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TMT Investments - VC Of The Month
16 December 2020·7 min read

Magdalena Balcerzak

Manager, Vestbee

VC Of The Month - TMT Investments

TMT Investments is a venture capital fund that invests globally in leading-edge, earlier stage technology companies. It has been quoted on AIM since 2010.  Their investment team consists of accomplished entrepreneurs and business professionals who have launched, sold, invested in, and managed numerous technology businesses, with tens of millions of users and hundreds of millions in total revenues.

Fund Strategy Overview

Geography: USA, Eastern Europe, Israel
Preferred industries: SaaS, e-commerce, Marketplace
Investment ticket: 0.5 – 2M USD
Company stage: pre-A, A
Product type: Ready product
Product stage: Software and services
Revenues: MRR 70k USD+

Q&A with Artyom Inyutin, Co-Founder and Head of Investments

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

Through the years of providing startups support we were able to watch their development, successes, struggles and other obstacles. Based on that experience we created the ideal startup’s profile that assures its preparedness for getting funded and joining us. Here are these key factors that we are always looking for: 

  • High growing project with potential for further exponential growth
  • Good technology as well as stable business model
  • Fabulous and sales-oriented team involved in the project
  • Business presence in at least 2 countries with plans for further scaling

These all factors adding up together are a good combination of soft and hard skills along with great ambition and knowledge that while being in the right hands are doomed to success. 

What disqualifies a startup as your potential investment target?

The answer is as simple as it is. When a startup doesn’t develop the qualities mentioned in the previous answer, it is definitely not ready to become our target. Every startup should include these points on its checklist and tick off before trying to get any funds.

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

Best founders always have profound knowledge of the market they operate in and of their competitors’ moves. They have not only plan A, but plan B as well to ensure a stable future no matters what scenario comes alive. Crisis situations aren’t extraneous for them, but are treated as the lessons indicating what to do when a new crisis comes unexpectedly. And last but not least, an important quality of a professional founder is creativity. They should think out of the box and avoid making so-called ‘ fear pivots’.

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

In our opinion it would be reasonable for a startup to consider the following:

- Did a startup reached the stage that is interesting for the VC;

- Does it have a certain legal structure and implement financial reporting;

- Does it  have a professional craft pitch deck;

- Can it assure good growth and ambitious plans for the future showing the desire to conquer the market.

When a startup’s founder is able to provide affirmative answers to these points he or she definitely should go for it.

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

We have multipliers for every IT-segment we work in. After the analysis of startup’s legal and financial documents, we can easily estimate its valuation. In addition, we evaluate the current competition’s environment and are able to calculate discounts and premiums to a standard valuation. And, of course, dialog with a team always helps to understand a startup’s need for investment and its certain valuation. Regarding our share, we always take a minority stake but it differs between companies. However, it usually hovers from  2 to 10%.

How do you support your portfolio companies?

Firstly, we support our portfolio companies with current and future fundraising rounds and bringing in other funds when needed. Secondly, we give consultations on its product, promotion and finance projects. Thirdly, we provide necessary contacts within its area of development. Fourthly, we also help the project find a strategic investor.

What are the best-performing companies in your portfolio?

As of today, we have made more than 50 deals, and most of our portfolio companies are growing very well. Among the most well-known and fast-growing startups, we should definitely mention unicorns Pipedrive, Wrike, Bolt as well as PandaDoc, Scentbird, Backblaze, Depositphotos, Mel Science, Hugo, Scalarr, Affise and etc. We invested in all these companies at an early stage.

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

In our view, a founder and team members should have a significant stake, which would give them good motivation for project development. Moreover, we made a couple of mistakes when we did not get to know and understand the founder’s objectives and aims. Of course, it is hard to understand a person’s perspective having had only 2-3 meetings with, however it is crucial. 

There are as well quite objective reasons for projects' failures, caused by the mere lack of money. When both a project and a market are not bad, but a team cannot catch the fancy of potential investors and raise funds on time, a project stops growing well. 

Another lesson that we have learned is that a team should not spend all its efforts just on a product. Successful sales are necessary practically from the very beginning of a product’s existence, as well as permanent feedback from the clients. We believe that founders’ previous experience is very important as well, because there is always a lesson to learn from that. If a person has vast experience in a project area and has survived a crisis, it grants additional stability to the business.

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

We are very excited about online education, AI, e-commerce, SaaS. Among the segments, which we work in, like  fintech, online entertainment and healthtech, we see the hype now and expect it in the near future

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

Over recent years huge money has arrived on the market of hi-tech companies, and this growth will continue. Therefore, there is a long-term trend of the venture capital market growth. Startups frequently operate faster and much more efficiently than big corporation departments.Thus, strategic investors are delighted to buy startups in order to increase their market shares or obtain new technology. Year by year the number of such deals is increasing. 

On the other hand, IT is one of several industries where one can earn big money from scratch. In the future due to robotization and automatization more and more people in Europe will be free of routine tasks and become more involved in creative activities. Therefore, even more people will head to IT to have an interesting job and earn good money. Moreover, in Europe there is a regional trend that a lot of new projects are executed in  Eastern Europe: Poland, Russia, Estonia, Ukraine, Belorussia, Latvia. The traditional economy of these countries shows slow development, while in IT due to the short investment cycle and usage of people’s creativity, interesting projects, aimed at global scaling, started to grow rapidly. Moreover, governments of many European countries continue to actively stimulate IT development, and this positively impacts the quantity and quality of products. So, in the future we expect even more interesting projects in Europe!

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