VC Of The Month - Lead Ventures
Lead Ventures is a Budapest-based VC firm, backing scale-ups on their journey to reach their goals in international expansion. Since the foundation in 2018, Lead Ventures has selected 16 exceptional tech teams and provided financial and strategic support to boost their growth and reach their ambitious targets. The two VC funds of Lead Ventures amount to €100M.
Fund Strategy Overview
Geography: Europe (strong focus on CEE) – “From the region to the region” concept.
Preferred industries: Various.
Investment ticket: Initial ticket €1-5M (Up to €10M including follow-ons).
Company stage: Early/growth stage.
Product type: Mostly B2B software.
Product stage: Launched product.
Revenues: Product - market fit, scale.
Q&A with Abel Galacz, Founder & CEO of Lead Ventures
What are the 5 main things you look for in a startup?
In short: we look at the team and the TAM. Founders play a critical role in the success of the startup as they are the driving force behind the company. Before investing in a startup, we put a lot of effort into assessing the market opportunity and analysing the competitive landscape, some might say we go quite deep in analytics. We look for startups with the potential to become significant players in the industry at a global scale and with a clearly defined competitive advantage that has already been validated by the market.
What disqualifies a startup as your potential investment target?
We are looking for startups that proved that their solution is attractive internationally and not only in their home market.
What, in your opinion, differentiates the best founders from the rest?
We meet with hundreds of founders every year, and we consider the first impressions crucial to decide whether the chemistry between us works or not. Self-reflection is critical, as no story is a straight line from start to global success, therefore, dealing with obstacles, failures, and pivots is key. The best founders are always well-prepared, open to all questions, and willing to accept feedback and learn from others. They must have a strong vision and be passionate and dedicated to putting in the time and effort to achieve their goals. Being resilient and adaptable is critical considering the constant changes in a fast-paced startup. Having a powerful team on the founder’s side is an important factor of success, and founders need to have the ability to recruit and retain the best talents and keep them engaged and invested in the startup’s long-term growth.
What startups should take into account before making a deal with a VC fund?
Just like VCs have their own criteria for startups, startups should have the same. They should consider that this relationship lasts for many intense years. Besides the strategic support, the ability to do follow-ons and connect startups with later-stage investors or potential customers is also important.
What is your approach to startup valuation and preferable share in the company?
There is a mathematical approach to valuation, but it's also about perception. The value should not be too low, as it would hurt the cap table, but a too high valuation could lead to difficult funding situations at a later stage. Both the founders and the VCs need to assess these aspects before fixing a valuation.
How do you support your portfolio companies?
We leave space for the management to focus on the product and growth, however, we are there to support them in every important strategic decision.
Lead Ventures is the first Hungarian VC partner of Plug and Play. Portfolio companies benefit from the unique ecosystem built by Plug and Play, opening the doors to the largest corporates globally. This relationship may help them in their business development and customer acquisition once leveraged efficiently. Besides the Plug and Play ecosystem, the Lead Ventures team has a broad network of industry connections across Europe and beyond, which may enhance finding talent and business prospects for our founder partners.
What are the best-performing companies in your portfolio?
We are proud of all our portfolio companies and believe they can achieve their outstanding goals. We stand beside them during their journey and work with them until they succeed. From a VC perspective success is measured in exits, therefore we are very proud of the Aimotive team, which was recently acquired as the largest Hungarian startup exit by today. Their success paved the way for our other portfolio companies to follow.
What are your notable lessons learned from investments that didn’t work out as expected?
In our view, startup founders should maintain their flexibility and adaptability even in later stages, which helps them to retain their competitive advantage. They should not overvalue the current product and should be ready for product pivots in case the market demands it. Operational excellence is a key winning factor in times of high market volatility, therefore scaleups should strive for it to secure their basis for growth.
What are the hottest markets you currently look at as VC, and where do you see the biggest hype?
Obviously, CEE. The region’s investment volume has grown the fastest in Europe in the last 5 years. Besides that, CEE has got a total of 44 unicorns so far, from which 23 new startups have reached a $1Bn valuation in the last 2 years. Verticals and industries emerge and descend every year, however, CEE’s momentum is expected to stay with us in the coming years, therefore we will be there to support founders to scale.
In your view, what key trends will shape the European VC scene in the coming years?
The VC market is tightening, therefore founders should consider partnering up with larger funds in their cap table, as the importance of follow-ons is seriously higher these days. Besides the ability to offer follow-ons, the post-investment support will also increase in relevance, as founders look for advice on navigating the current market.
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