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20 June 2023·9 min read

Konrad Koncerewicz

Head of VC & Startups, Vestbee

VC Of The Month - TechOne Venture Capital

TechOne Venture Capital is a smart-money platform that invests in early-stage technology startups in CEE and Turkey with aspirations of becoming global leaders in their verticals. Our strength comes from the diversity of our stakeholders and the multi-disciplinary nature of our Team. We provide more than just capital; we bring strategic expertise, connections, hands-on mentoring, and operational excellence. Leveraging our global financial and strategic network, our operating capabilities, and strong partnerships with academia, we focus on being the best partner for founders!

We believe that only extraordinary teams with infinite persistence and a global vision will build leading companies of the future. We are keen to partner up with outstanding entrepreneurs with a vision to shift or disrupt market dynamics through the power of innovation. We provide whatever a founder would need with 30+ full-time professionals and more than 100+ strategic partners.

Fund Strategy Overview 

Geography: Turkey and Emerging Europe

Preferred industries: B2B Saas, Generative AI, Cybersecurity, 

Investment ticket: 150,000 USD – 1,500,000 USD

Company stage: Early Stage (Seed through Series A)

Product type: Software-driven

Product stage: Post-MVP  

Revenues: Post-revenue

Q&A with Yiğit Arslan, Partner of TechOne Venture Capital

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

The first thing we look for is the quality and the composition of the founding team. A good team should have complementary skill sets along with infinite persistence. In addition, we evaluate a startup by taking into consideration: Size of the market, scalability, value proposition, and our value add as well as the maturity and potential of the technology aspect.

What disqualifies a startup as your potential investment target?

We easily disqualify two cases: 

1) Where there is a discrepancy between the team who will have to dedicate and risk their entire career for the sake of growing the business and the cap table. In short, we want the founders to be full-time, and vested. Also, the key non-founding team members are to be a part of the employee stock option pool. 

2)  We are not interested in B2B startups that aim to become local champions, instead, we are interested in global stories. 

What in your opinion differentiates the best founders from the rest?

Some founders have what we call “infinite persistence” that opens the way to an infinite number of iterations before eventually succeeding in any part of the business. Another quality is the ability to learn from your mistakes, but even better learn from others’ mistakes. Founders’ ability to attract and retain top talent is another key aspect for a startup at any stage.

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

Startups should beware that this is a long-term relationship and should talk to their potential investors’ other portfolio companies for feedback. I would advise them to separate smart money from any other investor, and diversify their cap table according to their investors’ capabilities. One investor may be helpful in international sales, whereas another investor may have great VC network. 

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

We believe, eventually, the valuation is a result of supply&demand dynamics within that specific market, however, the key question we ask the founders is: “After you close this round with x valuation and y cash-in, are you comfortable that you will be able to receive 2y funding with 2x valuation in 12 months.” If the honest answer is yes, we believe we’re on safer ground. If the startup is raising at a 

We define a proper equity round as a round where the founders dilute at least 10% in total and provide themselves with a runway of at least 12-18 months. We typically aim to receive at least 2.5% shareholding within such a round.

How do you support your portfolio companies?

One of the reasons we established Metis was to provide top-notch support to our portfolio, to make sure they cover as much distance, in the most efficient way, between fundraising rounds as possible. We define ourselves as a platform that helps our portfolio companies and their founders deliver at their next level. We try and help a seed startup define their GTM plan as professional and detailed as a Series A. We help a Series-A fundraise as organized and good looking as a successful pre-IPO company.

Our platform team’s promise is to make sure there are KPIs and deliverables in every sort of support we give our portfolio companies. Thus, we try to focus on these initiatives and measure our impact every time we help a portfolio company:  finance (make sure monthly reporting, cash flow etc. in place and shared with investors), fundraising (help founders with the storytelling, projections, financials, target investor list and reach out) , strategy (product-GTM-pricing), digital marketing (performance marketing) and sales (international partner - channel management mostly). 

What are the best-performing companies in your portfolio? 

We have done our first closing for TechOne in July 2020, so it’s been almost three years since we started investing. We have invested in more than 30 early-stage startups and exited from one. So, I’ll start with our first exit: Tridi – is a tech-enabled on-demand manufacturing platform. We closed our investment in September 2021 and exited at the beginning of 2023. Two key pillars of our investment decision to Tridi were:

  1. Macroeconomic tailwinds, favoring Turkey as a low-cost industrial manufacturing base.
  2. Possible consolidation opportunity in the on-demand manufacturing market as there are a few larger and well-funded scale-ups in the globe.

We were both visionary and lucky that both of our key pillars worked in favour of Tridi, and we exited in less than 18 months with a 3x multiple. 

Apart from our exit, we are so proud to see all our portfolio companies manage to survive without an exception within these 3 years. Wask, a digital marketing enablement platform, has more than ten folded its MRR since our initial investment in 2021. Figopara, a B2B trade finance fintech, is leading in Turkey and expanding its horizons in Europe and MENA. Weplay, our early-stage gaming platform investment has created more than 25x multiple for our fund and is operating in CEE now. 

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

As managing partners of TechOne, we come from a financial background, where we are used to deep-dive into evaluating mid and long-term prospects in different industries and companies. Thus, in the first few years of our VC practice, we have devoted a lot of effort in trying to evaluate business models, companies, and industries even though VC literature attaches more importance to team formation in a startup.

One of the main lessons learned from investments with a slower growth trajectory was the discrepancy between the set of core skills that needed to be in place for that startup to succeed vis-à-vis the core skills the founding team has. Let me give an example: You would prioritize having a founder from an enterprise sales channel management background for a B2B enterprise software, along with a strong product manager and CEO. On the contrary, you would prefer investing in a founder with strong digital growth marketing and B2B Saas background for a B2B product with a zero-touch sales approach.

Today, we have evolved our investment decision-making process with a more quantitative approach, to deliver a more realistic assessment of the founding team of a startup, come up with actionable advice and map the core human skills that we believe will drive that particular startup to success.

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

We are very interested in how generative AI has already started to change the whole landscape for tech startups. We see the biggest hype in anything that increases productivity in B2B landscape. 

We are very interested in the cybersecurity space as well, given the fact that there is a very big consolidation wave to ride, meaning that we expect a lot of M&A activity within. 

Third, we think local to global B2C is still very interesting as we operate out of Istanbul, and there is above 200 million population within 2 hours of flight time, with above 90% mobile internet penetration. 

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

The European VC ecosystem has and will continue to cover a lot more distance in the coming years. We see CEE and Turkey as great talent hubs, and the more these regional founders gain international experience, grow their businesses, and exit; the more examples they will set, and give back to the ecosystem. 

We believe one of the key trends is the unification of European VC scene. We do this in conferences, in media coverage, and in the diversified cap tables of European startups.

We think another important trend is the rise of thematic investments in the European VC ecosystem. There is a lot of vertical focus coming into the market starting from the accelerators that we believe will continue with the emerging VC funds. Combining this with the roots of the corporate culture, we see more and more blue-chip corporates investing in the startups within their verticals. 

These two trends, we believe, are deepening the level of funding, expertise, and diversity in verticals, and will definitely result in more European unicorns.

 

Related Posts:

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VC Of The Month - Flyer One Ventures (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)

VC Of The Month - Lead Ventures (by Konrad Koncerewicz, Head of VC & Startups, Vestbee)

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