Thank you for taking the time to share a couple of great VC insights with our community! To kick things off, can you tell us a little about Credo and your role there?
Pavel: Credo Ventures is one of the leading VC funds in Central Europe. We invest in in Seed and Series A and are looking for teams with global ambitions and strong, technological products. My role at Credo is to source investment opportunities in the Czech Republic and consequently to support our portfolio companies post-investment.
Why do you think startups should raise with a Venture Capital funds? What are the pros and cons?
Pavel: Venture capital is a very specific form of financing business operations. And even though it has gained a lot of popularity in our region in the past couple of years, it is definitely not suitable for every company. Probably the most differentiating factor of VCs is their level of involvement. When you are seeking strategic advice, need help with hiring or you have the ambition to expand globally, a VC investor can provide a lot of support besides the plain cash. On the other hand, if you are trying to build a regionally-focused SME, which you want to fully control, then VC is not the right choice.
Cool! You probably have startups applying to Credo at all possible stages. When is it the best time for startup Founder to look for VC money?
Pavel: From the very beginning, every founder should start building their network and get their (and the company’s) name out there. Even though we invest in later stages of companies' life cycles, we like to talk to them early on and watch them grow and progress. When the time is right, we are ready to open investment discussions. However, before a company is VC-ready (has a working product, can show some traction etc.), it has to either bootstrap its operations or seek funds from Angel investors.
What are the 3 most common reasons based on which you decide not to invest?
Pavel: That depends on the stage of a company. In the Seed stage, the two most important factors from our perspective are the team and the market potential. If we are not able to build our confidence in the founders or if we do not see big enough potential in the market they go after, we decide to pass. In the later stages, we dive deeper into many aspects, such as technology, business model, competitive landscape and so on. Overall, we always need to see a strong USP, which helps to differentiate the company from its competitors.
What are the 3 main values you are looking for in a Founder?
Pavel: It is hard to single out only 3; it needs to be a right mixture of many characteristics. However, if I had to select a few, I’d mention prior experience, knowledge of the given sector and the right motivation. Unfortunately, with the increasing number of start-up success stories, we see more and more founders seeking the “shiny” lifestyle, instead of trying to build something incredible.
How long does the investment process usually take?
Pavel: Again, it depends on the stage of the company and structure of the investment. Sometimes, things can move as quickly as a month or two. However, if more detailed due diligence is necessary, foreign entities need to be set up or there are ongoing negotiations with co-investors, the process can take as long as 4-5 months. I would suggest reaching out rather sooner than later. One of the worst things that can happen to a founder is that he runs out of cash before he secures the next round of funding.
What’s the first thing you want your startups to do after closing?
Pavel: Establish the board of directors and put in place the internal processes that are related to it. The board, where we also take a seat, is there to assist the founder with any dilemmas and strategic choices he or she might face. As part of the board meetings, the investors expect a reporting package, which include business and financial updates. Although it might seem like extra work for the founder at the beginning, it has beneficial effects as it forces the company to set up its internal process properly and to start truly understanding various aspects of its operations.
Awesome! My last question is what was the boldest thing a founder did on investor meeting, when looking to raise?
Pavel: One time, at the end of his presentation, a founder showed us a screenshot of his CRM system, which clearly displayed several other VC funds he was talking with at the time. The power of FOMO (fear of missing out) can be very powerful at times :-)
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If you want to meet Pavel in person join us at Startup vs. Investor hosted by WeWork in Prague on October 29th.