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Eleven Ventures - VC of the month
17 March 2021·9 min read

Magdalena Balcerzak

Manager, Vestbee

VC Of The Month - Eleven Ventures

Eleven Ventures is one of the leading early-stage VC funds in Southeast Europe. With more than 150 investments to date, its team has been instrumental in catalyzing the regional startup ecosystem by supporting the local heroes to grow on the global stage.

Some of the visionary founders that Eleven has backed are building the world’s best OKR software Gtmhub, the recently acquired SMS marketing platform SMSBump, the autonomous drone manufacturer Dronamics, the fintech company Payhawk and the 3D-bioprinting technology Printivo, among many others.

Fund Strategy Overview 

Geography: Southeastern Europe
Preferred industries: The main four focus verticals are: Fintech, Healthtech, Future of Work, Future of Food. While they remain open for good opportunities across a much broader range of industries, the synergetic effect of investing in the four above-mentioned clusters, makes our value-added proposition much stronger.
Investment ticket: From €250K to €1M initially, up to €2.5M per company, including follow-ons.
Company stage: Early-stage companies, Pre-seed and Seed
Product type: Primarily SaaS, B2B, Enterprise software.
Product stage: All stages.
Revenues: While having revenue gives a serious advantage to the companies, we do not require solid revenue in order to invest. We do, however, expect to see the very positive feedback from early customers.

Q&A with Daniel Tomov, Founding Partner

What are the 5 main things you look for in a startup?

  • Relevance to our focus verticals and prior experience
    This important factor comes in two parts, but it is directly connected to how much value we could add to the respective company. As mentioned before, having a specific domain focus on our four main verticals (Fintech, Healthtech, Future of Work, Future of Food) creates a synergetic effect and makes our value proposition much stronger. In addition, having prior experience in the field of a startup means that we’ve gone through struggles, know the players and the specificities of the industry.
     
  • Solving a major problem for clients
    The companies’ solutions should be relevant to the needs of their clients.
     
  • Having a large enough international market
    Solving a local problem won’t cut it - that’s why we want to see a sizable international market. This doesn’t mean that the startup can not begin with the local stage to test and validate the business idea, but having the global potential is crucial. 
     
  • Domain knowledge within the founder team
    Without a doubt, the most important aspect is the team. Being more specific here, we want to bet on founders that understand their industry inside-out. If they will be participating in the race, they need to know the track, the rules of the game, and who they are competing with.
     
  • Ideally some initial B2B traction
    We always appreciate seeing that customers are already loving the product, even with its early version imperfections. Client feedback, demo requests, and paying customers are a very promising sign.
     

What disqualifies a startup as your potential investment target?

In our due diligence process, we look at many aspects of the company.
Definitely the biggest deal-breaker for us is the team. If we have the slightest doubt in the competency, integrity or personality of the founders, we never hesitate to pass on the deal. 

What in your opinion differentiates the best founders from the rest?

The two main qualities come directly to my mind - persistence and tenacity. Those factors definitely differentiate the best founders from the rest showing their willingness to be involved in the startup development process and endless dedication.

What startups should take into account before making a deal with a VC fund?

The funding possibilities for European startups have been increasing year-over-year. Currently, there is more VC money available than ever before and capital is easier to access. This means that the amount of capital offered by a VC fund should not be the primary decisive factor for startups.

At Eleven Ventures whenever we speak with fundraising companies we generally advise them to:

  • Think about a VC deal in the same way as about a marriage. If a startup has a completely different vision than an investor, or can’t spend an hour in the boardroom together, then the deal probably won’t work.
  • Evaluate what does the VC fund bring to the table besides money and check if it answers the specific needs of the company. We believe that the right investor at the right time could largely amplify the efforts of the founders and supercharge their growth.
     

What is your approach to startup valuation and preferable share in the company?

Our preference is to be a lead investor in Pre-seed and Seed rounds, with an initial ticket between €250K and €1M. We aim for an equity share between 5-10%. Most of the companies we invest in are B2B and have some first clients. We may go for a startup that is not on the market yet if we see a big growth potential after a long R&D phase, like some health and biotech companies.

How do you support your portfolio companies?

