Friday, May 1, 2015
J. Mikuž, RSG Capital: Happy for Celtra, ShoutEm & Degordian's growth!
"I can by only happy when I see Celtra, ShoutEm and Degordian's growth," says Jure Mikuž, former broker, now the managing director of RSG Capital – the primary and most successful Slovenian venture capital fund. We talked to him about the incredible advancement of the Slovenian start-up scene in the past few years, about relationships and trust between entrepreneurs and investors, best practices of venture capital funds and the “venture capital mafia”. However Mikuž, who is also a member of supervisory and management boards in companies such as 4thOffice, Degordian and Celtra, also pointed out that we will still have to wait a couple of years to see actual results of the first bigger investment wave.
What are the differences between being a broker and being a VC investor?
For me personally, the key difference is in adding value. As a broker, you more or less exploit certain asymmetries of information on the market. Meanwhile as a VC investor, you always have the feeling of being part of a story that’s still being written and you can get an incredible feeling of satisfaction when a company grows from 3 to 150 employees. I can be only happy when I observe the growth and development of companies such as Celtra, ShoutEm or Degordian…
After all these years of rich experience, how do you see the industry and the Slovenian start-up scene today?
The Slovenian start-up scene is definitely going into the right direction. The hype started four, maybe five years ago, when people started talking about stories like Outfit 7, Zemanta, Celtra. The question is what will happen in the future, since we still have to wait a couple of years to get the results of the first bigger investment wave, in which participated RSG Capital and other VC funds but also the Silicon Gardens Fund and, of course, the Slovene Enterprise Fund.
During this time, have you changed the criteria of how you approach potential investments today compared to how you did in the past?
At the beginning, we were probably more naïve than we are today, so that’s definitely one of the changes. Another thing changed: in 2007, 2008 when we were starting out, we didn’t have access to companies we do today. If we offered a million euros for an investment back then, they told us that we are entirely too small for them. Today, when other financial sources in Slovenia are limited, the doors are more open. During this time, we succeeded in proving that we know how to do things, that we are a reliable and stable partner with detailed knowledge of our field, which is why potential partner companies take us a lot more seriously than they did at the beginning.
Relationships are the most important thing with venture capital. Is this especially obvious in bad times?
The most critical moments of relationships and trust obviously show when things go downhill. The investor then has to trust the entrepreneur 100 %, has to trust them a lot more than when things were going uphill. When a company is growing quickly, everything is quite euphoric and you know that the entrepreneur is investing money into development. You know they’re not putting it aside for their private needs. But if something goes bad, it’s that much more important to trust that the entrepreneur is handling money responsibly.
So how do you fulfil this role of an active manager when the company isn’t doing well?
We are absolutely involved all the time, which is why quite a lot of companies are in our facilities. We have a weekly briefing with entrepreneurs and with those that we communicate mostly via skype, we strive to have a personal meeting at least once a month. And there are also monthly reports and longer quarter-year meetings where all fund partners are present.
RSG Capital is the most active fund in the Alpe-Adria region and the most popular amongst start-up companies. How do you differ from other funds?
Our key advantage is that we have local presence and global reach. The quality of our services and work strives to be the same as the quality of funds that are functioning in developed environments, such as London, Belin and New York. However, the difference is that we are actually here, in the region, which is why we know the local specifics, local language, local culture. We don’t finance start-ups in Austria or Germany, they have their own funds there. We’re interested in startups from Slovenia, former Yugoslavia or the western Balkans that are ready to sell their solutions on international markets.
So how important are connections with the US and other bigger markets that you are building in order to help companies with international sales and finding new financing rounds?
This connection is crucial for us and for the success of our startups. However, entrepreneurs have to realize that they can’t sell on international markets from home. So if they want to sell their products in London, they have to be in London. Nothing more to it. And the fact that you’re in London costs the company a lot. We are financing exactly this gap and when it comes to new financing rounds, we collaborate with partners, such as Grandbanks Capital, Fairhaven, Softbank Capital or Notion Capital.
What are the principles and mechanisms for being an incredible venture capital investor and what are the bad practices that are shedding a bad light on the entire industry?
The venture capital industry is incredibly fragile and sensitive. It’s an industry based on trust, which is why all fund investors demand that managers also invest their own resources, usually in the amount of one percent of the entire fund. Interests must be settled. Complete transparency and integrity are necessary and crucial mechanisms, especially since most bad practices are connected to taking money from companies for personal interest. Some call this the “VC mafia”, driven by human greed.
