Do you not want companies to realise their full potential, beyond the early trade sale opportunity?

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.

Why are you so negative?

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.

Are you the only VC type investor who has such a strategy?

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.

You talk a lot about “start with why”. What is your own why?

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.

Should I plan to be a unicorn (like everybody else, and what many advisors are pushing me to do)?

(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

What do you mean with Startup/Investor fit ?

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.

How do you differ from other VCs ?

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).

What gives Gorilla Capital knowledge of the things you talk about ?

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.

What about Business Finland grants/loans?

(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.

Will you help us get other investors?

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.

What else besides your “OK” is needed to close the investment with payment?

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.

How long does your investment decision take ?

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:

  1. You do not have enough inves­tors to clo­se the round (we are never the only inves­tor so you will need others)
  2. The DD brings up issues that need to be addres­sed prior to final clo­sing (such as unfi­nis­hed paperwork in sha­re trans­fers).

What do I need to have when I contact you?

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.

How to get your attention?

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.

What kind of companies will you invest in?

Plea­se read

  1. The invest­ment cri­te­ria lis­ted on our web­si­te
  2. Goril­la” rela­ted articles on Know­led­ge­ba­se
  3. 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.