An investor with conviction — an interview with Markus Grundmann

Markus Grundmann loves to play offense. Believe it or not, it’s not because Senovo, his VC fund has its headquarters in Munich, home to Bayern Munich, one of the best European football teams. On the contrary, the VC firm is located closer to Ludwig-Maximilians-Universität München (LMU) — one of Europe’s premier academic institutions — than to Allianz Arena — the epicenter of football in the town. Even so, keeping eyes on the ball is critical to both a football team and Senovo’s strategy.

What playing offense means for Markus is to move fast and break things — but in a conscious way. It’s also about being extremely focused and geared towards maximizing your impact whatever you set out to do. Now in their second fund, Senovo has been doing exactly that, focusing their efforts on supporting B2B SaaS companies once they have achieved product-market fit and have to scale for the first time. Read our interview, to find out how Markus reached this point.

Paweł Michalski (PM)
: Markus, what did you do in your 20s?

Markus Grundmann (MG)
: Oh, those were exciting times. I remember the sentiment — it was quite similar to what we are experiencing now. It was relatively easy to get a job at a very interesting company if you had the right skillset. I was studying computer science in the dotcom era. I joined a product development team at a company that IPOed shortly before I came here.

I spent a year and a half at the company, and then I went to Silicon Valley to take another software development job. After a year, I returned to Germany to complete my studies, and I simultaneously took a part-time job at the R&D department at IBM.

PM
: What do you remember about the dotcom bust?

MG:
One of the big lessons for me was that we could usually deliver the right technology, but we did not have a proper understanding of the relevant business model yet. It ended poorly in the early 2000s.

It got me thinking about the business side of software development. Instead of taking another developer post-grad job, I joined Accenture. While I was moving up the ranks of the company, we started receiving an increasing number of questions about digitization. Companies were looking for new revenue generation possibilities and wanted to explore digital products.

PM
: So, what did you do?

MG:
I did an MBA at the University of Cambridge, and while there, I asked myself the most important questions: what do I want to do? What is my passion? I believe that in your career, you can either play offense or defense. Playing defense is about job security, the brand that you can put on your CV, a stable platform to build your career. In a defensive approach, you fight for small, incremental changes in the market.

On the other hand, playing offense is about moving fast and breaking things — deliberately, not recklessly. It’s about being part of a smaller company with bigger ambitions, where it’s mission-critical to make big decisions, even with missing data. It’s about gearing every asset towards maximizing your impact. And I enjoy this kind of lifestyle a lot.

So after graduating from my MBA, I tried to join another startup as a product manager. Unfortunately, the company was sold before I came to terms with them. Luckily, their Early Stage Lead Investor was looking for an associate who could bridge technology and business — crucial for their deep tech investment focus — and I happened to have the perfect profile. I joined them and stayed there for four and a half years, focusing on B2B software and IoT investments.

PM
: What lessons have you learned as a young VC?

MG:
At that stage, I found out that my investment thesis revolves around a focused approach. For seed-stage companies, it’s about exploring and finding the right product/problem/market fit. At the Series A stage, the challenge is to double down on what works and to create these magical KPIs which enable you to raise a large growth round. I think in the mid-market and enterprise space, the best B2B startup founders have deep domain expertise. They have seen from an operational perspective how a business process is severely broken, “give up” their career, and set out to change an industry.

Past that point, it’s about building and scaling a software company. So, VCs should have a playbook: a list of the most critical operational decisions with an understanding of how these decisions impact the overall business of the company. That’s what we at Senovo excel at.

PM
: How do you approach this at Senovo?

MG:
We are in our second Fund, having invested in 24 companies so far. We are completely focused on B2B SaaS companies entering what we call the initial scaling phase.

In our opinion, there are three major scaling phases. The first one occurs when you are still a 10 to 20 people organization, looking for your product-market fit. Your job is to find an answer to the question: can we get customers excited enough to pay for our product?

This phase is followed by the initial scaling phase — and it’s all about creating an operational framework to make a growing organization work. And then you have the actual growth phase. At this point, you already have a North American and European footprint with 60 to 120 employees. We try to focus entirely on the second phase.

