- Flashpoint, the international investment firm that manages venture capital, secondary buy-out and venture debt funds, and supports Series A tech startups originating in Emerging Europe and Israel, closes its Flashpoint Venture Capital Fund III at $102M.
- The VC, which is funded by 130 major family offices and high-net-worth individuals, onboarded its first institutional investor – the Hungarian sovereign fund SZTA.
- Despite the impact of the economic downturn on fundraising, the final closing of Flashpoint’s third fund exceeds the initial goal of over $100M.
“We have a tailored strategy to invest in B2B software companies in Western markets where we are particularly focussing on founders who originate from Emerging Europe and Israel. 1/5th of Western unicorns were founded by expats from Eastern Europe and Israel – they are much more cost-efficient than an average U.S. start-up and there is tremendous pent-up demand for capital among them. We, therefore, bring a strong cultural fit, a wide business network and we look forward to equipping our founders for the next phases in their development,” Alexander Konoplyasty, co-founder, General Partner at Flashpoint, comments.
The size of Flashpoint VC III almost doubles that of the second fund which had $57M assets under management.
“Current environment is much tougher than we witnessed before, so we are happy that we agreed to the deal before the market collapse. Legal documentation took longer and the due diligence process has just been finished and we closed the deal,” comments the team of Flashpoint on what it is like to raise a fund amid an economic downturn.
Accelerated focus on software and early winners
The team of Flashpoint shares what were the lessons learned from VC II and VC I and how they will now use them to improve VC III.
“The first one was to identify your strength and focus on what you do best. In our VC I and VC II fund we had a lot of business model diversity in terms of exposure to marketplaces and the internet of things segment apart from software as a service model. From VC I to VC II we went from 25% focus on software to 75% and after finishing deploying our VC II and looking back at the consistency of risk-return profiles of our investments it was clear that predictability and significant return drivers for both of the funds were investments into global software companies,” Flashpoint team shares.
Although about 10% of the fund will still be invested opportunistically into consumer internet and IoT companies, 90% of the focus has shifted to B2B software business models. Flashpoint Venture Capital has developed an operational framework on how to assist B2B software companies in their 5-10x growth from receiving the investment to securing their next round.
“The second core lesson learned was to double down on early winners and limit additional exposure to companies that are not able to deliver the promised results. As a private market investor, unlike a public market investor, your ability to exit from a non-performing is almost non-existent unless the business has grown to at least $5-10M of revenue. The next best thing to do if you can’t sell is not to add more money if things aren’t working as expected,” Flashpoint team adds.
The impact of the first institutional investor
The Hungarian fund manager, Széchenyi Funds invested $20M in Flashpoint VC III fund. Being one of the largest and most active investors in the Hungarian market, Széchenyi Funds manages assets of over $400M, including 80+ portfolio companies. While the focus of the fund is on financial institutions, large corporates, and more mature SMEs, it supports startups with smart money through domestic incubators, accelerators, and fund of funds investments.
“We know from experience that Emerging Europe talent and professional investment is a highly efficient combination. Especially so in the following years when increasing cost efficiencies through technology will be more important than ever before,” Dénes Jobbágy, CEO and president of Széchenyi Funds, adds.
Investment criteria and strategy of Flashpoint VC III
The third fund of Flashpoint Venture Capital will invest in Western tech Companies founded by expats from Emerging Europe and Israel. The focus will remain on late-seed and Series A stage companies, and on B2B SaaS solutions. Flashpoint’s third fund will be looking for teams of expert founders with initial traction of $50-200K MRR.
When it comes to the terms of the investment, the VC offers an initial check size of $1-4M with follow-on opportunities for up to $15M in return for 10-20% stakes and board roles.
Flashpoint has offices in London, Tel-Aviv, Budapest, Warsaw, Riga, and Nicosia, and has invested in more than 55 companies including the Romanian B2B meeting automation app Chili Piper, the Bulgarian coworking property management software OfficeRnD, and the Greek personalized transportation startup Welcome Pickups. The fund has completed eleven exits, including Shazam (to Apple) and Chess.com (to PokerStars founders and General Atlantic).