Every investor wants to invest in a company that will be successful and profitable. The venture capital investment field is very attractive, but also very different. Choosing the right startup is far from easy, as around 80% of startups do not reach their goal and go out of business before they become profitable and successful. Only the investors who know the specifics and laws in this area are successful here. Do you want to become a successful investor and gain knowledge from the best of the best?
As part of the Startup Plus program, a virtual School for Venture Capital Investors is also taking place this year, which is financially supported by SEF and organized by ABC Accelerator in cooperation with South Central Ventures.
If you read on, you will find interesting tips and tricks from the following investors: Gregor Pipan from X-lab, Julien Coustaury from Fil Rouge Capital, Jure Mikuž and Tatjana Zabasu Mikuž from South Central Ventures and Rok Habinc from STH Management.
An interview with experienced investors
We touched on issues that are very important for investors: why they decided to enter the world of investing, what excites them most about their work, how many investments they have participated in, whether they keep a list of "the deals we missed", what are the most common factors for business success, which element in the investment process is the most important and which part in the investment success process is the most crucial and whatćs their advice.
Why did you decide to enter the investment world?
Julien: “I started investing in 2010 when I invested in Doublerecall, which I later joined as a co-founder. My reason for starting is definitely related to Dublerecall, which was the first startup to go outside the region. That’s when I felt it was an opportunity to make money. I think too many investors say they like to invest because they like to do it and because they like doing something in return, but I think the key guideline for almost everyone is to make money. One of the key reasons I started investing was because I realized I could make money. "
Tatjana: "One thing that I think is crucial is that you can really make a difference and see your contribution when a tech company gets bigger faster than it normally would. "
Jure: "The desire to be a part of something from the beginning, not just to transfer money from one pocket to another, but to actually assist someone and be part of a company, from the very early stages to the exit."
Rok: "When I was doing an MBA in America in the 90s, there was this first major wave of investing in VC. It was then that I became interested in it as I learned a lot about finance and was transitioning into the financial world. Since I am also an electrical engineer, I thought this was a great combination where I could combine both technical and economic-financial knowledge. When I returned to Slovenia, I got a job at Aktiva Group, where my colleague and I started one of the first venture funds in Slovenia, Aktiva Ventures. That’s when it all started. When I left Activa, I was investing more and more in other, older industries. Nevertheless, the desire to make venture types of investments remained. In 2010, we applied for a co-investment tender organized by the Slovene Enterprise Fund and created our first venture fund. "
What excites, delights and fulfills you the most in your work?
Gregor: "This drive, when people are exposed to real problems and then they are driven to come up with a solution and solve things technologically. You have to learn to do business because it’s not enough to have a technically great product. You have to know who the players are, what they buy, who the end customers are and for me that’s the interesting part. So getting to know each other and trying to find solutions that are better than they are now. "
Julien: "For me, the biggest excitement is when the founder calls you and tells you that the company was successfully sold and how much I earned. This is the pinnacle of enthusiasm for me. Investors invest to earn more money than they have invested in the company. It's the basis of everything we do and the only basis for this ecosystem to survive and thrive. "
"When you get a check is nice." - Julien Coustary
Tatjana: "It's one thing to be in constant contact with people who are developing new things and learning something new. On the other hand, you're helping these people create something new, new monetary value, new markets or new products. "
Jure: "I am glad that there are very few factors that are at the forefront in the cooperative world or in mature companies. There is very little lobbying and recalcitrance. In its own way, the competition between these companies in the market, especially in these industries in which we are present, is much healthier. With real entrepreneurs, I always see that energy to do something new, to change and develop something. This is what gives you energy. Of course, I also have to mention the result when you work on a project and then it succeeds. "
Rok: "Because it is very dynamic in the investment world. As an investor, we talk about something else every half an hour, about some new technology, usually with young, agile people who have a lot of ideas. That’s what makes me wake up every morning with a smile on my face and what drives me. No day is the same. There are a lot of things that I can learn and some that I have to learn on my own to be able to follow them and gain knowledge. "
How many investments have you been a part of?
Gregor: "I don't like to count that. There are quite a few that happened formally and the establishment of the company followed. But a few of them died before it even started, so we started researching the area with a team and it didn’t work out. In addition to Xlab, I consider Sentinel Marine Solutions and Daibau to be my main investments. "
Julien: "As part of Fil Rouge Capital, I definitely participated in about 120 investments, and around 40 myself. "
Jure in Tatjana: "If we add up everything in RSG and SCV, there were about 40 of them."
Rok: "In venture type investments, I participated in seven. However, I have been involved in many investments in already established companies. "
Do you also keep a “the deals we missed” list that many investors have?
