The Twenty Minute VCKlaus Hommels: Why "Portfolios are Merely a Construct to Make LPs Happy"? | E1231
At a glance
WHAT IT’S REALLY ABOUT
Klaus Hommels Rejects Venture Orthodoxy: Portfolios, Pricing, and Defense
- Klaus Hommels, founder of Lakestar and chair of the NATO Innovation Fund, discusses his unconventional philosophy on venture investing, arguing that portfolios are largely an LP-pleasing construct and that true returns come from concentrated, high-conviction bets. He emphasizes venture capital as “outsourced business development” for founders, not a financial engineering game, and explains why he is deliberately not price-sensitive when backing exceptional companies. A major portion of the conversation focuses on Europe’s structural underfunding of innovation and defense, the need for technological sovereignty (in areas like space, satellites, and AI defense), and how deep tech can reshape modern warfare economics. He also reflects on career-defining wins (Spotify, Revolut, Airbnb, Facebook) and losses, the role of luck and ethics, and what actually drives long-term fulfillment as an investor and human being.
IDEAS WORTH REMEMBERING
5 ideasPortfolios are a construct to satisfy LPs, not a compass for great investing.
Hommels argues that the formal portfolio model (number of companies, reserves, per-company caps) is mostly about fitting institutional rules; in reality, fund outcomes are driven by one or two exceptional companies, so investors should be structurally willing to over-concentrate when they truly see an outlier.
When you find a truly exceptional company, you should take disproportionate risk.
He openly pushes against rigid per-company allocation limits, negotiates more flexibility with his advisory board, and believes capital constraints should not prevent backing a clear winner with very large checks over time.
Being price-sensitive at the early stage is far less important than being right.
Hommels says he is “absolutely not” price-sensitive: the great companies would be worth backing even at 30% higher valuations, while bad ones aren’t attractive even if 30% cheaper; the judgment of quality and founder is what compounds, not entry precision.
Venture capital is best understood as outsourced business development for founders.
He rejects the image of VCs as gatekeepers with ‘borrowed LP power’, instead framing his job as increasing a founder’s odds of success through networks, business development, and hands-on help—reasoning why he only backs a limited number of companies he can deeply support.
Europe massively underfunds innovation relative to the post-war decades and the US.
Historically, Europe financed ~4% of GDP into innovation (via banks); now only ~0.5% of GDP flows through venture, an 8x shortfall versus the levels that built Bosch, Siemens, Porsche, etc., which Hommels believes makes it unrealistic to expect similar wealth creation.
WORDS WORTH SAVING
5 quotes“Venture is not sitting in a nice office with borrowed power of LPs and playing like in old Caesar's times, thumbs up, thumbs down.”
— Klaus Hommels
“I'm not so keen of building portfolios. If I find cool companies that make a difference, that is where the beef is.”
— Klaus Hommels
“If you see the right company, you should take a lot of risk and over-proportional risk in those.”
— Klaus Hommels
“The progress of a society is the way how they can handle risk.”
— Klaus Hommels
“The heaviest things in life are not iron or gold, but unmade decisions.”
— Klaus Hommels
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