Finch Capital is a Pan-European growth investor, supporting technology companies in financial services, real estate and health. So far, they have made more than 45 investments, in companies such as Zopa, BUX, Grab, Goodlord and Fourthline. They are active investors with a value-add strategy framework and thought leaders in their three core verticals.
Fund Strategy Overview
Geography: Europe
Preferred industries: FinTech, HealthTech, PropTech
Investment ticket: €5-10m
Company stage: Series A/B
Product type: Software
Product stage: Launched
Revenues: €2m+ ARR
Q&A with Aman Ghei, Partner at Finch Capital
What are the 5 main things you look for in a startup?
- A dynamic team, that has preferably worked together in the past, with an infectious passion for the product.
- The product, which is a solution to a real problem rather than the other way around.
- A clear understanding of the markets and trends
- A strong product market fit
- The company, that is tech-driven and not tech-enabled
What disqualifies a startup as your potential investment target?
Our core competence and experience lies in helping startups grow the right product to a bigger scale. This is where we can add the most value and really support the founders. To make sure that we can support our portfolio companies as much as they deserve, we maintain high standards during the sourcing of the deals. Having a strong PMF and 2m+ ARR within one of our core verticals is a must. Then we also look at whether the company is tech-driven, has strong IP, and really solves an important problem.
What in your opinion differentiates the best founders from the rest?
When looking at a founding team, we are always trying to figure out whether the members have a complementary skill set. The dynamic between the founding members is also essential. Ideally, they have worked together in the past. We have also seen that the combination of founders with strong market expertise and founders with sometimes broader entrepreneurial experience can be very successful.
What startups should take into account before making a deal with a VC fund?
- Does the VC have the right expertise to enrich the journey and does it share the excitement for the product?
- What exactly they are looking for? Are they looking for a long-term partner, are they looking for guidance, market expertise, or all of it together? Smart capital is better than dumb money. These questions will usually already help founders narrow down the VCs that could make a good fit.
What is your approach to startup valuation and preferable share in the company?
We like being active investors and usually take the lead in funding rounds. We look at market valuations and try to bring a sensible approach to valuation and economics for both sides. We are investing in sustainable businesses that don’t need much more capital apart from our round to grow, so markups are not something we actively go out to achieve.
How do you support your portfolio companies?
As mentioned above, we like to be active investors and have set up a framework according to which we make our investments. To elaborate - on a high level, we usually create a 100 plan with our portfolio companies and help them achieve it. We also leverage our expansive network to hire the right managers and outsource operational tasks to trusted partners. This network and our previous experience are especially helpful when the company decides to scale internationally.
What are the best-performing companies in your portfolio?
Goodlord, Fourthline, Lantum, AccountsIQ among others
What are your notable lessons learned from investments that didn’t work out as expected?
- The team is key. A strong team reduces execution risk drastically. It does not mean that they always make the right decision but are agile enough to adapt and learn from mistakes.
- Product momentum is very important. We also noticed that some founders do not prioritize sufficiently
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
- Finance: There has been a renewed focus on improving efficiencies across organizations so we are excited about a number of trends including CFO software, embedded finance, and the broader finance-as-a-service vertical.
- Health: The pandemic has allowed us to see the big problems that still characterize our health and care system. Nowadays, more and more digital health startups are gaining traction using technology to tackle these pain points and support our hospitals and care homes.
- Real estate: Property management focused on efficiency and sales enablement is also a great investment direction.
In your view, what are the key trends that will shape the European VC scene in coming years?
No doubt the current macroeconomic situation will have a strong impact on the fintech vertical. We are seeing a strong shift towards sustainable growth vs growth at all costs, as companies are pushed to prove operating leverage sooner rather than later.
