Investor Florian Heinemann (#782)

Heinemann on Europe's productivity gap and its fix

Europe has fallen far behind the US on productivity and growth, and Heinemann thinks the answer is entrepreneurship and imported talent, with public money aimed at whole technology fields rather than single companies. That frame runs through the conversation, from reading Zalando's About You purchase as healthy consolidation to Project A's shift almost entirely into B2B and defence. The serial founder who builds to flip is finished, because good companies now take five to ten years.

Takeaways

• The serial founder flip era has ended. Heinemann says a very good company now needs five to ten years, and funds need exits of several hundred million. The lesson of 2020 and 2021 is that too much money at too high a valuation can destroy promising companies.
• Most companies should not take venture capital. Heinemann argues only very few companies need venture funding, because it pushes them onto a narrow path and forces extreme growth towards a valuation of several hundred million. The bootstrapped businesses Westermeyer raises did not need it.
• Europe needs entrepreneurship to close its US gap. Heinemann says Europe has little productivity progress and the US has overtaken it completely in ten years. He wants Europe to attract global talent and to fund technology fields such as fusion and defence, not industrial policy pinned on single companies like Lilium.
• Zalando's About You deal is healthy consolidation. Heinemann calls the deal a good consolidation with benefits for everyone. He was surprised Otto exited, since Otto only holds stakes where it is materially invested, and the founders including Tarek stay on with roles and capital. Zalando is worth around 10bn now.
• Project A has moved almost entirely into B2B. Defence is around 25 percent of activity, and 80 to 90 percent of the portfolio is B2B. Recent investments include Labris in defence and humanitarian coordination, NAPI in EV charging clearing, Relay in last-mile logistics and Rematic in AI for medical regulation.
• Missing exits trace to mismatched expectations. Heinemann blames expectations set by 2019 to 2021 vintages and a backlog of three to four years of companies that should be public. The US IPO market is slow too, and Axel Springer went private because the exchange was too complicated.

What Heinemann expects next

• Only two or three general AI players will win, probably including OpenAI. Project A backs specialised players such as 11x and Rematic instead, because building a new LLM takes several hundred million and the rest will be write-offs.
• Tariffs are probably not the way, since all countries have benefited enormously from free trade. They will hit Shein and Temu.