Gregor: “No, I invest because technology makes me happy, if I miss an investment, why would I worry about it? I prefer to focus on those I work with and try to make a breakthrough. Otherwise, you always regret what you missed out on. "
Julien: "At Fil Rouge Capital, we don’t do that. There are two ways; one is to make a list from which you can learn a lot from and find out why you don’t have something, and the other is to not look at it and look at what opportunities are “on the table”. We go with the latter. "
Jure: "We don't have an official list, but it's in our minds and there are surprisingly fewer companies on it than you might think. There are some companies that are still around and have gone down a certain path that is respectable, but there is a difference between a company that is profitable and one that brings a return to investors as well. Many companies that have gone down this route and are successful would not necessarily be a successful investment for investors. "
Rok: "No. There are very few deals that we are sorry for, as there are always enough others available. None that we missed or weren't a part of were so very successful to upset us. There is no regret here. "
What is the most common reason for a startup to succeed?
Gregor: "I would say that the spirit of the team, whether they are willing to be in it together and trust each other so much that they will focus on the product and that each of them will cover their own segment of the company. If there is no trust, all the founders do one thing, which is suboptimal from the start. Interdisciplinarity and different competencies and trust within the team are extremely important, which is crucial for them to be able to build on. It's nice that they are each relatively good in their field. "
Tatjana: "Quick responses and good execution. In practice, we saw a lot of ideas that looked interesting, but then they weren't well executed and the companies didn't grow at all and didn't get to the next stage. "
Jure: "Definitely a good execution, but I think there is another common feature of successful companies in our portfolio and that is having a very brave founder. A front man who isn’t looking for golden parachutes or safety nets, but always goes “all-in”. These people sometimes surprise you with their ideas for the next step, but they actually do it. Later on, they are willing to take big risks because it's the only way to take big steps. So, I would say big steps and a lot of courage. "
Definitely a good execution, but I think there is another common feature of successful companies in our portfolio and that is having a very brave founder. A front man who isn’t looking for golden parachutes or safety nets, but always goes “all-in”.
Rok: "The one and only answer is the team. There are a lot of ideas and interesting technologies, but it is the team that does it. Businesses succeed or fail, because of the team. People are the ones who have to continue the story. As soon as they meet, they must have a “drive” to do something and not stop at anything. Failures occur when dissatisfaction arises within the team or when they quarrel. If they succeed in tough times without quarreling with each other, then that's fine. It's the team that matters, more than any other factor. "
Which element of the company (team, market, product, business model, competition) is the most important for you in the investment decision-making process and why?
Gregor: "Definitely the team and the field they work in. I wouldn’t feel good investing in some sports startup developing solutions in professional sports because even though I love sports, I still don’t feel confident enough to assess the risks, help with advice to keep the company going. For this reason, the field in which the company works in is very important. "
Julien: "This is a very simple question for me, I always go for the team. If I like the founder and see passion and boldness in his eyes, that’s key. My big motto is that a great founder might turn a very bad idea into gold, while a bad founder can turn a great idea into disaster."
If in the process of "due diligence", which lasts about half a year, we find elements in the team that we do not like, we will probably not cooperate and invest.
Jure: "The team. If in the process of "due diligence", which lasts about half a year, we find elements in the team that we do not like, we will probably not cooperate and invest. Of course, red flags can be found on the market, product and the competitor's side, but I would still highlight the importance of the team. If we see that they are not capable of executing an idea that they have well thought out, then we are not moving forward with them. "
Tatjana: "I also think that the team is extremely important. If the team is good, they will usually just look at how the market works, what the competition is like, etc. "
Rok: The answer is the team. The problem is that it's much easier to do "due diligence" for other things. We can look at the technology to some extent, the market can be looked at, but there is a lot of psychology in the team. You gain some experience over the years, but you can never know how things will turn out in the next five to ten years. Then there are the personal circumstances in the lives of these people. Unfortunately, for larger tasks, there is one reason things can go right and a thousand why things can go wrong. "
Which part of the process is the most important for the success of an investment? 1. the process of selection and deciding who to invest in, 2. active monitoring and management 3. negotiations for exit.
Gregor: "If you want to have a successful investment in the end, all three steps are important. If you get stuck along the way, you will never get your investment back. After all, it’s good to be aware of what you’re good at and what you’re bad at. Let’s say I have the least experience with this last step, finding strategic partners or exits. I really like to try new things, but if I read just two books about how someone made a successful exit, I still won’t think I know how to actually do it. Until I make a big exit, I'll say I don't know. "
Julien: "I would definitely focus on the first one, because everything happens at the moment of the decision. It all lies in that the moment, if we choose the wrong founder, we will find it difficult to help him grow and progress. A donkey simply cannot be made into a winning horse. Even when we talk about exits, we need to go back to the first step. We cannot force or influence the exit, we can only influence it if we take the first step correctly. It all depends on the moment of choice. "
Tatjana: "If you want to have a really great investment, all three steps are important. It is impossible to do something completely wrong in one of these areas and have a successful investment in the end. It would be hard to decide on just one. If you really want the investment to be good, you have to consider all three. "
It is impossible to do something completely wrong in one of these areas and have a successful investment in the end..
