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Inovo Venture Partners - VC of the month
19 October 2020·7 min read

Magdalena Balcerzak

Manager, Vestbee

VC Of The Month - Inovo Venture Partners

Inovo Venture Partners is a multi-vertical, early-stage VC fund with over €50M in AUM. It focuses primarily on the B2B software and SaaS-enabled marketplace tech companies built from the CEE region and sold globally. Run by a team with a diverse mix of operational (Rocket Internet, Allegro, Booksy), investment (Penta, Rothschild), and technical (Google) backgrounds, Inovo has invested in over 25 companies alongside the most reputable funds like Andreessen Horowitz, Hoxton Ventures, Point Nine Capital, Credo Ventures, Enern, Piton Capital, Karma Ventures, Industry Ventures, and many others.

Fund Strategy Overview

Geography: Europe, with an emphasis on Poland and the CEE region
Preferred industries: Industry-agnostic. Portfolio companies’ sectors include Customer Service, DevTools, Health&Beauty, FoodTech, EdTech, Gaming, and more.
Investment ticket: Initial ticket of €500k - €1.5M with a total commitment up to €8M.
Company stage: Late Seed / Series A.
Product type: All asset-light tech products, preferably B2B software and marketplaces.
Product stage: All stages, preferably post-launch.
Revenues: Commercial validation of the product or a strong pipeline of potential clients.

Q&A with Michał Rokosz, Partner at Inovo Venture Partners

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

Great startups are built by great people. Founders and the culture they set are the two most important factors we take into consideration. We seek resilience against hurdles, ambition to create category-defining products, and integrity to attract and lead a strong team.

Startups thrive in markets that are either huge or grow very fast. If there is a combination of both, we love it even more! For example, Infermedica’s healthcare AI market is estimated to be worth 4.8bn USD, and CAGR 42.8% is poised to reach 99bn USD by 2027. Such a trajectory gives a substantial opportunity to grow and create a return of investment typically expected by a VC.

As a late Seed/Series A VC, Inovo also looks at indications for the growth and the ability to multiply revenue in a short time. Here, we take into account past results, projections for the future, quality and depth of acquisition channels, scalability, unit economics etc. Founders’ clarity and ability to put KPIs into a robust and actionable strategy is vital.

Great products bring clear and measurable benefits to their customers. Just think of Booksy – it is a simple yet powerful platform that enables beauty & wellness service providers to optimize their time and attract new customers. Finally, they’re based on a promising technology that enables them to develop over time.

 What disqualifies a startup as your potential investment target?

Startups aren’t supposed to make easy decisions. Building something innovative requires a combination of risk, calculation, and vision. We can accept failure, but we cannot accept low ambitions and not trying.

 What differentiates the best founders from the rest?

There is no template for a perfect startup founder. In the book “What You Do Is Who You Are”, Ben Horowitz writes about how leader’s different traits influence an organization's culture and create different outcomes (We recommend the book to all founders).

For a perfectionist it takes more time to create better products, but a person driven by growth allows a margin of error for the sake of development. Both ways are okay, and it’s worth being self-aware of what your end goal is.

In our view, the trait that bonds all great founders together is their commitment, passion, and ability to develop over time.

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

On a high-level, startups should be aware of what comes in the package with VC money: expectations for high-growth, long-term commitment, and high pressure. Such a journey requires plenty of support, so make sure to have good chemistry with your investors before you sign the term sheet.

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

Valuations are an essential part of the startup journey, but they do not necessarily reflect a company's growth. WeWork’s example shows that a charismatic leader with a convincing story can do a lot, even without the right numbers underlying the pitch.

As Inovo, we consider valuations secondary to founders, product, and the promise of future growth. However, as the saying goes – a small piece of a big pie is better than a large piece of a small pie.

How do you support your portfolio companies?

Every company in our portfolio can count on our full support. Depending on the founders' needs, we can connect them with follow-on investors, advise on product development, or help with hiring top talent. Ultimately, it's about offering the right help. Some startups need operational support and some need assistance with growing their network. At Booksy, we helped to grow revenue 10x with full-time operational support.

We also know the pressure and challenges of becoming a founder. Sometimes the best we can offer is our mental support and the space to have an honest conversation.

What are the best-performing companies in your portfolio?

We’re excited about the progress of all of our portfolio companies. Infermedica just closed a $10M Series A and has grown the revenue 3x within a year since our investment. Tidio continues to impress us with its growth rates and cash efficiency. Allset has managed to help restaurant businesses offset losses during the COVID-19 lockdowns. Intiaro is revolutionizing how upscale furniture brands work. Finally Spacelift, a CI/CD tool for infra-as-code, is looking to take a chunk of the cloud computing and infrastructure market.

Overall, we are pleased with all of our portfolio companies' performances, and we will soon announce three more startups we've invested in over the last few months.

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

We believed that a VC’s role could be really meaningful, but the job of building a startup belongs to founders and founders only. Startups must know that they have all the support they need, but that the decisions ultimately always belong to them.

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

We see a massive opportunity in digitizing many industries that still operate in an analogue way. Whether it’s education, logistics or gastronomy, there are still many problems that can be solved through digital products. This trend will only get accelerated by the increasingly important machine learning solutions that can automate a big part of the so-far manual processes.

Even within industries that seem to be highly digitalized already, we constantly observe new developments - think FinTech and open-banking. Connecting to financial institutions through an API enables a new set of services and fintech products that were not available before.

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

When it comes to building strong innovative products, Europe is no longer second to the US, and the CEE is no longer second to West Europe. DocPlanner, Brainly, Booksy, and Infermedica prove that EU startups can successfully utilize local European talent (6 million developers in Europe vs. 4.3 million in the US) and conquer both continental and US markets. European startups raised $34.3bn in 2019 compared to $15.3bn in 2015, indicating that access to capital is democratizing globally.

We will see more angel investors investing early on, many of whom will be coming from the first wave of successful European startups such as TransferWise, Adyen, or Spotify. On a local level, we will also have greater access to knowledge and experience, which will further level the playing field.

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