Disruption, right?
One of the first things that the panel did during the Innovation, Disruption & Tech Forecast stream on Tuesday at SuperInvestor in Berlin was debate the very notion of disruption itself.
Uber might be thought of as the world's most famous disrupter, but is it?
Well, no.
At least, not according to Hans-Jürgen Schmitz, Managing Partner at Mangrove Capital Partners. The company doesn't fit in to the definition of disrupter as outlined by Clayton Christensen, he explained. A disrupter, he said, was a smaller company with few resources that is able to successfully challenge an incumbent.
The issue with Uber, Schmitz said, was that while it was true to say that it began as a small company, it certainly wasn't with few resources. And whether it successfully challenged an incumbent was also questionable, because what they actually did was not disrupt the taxi business, but increase the footprint of usage for that kind of transportation.
Roberto Bonanzinga, Co-Founder at InReach Ventures, disagreed, saying that if you went to LA you could see the affect Uber had had.
But he did agree that the term disruption was one used far too often.
The word wasn't disruption, he said, but innovation.
"Sometimes we as investors tend to confuse the two terminologies," he said, "but the ramifications of the two are very different."
Possibly the most inflated sector for investment was fintech disruption, and yet much of it was about innovation that would help incumbents, not disrupt them, he added.
You don't make money from disruption
Andrin Bachmann, Partner at Piton Capital went even further, saying that you don't make money from disruption per se.
"We are not in the business of disrupting, but of understanding what disruption can do," he stated.
"What it can do to either new entrants, which are the ones that we back, or, for the more established companies, how preventing disruption can protect incumbents from new entry."
Jordan Buck, Head of Non-liquid Investments at LGT Vestra Private Office, added that it was the scale of disruption that was important.
"Whilst we may think that VC is looking for the most disruptive companies, that wasn't necessarily the case. "The more disruptive an idea is, the longer it will take to realise an investment," he said.
Breakthrough innovation
Nils Rode, Co-Chief Investment Officer at Adveq Management and the session's moderator, then suggested that the session title should be changed to "breakthrough innovation". So what were the next big things? he asked the panel.
Hans-Jürgen echoed Jordan's earlier comments when he talked about the dichotomy within VC of identifying and backing the most innovative technologies on the one hand, and having to make money for investors within a certain time frame on the other.
"So you make compromises. You may not go for the most innovative ideas because you can't see them crystallizing into something within that time frame, or you go in at a later stage."
"The challenge is timing," he added. "And we don't often get it right. "
But Roberto said that the industry was too trend-driven.
"We as industry are like cows; we go where the grass is," he said, going on to explain that: "The amount of capital deployed in spaces that all of a sudden became cool is out of proportion.
"We need to go back to the principles of backing innovations when we see them. We need to have the courage to invest when we see something that we like that is addressing a big problem, whether fashionable or not."
AI is probably the most talked about thing right now, said Andrin. "It has a tremendous impact, but it's more of a sustaining than disrupting technology. It allows an incumbent with a lot of data to automate things that have been done manually."
For Andrin it wasn't so much the technology as the business model that was important, such as the concept of a "network effect". The network effect is where a product or service gets better the more people use it (think the telephone, Facebook and Google).
Roberto said that the key was keeping an open mind.
"I try to unlearn as much as I can, he said. "One of the biggest issues is that we too often think that we have the answers before asking the questions," he said.
Hans-Jürgen said that they tended to look at problems where technology and business ideas could help. Recruitment was one industry full of opportunity, he said, attacking the incumbent headhunters by bringing parties together in mobile marketplaces.
Roberto's concluding comment showed that perhaps the panel had to look closer to home – the use of technology within venture capital itself.
"How are we here to invest in top technology and yet we use zero technology in our own business?" he asked.
The answer as far as he was concerned was to put technology at the heart of his work in identify deals.
And it was working, he said. "Before I was looking at 100 deals per month, now it's 1700."