The majority of current fund’s resources are already invested, what are your plans for the future?
We are planning a new fund and remaining an active market player. We will be able to announce more about this in the following months. Current fund’s resources were invested into 11 companies in total, one of which went out of business, while the rest are developing and growing. Altogether, about 13.5 million euros were invested.
Which key improvements have you remarked in our start-up ecosystem, especially if we consider the quality of ideas and teams?
The quality of pitches, ideas and teams has significantly improved. All these start-up schools, events and programmes have an incredibly big impact. Just recently, when I was listening to company pitches for the SK75 product – for obtaining a 75,000 euro convertible loan of the Slovene Enterprise Fund – some teams ran out of time, but all pitches made sense and covered all essential elements of an investor pitch. This wasn’t the case years ago, when we had to literally drag some information out of people, for example how they are planning to sell things. What also has a big positive effect is ensuring seed capital for the early startup phases, which are necessary so VC funds can join later on. The fact that entrepreneurs actively started to exploit opportunities offered by international accelerators, such as Seedcamp and LAUNCHub, is also very important.
You are also a sponsor of the PODIM Conference and PODIM Challenge, the investor part of the conference. Do you think that such a conference is important for the development of start-up entrepreneurship in Slovenia?
Conferences like that are also important so that speakers, coming from USA, Europe and other countries across the world, see Slovenia as an efficient start-up ecosystem with stories such as Outfit 8, Akrapovič, Celtra and others. Wouldn’t it be great if American guests arrived at the airport to see a Talking Tom with a billboard saying “Welcome to my homeland”? Stories like this are a national treasure, while conferences such as PODIM are an excellent opportunity to introduce them to the world. But a conference like this is of course also important for knowledge, experience and networking, ensured by international speakers. It’s important to know how to talk to them, though, not just jump at them and start with “Hey, what do you think about my idea, let’s do business together”.
Do you find it important for start-ups to connect with established companies, which is also the main topic of this year’s PODIM Conference?
Definitely, it’s a very good topic. All start-up ecosystems need pilot projects, pilot markets, testing environment and labs. Meanwhile big established companies should pick up the agile and lean activity, for example employees shouldn’t have blocked access to LinkedIn and other social networks that start-ups take advantage of for promotion and sales. I’d like to point out Kolektor, our biggest investor, as an example of good practice. We’ve connected quite a lot of our companies with them for development collaboration in the field of automobile technologies.
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Author: Stanislava Vabšek / Initiative Start:up Slovenia
Photo: Jure Makovec / Business Daily Finance
What are the differences between being a broker and being a VC investor?
For me personally, the key difference is in adding value. As a broker, you more or less exploit certain asymmetries of information on the market. Meanwhile as a VC investor, you always have the feeling of being part of a story that’s still being written and you can get an incredible feeling of satisfaction when a company grows from 3 to 150 employees. I can be only happy when I observe the growth and development of companies such as Celtra, ShoutEm or Degordian…
After all these years of rich experience, how do you see the industry and the Slovenian start-up scene today?
The Slovenian start-up scene is definitely going into the right direction. The hype started four, maybe five years ago, when people started talking about stories like Outfit 7, Zemanta, Celtra. The question is what will happen in the future, since we still have to wait a couple of years to get the results of the first bigger investment wave, in which participated RSG Capital and other VC funds but also the Silicon Gardens Fund and, of course, the Slovene Enterprise Fund.
During this time, have you changed the criteria of how you approach potential investments today compared to how you did in the past?
At the beginning, we were probably more naïve than we are today, so that’s definitely one of the changes. Another thing changed: in 2007, 2008 when we were starting out, we didn’t have access to companies we do today. If we offered a million euros for an investment back then, they told us that we are entirely too small for them. Today, when other financial sources in Slovenia are limited, the doors are more open. During this time, we succeeded in proving that we know how to do things, that we are a reliable and stable partner with detailed knowledge of our field, which is why potential partner companies take us a lot more seriously than they did at the beginning.
Relationships are the most important thing with venture capital. Is this especially obvious in bad times?
The most critical moments of relationships and trust obviously show when things go downhill. The investor then has to trust the entrepreneur 100 %, has to trust them a lot more than when things were going uphill. When a company is growing quickly, everything is quite euphoric and you know that the entrepreneur is investing money into development. You know they’re not putting it aside for their private needs. But if something goes bad, it’s that much more important to trust that the entrepreneur is handling money responsibly.
