Next Road Ventures is a Warsaw-based early-stage VC fund. They primarily focus on CEE-based startups in Saas and Marketplace verticals fundraising up to 1M EUR. The fund targets committed entrepreneurs with scalable businesses willing to develop globally, who have the clear vision, motivation, and strong drive to succeed. Apart from capital, portfolio companies are provided with support tailored to their current business needs and goals.
Fund Strategy Overview
Geography: Central and Eastern Europe
Preferred industries: Sector Agnostic, with a strong preference towards Saas and Marketplace verticals
Investment ticket: up to 1M EUR
Company stage: seed, pre-A, and pre-seed in exceptional cases
Product type: software and tech-enabled business models
Product stage: preference on post MVP
Revenues: preference on several months of revenue traction, however, it’s not a must
Q&A with Marcin Laczynski, Partner
What are the 5 main things you look for in a startup?
1. Right Team - we pay great attention to founders’ experience and knowledge about the industry, as they are the main driving force behind any startup’s success, especially at the early stage which we target.
2. Market Size – the market has to be big and must be able to accommodate a high-growth company.
3. Defensibility - we look for companies with defensible, unique and substantial solutions.
4. Timing – in the world of startups the right timing is essential.
5. Cap table – all stakeholders must be aligned properly and stay sufficiently motivated in the subsequent financing rounds.
What disqualifies a startup as your potential investment target?
There are a few factors that disqualify a startup as our investment target right away.
- Too small market
We disqualify companies that lock themselves in relatively small markets with poor growth dynamics. Such markets may be sufficient for successful lifestyle businesses but are definitely too small to secure our exit. - Geographies from outside the CEE
We have a very strict investment strategy aimed at early-stage startups from the Central and Eastern Europe region. - Founders with narrow vision and low aspirations
Go big or stay home is the main benchmark we apply while talking to founders. We bet on visionary founders with the ambition to seriously shake things up. If a startup prefer to stay locked-in to your comfort zone, we are probably not the best match. - Broken cap table
That happens i.e. when investors take up too much equity exposing founders to significant dilution at later stages and misaligning the motivation between various stakeholders. Sadly we still see it way too often in the CEE.
What in your opinion differentiates the best founders from the rest?
There is no one-size-fits-all formula, however, there are few traits that may be noticed in many great founders - having a broad well-thought vision, confidence in prosperity, and strong drive to succeed. Besides that, the best founders have to prove a clear understanding of the problem they are trying to solve and the business they operate in. Ease of storytelling and building compelling narratives is also a useful skill while combined with the pragmatism and ease to listen and learn from others.
What startups should take into account before making a deal with a VC fund?
I always compare an investment deal between a startup and VC fund to marriage as it is a long-lasting relationship for good and bad. Therefore, the right match and alignment between a startup and a VC are crucial. Without mutual understanding and sharing the same goals, the whole cooperation is not going to work.
What is your approach to startup valuation and preferable share in the company?
There is a certain level of mysticism surrounding the subject of early-stage valuations, as usually traction metrics and some benchmarks are missing at this stage. Of course, we aim for a fair share, but at the same time the ownership structure and related founders’ motivation must remain sustainable in the long run.
How do you support your portfolio companies?
Our main motto is “Do not disturb and engage when needed”. Although we love to stay close to our founders, we are not the back seat driver type of investor. Our approach is to stay on the listening side during the dialog with a startup. With our companies, we work on a very individual basis which enables us to provide dedicated and tailored support.
What are the best-performing companies in your portfolio?
In our portfolio, there are many well-performing startups and so far all of them are on the prospecting development path. Definitely worth mentioning are Amberlo, HiPets, Smabbler, and Sunroof.
What are your notable lessons learned from investments that didn’t work out as expected?
Some founders are great salesmen who brilliantly hide their inability to listen to others. Taking into account the limited amount of time a VC has to build a relationship with a founding team and seal the deal, this problematic trait may not always show up.
Sadly, founders who are bad listeners and do not let go of their personal convictions against strong signals may have a negative impact on the business. So close interaction with founders is very important as it helps to know founders’ qualities and approach to business.
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
Like all my colleagues from the industry, I must underline that Covid-19 was a game-changer and fueled digitalization in nearly every industry. As investors, we are pretty bullish on Fintech, Cleantech and reshaped by pandemic Healthcare and Proptech. We think there’s a bit of hype on the 15min grocery startups (2 years down the line I’d love to see the unit economics of these companies).
In your view, what are the key trends that will shape the European VC scene in the coming years?
At Next Road Ventures, we are firm believers in the increasing significance of the European VC scene. With the constantly growing and steady influx of money within a decade the European ecosystem should close the gap to its peers from the US and China. We are also bullish about the nascent CEE VC ecosystem, which in the years to come should supply more exciting startups and some really amazing success stories, most likely in the tech scene where CEE has a very strong talent pool.
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