To kick things off, can you tell us a little about Enern and your role there?
Tomáš: Enern is an early stage investor - we back ambitious entrepreneurs who are looking to change the status quo in their respective industries and build landmark durable businesses. Companies from our portfolio, that people would be most familiar with in the Czech market, include Rohlik.cz, Damejidlo.cz, Twisto.cz among others. We invest across Europe with a focus on Central and Eastern Europe. We can be the first investor in the company or lead at a later stage (usually no later than Series A round). We are sector agnostic but over the past 10 years have developed affinity for some sectors - such as healthcare, fintech, grocery or energy verticals. We don’t necessarily invest into software only companies – but also into technology enabled businesses. We like to keep an open mind about things that are possible and we can be very creative when we like something. We are an investment team of six people our role is not limited to investing only - that is where the journey starts. We stay with the companies we invest into for a number of years and offer to provide them with resources, network & help outside of capital. We also have a network of so called venture partners & advisors who are founders or business executives that our portfolio companies can speak to when seeking advice.
What gave you the power to take on such an important role?
Tomáš: Being a VC investor is very humbling in many aspects - you get to speak with entrepreneurs that many times want to “change the world” or have ambition to do things that are unimaginable for most. It requires us to keep a prepared and open mind and have an imagination that some might consider sci-fi. 🙂 I consider myself fortunate to be part of that ecosystem that in a way facilitates the change that we see in our everyday lives and to work with the daring entrepreneurs who are ready to risk everything to build their dream. On the other hand it comes with great responsibility not only towards our investors who trust us with their money but also towards founders we back – in continuing being available and resourceful if they so require.
Why do you think startups should raise with a Venture Capital funds? What are the pros and cons?
Tomáš: I certainly don’t think that all startups should necessarily raise VC money. It is a very specific type of capital that is best utilized in companies that have exponential growth potential and can reach a certain size. This can vary depending on a fund’s strategy and model. What is or isn't a good fit for VC funding can often be a matter of how big that company can get within 3 to 5 years – hence the obsession with the unicorns. If the business you are building is targeting to be smaller than tens of millions of euros in revenues, it can still be a great business, but maybe not for the biggest funds to invest in. VC funding can fast forward many things that would otherwise take much longer or would simply never happen while bootstrapping. It can also attract and retain the right talent.
Cool! You probably have startups applying to Enern at all possible stages. When is it the best time for startup founders to look for VC money?
Tomáš: Typically if you see that additional capital beyond savings, friends, family or business angels could significantly speed-up your product development or scaling of sales. Sometimes, if you don’t have the previous experience, it is hard to know or judge that. Best is to reach out to other founders who have that experience and get different opinion.
What are the 3 most common reasons based on which you decide not to invest?
Tomáš: We look for businesses that provide a solution to real problems and pains, we like to ask the question if a business has the Aspirin potential – a painkiller. If it's just a nice to have solution we usually pass. Another reason could be that the business is not using or developing a proprietary technology and as a result can be easily replicated. Last one worth mentioning is that the ambition of the business is just not large enough for us to invest we look for businesses that aim to grow to at least hundreds of millions of euros in value within 5 to 7 years.
What are the 3 main values you are looking for in a Founder?
Tomáš: In terms of values we look for what we keep ourselves accountable for: honesty, transparency and integrity. In terms of specific characteristics that we believe help when building a great company, we look for founders who have a strong why beyond the financial results. Meaning a reason to continue with their mission even when things get really tough. We also like founders that understand how their business can create and capture value. Curious minds and lifelong learners are also very important to us.
How long does the investment process usually take?
Tomáš: The time from the first meeting until the term sheet is getting shorter and shorter in general. It can be driven by a number of factors such as competitive dynamics, stage of the business or size of the round. For smaller checks below 200 000 EUR is a single partner decision. We strive to provide a yes or no answer in a matter of days. For larger checks it can take up to 2 weeks, sometimes longer. We understand that the fundraising process can be a huge distraction for founders who need to be focused 100% on the business. On the other hand, from experience in our own portfolio, going through the fundraising process can be a forming moment for the team. It can help with articulating the product proposition, re-prioritizing initiatives or expansion plans or hiring the right profile. If you look at fundraising purely from the angle of getting money then wrapping things up quickly can be justified. If you expect a partner and want to know who you will be working alongside with for 5+ years, then getting to know the actual people behind the brand of an investor justifies a few extra days in my opinion.
What’s the first thing you want your startups to do after closing?
Tomáš: Closing is usually just the formality and by the time it happens we are mostly all up and running full steam ahead. Fundraising process can take lots of energy and focus away from the team. Founders go back into full focus on the company building as soon as they can. We try to understand where we can help already during the process so that when the closing happens founders know which resources or part of our network they can draw on if and when needed.
Awesome! My last question is what was the boldest thing a founder did on an investor meeting, when looking to raise?
Tomáš: A product experience is worth a thousand slides. Investment decisions usually start with intuition, an emotion that triggers the initial interest. The rational analysis comes after that. Triggering that emotion can be hard to do in a meeting room when looking at slides. Once a founder after our initial meeting sent us a video message recorded for our team by one of the famous Hollywood actors usually starring vice guys telling us to consider the investment. It made us live through that product experience and made us smile. Although we ended up not investing in the end, it certainly had a personal touch and passed the memory test.