Venture capital is very “different” than “traditional finance” and is “nothing like” how things work at large financial institutions. At the same time, technological innovation is driving the financial sector to evolve faster than ever before.
Those are the driving forces behind a training programme offered by Middlegame Ventures and the Luxembourg House of Financial Technology (Lhoft). The three-week crash course, which ends at the end of this week, aims to expose high-flying finance students and graduates to the world of fintech VCs.
The “” project, now in its second year, is the brainchild of Pascal Bouvier, managing partner at Middlegame Ventures. “I’m a venture capital investor and invest in early-stage startups. So I’m trying to figure out, off of that, how I can help the Luxembourg ecosystem,” Bouvier said during an interview.
“Given that there is an increasing rate of change in the financial services industry, I believe--and I think that many people within the industry believe--that people starting their career should have an understanding of the high-level trends that are going to change the industry,” he said. “Whereas 20 or 50 years ago, that was not necessarily the case. It’s because the industry was not changing as much as it is right now, via the application of technology, via regulatory fiat, via consumer and customer expectations having changed”.
“So I asked, how can I help, with my subject matter expertise, the ecosystem here? In answering that question, a lot of people would suggest doing an accelerator. Like a programme catered to startups”. But Bouvier said “there are many such programmes” in Luxembourg and elsewhere. There are so many masters students and PhD students that either are about to start working, have just started working, or are finishing their studies, that are interested in financial services” in Luxembourg and across the EU. In his three years in the grand duchy, he has “kept hearing ‘hiring is so difficult’ because the industry is thriving.” This prompted him to think through what type of programme, in partnership with the Lhoft, could connect with them.
Three deliverables
He wanted to “create a programme that I personally had not seen before.” The sessions provide an overview of Luxembourg’s financial sector, high level fintech trends, how to analyse startups from an investor’s perspective, and how VC firms operate.
It gets them to start thinking about how to make decisions with a limited amount of time and incomplete information.
The curriculum is centred around three sets of deliverables, each submitted in a written report and then presented and defended verbally.
The first is, out of a given universe of startups, how do you analyse that universe to rank the startups from most interesting to least interesting.
The second deliverable is, how do you write a short document that will introduce to a reader or listener--your colleague in an investment fund, for example--to that startup that you have highly ranked. The document should convey, with a limited amount of information, that the startup is actually interesting.”
“The third deliverable is a full investment memo, which usually happens around when an investment is made in a startup. And that’s a natural progression of the investment life of a fund.”
Decision-making skills
While the course “approximates very, very closely how we make investments,” there is a second set of skills organisers aim to impart “that’s probably slightly more important”, Bouvier said. “It gets them to start thinking about how to make decisions with a limited amount of time and incomplete information.” It “introduces them to a world that I view as probabilistic.”
In any sector, not only finance, “large incumbents, large businesses, are all about deterministic decision-making. They want to reduce, mitigate, all the way to close to zero, an unknown.” Listed companies want to publish predictable quarterly figures, for example.
“The world of a startup creation is nothing like that, right? It’s all about ups and downs, and volatility,” he continued. “Even if you end up with a large insurance company or a large bank, you should have in mind that you’re going to live in a completely different world. And so having that peek into how someone like me, my team and my other partners approach risk and investing in a probabilistic way is quite interesting, especially for students.”
Real-life exposure
One of the students in the course is Clémence Jérome, who has just completed a master’s in digital transformation in finance at the University of Luxembourg. She previously earned a master’s in general finance and economics, and a bachelor’s in economics and management, likewise from the University of Luxembourg.
Jérome applied for the VC class because “one of my friends took part in the programme last year, and she told me that I really had to do it this year.”
“Venture capital is a field that I did not know much about before applying to the programme, but since I love entrepreneurship and finance, I felt like it was a good match,” Jérome said in an interview about halfway through the course. “I’m also passionate about fintech.”
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“It’s kind of rare as a fintech person and enthusiast to meet people that actually understand my questions, and with whom I can actually talk that deeply [about these] subjects, because I truly love fintech.” She has found it astounding “that we’re actually paid to participate in this programme. I mean, it’s completely insane. I think we should be the ones paying for it.”
“Tacit knowledge”
Jérome said that she has been gaining “tacit knowledge that you cannot get by just attending traditional lectures or by reading a book.”
The subject matter has surprised her, as well. “Venture capital is actually way more different than I thought.” Jérome has found the VC space to be quite discrete from the “traditional finance” she has been studying.
She officially finished her master’s degree last week and was not entirely sure of her future plans. The VC class should help her “know a little bit better what I want to do,” Jérome said. “I just don’t want to go into the first company that offers me some job”.
Motivation for Bouvier
Bouvier co-founded Middlegame Ventures in 2018. The firm is investing its first fund, . “We are currently fundraising our second fund”, he said.
The VC outfit on its website that it focusses on early stage “fintech 3.0 and web 3.0” startups and that it has invested more than €300m in more than 40 companies in more than 10 countries. In addition to its headquarters in Luxembourg, the firm has offices in Dublin, London and Washington.
I get that question a lot... I do it to give back and help the ecosystem.
So what is Bouvier getting out of running the VC scholar project?
“Yeah, I get that question a lot”, he replied. “And it’s very difficult for people to understand that I do it to give back and help the ecosystem.” Referring to the expression apparently visible on your correspondent’s face, Bouvier added, “I get that look that you’re giving me.”
“I’m not a charity. I’m a venture capital investor. So I’m a dirty capitalist. But at the same time, it’s important to give forward and help the ecosystem. Just picture the network effects of having a group of scholars every year. So fast forward 10 years from now. Let’s assume that we have 10 scholars per year. That’s a fairly good network. And if even 10% or 15% of these people end up working in Luxembourg, at some point that will have pretty interesting effects for the ecosystem in Luxembourg.”
If it so happens that “there is a fit” with a particular participant, “and we really like that person, then we would recruit that person, but that’s really not the reason, the genesis,” for the scheme.
“Neat incentive”
This year, students are participating in teams of two. The team with the top score at the end of the three weeks will win a two-month internship. The first month of the internship is with the Luxembourg fintech Fundcraft and the second is with Middlegate Ventures. “Not that it’s an amazing prize, but I think it’s kind of a neat incentive,” Bouvier said.
Asked if he’s already planning to repeat the course next year, Bouvier answered that “I’m planning a programme that will outlive me. So I’m not planning a third edition, I’m planning a platform that I hope is still working 50 years from now .”
Middlegame Ventures and Lhoft have not yet announced the dates for next year’s programme, but Bouvier expects it would take place in late summer.
This article was published for the Paperjam + Delano Finance newsletter, the weekly source for financial news in Luxembourg. .