Change Ventures backs motivated startup teams from one of the three Baltic states (Estonia, Latvia, Lithuania) who have the grit and ambition to build world-class businesses. First and foremost, they provide entrepreneurs with fundraising support in the following rounds, while also sharing advice based on their long operating experience. Change Ventures focus on early-stage companies developing tech-powered solutions.
Fund Strategy Overview
Geography: Baltic states (not restricted by jurisdiction but “nexus” of the team)
Preferred industries: Broad, diversified investor in tech startups
Investment ticket: 100k to 2M EUR
Company stage: Pre-seed focus, some seed and Series A
Product type: Various
Product stage: Various
Revenues: Many have but not necessary
Q&A with Andris K. Berzins, Partner at Change Ventures
What are the 5 main things you look for in a startup?
Grit, grit and more grit! We focus on the founding team and whether they have the passion and perseverance to build a fast-growth, massive global business. At the very early stage, we know a product will have to adapt to the market, the target market might change, technology might change but the one aspect that has to remain constant for success is the core team. I wrote a blog post on this back when we started the fund, still true.
What disqualifies a startup as your potential investment target?
The very first thing that came to my mind is a lack of ambition to conquer big markets outside the Baltic region. We are lucky that the small local market forces great founders to tackle the challenges coming from big international markets very early on. Having a global mindset from the beginning is the only way for them to become successful world-known businesses. Founders who are not aware of or are not up for this, won’t be able to build a company with the potential to scale and concur international ecosystems. Such an approach definitely discourages us to have an interest in the company.
What in your opinion differentiates the best founders from the rest?
We are backing to grit again ;) Staying power. Not giving up. At the same time, we want to see that the startup team is working on adapting the product or service to customer needs in order to find product-market fit. But the process is hard and most founder teams don’t make it. We look for evidence of those characteristics of this in teams we meet.
What startups should take into account before making a deal with a VC fund?
First of all, startup should be aware that becoming a venture-funded business means signing up for ambitious growth goals. Without establishing them it makes no sense to try to reach the VC funding Founders need to understand that deal with a VC fund, despite additional support, advice and resources, involves outside pressure and high expectations. Some entrepreneurs thrive on that and get even more motivated, while some simply don’t - it’s nothing wrong with that, but they are just not the right much for us. It is OK not to go down that path. There are many happy bootstrapped founders too.
What is your approach to startup valuation and preferable share in the company?
We want to invest when the price is fair and when we see the potential for significant returns. In other words- every investment needs to be a potential “fund returner” that pays for the many less successful ones. As such, we do look at possible ownership stake at each stage of investment, however it varies by the startup stage.
How do you support your portfolio companies?
First, we get out of their way so they can operate and build their companies – the first rule is “do no harm”. We will never know their business as well as they do. Of course, we are happy to help with strategic advice, sometimes specific things in operations, sales & marketing or development, depending on the need that might match the experience of one of our partners, all of whom have extensive operating experience. However, we definitely focus the most on supporting startups’ fundraising process .But probably most of all we help to raise funding. Often after we commit we help recruit specific business angels or other co-investors who bring knowledge and network to the company. (see recent Cloud.Factory investment where we brought co-founders from Printify and Oberlo, a Shopify company, to this e-commerce related startup).
What are the best-performing companies in your portfolio?
Our first unicorn is Veriff - leading provider of online ID verification providing developer-friendly API solution, while Nordigen, freemium open banking data provider, was our first exit. Among the other success stories are Interactio - remote interpretation platform, enabling complex multi-lingual meetings, Giraffe360 - developing advanced robotic camera technology, Aerones - robotic wind turbine blade inspection, maintenance and repair system, Eurora - provider of tax compliance solutions for cross-border EU trade requirements and Planet42 - inclusive fintech solution dedicated to the underbanked from South Africa.
What are your notable lessons learned from investments that didn’t work out as expected?
A couple of investments have had founder conflicts that ultimately led to the team splitting and a loss of power to proceed. These issues are hard to manage, that’s why the startup team’s integrity and strength of people interactions within a company are very important and for us become one of the key success factors when it comes to business development in general, as well as the VC-founder cooperation.
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
We look for “hot founders” not markets as talented entrepreneurs are the ones that make some specific markets more attractive than others. The best founders create markets where there were none before.
In your view, what are the key trends that will shape the European VC scene coming years?
Broadly I am very optimistic about the European VC scene as there are increasingly more new early-stage funds in the market, which provides more opportunities for startups and more industry expertise which is a real added value from the investor side. The arrival of the US investors during the last few years has also been great, as they bring more aggressive terms and a less bureaucratic approach to investments. This phenomenon is shaking up the European market bringing fresh perspective and optimism.
Related Posts:
VC Of The Month - Day One Capital (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)
VC Of The Month - Outward VC (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)
VC Of The Month - South Central Ventures (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)
