Shooting for the VC moon with Luis Shemtov from Lunar Ventures
Investor, hacker, psychologist, software engineer — Luis Shemtov is a man of many skills, VC prime among them. This jack of all trades is one of the founders of Lunar Ventures, a Berlin-based European VC firm.
Established by three Israeli expats, the Lunar team is looking for moonshot projects at the intersection of deep tech and software. Investing in complex projects at an early-stage has always been difficult, especially with limited resources. Yet, these first-time fund managers have made it their case and convinced experienced LPs to invest in them.
I recently interviewed Luis, one of the General Partners at Lunar, to discover why of all the professions he decided to become a VC, what technology he uses, and what it would take to change the European ecosystem into the next Silicon Valley.
Paweł Michalski (PM): My first question has already become a tradition, so here goes: what were you doing in your twenties?
Luis Shemtov (LS): It was not that long ago (laugh)! I was studying psychology while working in IT.
PM: That seems like a rather unusual combination.
LS: I treated university as an opportunity for personal enrichment, not training for a specific profession. I’m a self-taught software engineer. I started hacking when I was still a teenager. I’ve been working on IT projects from the moment I graduated high school — first on the technical side, and then eventually, I got involved in the business side as well.
PM: How did this experience lead you, an Israeli tech aficionado, to become a Berlin-based deep tech VC?
LS: Well, I wanted to join a startup, but I couldn’t find anything interesting. Frankly speaking, if you had told me five years ago that I would be managing a VC fund, I would have probably laughed at you. However, I’ve always been interested in the interaction between tech and society. Though it might sound cliché, this is why I chose to be a VC.
PM: Is there anything you wish you knew before starting Lunar?
LS: Not really. I knew pretty well what I was getting myself into. It was a lot like starting a restaurant — it’s pretty straightforward on paper, but highly competitive in reality. You work hard on attracting your customers and try to avoid making mistakes that could break you. Only a few VCs achieve substantial success, the rest is quickly forgotten and replaced.
Running a fund and a restaurant is also similar in terms of growth, which can end up being detrimental. You grow your assets under management and, all of a sudden, you can’t invest in companies you like, because the economics of the fund doesn’t work anymore.
PM: It’s like serving a gourmet dish at a fast-food restaurant.
LS: In a sense.
PM: Is that why VC has become such a popular industry?
LS: Initially, VC was a cottage industry — a hobby for large endowments, a cherry on the top of other asset classes in their portfolios. All of a sudden, it became easier for people with connections to potential LPs to raise a fund, even a large one. More often than not, these people did not spend years in the start-up ecosystem and did not understand the rules of this game. They just followed a trend.
You see a lot of organizations that are not VCs per se, but are called VC investors nevertheless: family offices, private investors, people who are not risk-loving, whose governance structures are tricky and who act opportunistically. While being a follower might work under some circumstances, I don’t believe that long-term success in venture capital can be achieved without focus and dedication.
PM: What makes this line of business exciting for you?
LS: Spending time with brilliant people. It is challenging to stay sharp, jump between different roles, and learn about various sectors to be a partner to the founders. I love it, though.
PM: What do you consider your biggest accomplishment so far?
LS: Even though we are very early in our journey, we have already built a professional firm. We have institutional investors and great VC funds as LPs, which is a significant accomplishment for a first-time fund.
PM: What’s the hardest part of being a VC?
LS: Saying no. This is something that I didn’t realize before becoming an investor.
PM: Have you made any regrettable mistakes?
LS: One that comes to mind was one of our angel investments. We backed a great company on funky terms. This company built a dominant position in its market. Yet, when they started raising another round, other investors said they won’t invest on these terms. The company’s current investor didn’t want to move a bit, and I learned about the importance of alignment in the venture business.
PM: What are the skills that you believe make the best VCs?
LS: I think that VC is journalistic in its nature — you need to listen, learn as quickly as possible, and be elastic in your thinking.
PM: Are you leveraging your background in software engineering to make your VC life easier?
LS: No, we run our shop like any other startup. We use Airtable, Notion, Trello, and Google Drive, and automate how they interact with each other, but otherwise, it’s quite manual. If you’re asking about some magical tools that would automatically decide for us, then no.
First of all, the startup ecosystem has pretty bad data so that it would be a “garbage in, garbage out” kind of thing. Secondly, VC investing is so power-law distributed. It wouldn’t make a difference if we outsourced the decision-making process to any type of data analysis software.
Finally, I don’t think that a deep tech VC could keep its competitive edge focusing on technology only. Spending time with founders and being able to figure out who they really are — now that’s important. It’s a relationship business, you need to meet and connect with people.
PM: Why do you focus on the deep tech of all things?
LS: It used to be called tech before people started calling WeWork a tech company. It’s not — it’s a subletting company. Tech is something different than a neobank or a novel insurance company. Venture capitalists used to invest in tech, but at some point, the term became fuzzy. At Lunar Ventures, we want to write the first or second check to companies with fantastic technology and help them develop something relevant for more significant industry players.
PM: Is Europe the right place to do it?
LS: It’s a great question. In the VC world, location still matters, and the market dictates the circumstances. The European market is very dispersed. Berlin is a great place for consumer startups, Paris is an amazing location for biotech companies, and London is the hometown of AI tech in Europe.
Market dispersion used to be a real problem for startups. Remote investing also seemed undoable, and now we are investing in founders we have never met in person before. If you look at the most successful companies in the EU over the last ten years, like Elastic or GitLab, they all hire remotely, and they make use of the best talent pools they can tap into. So my response to your initial question is still “depends”, but not as much as it used to.
PM: What do you think we need in Europe to be more successful?
LS: We need to unlock the features of a functioning ecosystem. There are no deep tech business angels, exit possibilities are few and far between, and the learning curve is not steep enough.
PM: If we unlock these things, do you believe Europe could compete with Silicon Valley?
LS: I’m not sure. Silicon Valley is more than just a place. It’s a mindset. I don’t know if the European tech scene could inspire a similar kind of mentality. For instance, ten years ago, Europe emerged as a startup factory because Rocket Internet had mastered cloning great ideas and putting excellent managers to work. But guess what — Silicon Valley has already topped that — just look at how many companies emerge from the Valley these days. It’s not easy to compete with such a well-oiled machine, even if it has flaws.