“We are looking for teams that have the characteristics of our previous successful investments,” says Jure Mikuž, the managing director of the most successful venture capital fund in the region, RSG Capital, whose exit in Celtra brought a 10-times return on the invested euro. What is also interesting is his opinion that pitches are overrated, because they only help you find out whether the person on the stage is capable of selling his or her idea to the investor, which increases the possibility of them knowing how to sell it to users on the market. For Jure Mikuž and his manager team, pitching lasts from the first meeting to signing the contract and also includes everything that happens in between – besides the idea and business model also, and especially, what happens on the level of relationships and people! RSG Capital has successfully completed its ten-year investment period, but its successor, the South Central Ventures fund has a bright future with new investments and will be joining us at this year’s PODIM as one of the main conference partners. Do you want to know how you can convince them and what is the secret behind their success?
It is always interesting to talk to Jure Mikuž, managing director at RSG Capital, the first venture capital fund in Slovenia and one of the most successful ones in the region. He is an investor with rich experience, whose investment into Celtra, a leading global company in the field of mobile advertising, achieved a ten-times return on the invested euro for RSG Capital. In this year, he is planning exits from at least three or four companies from amongst the ten portfolio investments of the mentioned fund.
The experience they had acquired by investing into tech companies, their social capital and excellent knowledge of the conditions in the region are the more than welcome dowry that Jure Mikuž, Tatjana Zabasu, Jan Kobler and Domagoj Oreb are bringing to the South Central Ventures fund (SC Ventures). The fund has 40 million EUR of assets at its disposal, from which €1.5 million is intended for seed investments and the rest to “early to growth” development stages, up to three million EUR per invested company.
Considering the results achieved by RSG Capital – besides Celtra, they also celebrated with investments into companies such as Degordian and Efos, for example – we can assume that the success will also spill over to SC Ventures. From the year 2016, when they began investing, they entered 13 high-tech, mostly B2B companies through their offices in Zagreb, Beograd and Skopje. The majority of the companies (the list of them can be found here) are diligently achieving the set milestones with dedicated teams, knowledge, competences and the support of SC Ventures managers.
In this year’s PODIM interview, we talked to Jure Mikuž about what he thought about investing in startups ten years ago and what he thinks now. We were also interested in how the regional startup ecosystem is changing and what ends up tipping over the investors’ scale. You also shouldn’t overlook the TOP 3 pieces of advice for all founders who are beginning to look for a VC investment.
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Considering the results of RSG Capital and the progress of portfolio companies of SC Ventures, it seems that you have a lucky hand in choosing the startups you invest in. What is the secret behind your success?
I think it’s the mileage (laughs, a/n). The other very important thing are the people we have around us, who know specific industries. They help us recognize quasi-promising projects and eliminate them relatively early, which means that we aren’t the only ones to deal with the analysis of whether a certain solution or technology will make a breakthrough or not, what will happen … Well, the chances of success of course also improve with the number of pitches, meetings, due diligences that you make …
How many pitches have you heard in your VC career so far?
Many. Probably a couple of thousand, without counting those during coffee breaks at conferences. I don’t keep a consistent record.
Quite a number! But a little bit of a psychology is probably hiding in every investor …
Psychologist, psychotherapist, but mostly someone who trusts their gut. Not so long ago, for example, we were studying a case of one startup that had traction, in short, the guys had something to show. But in one of the first meetings, we simply got a bad feeling, because of the way they acted, the way they answered our questions and also forgot what the answer was when we set the question the first time. And we decided not to collaborate. Well, otherwise I also think that pitching is overrated.
Why do you think that?
Again, I’m speaking based on experience. I’m attributing less and less importance to certain public appearances, pitching and competitions … The only thing that you can find out with a pitch is whether the person standing on the stage is capable of selling their idea or product or not. Because if they don’t know how to sell their story to the investor, then they will also find it very difficult to sell their product to the market.
So what counts is that at the end, a contract is signed or there is an investment?