PM:
Where did the strategy come from?

MG
: When I started as a VC, I was surprised to see that many investors didn’t understand the operational trade-offs deeply enough to link them to high level strategy and the implications for their portfolio company. As a consultant, it was my job to discover the levers that you need to pull to enable the methodical and efficient growth of companies.

I think that at Senovo, we probably know as much as any other VC, but we are focused much more on just one area. We know the KPIs. We have navigated many operational issues few others have done.

As an investor, we want to deeply understand the situation of the company and figure out which levers to pull. We want to have a clear value creation plan. I call this strategy: “McKinsey + Capital”.

PM:
What is the most rewarding part of the VC job?

MG:
Seeing teams succeed. Let me just leave it at that. It has plenty of dimensions: it could be hiring a rockstar performer or raising a new round, but also the smallest victories.

PM:
In that regard, what has been your favorite victory so far?

MG:
I’m not sure it’s a victory, but I’m proud of our value proposition. We are extremely well-positioned to help founders who have a certain kind of product. Besides, it’s really fun to help people, and being able to do it professionally is a blessing.

Another thing that makes me proud is our conviction. I would say that investors are usually careful and insecure in the way that they are looking at companies — a bit of bad news, and they stop trusting their instincts. But if you take a close look at venture capital, it is about having convictions: about your niche, about what you do and who you invest in.

We approach our decisions with a deep belief — one that we can stick with and defend. That’s how you separate signal from noise. That’s something we set out to do many years ago, and now we are mastering it.

PM:
And how are you doing that?

MG:
By learning. We learn from the entrepreneurs we work with. We learn from other investors and their portfolio companies. We learn by analyzing companies. I’ll tell you what: if a SaaS company files for an IPO, I will have read the filing by the end of the same week.

As VCs, we aggregate information, structure it, and disperse it with our portfolio companies. So if you have to distill it to the absolute core: the most important part is learning about SaaS companies. This is the driving force behind our value proposition.

PM
: What do you think you need to succeed as a VC?

MG:
You need to be very analytical, you need to be extremely curious, and you need to have an open-minded, friendly personality. With that skill set, you should be able to acquire information, structure it into knowledge, and have the ability to relay it for the benefit of a company.

PM:
Okay, so what’s the challenge here?

MG:
I think it’s the ability to balance things. Take our firm: as a relatively young VC fund, we have limited bandwidth. So there has to be a clear hierarchy by which we prioritize. For us, it’s portfolio first, hot deals second, managing general deal flow in third place, and other activities are number four.

Now, there are situations where this hierarchy stops us from doing something. Like when we see how we could help a company not in our portfolio with advice, but don’t have the time to do it. To some extent, we try to solve it by blogging.

PM
: Is it easy for you to find the same kind of balance in your personal life?

MG:
I have set clear boundaries and encourage everybody in my team to do the same. Just as with your work, you have to create a clear balance for yourself. For instance, I don’t work on weekends. I also don’t do meetings before 10 am and after 6 pm. If you establish rules, like time-boxing in your calendar and a clear hierarchy of tasks to do, things naturally fall into place. It simply narrows down the number of other things that you can do. It has been working relatively well for me so far.

PM:
Is there something you struggle with?

MG:
I’m a bit too stressed at times. I often need to decide between wanting to help and doing what’s relevant for our mission. It means saying no knowing that you could help an entrepreneur of a startup not in our portfolio. So you’re doing the right thing by time boxing, but it still bothers me that I could not make more time available.

PM:
Do you use any tools that make your VC life easier?

MG:
I think our tech set-up is very standard. We use a combination of MS Office and GSuite tools for office work, Zoom for teleconferencing, and Slack for internal communication. We organize our notes with Evernote and are avid Spotify users.

If there is anything I would like to recommend, it would be Podio. We run our processes, including dealflow, using this tool.

PM:
One last question: what gets you going outside of work?

MG:
Mountain biking. I do a lot of enduro and mountain biking. If you want to find the best trails — go to Italy!