LAUNCHub Ventures is a leading early-stage venture capital fund investing in technology startups in the Seed and Series A funding stages. Based in Sofia, Bulgaria, they invest in Southeastern Europe and broader Central & Eastern Europe (SEE & CEE), and in companies built by ambitious founders from those regions who are based in the leading startup hubs such as London, San Francisco, and beyond. The team has been investing together since 2012 and had over the years around 100M EUR in total under management. Some of the fund’s notable investments include FintechOS, Gtmhub, and OfficeRnD.
Fund Strategy Overview
Geography: Central and Southeastern Europe (SEE & CEE)
Preferred industries: sector agnostic with a stronger focus on SaaS, Fintech, Proptech, Big Data, AI, Marketplaces, Digital Health, Blockchain, IoT
Investment ticket: Initial investment is between €300K and €2M, leading investment rounds of €300K to €5M.
Company stage: Seed and Series A
Product type: software and tech-enabled
Product stage: launched product with early customers is preferred
Revenues: several months of initial traction is preferred
Q&A with Stephane Gantchev, Partner
What are the 5 main things you look for in a startup?
- Team
“Investors invest in people'' - this phrase has turned into a cliche in the startup world, but it still remains true today. The abilities of the founder and management team are the most important factors driving investment decisions. The direction of the company may change and the startup can evolve over time - it’s the team’s ability to navigate the change and withstand all turbulence throughout the startup journey.
Before making any investment decision, we always try to understand the team’s history and dynamics, to see how they interact and work together.
- Market & Trends
After we’ve evaluated the team, most often our next question is about the size of the market. Even the best team out there won’t make it if there is no market for their product. Often the market opportunity is connected to emerging trends in the sector. For example, a regulatory change can turn the particular startup product from “nice to have” to “must have” overnight! The pandemic increased the pressure for digitalization - many industries adopted products way faster than it would’ve initially taken them. - Competitive Landscape
We always do a deep dive on the competitive landscape - who are the biggest players in the fields, are there any recent funding rounds in this vertical, and how the company we are evaluating stands against them. - Scalability
There are many businesses out there that are having a nice healthy growth over time, however often VCs are looking for high growth startups - by this, we mean startups that can quickly scale the company and grow to new markets. - Fundability
At LAUNCHub Ventures, our main focus and added value is to help founders raise their next round of funding. If a startup meets all 4 points above, the next factor we start taking into consideration is: how quickly can the startup raise the next round of funding and do we know investors in the field we can introduce the team to. That’s something we always have on the back of our minds when we make investment decisions.
We host an internal program called Series A Academy, where we help our portfolio founders raise their next round. 62% of participating companies raised Series A in 12 months - over €30M in total. After this success, we decided to open up the program to the public. If you are a founder currently fundraising, you can join our online community here.
Having said that - there is no one formula-fits-all when it comes to investment decisions. We always apply an individualized approach when talking with different teams about potential investment.
What disqualifies a startup as your potential investment target?
We have two such criteria - startups with a lack of stage fit or product type fit are not considered as our investment target.
- No stage fit: We are looking for scalable businesses with initial traction to preferably lead their Seed round and support their growth by helping them raise their next round of funding. We rarely invest in idea stage startups (pre-product and pre-revenue) - an exception made for founders that we already know quite well.
- No product type fit: We invest in startups using technology to power their products - companies building great products that are scalable and have the potential to go global. We respect entrepreneurs of all kinds, but we simply can’t invest in companies that are solving a very local or niche need, or the ones that are predominately making revenues out of consulting services rather than selling a product.
What in your opinion differentiates the best founders from the rest?
There is no golden formula for the best entrepreneur. It’s usually a healthy mix of passion and grit alongside relentless work ethic and focus. From our experience working with successful founders, who managed to build global business, what we value the most is resilience and persistence. Having the ability to bounce back from any difficulties throughout your entrepreneurial journey is perhaps the most important skill for a successful founder to have.
What startups should take into account before making a deal with a VC fund?
