10 lessons learnt from investing in Startups in Poland and Europe based on the experiences of two, private micro-funds / VCs.

1. 10 lessons learnt from
investing in Startups

2. Start 2013
Money deployed:
Euro 5M
15 investments
Seed + early stage
Marketplace & Saas
+ others
Start 2013
Money deployed:
Euro 4M
12 investments
Mainly seed
Marketplace & Saas
+ others
Business Angels
Start 2011
Money deployed:
Euro 1M
12 investments
Seed
Marketplace & Saas

3. • 4000 projects reviewed
• 35 investments (incl. 4 co-investments)
• 20% write-offs
• 10% money-back
• 8 companies with 5x+ growth
• 2 companies exceeding Euro 100 M valuations
Business Angels

4. Current, total valuation of companies in Protos, HH and our BAs
portfolio exceeds Euro 400 M

5. - People are by far the most important factor. People
constitutes 80% chances for a success or a failure, both for a
Startup and aVC.
'You are the average of the five people, you mostly spend time with'
Lesson for a Founder:
- Chose your partners very wisely.
- Friends and Family is usualy an average choice.
-Your Investors will be your Partners. Spend time on getting
know your potential Investor.
Rule #1. - People

6. Rule #2. - Specialization / Focus
- VC as well as a Startup should have a common focus (an
area of interest).
- Funds offering REAL smart money usually present strong
specialization.
Lesson for a Founder:
- If you would like a real support from your Investor -
chose aVC with a specialization matching your business.
- CheckVC's current and past portfolio.
- Not everyVC is good for you.

7. Rule #3. - Values / DNA
- VC usually has its own 'backbone', its 'code of conduct',
unbreakable values and rules - its 'DNA'.
- These values are presented i.e. in their investment
agreements, specific clauses, and the way they treat
Founders.
- DNA of aVC influences its perception at the market.
Lesson for a Founder:
- Find out what values and investment standards presents a
VC.
- The best source of information are other founders from this
VC's portfolio.

8. - GoodVC (seed / early stage) present adequate relation of number
of Startups in portfolio to internal resources:
- approx. 5-6 Startups per 1 Partner
- portfolio of 25-50 Startups
- > 25 Startups - decreased probability for 'Dragon' or 'Unicorn'
- < 50 Startups - possible defocus ('Spray and Pray' strategy)
Lesson for a Founder:
- Check if aVC would be able to help you, or you 'will be lost' in its
portfolio.
- CheckVC's Partners and Inv. Managers prior experiences and track
record.
- Find out with whom will you be able to work.
- The way your fund will help you depends largely on you.
Fight for their time!
Rule #4. - Portfolio / Resources

9. Rule #5. - Follow-on Policy
- Follow-on policy is a crucialVC success factor
- 50/50 - optimal ratio
- A goodVC should have a clear 'stage' and follow-on
investment policy.
Lesson for a Founder:
- Be sure if aVC you are dealing with will support you in later
rounds and on what conditions.
- A lack of follow-on of your fund in later rounds can be really
problematic.

10. - One of the key elements ofVC is it's network: BAs, other
VCs, entrepreneurs, specialists, they work and co-invest
with.
- Network is the most important dealflow channel.
Lesson for a Founder:
- Check out the network of aVC you are dealing with and
get to know how you can benefit from it.
- Ask who are LPs and what are the examples of their help.
- Find out if other Startups from aVC's portfolio benefited
from such co-operation.
Rule #6. - Network, network, network

11. - Startup's lifetime is on average longer nowadays as it was
few years ago due to the international expansion.
- The longerVC's lifetime the longer fund can stay with a
startup and generate better returns.
-VCs stay with a startup on average 5,5 years.
Lesson for a Founder:
- Check out what's theVC's lifetime you are dealing with.
- Be sure how long aVC can stay with you and what are their
goals when it comes to returns.
-You don't want yourVC to try to sell their shares in your
startup after 2 years becuase they are motivated by internal
regulations.
Rule #7. -VC's Lifetime / Investment Period

12. -VC should support its Startups in all possible, business
aspects incl.: recruitment, accounting, legal, PR, software-
house, e-marketing etc.
-VC should be 'a Hub' offering complex services easing the
successful start of the business.
Lesson for a Fouder:
- It is better to chose a Fund being a Hub of all services you
need.Ask theVC what do they have?
- GoodVCs often have own Platform where Founders and all
members of their network exchange information and help
each other.
Rule #8. - The Hub / The Platform

13. Rule #9. - Dealflow
network invitation active hunt organic
no of projects 460 32 12 940
no of deals 9 2 2 2
conversion 2% 6,4% 17% 0,2%
Lesson for a Founder:
- Sending your deck to kontakt@vc.com rarely brings positive result.
VCs receive plenty of projects from organic and they call it 'the noise'.
- Do not write directly to investors at FB Messenger nor LinkedIn.
- It is much better to reach-ourVC through an intro / refferal from
somebody from their network
- VC scan different market opportunities and often they actively look
for projects in specific areas or sectors.You could askVC for an
inspiration.

14. Rule #10. - Track Record / Fitness Trail
- A good Team would be successful with a difficult business and 'adjust' it
to the market. A weak Team could not be successful even with a
business easy to expand.
- VC are eager to invest in 'serial entrepreneurs' or people with
executional experiences and proven track record (both of successes and
failures)
- AmongVCs there is limited trust for Founders without track record and
you have to build one.
Lesson for a Founder:
- If you do not have a track record, take care about your referrals.
- Be prepared for a 'Fitness Trail' (a few months) when you co-operate
with aVC (before an investment) proving your execution.