So how do you fulfil this role of an active manager when the company isn’t doing well?
We are absolutely involved all the time, which is why quite a lot of companies are in our facilities. We have a weekly briefing with entrepreneurs and with those that we communicate mostly via skype, we strive to have a personal meeting at least once a month. And there are also monthly reports and longer quarter-year meetings where all fund partners are present.
RSG Capital is the most active fund in the Alpe-Adria region and the most popular amongst start-up companies. How do you differ from other funds?
Our key advantage is that we have local presence and global reach. The quality of our services and work strives to be the same as the quality of funds that are functioning in developed environments, such as London, Belin and New York. However, the difference is that we are actually here, in the region, which is why we know the local specifics, local language, local culture. We don’t finance start-ups in Austria or Germany, they have their own funds there. We’re interested in startups from Slovenia, former Yugoslavia or the western Balkans that are ready to sell their solutions on international markets.
So how important are connections with the US and other bigger markets that you are building in order to help companies with international sales and finding new financing rounds?
This connection is crucial for us and for the success of our startups. However, entrepreneurs have to realize that they can’t sell on international markets from home. So if they want to sell their products in London, they have to be in London. Nothing more to it. And the fact that you’re in London costs the company a lot. We are financing exactly this gap and when it comes to new financing rounds, we collaborate with partners, such as Grandbanks Capital, Fairhaven, Softbank Capital or Notion Capital.
What are the principles and mechanisms for being an incredible venture capital investor and what are the bad practices that are shedding a bad light on the entire industry?
The venture capital industry is incredibly fragile and sensitive. It’s an industry based on trust, which is why all fund investors demand that managers also invest their own resources, usually in the amount of one percent of the entire fund. Interests must be settled. Complete transparency and integrity are necessary and crucial mechanisms, especially since most bad practices are connected to taking money from companies for personal interest. Some call this the “VC mafia”, driven by human greed.
The majority of current fund’s resources are already invested, what are your plans for the future?
We are planning a new fund and remaining an active market player. We will be able to announce more about this in the following months. Current fund’s resources were invested into 11 companies in total, one of which went out of business, while the rest are developing and growing. Altogether, about 13.5 million euros were invested.
Which key improvements have you remarked in our start-up ecosystem, especially if we consider the quality of ideas and teams?
The quality of pitches, ideas and teams has significantly improved. All these start-up schools, events and programmes have an incredibly big impact. Just recently, when I was listening to company pitches for the SK75 product – for obtaining a 75,000 euro convertible loan of the Slovene Enterprise Fund – some teams ran out of time, but all pitches made sense and covered all essential elements of an investor pitch. This wasn’t the case years ago, when we had to literally drag some information out of people, for example how they are planning to sell things. What also has a big positive effect is ensuring seed capital for the early startup phases, which are necessary so VC funds can join later on. The fact that entrepreneurs actively started to exploit opportunities offered by international accelerators, such as Seedcamp and LAUNCHub, is also very important.
You are also a sponsor of the PODIM Conference and PODIM Challenge, the investor part of the conference. Do you think that such a conference is important for the development of start-up entrepreneurship in Slovenia?
Conferences like that are also important so that speakers, coming from USA, Europe and other countries across the world, see Slovenia as an efficient start-up ecosystem with stories such as Outfit 8, Akrapovič, Celtra and others. Wouldn’t it be great if American guests arrived at the airport to see a Talking Tom with a billboard saying “Welcome to my homeland”? Stories like this are a national treasure, while conferences such as PODIM are an excellent opportunity to introduce them to the world. But a conference like this is of course also important for knowledge, experience and networking, ensured by international speakers. It’s important to know how to talk to them, though, not just jump at them and start with “Hey, what do you think about my idea, let’s do business together”.
Do you find it important for start-ups to connect with established companies, which is also the main topic of this year’s PODIM Conference?
Definitely, it’s a very good topic. All start-up ecosystems need pilot projects, pilot markets, testing environment and labs. Meanwhile big established companies should pick up the agile and lean activity, for example employees shouldn’t have blocked access to LinkedIn and other social networks that start-ups take advantage of for promotion and sales. I’d like to point out Kolektor, our biggest investor, as an example of good practice. We’ve connected quite a lot of our companies with them for development collaboration in the field of automobile technologies.
--
Author: Stanislava Vabšek / Initiative Start:up Slovenia
Photo: Jure Makovec / Business Daily Finance
