Part of Molten’s Fund of Funds portfolio, Moonfire’ approach to finding harmony between human expertise and rapidly developing machine learning technology has positioned the firm as an industry trailblazer.
Our conversation with its founder and managing partner, Mattias Ljungman, delves into the origins of Moonfire, its innovative approach to pre-seed and seed-stage investing, and the imperative of infusing AI deep into the fabric of venture capital.
We meet Mattias over Zoom in November last year – just as the industry was mourning the halcyon days of mammoth spending, navigating a faltering NASDAQ, and as the waters circled around FTX and SVB. We delved into Moonfire's origin story, its novel approach to pre-seed and seed-stage investing, and its conviction in the importance of AI and machine learning in venture capital.
Since that discussion, events have caught up with Moonfire’s stance on the role of technology in VC. ChatGPT’s success took the world – and even its creators – by surprise. And at the time of writing, two further iterations of the AI language model have been released, the latest of which can ace Bar exams and impress medical scholars. What about transforming venture?
So what is Moonfire all about?
Mattias begins with a straightforward premise: as technology continues to revolutionise every aspect of the global economy, venture capital must evolve to stay relevant. “VC has changed dramatically, since its origins in the 1970s,” he says.
“Silicon Valley was a place where you knew people, and deals were done by handshakes and investors driving around to fund teams developing innovative projects, particularly in the San Francisco Bay area.” Fast forward to the present, and technology has permeated every aspect of the economy. No one, in any industry, can claim that they are not, in some way, a tech business.
"Maintaining a competitive edge in this fierce environment requires every company to leverage technology," he observes. “Even businesses producing simple components like nuts and bolts need to consider their technical infrastructure. Board executives everywhere are focusing on this, and it’s leading to a transformation of the entire economy. We are experiencing an unprecedented era of innovation in human history. It is unrealistic to assume that venture capital will continue with its traditional, small-scale, relationship-driven approach over the next 10-20 years.”
Marrying technology with human expertise
Mattias firmly believes that it is essential for funds to explore models that not only capitalise on the benefits of scale and size, but also employ technology to enhance accuracy, precision and performance. “This is a critical aspect of our core principles, which is why we have more machine learning engineers than investors on our team – currently twice as many. We are always open to having that conversation.”
Moonfire envisions a future where technology and human expertise work in harmony to make better investment decisions. "We're talking about a symphony between tech and humans working together," he explains. "It's not about technology finding great founders, but technology helping venture capitalists become even better at their jobs." By fusing machine learning with human intuition, Moonfire has set itself apart within the industry and proven the effectiveness of its strategy.
Moonfire has also set its sights on addressing a disparity in the European investment scene. Mattias notes that Europe has fewer seed funds with billion-dollar outcomes compared to the US. Moonfire aims to change this by revolutionising the way pre-seed and seed investments are made in Europe. There’s "only a handful of seed funds that can claim to be the first money into any of these unicorns."
'We feel vindicated in our vision"
We ask Mattias if Moonfire's founding values have evolved since the company's inception. He replies confidently: they have remained steadfast in their approach.
"We feel vindicated in our vision," he says, pointing to the increasing impact of machine learning and AI on the ecosystem as evidence of the growing importance of technology in venture capital.
“[AI] was once a mere research project; now it’s being used widely across our ecosystem. Most of our portfolio companies are thinking about how they can deploy that type of technology, and we are doing the same.”
Mattias explains that technology helps them narrow down interesting businesses, allowing their human experts to focus on evaluating the founders themselves. He identifies some key qualities they seek in founders: an obsessive nature, a relentless drive to win, being a team magnet, and being data-driven in product development. “Founders must genuinely care about the problems they aim to solve and have the tenacity to see their vision through. You need people who have this sort of mindset of being able to run through walls, to solve that problem they really, really care about."
Turbocharging the Moonfire approach
We then turn to Moonfire's partnership with Molten's Fund of Funds programme. The collaboration, says Mattias, achieves something quite special: the benefit of working with a partner that effectively turbocharges the Moonfire approach. “A tech-first approach to venture needs to be complemented by sustainable and likeminded sources of capital – capital that understands the industry today, and what we’re trying to achieve,” he says. The partnership has also helped Moonfire extend its networks and build references. “The businesses you’ve invested in are now creating the next generation of founders that we want to connect with.”
Lauding Molten's knowledge and our experience as operators in the industry, both of which have been valuable assets to Moonfire, Mattias believes that our collaboration has contributed to Moonfire's success in its mission to reshape seed-stage VC.
Moonfire's spirit and steadfast commitment to its principles are undeniably admirable. Mattias' unwavering belief in the role of technology in venture capital and his dedication to nurturing the next generation of European startups leaves a lasting impression.
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In a world where businesses must adapt to survive, Moonfire's approach is a shining example of how embracing change and innovation can lead to success. As they continue to forge ahead, the Moonfire team will play a crucial role in shaping the future of seed-stage VC, both in Europe and beyond. Of that there is little doubt.