Here is a article one of our portfolio founders, Jacob from Vinter.co wrote. Definitely worth to read
We came across these two good articles. Definately worth to read you want to understand venture capital:
Absolutely we want everyone to reach as high as their abilities allow them to! A unicorn would be fantastic! A lot of what we say should be preceded with “until proven otherwise”. As we believe in data and statistics, we assume the median type outcome as the placeholder – UNTIL PROVEN OTHERWISE. I.e. once you have evidence that you can do better and reach higher than the typical/median case, then raise the bar! But you need to prove you can walk until you try to run. And until you have proven your ability to run, you should stay on a route where running is not mandatory.
One reason is our personality – we are all “glass is half empty” people, so we look at everything from that angle. But we don’t intend to be negative or judgemental, we are simply analytical and fact driven and we believe in statistical math, not fairy tales. We are ultra-curious and we always want to understand. When we ask questions people have no good answers for, some people take it as a negative. Sorry, then we clearly do not have an alignment in the basic philosophies and we are not meant for each other.
No, but this is still more of an “exception” rather than “the norm”. Some investors who have a similar kind of basic philosophy (model is more of a “scalable Angel” rather than “VC”)
https://www.kimaventures.com/ (the only European on this list)
http://rightsidecapital.com/ (we owe a lot to these guys for setting up a role model we have taken full advantage of. Big thanks to Kevin & al for the inspiration and openly sharing their thinking)
https://svangel.com/ (building on the heritage of the original SuperAngel Ron Conway, they have the longest track record to demonstrate the strategy works)
https://500.co/ (the most vocal on this list. For them investing is just one of the things they do)
There certainly are more but most investors with this strategy tend to prefer a low public profile, they focus on their business rather than PR.
The overarching higher cause for us is about making the whole startup community aware of an alternative to the stereotypical “how to raise as much money as possible” thinking (which results in having to tell a really bold story to pump valuations up, and everything that forces you to do). We want to help build more successful startups, which reward the founders and investors for the risk-taking. One cornerstone of that is the acceptance of basic facts such as statistical probabilities of success in different scenarios. Hence we favour a rational approach to risk and funding, as on average the survival rates are much better when your plan does not depend on winning-the-lottery type odds.
(People who have already done several exits at tens of millions – you can skip this part)
If you want to make an informed decision you should understand the odds – some basic statistical math. What matters are not paper valuations on which money has been raised, but realised exits where founders and investors received money back. So lets look at some exit facts:
- Median exit value in technology companies in Nordics hovers around 12-15m€ (disclosed exits - public companies have to disclose material transactions, so larger deals tend to be disclosed). There is a large number of non-disclosed exits that are typically less than this.
- In the whole of Europe there are only a few >250m€ technology exists every year (half a dozen or so).
- Trying to build a unicorn takes a lot of time (>10 years) and multiple investment rounds, resulting in big changes on cap table. Markets change, people change, preferences change, technologies change…
- There are hundreds of companies who have raised money at Unicorn valuations, but only a few which have been bought (or IPO’d) at Unicorn level
- Your odds of getting a Unicorn exit are much MUCH lower than your odds of hitting a hole in one in golf (regardless of your HCP)
By all means dream big and set the target high, but learn to walk before trying to run. How about being worth 10M first, and then deciding whether you want to raise the bar or not.
You don’t need to be unicorn to be a success
Similar to product/market fit, there needs to be a match between what the startup needs and the investor can offer. This applies first to all “visible” elements of the investor’s screening profile: fit against investment strategy, stage, ticket size, vertical focus etc vs the profile of the startup. And it goes beyond the “visible” – there needs to be a strong alignment in values, philosophies, ways of working etc for the relationship to last during the rough ride ahead. We are not the right investor for many, as what we believe in is rather different from the stereotypical thinking.
Every investor should have a clear investment strategy, including an exit thesis. What we believe in is what professional Angel investors in the US have practiced for years and proven to work. Which results in a very different approach from the typical VC. So while we technically are a VC (=we make a living of investing 3rd party funds in startups), our philosophy is much closer to that of an Angel investor (who invest their own money, so the downside risk feels more real).
We have been there ourselves.
Gorilla partners have founded companies, scaled them (up to 100m€+ turnover) and exited them. We have worked hands-on with startups for 10+ years, of our 2 funds we have to date invested in 50+ startups (+ our own personal angel investments). We have screened thousands of startups, analysed closely hundreds and worked hands-on with 100+. We have an analytical mind so we have seen what works and what doesn’t. Everything we believe in is based on either our own first hand experience, or objective data available to anyone.
(non-Finnish startups: this does not apply to you)
Any company seeking funding from us should be eligible for Business Finland funding. It is non-dilutive which is good for both current owners and new investors. In a normal case it forms a significant part of the overall funding package and we expect you to take advantage of it.
No, we don’t care about the ownership percentage. We think simply about the cash on cash return we can get. We would not want to become too big of a shareholder though, as we think it is better for the startup to have a somewhat diversified investor base.
Not really, we decide for ourselves only and expect the founders to reach out to other investors. It is also an acid test of the founder’s ability to sell – if you cannot sell yourself and your business to investors, you are likely to fail with customers as well.
Governance and Legal DD (Due Diligence) and Agreements. We have standardised processes and templates on both, there are no mandatory out of pocket expenses. The speed of the process is in your hands as you will do most of the work. We do not insist on our processes if there are better alternatives. We care about the end result, and are pragmatic about getting there. But we do need a proper DD and Agreements.
For us making the ”yes we’re in” decision is fast – can happen in days. Decision is made among the 3 of us, no committees needed. We work independently and our decision does not depend on what others do so we are often the first to commit.
But getting to the closing including payment totally depends on you. If you are well prepared and execute promptly on all formalities it can go through in a few weeks, but usually it takes longer – can be several months. Two most common reasons for that are:
- You do not have enough investors to close the round (we are never the only investor so you will need others)
- The DD brings up issues that need to be addressed prior to final closing (such as unfinished paperwork in share transfers).
Our target is to have 100 companies in the portfolio. Our runrate is 20+ new investments per year. We are actively looking for new companies to invest in.
A good understanding of your target market, your customers, their problems, your competition, your strengths, why customer buys. Informative numbers about your past performance and future plans. You need to have done your homework so that you know what is important and what is not and you can tell your story effectively.
No need, we are most productive in reviewing written material first. We will contact you when we want to discuss.
Send us a well thought out pitch deck (use whatever template you want) that demonstrates insightful understanding of the customer problem and their purchase behaviour. We process incoming proposals on a FIFO basis and we try to be quick in giving a response. Feel free to ping us if you think it’s taking too long. No need for introductions etc – we assess every case on it own merits anyway.
Initial ticket is 50K-150Keur, max 50% (no minimum) of the round . Follow on rounds on a case by case basis.
- The investment criteria listed on our website
- “Gorilla” related articles on Knowledgebase
- “What Founders Say about Us” testimonials
Those 3 should give you a fairly good understanding of what we are like and what we are looking for.