Molten Ventures plc is a leading venture capital firm in Europe, developing and investing in disruptive, high growth technology companies. We believe it is our role to support the visionary entrepreneurs who will invent the future. We fuel their growth with our ‘energy’ in the form of truly patient capital, access to international networks and decades of experience building businesses. Currently, Molten Ventures is a shareholder in a diverse portfolio of companies including Thought Machine, Coachhub, Graphcore, Aiven, Ledger and Aircall. For more information please visit: www.moltenventures.com
Fund Strategy Overview
Geography: Europe
Preferred industries: Deeptech, SaaS, Enterprise software, Healthtech and Consumer Tech
Investment ticket: €5m-€20m
Company stage: From Series A to growth equity
Product type: No preference
Product stage: Post-product
Revenues: Depending on business model, typically revenue generating
Q&A with Ozan Sonmez, Partner of Molten Ventures
What are the 5 main things you look for in a startup?
When evaluating early growth-stage companies for investment, we prioritize five key factors. Firstly, we look for a proven product-market fit, ensuring the company understands its target market and has successfully established its product. Secondly, we assess sustainable unit economics, examining indicators like positive gross margins and healthy customer acquisition costs to ensure long-term profitability. Thirdly, we evaluate the sizeable market opportunity, considering market size and competition. Fourthly, we examine the company's attack plan, scrutinizing their go-to-market and scaling strategies. Lastly, we focus on the team, seeking a capable group with a track record of execution and the ability to adapt.
What disqualifies a startup as your potential investment target?
We typically decline investments due to a lack of alignment between the team's skill set and the business problem they aim to solve, an insufficiently large target addressable market, a lack of emphasis on product-led growth, and poor traction in target markets. Additionally, if the founders do not hold a meaningful equity stake, we tend to pass on the investment. Lastly, we expect to see a well-thought-out business plan and transparency during the due diligence phase.
What in your opinion differentiates the best founders from the rest
The best founders differentiate themselves through their deep understanding of the business problem and their passion for the product. They navigate complexities with innovative solutions, exhibit attention to detail, and drive execution with an unwavering commitment to success. Finally, they can balance their strong convictions with openness to feedback.
What startups should take into account before making a deal with a VC fund?
Firstly, it is crucial to ensure that VC investment aligns with the company's overall strategy and vision. Startups should be convinced that the investment will support their mission and be prepared for the eventual exit once that mission is accomplished. Secondly, startups should be prepared to be challenged by VCs. VCs will ask probing questions to identify opportunities and guide the startup towards the most productive use of resources. Thirdly, startups should anticipate an iterative and detailed diligence process. This process not only serves as a truth-finding exercise but also helps identify areas for improvement to align with the business plan. Lastly, it is important to know the investment professionals who will be leading the deal. Building a strong personal relationship with them is essential since the journey will involve both positive and challenging times
What is your approach to startup valuation and preferable share in the company?
Our approach to startup valuation centers around a backward engineering methodology. We strive to estimate the ultimate valuation of a company if its business grows as planned, enabling us to identify the optimal investment opportunities to achieve our target returns. This valuation exercise relies on several key assumptions, such as our assessment of the business plan, future funding requirements, timeline, and potential exit strategies.
When it comes to determining our preferred percentage share in the company's capitalization table, our aim is to secure a substantial stake that justifies our active involvement in key decision-making processes concerning the overall direction of the business.
How do you support your portfolio companies?
As one of the leading VCs in Europe, we possess a wide range of resources that we offer to our portfolio companies. Firstly, through our board representation, we provide access to our expertise and network, which includes introductions to key experts. We also act as a sounding board, offering coaching and sector-specific knowledge. Secondly, we support important strategic initiatives through our portfolio team, such as go-to-market strategies, internationalization in Europe and the U.S., hiring, follow-on funding, and exit preparations. Lastly, we provide operational-level assistance, offering support in areas such as HR, strategy, ESG, marketing, finance, legal, and compliance.
What are the best-performing companies in your portfolio?
Molten Ventures has invested in over 70 companies in Europe, focusing on four core pillars: consumer, technology, enterprise technology, hardware & deeptech, and digital health & wellness. We are extremely pleased with the performance of our portfolio, even in the face of current market headwinds. Our top positions include Thought Machine, CoachHub, Aiven, Ledger, and Aircall. It is worth noting that some of our most successful investments have come from the CEE region, including UI Path, Peak Games, Revolut, and Wise.
What are your notable lessons learned from investments that didn’t work out as expected?
Failures in investments are seldom attributed to a single issue. They usually result from a combination of factors that ultimately lead to disappointing outcomes. However, a common underlying theme in most cases is the inability of management teams and boards to react in a timely manner with appropriate measures, often due to a lack of communication or a poor feedback culture.
While it is important to acknowledge the multifaceted nature of these failures, there are several contributing factors worth mentioning. These include a weak product-market fit, difficulties in internationalization or go-to-market strategies, and a failure to develop the necessary organizational capabilities for scaling the business.
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
We believe that B2B software, specifically enterprise or SaaS, will continue to be the epicenter of value creation, particularly through AI-first/AI-enabled products that have the potential to revolutionize how businesses operate day to day. Therefore, this market is currently and will likely remain the hottest in the near future. As for the biggest hype, if we had discussed this a year ago, we would have listed numerous trends, ranging from SPACs to rapid funding rounds. However, much of this hype has recently normalized, which we view as a healthy development for the entire sector.
In your view, what are the key trends that will shape the European VC scene in coming years?
Expanding on my answer to your previous question, we anticipate that the CEE tech ecosystem will play a significant role in the AI-driven transformation that will shape the European VC scene in the years to come. This transformation will be fueled by the region's exceptional tech talent, strong connections to global markets, entrepreneurial spirit, and proven go-to-market strategies demonstrated by successful case studies, some of which are part of our track record. Moreover, the post-pandemic shift in operating principles and the drive for enhanced productivity due to cost pressures and inflexible labor markets further support this trend. I firmly believe that CEE offers an ideal foundation for Europe to maintain its competitive edge in this race. Therefore, at Molten, we are doubling down on our CEE strategy
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