Rok: "A lot of things are decided in the first step. In the first step, it is necessary to know that you are dealing with leading people who are capable of carrying things out. Performance is what makes it or breaks it. Execution is what is critical. In fact, it is important to know from the very first stage whether the people we are talking to are executors and whether they are capable of carrying out the idea. During monitoring, we have to execute everything and this makes the exit easier. If the execution is not appropriate, the exit is harder. "
What advice would you, as an experienced investor, give to new investors?
Gregor: "One is definitely to ask yourself, what you can contribute to the company besides money? When you know how to answer this and assess the value, you will also be more confident that the investment will be healthy and that it will grow. However, if you only give money to a team, you actually leave it to the team to solve all the problems on its own and it will be less likely that the investment will succeed. As an investor, you bring experience to the company, senior staff. From my own experience, 20 years ago, when we started Xlab, no one had entrepreneurial experience. The whole team learned a lot, how to conduct a business meeting, how to make a pitch, present solutions, design them so that a client will see them as valuable, etc. We had to learn all of this from our mistakes. If we had someone who's been doing something similar for 10 or 20 years, he'd be able to give us quick advice on certain things. "
Julien: "The driving force must be making money and nothing else, because that is what we all need in this ecosystem. Keep in mind that making money and patience are key. "
Tatjana: "Above all, a new investor must know what his expectations are and test if those expectations are realistic, depending on what he is getting into. The other is to invest in things he understands, at least to some extent. You don't get into things you don't know and don't understand. "
Jure: "I feel like it is important for a fresh, new, inexperienced investor to do things gradually. That he is aware he may not be able to make it with the first few investments, which does not mean that he will not be able to make it with the next one. It is necessary to invest gradually and not give up at the first failure. Even more important is that he invests in what he understands. Keep your eyes peeled and ears open for all red flags from the date of the investment. Before he decides on a final investment, he should not fall in love with the company and thus ignore the red flags, because it will be too late. "
I feel like it is important for a fresh, new, inexperienced investor to do things gradually.
Rok: "Only invest assests you can afford to lose. It is a well-known statistic that a large percentage of investments in venture capital fail. Disperse your investments into more investments, companies and definitely don’t put your house on the line. By their very name, they are risky investments and many of them fail. It very often happens that the investor does not get anything back from them. Go for it if you enjoy it and if you want to, but don’t go into this it with assets that are crucial to you. "
The School for Investors is a great opportunity to gain practical knowledge
Šola za vlagatelje tveganega kapitala je brezplačna. Namenjena je pridobivanju znanja iz “prakse v prakso”. Programa se lahko udeležijo vsi potencialni vlagatelji, ki imajo interes, a ne vedo kje in kako začeti ali vlagatelji, ki želijo nadgraditi svoje znanje. Predavanja bodo potekala preko spleta in bodo iz dveh modulov. Na predavanjih se bodo lahko bodoči vlagatelji učili iz izkušenj vlagateljev, ki so v preteklosti imeli tako odlične kot zgrešene investicije. V šoli za vlagatelje verjamejo, da je učenje iz izkušenj najbolj učinkovito in dragoceno, zato bodo največ znanja pridobili s pomočjo praktičnih primerov. Program bo potekal novembra 2021. Prijaviš se lahko tukaj.
It is free of charge and intended to put knowledge from practice into practice. The program is open to all potential investors who have an interest but do not know where and how to start or investors who want to upgrade their knowledge. Lectures will be held online and will consist of two modules. Prospective investors will be able to learn from the experiences of investors who have had both excellent and bad investments in the past. At the school for investors, they believe that learning from experience is the most effective and valuable. The program will take place in November 2021. You can sign up here.
Many other Startup Plus programs
The Slovene Enterprise Fund also organizes many other top entrepreneurial programs for portfolio companies, such as the Push2start Acceleration Program, Startup Clinic, SK GROWTH CAMP, NextRound, GROWdigital, KorpoStart, INTL, Nextround, School for Investors, HardwareSTART, CEED Founders Talk and ScaleUPgrade. The content programs effectively complement the financial products P2, SK75 and SI-SK, which provide Slovenian start-up companies with EUR 54,000 to EUR 600,000 in start-up funds.
Content support for recipients of P2, SK75 or SI-SK financial products under the "de minimis" scheme is co-financed from the Slovene Enterprise Fund and the European Union from the European Regional Development Fund. This is implemented on the basis of the Content Support for Funds Recipients (SMEs) Programme in the 2018-2023 period, under the Operational Programme for the Implementation of the European Cohesion Policy 2014-2020.