The same way we as investors are evaluating your startup, the same way you, as a startup, should be evaluating the investor. Choose a VC fund, who will be on your side and will be a long-term partner. Also, consider the network your potential investor has access to and if it will benefit your company in any way. Don’t be afraid to ask for introductions and help - we do this all the time for our portfolio startups!
What is your approach to startup valuation and preferable share in the company?
It’s important that this works for both sides - for us as investors and for the founders. We approach valuations from both stages of development point of view, and from the desired shareholding against needed investment. Our preferred shareholding in the companies we invest in could differ, but we usually aim at around 15-20% when we are the lead investor.
Also, it’s crucial for the founders not to dilute their shares too much - this makes the company unfundable in future rounds. We’ve seen examples of founders giving away too much ownership to angel investors in the early stages of the company development, which is often not a good idea. That’s why the valuation needs to fit both parties, so we make sure the mathematics work for the founding team, as well as for us.
How do you support your portfolio companies?
We help companies with so much more than just money. We even have a dedicated team member, who focuses on post-investment portfolio services that we call our Platform. At LAUNCHub Ventures we believe that a successful platform strategy is built on three pillars: advice, network, and services.
- Advice: we have monthly expert webinars on different topics for all departments in our portfolio. For example, when the world went remote overnight, we invited experts to advise our portfolio on how to best make the transition. We also believe in the power of P2P support, so we provide space for founders to connect directly with each other and get support.
- Network: the team has been investing in the region for the past 10 years and we value the network we’ve built. We make sure we always give the opportunity to our founders to tap into that knowledge pool when they need to.
- Services: We select different service providers who work directly with the portfolio companies on preferential prices.
What are the best-performing companies in your portfolio?
Venture capital is a long-term game - we partner with the teams we invest in for the long timeline. We are happy with how our current portfolio startups are performing and we’re closely monitoring their growth. FintechOS has raised a 60M Series B round led by Draper Esprit, with the participation of Earlybird. Just a year after a $9 million Series A with CRV, Gtmhub raised a $30M Series B round with Insight Partners, CRV and Singular.
Some of our notable exits include: Charlie Finance, an AI personal finance app for achieving debt-freedom, has been acquired by Chime, one of the fastest-growing US fintechs, the sports streaming scaleup FITE was acquired by TrillerNet, Cleanshelf, SaaS Management Provider, joined LeanIX, and Cloudpipes, a leading cloud-based integration and automation platform, was acquired by Quick Base.
What are your notable lessons learned from investments that didn’t work out as expected?
There are so many changing and unmeasurable parts when it comes to the success of a business. There are some factors that can be easily measured like recent and upcoming new trends, the financial viability of the venture, the winning business model, etc - all factors we’ve learned to recognise during the past decade as investors in the region. However, there are some factors that can’t be measured - the human factor cannot be calculated with any formula. For example, we’ve had situations where the founders decide to sell the company way earlier than we’ve anticipated. The journey of a founder is hard and you never know if that’s for you unless you start walking that path. Putting ourselves in their shoes, it’s totally understandable to decide that you don’t want to walk that path anymore.
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
The biggest hype nowadays are NFTs. We are in Crypto since early 2014, and from then on, we’ve been closely monitoring the space and looking for new investment opportunities. In the SEE region - we have led Kriptomat €2.2M round, a leading regional crypto exchange startup.
After the pandemic and the move to the remote world we’ve seen an increase in dev tools, workflow automation and ecommerce tools, as well as health tech and telemedicine. The creators economy is also a vertical that is on the rise.
In your view, what are the key trends that will shape the European VC scene in the coming years?
We have recognised two key trends:
- Speed of digitalization
The pandemic forced many industries to adopt more innovative products and digitalize even further. This trend will continue shaping the world we live in today and the one we are building for tomorrow. It has become apparent to us following the growth of our recent investment in FintechOS that helps banking, financial services and insurance companies keeping their services up to date. - Remote first
The pandemic also moved our world online overnight - meetings, company retreats, birthday parties… Communities worldwide completely shifted to online interaction. We are keeping a close eye on the upcoming trends around the future of the community. To put our money where our mouth is - we invested in Orbiit, the matchmaking engine that uses AI to put 1:1 peer connections and human interaction at the forefront of every professional online community.
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