Zagreb Entrepreneurship Incubator, Pioneers Ventures & Speedinvest

Zagreb, 22.9.2015. – As the leading southeastern startup accelerator, Zagreb Entrepreneurship Incubator signed a strategic partnership with Speedinvest and Pioneers Ventures the leading Venture Capital funds for digital Startups in the CEE region.

Zagreb Entrepreneurship Incubator (ZIP) is the first startup accelerator in Croatia, founded in 2012. with the goal of helping aspiring entrepreneurs from the region of Southeastern Europe to build their companies. Awarded as the best entrepreneurship support institution in Croatia in 2014 by the Ministry of entrepreneurship and crafts, ZIP has established itself as the strongest startup accelerator in the region.

Pioneers Ventures is a pre-seed investor empowering outstanding startups with it’s global network of corporates, industry experts and entrepreneurs. Besides the cash investment it provides startups with an extensive support program.
Speedinvest is the leading venture capital fund for early-stage technology companies in Central & Eastern Europe. They contribute seed- and growth-stage capital to the best European startups, and also provide hands-on, entrepreneurial support from its team of seasoned, successful startup founders. Through its operations in Vienna and Silicon Valley, Speedinvest is able to create global companies from the top regional talent.

In March of this years, Pioneers Ventures and Speedinvest raised €58 million in their first closing of the “Speedinvest 2” fund, in which Pioneers is a stakeholder and partner.  Mr. Mihovil Barancic (ZIP), Mr. Marius Starcke (Pioneers) and Mrs. Marie-Helene Ametsreiter (Speedinvest) signed the strategic contract which will bring the three entities into partnership motivated by empowering the startups of the Southeastern European region.

This partnership will enable Croatian startups coming from ZIP accelerator a broader exposure to much needed capital in the pre-seed (up to €125k), early stage and growth stages (up to €3 million). Together with potential financial benefit this agreement will also bring support from successful startup founders from the Pioneers and Speedinvest network to startups of the Southeastern Europe. Applications for the ZIP Startup program are open for regional startups until September 25th at

Optimize for value, not for valuation

Speedinvest has completed over 25 seed investments in a little less than 5 years, and that means a lot of deal negotiations. Termsheets are essentially a sales process, where founders try to sell their product (the Startup) as well as possible, and the buyer (the Investor) tries to assess the real value to his or her business, which is, in this case, future returns. The price for the product is the valuation. Naturally, during the negotiation process price is one of the main topics. But the analogy with selling a product clearly ends there. Unlike the price tag on a washing machine or used car, where the future value is subject to simple and well accepted formulae, the future value or returns of a startup is subject to more complex interpretation. It’s a figure so highly individual and incomparable, that there is no golden rule for setting the price.

“Investors are greedy, they want all of my startup!”

We always try to tell founders (during seed-stage deals and also in later rounds): don’t optimize for valuation. Now you could say „Of course, you’re an investor, you want to get as much as possible from my precious company, lower valuations make more sense for you“. Wrong. We want to have a fair share in a successful startup. We don’t look for the lowest valuation, we look for the right valuation. Why? Because the wrong valuation can make or break a startup. What is a fair share? Big enough to make us take good care, small enough that the founders are motivated.

Let’s get into a bit of background. Chances are high that we as a Seed Investor are not the last investor you might have. We’ll invest up to 500k, but you will most likely need more money, depending on your product and the industry you are in. Investors come in clusters or “rings”, much like an onion skin. There is the right investor for every phase, and that means every investor has a different sweet spot and a different valuation range. So getting the right valuation for your startup is an options game, where you have to try to keep as many options open as possible, and then close just the right one.

If your valuation in the Seed phase is too high, you automatically exclude a certain cluster of investors. This is because your current valuation plus the near-term increase based on your traction or progress, will lead to a new minimum valuation for future rounds, and that new valuation might put good investors out of range. And conversely, if your valuation is too low, investors that want to put in a certain sum (because of their business model or investment strategy) will get too many shares (yes, there is such a thing for investors as ‘too many shares’). If founders are heavily diluted in early rounds, future fundraising can be impossible. Investors might decline if the valuation is too low, or worse, just keep you waiting until you “get more traction”. If you fall below that critical sweet spot, you could face the ‘Long NO’.

So valuation is much more a signaling and a targeting exercise than about maximizing a number. A professional investor will want a certain stake in the company to devote the necessary attention, so it’s not only about the ownership, it is also about focus.

But valuation shows how awesome we are

For many founders valuation seems to be a sign of success instead of a means to an end. Focusing too much on valuation is an easy trap: valuations seem comparable at first sight; and everyone talks about valuation. But the very important value brought by the right investors is not so easily assessed. Let’s look at a common example that might show the difference between value and valuation: at Speedinvest, we frequently come across startups that have managed to get Business Angels on board early on. Often they pay enormous valuations in early stages, because a) they are happy whatever the result may be (Roulette), b) they don’t care about the next round (Inexperienced) and c) they will be a minority shareholder going forward anyway, not putting a lot of focus or effort in (Distracted). Would you play Roulette with someone who is inexperienced about the game and easily distracted?

Many founders then wake up in the next funding round, finding out the hard way that no professional investor will pay the valuation increase they expected. The story that “so much has happened since our last round” doesn’t work if you are too expensive for the investor. Down rounds are bad. Very bad. They create the signal that “something didn’t go as planned” and they need a lot of explanation. In this case it is far better to have a nice, easy, upward trajectory. You might show slow growth and get by on bridge rounds for a little while, but at least you are moving consistently in the right direction.