At Eleven we focus on four major pillars when supporting our portfolio companies:

- Operations 

  • Hiring - perhaps the most significant issue related to companies’ growth;
  • Scaling up (operations, team, etc.) - a major pain at this growth stage, usually addressed mostly through the senior partners, peers, and our network of partnering organizations;
  • Sales and distribution - pricing models, sales & distribution channels, partnerships;
  • Startup knowledge base - shared knowledge of experience among founders - often invaluable insights, shared painkillers, shortcuts, introductions, cross-sales;
  • Admin & Legal - a combination of our in-house resources and independent service providers provide a hassle-free environment for the general administration of running a business.

- Product Development

  • Design Thinking Lab with a dedicated Design Partner, which provides design sprint sessions to the companies, when facing challenges with their existing products or launching new ones;
  • Customer development and acquisition strategies through mentors and peers;
  • UX/UI workshops and advice via our extended network.
     

- Strategy
Many times, founders struggle to strategically navigate certain issues, opportunities and areas to improve. This is where our advice and network come in on:

  • Building strategic partnerships;
  • Founder issues, company culture, vision, investor relations;
  • Fundraising rounds and their timing;
  • Nurturing acquisition or exit opportunities;
  • Pivoting and/or starting new lines of business;
  • Corporate governance.
     

- Fundraising
This is where we put our network of private and institutional investors to work. We are very fortunate to have as LPs some very active angel investors, who are happy to additionally co-invest with us in promising companies in combination with our network of strong European and US VC’s.

What are the best-performing companies in your portfolio? 

We have some well-performing companies worth mentioning.

Gtmhub the data-driven OKRs platform that has just announced a Series B round of $30M at the beginning of the year, after the company grew its ARR by a multiple of three last year.

SMSBump the text marketing and automation app for eCommerce store owners that in the beginning of 2020 exited to the US/Israeli company Yotpo and is now doubling its headcount in 2021 in Sofia, Bulgaria.

Payhawk, Nitropack and Kanbanize are three other examples of portfolio companies with impressive growth over the last year.

Dronamics, the cargo-drone manufacturer that announced the world’s first cargo drone port network and partnerships with five airports in Europe and is currently fundraising a substantial round to back up this ambitious endeavor and further growth. 

What are your notable lessons learned from investments that didn’t work out as expected?

Several lessons worth mentioning came to mind:

1. We have become more selective (down from 35 investments per annum to 7-8) and more focused (only several core verticals vis-a-vis a generalist approach) in order to add more value to each company;

2. Verticalization or clusterization of investments adds value to all participants and creates more opportunities for everybody. The more we invest in a given vertical or sector the better we become at spotting future trends and potential winners with the added benefit of a wider network of experts and partners to rely on;

3. Revenues trumps and fosters investments - hence we need to help the startups grow by shortening the sales cycle with direct access to corporates and B2B clients in general (something we are already successfully doing with our verticals approach) and/or help them in fine-tuning their value proposition (through our design thinking studio);

4. HR/Recruitment is the second (after revenues & business development area) most important aspect where we can help and this help is most appreciated by the founders;

5. Due to the relative inexperience of the local ecosystem (both business angels and fund managers), we have to be the de-facto lead investor longer comparing to market standards on mature markets and we need the capacity and firepower to lead or co-lead the early follow-on rounds (before Series A).

What are the hottest markets you currently look at as a VC and where do you see the biggest hype?

We put our money and efforts in Fintech, Health Tech, Future of Work and Future of Food. The first two are already pretty hyped up, while the Future of Food (or Agri Food Tech) is arguably still rising as a vertical.

In your view, what are the key trends that will shape the European VC scene in the coming years?

Large parts of Europe remain grossly underserved in terms of VC money invested, particularly Eastern Europe and South-Eastern Europe, while unicorns are already emerging in these markets. However, the world is converging and this gap is being quickly filled in by more daring US funds. In this respect we expect the competition in large Series A and beyond rounds to intensify among VCs for the top early-stage companies. Getting in early on the action would be important for all European VC funds, if they want to remain relevant. 

Another way for VC funds to stand out would be to become more vertically focused versus a more generalistic and country-centered approach in the past.

 

Related Posts:

VC Of The Month - Projekt A (by Magdalena Balcerzak, Manager, Vestbee)

VC Of The Month - Creandum (by Magdalena Balcerzak, Manager, Vestbee)

VC Of The Month - TMT Investments (by Magdalena Balcerzak, Manager, Vestbee)



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