In June, LAUNCHub Ventures hosted its annual LPs and portfolio meeting in Sofia, bringing together regional companies and institutional investors. As their representatives shared for The Recursive, it was a reflection on 12 years of investment experience and operations during diverse economic cycles.
Here are a few important points to highlight, while you can read the full report here:
- Significant revenue growth in portfolio companies, with a strong performance in seed-stage investments and notable fundraising successes.
- Increased focus on AI-related startups, Life Sciences, Health, and ClimateTech.
- Enhanced company scouting methods using technology and recommendations.
- Growing appreciation for the startup ecosystem in Central and Eastern Europe (CEE).
- Rising number of successful entrepreneurs and increased investor interest in the region.
To delve deeper into the topic, The Recursive spoke with Stanislav Sirakov, General Partner at LAUNCHub Ventures, and discussed some perspectives on the future outlook.
Given the different economic cycles experienced, how has the investment strategy evolved over the past 3.5 years?
We are very happy that we could expand our investments over three different economic cycles, thus capturing the value created by the variety of companies built and the financing terms in each of them. Though our core investment strategy stays the same: ‘invest in the global leaders from CEE’, we have to adjust through the period to accommodate for the lack of funding. As a result, we started investing in more robust companies and also looked at more mature ones – the ones that are at an inflection point in their go-to-market motion. Furthermore, there were several defined industry trends in the period, i.e., during Covid we’ve seen a lot of EcomTech and Digital Health companies; today is the market of AI models, tools, and applications. Last but not least, the funding environment changed, though much less visible at the seed stage compared to later stages. We are proud that we have invested in some of the new leaders in the region.
How do you anticipate the fund’s strategy will change moving forward in the current VC recession market?
We are not macro investors (chasing economic cycles); our focus is for the next 10-12 years and the companies that will become the big winners over that period. We are more eager to observe upcoming technology trends and to follow the brightest founders when they move into new, exciting industries. Having said that, we need to follow the market sentiment, i.e., companies that have identified ideal customer segments and a clear need for their solution are able to scale much faster than the g2m machine and to achieve Series A sooner.
What specific benchmarks or KPIs does LAUNCHub Ventures use to evaluate the success of its investments?
Our long-term goal is to help create global leaders in different categories that could be huge companies and provide exciting returns to our investors. There are two early approximations for this: the follow-on funding raised and the revenue created. On the first one, we are very proud that about 60% of our seed investments get to Series A, mostly from reputable investors across Europe and the US. More importantly, this happens while they gain significant revenues – if we count €1 million as an early metric for PMF, we have more than half of the portfolio surpassing it, and we expect 1/3 to become €10 million businesses very soon.
What are the primary challenges that companies like Ampeco and Colossyan faced while raising significant rounds, and how did they overcome them?
Both these companies achieved their Series A during very challenging times – this was mainly due to their hypergrowth and the supreme solutions they offer. Of course, each company has its specific challenges, but if I need to group them into a few, it is around overall market dynamics and what value is competition capturing. We are very happy that, together with these two, a wider portfolio group is able to stand out and start winning on the market.
How can LPs contribute more effectively to the growth and success of the portfolio companies?
We are very thankful that among our LPs we have different groups – institutional investors, family offices, and successful entrepreneurs (including quite a few founders from our previous investments). Each of these groups has a way to help our companies, whether it is with an advice and some strategies to get through challenging times (successful entrepreneurs passing on their experience), intros to other investors (both if they are portfolio funds to some of our institutional LPs, or were investors and board members to founder-LPs). Of course, one of the best is an introduction to a customer or becoming a customer – we have observed this happening many times. At the end of the day, it is this community of founders and fund investors that we are grateful to have and are helping us with our success.