Using valuation as a measure of success is a trap. Paul Graham puts it this way:

„Not only is fundraising not the test that matters, valuation is not even the thing to optimize about fundraising. The number one thing you want from phase 2 fundraising is to get the money you need, so you can get back to focusing on the real test, the success of your company. Number two is good investors. Valuation is at best third.“

So optimizing for higher valuation will

  1. Take you longer, defocusing you from what actually matters, your business
  2. Get you lower quality investors, that will not contribute much
  3. Hurt you in later phases, because of inflated expectations and limited options
  4. Not make you rich.

Looking for the right investor, that helps you get to the next phase, is much more important than anything else. Focusing on raising your round quickly also matters. 2 % more of your startup won’t make a change.

PS: Some words on convertibles.

Convertibles are growing increasingly popular among founders because you can “close the round quickly” and, probably the strongest argument, you don’t need to set the valuation (yet). Both assumptions are wrong.

In fact, no decent investor will forego the process of defining how you want to work together or fail to put that in writing (e.g. investment agreements). So you’ll end up drawing up the same list of terms as you would in a priced round. It looks quicker, but in truth it isn’t.

The benefit of setting a higher valuation, because it’s a cap (upper limits) and has a discount, creates the same signaling problem as above. If your cap is too high, you end up with a down round, with the serious risk of giving away more than you wanted, just because some things don’t go as planned. Floors (lower limits) are pretty uncommon in Europe still, and those would limit the potential damage.

Additionally, if you happen to raise a lot of money with Convertibles with different caps, the math quickly gets ugly and it becomes really hard to tell a potential new investor how big the round actually is and what the valuation will be. All the convertibles add up, thus increasing the round and all of a sudden you are raising a seed round in the millions, with most of the money already spent in the past.

Convertibles are good in two cases only: 1) if you think that you can scale the business substantially in the next months and need some money to get there from your existing investors or potential investors to reach the next financing round or 2) if you are raising some small tickets from casual investors, that don’t want to negotiate terms heavily, are insensitive of valuation and are fine with the instrument. In all other cases, do an equity round. It will save time, work and trouble.

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Speedinvest verstärkt Präsenz in Deutschland

Speedinvest, der Risikokapitalgeber mit Büros in Wien und im Silicon Valley, der im März dieses Jahres seinen mit 58 Millionen Euro dotierten 2. Fonds präsentierte, verstärkt seine Präsenz in Deutschland. Mit Helmar Hipp und Marie-Helene Ametsreiter werden zukünftig zwei erfahrene Entrepreneure in Deutschland zukunftsträchtige Startups scouten.

Speedinvest ist bereits seit seiner Gründung in Deutschland aktiv und investierte dort bisher in das Fintech Startup Payworks, sowie Joblocal, einen Anbieter regionaler Jobplattformen, der 2014 von der Funke Gruppe übernommen wurde. Darüber hinaus sind mehrere Startups des Speedinvest Portfolios in Deutschland äußerst erfolgreich unterwegs – allen voran Shpock (erfolgreiches Mobile-Classifieds Portal), Wikifolio (führende deutschsprachige Social Trading Plattform) und Flaviar (kuratiertes Kennenlernen von Spirituosen).

Der Schwerpunktliegt auf Seed Investitionen, allerdings verfügt Speedinvest mit einem erwarteten endgültigen Fondsvolumen von ca. 75 Millionen nun auch über ausreichende Mittel, um Startups in späteren Finanzierungsrunden zu begleiten. Der inhaltliche Fokus liegt auf digitalen Geschäftsmodellen, wobei sich Speedinvest, neben ein Reihe sehr erfolgreicher B2C Beteiligungen vor allem in den Bereichen Fintech und disruptive Kerntechnologien (“Deep Tech”) einen internationalen Namen aufbauen konnte. Insbesondere für Technologie – getriebene Startups hat Speedinvest mit seinem eigenen Büro und Sales Team im Sillicon Valley ein einzigartiges Angebot für europäische GründerInnen geschnürt.

Zukünftig wird der Fonds seine Aktivitäten in Deutschland verstärken. Neben Direktinvestments in deutsche Startups wird Speedinvest seine Portfoliounternehmen im Markteintritt in der größten Volkswirtschaft Europas unterstützen. Aus diesem Grund freut sich das Team Helmar Hipp als neuen Venture Partner bekanntzugeben.

Hipp verfügt über mehr als 20 Jahre Erfahrung in der Internet- und Medienindustrie und ist ein Experte für digitale Geschäftmodelle und dazugehörige Wachstumsstrategien. Zuletzt war er als CEO der Ifolor Gruppe tätig und ist darüber hinaus Business Angel und Beiratsmitglied verschiedener Startups. Bei Speedinvest wird er als Venture Partner sein umfassendes Know-How im eCommerce und B2C Segment in die Auswahl und Betreuung der besten deutschen GründerInnen einbringen.

Darüber hinaus wird Marie-Helene Ametsreiter, Topmanagerin aus der Telekommunikationsbranche und ehemalige CMO der Telekom Austria Group, in der Münchner Startup Szene aktiv werden. Ametsreiter ist bereits seit 2014 Partnerin bei Speedinvest und unterstützt Portfoliounternehmen in den Bereichen Marketing und Business Development. Per Anfang 2016 wird Marie-Helene Ametsreiter nach München übersiedeln und dort verstärkt in im lokalen Ökosystem präsent sein.

Oliver Holle, CEO von Speedinvest zum verstärkten Deutschland Engagement: “Speedinvest setzt auf globale Modelle, in die wir sehr frühphasig einsteigen und diese dann gemeinsam entwickeln. Deutschland hat mehr zu bieten als eCommerce Copycats, hier wollen wir unseren Fokus setzen.”