Michal Šmída’s entrepreneurial journey started more than 10 years ago, with Twisto. A buy-now-pay-later solution founded in 2013, when online shopping was not a fraction of its current size, and when the majority of people still paid for their goods by cash on delivery… Fast forward to 2020, Twisto exited, Australia’s Zip bought it, and it eventually ended into arms of Turkish owner Param.
Meanwhile, Šmída became Non-Executive Director on board 4 Czech startups (Birdwingo, Malcom Finance, DODO and VOCALLS) which was in itself an interview material. However, his last posting, as a CEO and investor at RockawayQ, put more immediacy to it.
Supporting transformations
Some of you may be wondering what RockawayQ is now. Czech private equity investment platform Rockaway Capital, with a strong track record in CEE and DACH, fairly recently sprouted a new investment division. RockawayQ is focused on transforming established B2B companies into market leaders by harnessing the power of AI and expertise.
How did it come to be? Šmída points out how various businesses (both tech, SMEs, and manufacturing), that have operated in the past decade(s), are facing a critical juncture. “They will either digitalize and implement the latest AI tools into their business and operations or perish in the face of global competition and new tech companies.”
That’s where RockawayQ comes into play. He elaborates that RQ wants to become “a key know-how and IP holder that helps companies transform and up their game in the new digital era.”
“We want to do this by deploying capital to finance transformation, implementing relevant AI tools, and helping companies reach their full potential. We want to be an active, hands-on partner that helps companies unlock growth potential, both locally and globally.”
Not your classic fund (structure)
RockawayQ currently operates with invested funds of €20M, and in the next few years they plan to increase this capital to 50M – 100M euros. In the first phase, the search for ventures will be mainly in the Czech Republic and Slovakia, from where they will gradually move further in Europe.
Also, RQ doesn’t have a classic fund structure with a fixed investment period, Šmída shared for CzechCrunch.
“Our goal isn’t a quick exit, and we are flexible in terms of the structure of our investments and the holding periods of companies. We’re looking for firms where we can generate dividends over the long term and actively participate in their operations.
Unlike typical investors, we’re also flexible in the structure of our investments, which allows us to carry out primary investments—direct capital injections into companies to support their growth—as well as secondary transactions, such as purchasing stakes, ranging from significant minorities to 100% ownership, from existing shareholders or investors.”
They will be looking for companies in the B2B segment with an EBITDA profit between cca 1 million and 4 million euros and a turnover of 15 to 20 million euros. These companies usually would have around 150 to 300 employees.
“Late co-founders”
RockawayQ’s team and Šmída want to be very active with companies they invest in. “Think of us as “late co-founders” for the businesses, he adds.
“We are founders and entrepreneurs ourselves, so we are ready to roll up our sleeves and work alongside founders on this journey.”
“Our core focus will be around upping the technological competence, bringing them to the next level. We also want to work with teams on growth, international expansion, building strong sales teams, and building robust organization (processes, hiring A-players). For every company we invest in, we also want to see the potential to consolidate several players in the industry through vertical and horizontal M&A.”
RockawayQ will be looking at 2 types of companies…
What is RockawayQ’s “ideal” traditional firm case? How digitalized (ready) or not should they be? Šmída says they will look into two types of companies in the B2B space:
“First are late-stage tech companies who were initially backed by VCs, angels or bootstrapped and are profitable today. We will seek companies with proprietary know-how and data sets and work alongside founders in upgrading and boosting their tech stack through AI applications, work on their sales and explore new product-vertical applications.
The second type of companies are more traditional, mature companies/SMEs often started 20-30 years ago. We will be looking for founders/teams that have reached their full potential in the old economy and want to enter the next growth phase through tech transformation. These companies, typically generating €1-4M EBITDA, are poised for growth through tech integration and market expansion.”
Founder, Non-Executive Director, Investor
As mentioned earlier, in span of a year, Michal Šmída joined several Czech startups as a Non-Executive Director, leveraging his extensive experience. The startups are VOCALLS, an enterprise conversational AI platform; DODO, a data and technology-driven logistics service specializing in last-mile delivery; Malcom Finance, a fintech company that provides tailored financial solutions to logistics SMEs across Europe; and Birdwingo, “Duolingo for finance.”
He points out that he joined them in various stages of their development (from early to growth stage). “All are founders I have either known for a while, or we operated in the same vertical (fintech). I work with them on topics of strategy, fundraising, and exit, sharing my experience from Twisto.”
“I see many parallels in these companies with Twisto… constant iteration, adjustment to the market, and patience. There is no overnight success, but grit, perseverance, and hard work of the founder and the team around him.”
Then Rockaway came into the picture. Šmída shares that one of the key elements to him joining the new division was that Rockaway Capital is a founder-led organization, always aiming to be an early mover. “As we have seen the transformative impact of e-commerce and blockchain technologies, we are now seeing a huge opportunity in the next-gen digital/AI transformation and being a first mover. Alignment on this excites me and that’s why I joined forces with Rockaway on this mission.”
Šmída is also involved in his family investment platform, which was founded this year. He stated he had no intention to pitch it, as it is a closed platform, but he pointed out that it is a sort of a “think tank” that unites members of his family who share a common path of entrepreneurship.
“Our aim is to invest together into new ventures, discuss capital allocation and think beyond money – i.e. what positive impact can we have as a family for future generations and the environment around us.”
Having skin in the game
How will his experience help him in RockawayQ?
“By nature, I am a founder and an operator, and I strongly believe in the concept of founder-to-founder interactions. This is in contrast with some of our peers in the private equity or VC world, which professional investors and ex-C level executives often run. Our mindset is different and we also primarily invest our own capital – we believe that having a significant skin in the game is crucial in aligning interests and showing founders/teams that we are ready to take the risk, but also enjoy the upside together.”
“Experience in Twisto gave me an understanding that great things take time to build and having the right people is a key ingredient in succeeding.”
“We built Twisto into an international company which was inherently digital first and had AI-machine learning at the core of its product proposition, disrupting the traditional consumer finance product offering. We were constantly iterating on the side of technology, operational excellence and strategy.
We experienced both periods of high growth and expansion and then switching to profit focus and becoming break-even. At the peak, we grew to over 300+ team members operating in 4 markets and serving over 1 million customers … I am keen to share this experience with other fellow founders we will back through RockawayQ.”
“Fintech is here to stay.”
At the end of our conversation, I had to bring up recent news about the famous (global) Swedish BNPL platform – Klarna doing an IPO in America. As one discussion showed, part of the ecosystem isn’t so keen on the idea we are “losing” European company IPO to America. However, Šmída looks at it positively.
“Klarna is one of those companies that have been at the forefront of the fintech revolution and have transformed into a global leader. Doing an IPO in the US is a great testament to the strength of European tech companies, and hopefully, it will pave the way for more companies to access public market capital in the future.”
When it comes to fintech in general, he acknowledges it has gone through “ups and downs”.
“…from high growth (high burn) companies with mega-rounds and unicorn valuations to losing a bit of its charm as investors refocused on profitability. Today, those that survived are creating real shareholder value and are a testament that fintech is here to stay.”
In the end, we wanted to find out if any new transactions were coming up for RockawayQ. Šmída confirms several deals are in the pipeline but concludes: “We are not in a rush to invest … we are choosing carefully, and more news is coming soon :)”
