suggesting a belief in the potential rather than the certainty of each fund being a standout.
Assessment Beyond Immediate Performance
The transition from a first to a second fund often does not provide sufficient time to demonstrate real performance in terms of markups or DPI. Early successes or markups are seen as unsustainable for predicting future performance.
Consistency and Focus
Ertan values the consistency of the emerging manager with their initial strategy and approach. He looks favorably upon GPs who remain focused on their initial thesis and do not chase current market hypes or trends without a well-thought-out reason for any strategic shifts.
Networking and Co-investor Quality
The ability of a GP to build a network, attract follow-on investments from reputable names, and be invited to competitive rounds is viewed as more important than early performance metrics.
Entry Valuations as KPIs
An important KPI for Ertan is the range of entry valuations a fund manager secures. Investing at lower entry valuations, indicative of conviction and an earlier investment stage, is preferred over higher entry valuations that might follow market signals or competitiveness.
Brand Building and Recognition
Building a recognizable brand and becoming the go-to GP in a specific region, vertical, or niche is deemed more crucial than first-fund numbers. Recognition in the ecosystem can be a more significant indicator of future success than immediate performance data.
Advice for Emerging Managers
Ertan advises maintaining consistency, having a well-defined market thesis, and resisting the urge to significantly upscale the fund size or pivot strategies to follow current hypes. Managers should focus on being recognized as experts in their specific focus areas, which is seen as vital in a competitive market.

Q: Advice for your 10 year younger self.

Take advice more seriously.
Dont underestimate the fundraising part.
10y ago was my inflection point, so did right, but than after…

Q: Advice for fundraising managers

Try to identify the most realistic LPs for you. And that might be the closest, people in your network, like other angel investors, founders who invest in funds, smaller family offices, and also corporates as they might be strategic and strategic partners. So try to think before you're reaching out to everyone in a broad sweeping approach. I think most of that will be noise and will not be helpful.
Try to use intros. If people who are well-considered in the market makes an introduction to a fund that increases the probability that someone looks at your fund from a different view.
Try not to change your strategy every six months. Don’t adapt to a new strategy just because it is easier to raise capital. Just try to be very focused on what you do. And if that focus does not lead to raising a fund. So be it, I think that's better than raising a fund with a different focus just because of raising a fund.

Q: The most counterintuitive thing learned in venture.

Invest in people you don’t like.

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