Waterman Ventures is a fund set up to help Brown University alumni get access to capital
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed! While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Ludwig Pierre Schulze is Managing Partner at Waterman Ventures.
Schulze was Founder and CEO of Mistral Mobile and before that he was General Manager, Digital Financial Services and Business Development & Strategy Lead at Nokia, where he drove global sales, product management and development, and business development.
At LVMH Venture Fund & LPS Group, Schulze was a venture investor and product manager. He also served as a Strategy Consultant to The Boston Consulting Group. He has a BA in Political Economy from Brown and an MBA from Columbia. He holds several patents and is an active investor.
VatorNews: What is your investment philosophy or methodology?
Ludwig Pierre Schulze: The first signal we’re looking for is who is the lead investor. In venture, there are a relatively small number of firms that have consistently done exceptionally well. We want to invest with those firms and those partners.
The second signal is the team’s history. Entrepreneurship is hard (I know, having built my own company to serve 12M people) and there are an endless number of mistakes that might be made. The fact is that succeeding (or failing) a few times makes the team much more capable at overcoming the challenges of building a giant business from an idea.
The third signal or criteria is market opportunity. We are looking for big ideas that have the opportunity to disrupt an industry -- for example, is the product or service an order of magnitude better, cheaper, or simpler than existing alternatives? If you can bring something to a large population that didn’t have access before, then you’re onto something.
VN: What's your investment thesis and categories/stage of interest?
LPS: For our accredited investor clients, we are focused on creating a diverse portfolio of investments. That means that we do not want to overweight the portfolio in any particular industry, sector, geography or stage. We deliberately balance these to mitigate risk.
For Waterman Ventures, our focus is on the community of entrepreneurs, VCs, and individual accredited investors with a link to Brown University. We have 24 sibling funds within Alumni Venture Group that focus on their own communities and then share deal flow and networks across funds.
VN: What's the big macro trend you're betting on?
LPS: Venture capital is fundamentally a bet on the future. We are betting on the next great companies that will push innovation to another level, primarily with technology as the scaling factor. At a macro level, as Schumpeter observed, innovation continues to accelerate. These waves of innovation have had massive impacts on our societies--just consider that it wasn’t that long ago that the world didn’t have the internet or mobile phones. What will be next? How will it impact industries and society? That is one of the most thrilling elements of venture capital investing, being a part of that evolution.
More immediately, the fact is that companies are remaining private far longer than in past. The result is that most of the hyper growth is occurring before a company is public. This makes venture capital a critical asset class in capturing some of the greatest value appreciation.
VN: What stage/series do you invest in and how much is that in dollar amount for you? What kind of traction does a startup need?
LPS: On business stage, we generally prefer investing in companies that have shown market fit via revenue, generally Series A or B. But for the right combination of lead+team+opportunity we will also look at earlier and later deals.
VN: What other signals do you look for? Team, product, macro market?
LPS: I like to see economic value: meaning either revenue enhancement or cost savings. These are easiest to judge in business-to-business models but also apply to consumer use cases. Where it gets a bit more difficult is in content-related areas that are driven by consumer taste. Magical things can happen, but it is harder to be grounded in data.
VN: There are many venture funds out there today. How do you differentiate yourself to limited partners?
LPS: First off, very few funds are focused on accredited investors as their primary LPs. Secondly, the alumni networks we focus on tap into the primary connection point among our investors, a wonderful source of word of mouth.
VN: There are many venture funds out there today. How do you differentiate your fund to entrepreneurs?
LPS: The reason most entrepreneurs connect is due to our alumni community. They love the idea that fellow alumni will benefit from the success of their company. Beyond that, we’re able to do amazing things in portfolio services because of the size of our investment team and the 220,000 alumni community members that we’re closely connected with. Whether finding an independent board member, a whole set of customer prospects, or the next great employee, we can deliver something complementary to the entrepreneur’s lead fund. Lastly, we make it easy. As a former entrepreneur myself, I deeply respect our founder’s time. We therefore make our decision in weeks and without haggling around terms or playing waiting games, we’re either in or out.
VN: Name a couple of investments you're super excited about and why.
LPS: I love all my investments (children) equally, of course. But to give you a sense of the variety of deals we do, let me highlight a couple.
- Honor, which provides elder home health care services. Clearly addressing a massive market and societal need by improving the delivery of elder care in their homes. Furthermore, pleased to see Marc Andreessen’s personal involvement from an early point and his continued service on the board. Investors include A16Z and Naspers most recently.
- Freebird, which provides flight disruption insurance. Likely relevant to your entire audience. For a small fee, they provide you the confidence of getting to your critical business meeting (or vacation) by buying you a new seat if your flight is delayed, canceled, or diverted. General Catalyst was an early supporter, and we joined AmEx Ventures in the last round.
VN: What are some lessons you learned?
LPS: As an entrepreneur, I made a lot of mistakes, and I saw terrible days and great days. It is probably impossible to even realize all the lessons learned along the way, but it certainly gives me massive respect for the people who are willing to go after their dream through thick and thin every day.
VN: What excites you the most about your position as VC?
LPS: We’re an unusual fund in several ways as I mentioned. One of which is being able to invest across sector, stage, and geography. That allows me to learn about innovation across the economy—a sneak peek at where the world is going driven by great, driven people. What could be more fun than that?
VN: What is the size of your current fund, and how many investments do you typically make in a year and reserves you set aside?
LPS: Waterman is one of 25 funds under Alumni Venture Group. Collectively we deployed over $150 million last year and expect that to grow this year. Pitchbook ranked us the most active VC group by deal volume in 2018. Waterman Venture will invest into 25-30 companies this year to create a diverse portfolio for our individual investors.
VN: Is there anything else that you think I should know about you or the firm or your thoughts about the venture industry in general?
LPS: Like all funds under Alumni Venture Group, Waterman Ventures is not affiliated with or sanctioned by a university. We are private and for profit but very friendly with Brown University. We benefit the entrepreneurial ecosystem overall and support alums or professors teaching about entrepreneurism.
Waterman Ventures was created to enable Brown alums to invest together in a diversified venture capital portfolio. There are some very unique characteristics and benefits to our model: alumni have an easy way to acquire ownership of a diversified venture portfolio, most individuals don't have access to these kinds of investment opportunities. It also allows investors to “pay it forward.” Investors become part of something larger, helping support Brown’s entrepreneurial ecosystem and the next generation of Brown entrepreneurs. Finally, the power of our model is the huge community we’re building to source deals, refer investors and entrepreneurs, and socialize the fund.