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B. G., Opalesque Geneva: Ian Sosso founded Monte Carlo Capital (MCC) in 2009 after a career in investment banking and ended up winning the 2019 "Best European early-stage investor" award from EBAN (a Brussels-based trade association representing 10,000+ business angels in Europe), with a personal five-year IRR circa 40%. But now he is moving on the evolutionary ladder.
Over the past six years, MCC has invested more than €40m (US$43m), with Sosso running more than 50 syndicate investments as lead investor in the rounds, directly into businesses.
MCC, which has grown into one of the most active groups of high-net-worth and family office investors in early-stage businesses in Europe, has morphed into a venture capitalist (VC) firm with the launch of its first Fund, the MCC Early Stage Disruptive Tech Venture Fund.
For Sosso, the Fund is a genuine evolution. Indeed, he started MCC as an angel investor, investing his capital in businesses and essentially working on his own, focusing on clever selection and heavy hands-on involvement, before becoming a "Super Angel". Now as a VC, the new fund provides the firm with not only financial resources but also human resources, as he has a team of three to support him.
As an angel, he led up to five successive investments with MCC investing up to €7m in businesses and has built a portfolio of 23 companies. Given MCC's involved and concentrated approach, the group has built substantial ownership in some of those companies.
Now as a venture capitalist, Sosso is looking to build a more diversified portfolio, targeting a portfolio of around 30 companies within three years, which will lead to greater diversification.
This evolution will mean moving away from being the very hands-on lead investor in pre-seed and early seed stages toward a more conventional approach of co-investing, both as follow-on and co-lead, with other VCs, and a greater focus on seed stages (in companies with a bit more mileage).
There will be satellites surrounding the fund in the form of SPVs (special-purpose vehicles) for investors - and managers - who wish to make extra investments in any specific company. Sosso expects to launch SPVs to co-invest with the fund for around two-thirds of the companies at seed, with tickets of around half a million euros, and deploy a lot more capital over multiple rounds.
"I initially did not want to run a fund," he tells Opalesque, "but we have reached a stage where it is needed. The fund is the access vehicle, small and diversified. And we will be able to build bigger positions in our favourite companies via SPVs. And I believe seed investing, done properly, is the highest returning asset class over the long term. I built the strategy to invest my own capital and it is designed to sustain high returns over the long term. I try to avoid fads and invest in businesses solving real-world problems through technology or addressing big inefficiencies. … that's a strategy that is sustainable in the long term, irrespective of investment fads and economic cycles ."
Ian Sosso will be speaking during the next Investment Workshop webinar, "The Ultimate Alpha Strategy: Mastering Early-Stage Tech Investments," on February 27th (details below).
Borderline entrepreneur
There are several things which differentiate Monaco-based MCC from other VC companies, he says. Firstly, there is the hands-on approach, which historically has been more significant than that of traditional angels or VCs. " I used to say we were borderline entrepreneurs while remaining investors". Sosso adds that the "strategy will now allow for more diversification and co-investing, but we will keep our DNA of added value investors and allow our own LPs to do a lot of investments via SPVs."
Secondly, his international background, which includes living in Asia for 16 years where he ended up running an investment bank, a strong network in Europe (he is on the board of EBAN) and a partnership with a deep tech venture builder in the US., keeps him away from the constraints of locally focused funds and broadens his opportunity set.
Then his investors are essentially sophisticated and include hedge funds and entrepreneurs. "They bring a lot of value," he says.
The fourth factor is his background in investment banking which has taught him a lot about structuring deals, risk management, surviving a crisis, and, above all avoiding the typical pitfall of inexperienced investors, namely fads.
Deep tech and disruptive businesses
The 10-year fund targets 25%+ IRR net to investors. It had its first close in March 2023 and will have a hard close in August 2024.
Domiciled in Luxembourg, it seeks €15m (of which two thirds have been committed) to make more than 30 new seed investments of €250K, another €250K for follow-ons in 15 of them. The businesses are based in the US, Europe and the UK and the fund has already closed eight investments and launched five co-investment SPVs.
The target companies are in Deep Tech (i.e., solving problems via technology, backed by strong intellectual property and often stemming from universities). Examples include a nanofiber which is used in bone-to-tendon surgery yielding significant increase in repair strength in shoulder surgeries (US-based Atreon); a very predictive emotion analysis AI, spun off from one of the leading research centres in AI, with significant applications in a whole range of sectors ranging from defence to BtoB and BtoC (US-based Cognovi Labs); the leading industrial preventive maintenance business (US based Asset Watch); a highly disruptive satellite launcher which eventually should be able to launch satellites every two hours at a fraction of the cost of SpaceX, using magnetic levitation and a catapult, by eliminating the first phase rocket (US based Auriga); and a diagnostic device whose inventor is one of the world's leading heart failure key opinion leaders (US-based TegoSens).
The target companies are also businesses looking to address significant inefficiencies, which operate in a diversity of sectors, such as Swiss-based LeaseTeq, which is the first digital-first leasing company; US-based Asset Watch, the leading industrial preventive maintenance business; or Simba Sleep, which through a combination of high-quality products, marketing and smart logistic has become the UK's leading mattress brand.
WEBINAR
The Ultimate Alpha Strategy: Mastering Early-Stage Tech Investments
Join this exclusive investor interactive workshop and learn:
• How to identify 20x investments
• Why early-stage investment is the ultimate alpha generation strategy
• What is the full cycle investment process, from deal sourcing to due diligence, closing a deal and working with the company
• What is the most difficult in early-stage investing?
• Why deal sourcing and due diligence are the main drivers of return
• The channels to source high-value tech deals across verticals
• Why building tech investing know-how is not done by being a passive investor in funds. What you can do instead
Who: Ian Sosso, founder & managing partner of Monte Carlo Capital
When: Tuesday, February 27th 2024 at 11 am ET (4 pm GMT, 5 pm CET, 7 pm Riyadh, 8 pm Dubai)
Free registration: www.opalesque.com/webinar/
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