For us, pitching lasts from the first presentation to the day we sign the contract, through all the situations of getting to know the person or the team. Nine, six or three months can elapse in between. And we can step away at any point. And that is also what I keep telling my team. It can easily happen that an analyst dives into the details of the idea, business model and business operations of the startup, makes contact with people, becomes biased and doesn’t pay attention to potential obstacles. Or – they want to see them less. But we are adhering to the principle that until we invest, we keep our eyes peeled all the time and we pay attention to what could go wrong and, on the other hand, what are the positive things that could tip the scales.
Then it’s important to see how the founders act in as many different situations as possible …
Of course. Once we invest, the marriage is set. That’s why it’s really important that we go through as many different situations as possible with the founders and the team, both those that are pleasant and those less so. Maybe the less pleasant ones are even more important. When we set uncomfortable questions. That is when the person’s character is visible most clearly, that is when it might be easiest for you to judge whether the team will be a reliable partner even in the difficult times, whether they will be able to fulfil the given promises. Then again, the same goes for startups, it’s also important for them to get to know us in many different situations.
What, then, are the key lessons or situations that have personally helped you master startup investments?
Negative experiences. When I talk about personality characteristics of founders, I am basing it on what we have already experienced. And then we try to avoid it. This can often be frustrating for my co-workers because I also see fears where many others do not. Said differently – we are looking for teams that have the same characteristics as our previous successful investments.
Based on your previous experiences, what would be the top three pieces of advice for someone looking for a VC investment and intending to knock on your doors?
Get to know us, find out what kinds of companies we invest in, what are the solutions and technologies that interest us. Prepare your numbers exactly and stand up for them. Everything you say needs to be the truth or at least very close to it. And thirdly, you need to be prepared for a long-term partnership with an investor. And I probably don’t need to repeat the fact that you should solve a real and big-enough problem.
How would you comment on the conditions you worked in three or five years ago versus today, also in the light of the incredible boom of blockchain startups, ICO campaigns and crypto investments?
In this case, the Slovenian market is specific. Relative to the size of the market, nowhere else in Europe are there as many ICOs as there are in Slovenia. That is definitely the biggest change.
And what do you think about it?
It’s good that fresh capital is entering the ecosystem. I’m more worried about what will happen when the team that collected millions today will need to start delivering results and fulfilling promises. White paper is one thing, but it’s something completely else to get a lot of investors for an idea when most of them don’t even know what exactly they’re investing in. Earlier we talked about how for us, pitching lasts from the first meeting to signing the contract, and during that period there are many situations in which you can get to know the team, its technology, see how they are thinking, what they’re good at, where their weak spots are … There is no such moment with ICO stories. ICO is more like Kickstarter than us. Unfortunately, I am not sure that most investors are aware of that.
And what are the key differences between startups that pitched three or five years ago versus today?
Well, in Slovenia today, there are practically no more meetings where blockchain or ICO isn’t mentioned at least once. More than differences in startuppers, I can comment on differences between countries. If I look at the area of former Yugoslavia, Croatia has made the biggest leap. In Serbia, the ecosystem is also relatively well-developed, it shows that Microsoft, Comtrade and other development centres are located there. In Macedonia as well, the startup scene is dynamic, and the companies there are actively connecting with other countries. Albania and Kosovo are fairly focused on solutions for the Albanian language area, including the diaspora, but that isn’t a guarantee for a mass or global breakthrough. The startup ecosystem in Bosnia and Herzegovina seems to be developing the slowest, and in Montenegro, there aren’t that many startups, but the ones we do know are very active.
We are looking forward to enjoying your company at PODIM, and if we summarize – what teams will you pay attention to?
Tech companies in the B2B sector with solutions that we understand and that are solving real and big enough problems.
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Get in touch with the South Central Ventures team!
If you wish to introduce yourself to the South Central Ventures fund team, send an email with a short presentation of your business idea to info@sc-ventures.com or contact them through the form on their website.
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PODIM 2018
