Market One Capital is a EUR 45m seed fund based in Warsaw and Barcelona which invests in marketplaces and network effects platforms across Europe. The managing team and partners mainly include ex-entrepreneurs and experienced investors from the marketplace ecosystem. Thanks to that, startups from their portfolio can expect a founders-oriented approach, close cooperation and valuable support.
Preferred industries: industry agnostic
Investment ticket: initial ticket 200K EUR – 1.5M EUR with a substantial reserve for follow-on rounds
Company stage: seed
Product type: marketplaces (B2C, B2B), network effects platforms, SaaS
Product stage: usually post-launch, in pre-seed cases pre-launch is possible
Revenues: at least several months of revenue traction is preferred, but we sometimes do pre-revenue deals as well
What are the 5 main things you look for in a startup?
At Market One Capital, we consider founders as the most crucial ingredient of a successful startup. Our management team mainly consists of ex-entrepreneurs who have gone all the way from building their projects from scratch, through raising VC money, scaling up, to the exits. We understand what it takes to play this game. The idea itself is naturally important, but without A team founders who become great leaders, will be able to adjust to a constantly changing environment and deliver results, even the best ideas and products mean nothing.
In other words, “potential”. Every VC investor looks for companies that solve big problems in huge markets. For us, a sweet spot are companies with a total addressable market (TAM) of more than 10 billion euro. Sometimes we might also consider investing in companies which operate on smaller but dynamic markets, if we expect those markets to grow rapidly in the near future.
We always need to see that the product/solution offered by the company is in some way, a game-changer. It offers a definite economic advantage. No matter if it’s a marketplace or SaaS business, it needs to have a clear advantage over everything else on the market. In other words, it needs to have a very good product-market fit. What is also super important for us in product/solution, is its defensibility. I’m fond of the expression: “Competitive advantages help your company become successful. Defensibility helps you stay there.” It is a very complex factor as it involves many aspects like scale, uniqueness of the solution, retention, and most importantly, network effects.
In our opinion, most of the value in the tech industry is driven by network effects. Focusing on the network effects is very important as they are cheaper and easier to obtain than scale or brand, they are more powerful and available to every founder. There is a fundamental principle - the more people (both suppliers and users) join in, the value of the product or service the marketplace provides increases.
What disqualifies a startup as your potential investment target?
We analyze over 4,000 startups a year. It is very difficult to shell out the gems that have the best chance of becoming fund makers - a company that returns an entire fund. So referring to the answers given above, a startup with low-quality founders targeting a small market with an uncompetitive product, will obviously be a no-go for us.
What in your opinion differentiates the best founders from the rest?
In our day-to-day activities, we talk to many bright and passionate founders. However, three features determine who is the best among them.
Superfast learning skills - we call it being the ‘dumbest in the room’. It is the ability to learn very quickly from people who are smarter than you and analyze data. The best leaders build strong teams by recruiting people who are better than themselves at certain functions. In our investments to date, we have seen this quality in all the best founders.
Sales skills - often also called storytelling skills - is the ability to sell a vision to investors, but also to customers at a later stage. It’s also the ability to acquire the best talents from the market, and make a difference by impacting the market.
The winning gene - sometimes you meet people who are just winners regardless of discipline. It doesn't matter if it’s Michael Jordan, who once reigned on basketball courts, or Amazon founder Jeff Bezos. Scientists say that what distinguishes winners from the rest is the winner gene. What are the features of someone who has this gene then?
A) Being able to precisely define goals, and having an unwavering determination in their implementation.
B) Courage and steadfast faith in success.
C) Being aware of your strengths and weaknesses.
D) Respect for the opponent.
You can decide whether certain people possess this gene by examining their life stories. They usually scored top marks at school or were MVP in their sports teams. They have performed the best in different categories because they never give up in the face of difficulties. They put their heart and determination into everything they do.
What startups should take into account before making a deal with a VC fund?
This question can be answered in two ways. First of all, if you decide to cooperate with a VC fund, you enter the so-called “VC path”. From now on, you should be prepared to enter the high growth scenario. Everything will happen very quickly, and investors will expect you to put in 110% of your capabilities and resources. From this moment, you lose the luxury of growing your business at your own pace. There is a perfect growth path for a fund maker company. It comes down to “3x, 3x, 2x, 2x”, referring to a company’s annual growth year over year. This type of rapid company growth is always financed by investors’ money. In order to achieve this, you need to reach certain KPIs and raise a next VC round every 12–24 months.
On the other hand, before you sign the deal with a VC fund, a reference check is not only reasonable but in my opinion, it is imperative. A deal with a VC fund is a bit like marriage. You get together for good and bad. This is why you need to learn who the people behind the money are, what their track record is, what their motives and DNA are. Also, the way this VC works with its portfolio companies. This is quite easy to check. A few calls to the investor’s portfolio companies will give you an insight into how the cooperation looks like.
What is your approach to startup valuation and preferable share in the company?
There is no simple answer to this question. At Market One Capital, we assess the company's potential. We base our initial valuations on the end-game potential - what the company’s value might be in 5-10 years. This mainly implicates the initial valuation we could accept. It is also important whether the company has financial and operational traction, how much money it needs to grow in the next 12-24 months and usual dilution resulting from the round. As a minority investor, our preferred stake is a minimum of 10%.
How do you support your portfolio companies?
We are founders-oriented. At Market One Capital we are all ex-entrepreneurs, and we have followed exactly the same path as the companies we invest in now. Our biggest strength is our specialization. We have the best marketplace network consisting of several hundred people from all current and previous investments, C-level specialists and managers, and a huge number of VC funds. Once the startup joins the MOC family, our experience and network are wide open and fully available for them.
What are the best-performing companies in your portfolio?
We are super proud of all our portfolio companies. Business is a bit like a rollercoaster. There are ups and downs, and just because a company is facing challenges right now doesn't mean it won't be spectacularly successful tomorrow. Sometimes one strategic decision can completely change the situation. But right now we are particularly impressed by the results provided by the founders of:
What key lessons have you learnt from investments which didn’t work out as expected?
An excellent question. We asked ourselves the same question at the time when we were setting up MOC, based on all our former investments from the first fund and angel activity.
We looked for patterns and main reasons for failures. The most common finding was that in the long run, the team skill set turned out to be limited or incomplete. Great teams always emerged as business winners, even if they faced lots of challenges. Incomplete teams usually fail. That’s why we never again let ourselves fall in love with the business idea more than the founding team.
Another reason for failure is losing the product competitive advantage. Building a tool available for the global market, you need to invest a lot in the product and hire best product and tech talents. Even if your product is at some point the best on the market, it could be easily overtaken if you don’t invest in it enough. This is especially common among SaaS projects but also holds true about marketplaces and other businesses.
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
In principle, we invest in great teams all over Europe. But there are two geographical segments we mainly focus on. One is the CEE market, and especially Poland, where we can see the largest unlocked potential and increase in the quality of teams and projects in the history of the region. It is naturally associated with very high access to capital at the seed stage and economic prosperity in recent years. Nowadays, instead of choosing the corporate path, the most exceptional talents are more likely to step onto the entrepreneurial path. Apart from the CEE, we are mainly looking at four biggest western marketplaces and their hubs, Berlin, London, Madrid and Paris, because they aggregate the best regional talents, and are the best forge for the marketplaces. If you build a marketplace it’s very important to have a big initial domestic market to achieve a certain scale, before trying to expand internationally.
But we would like to emphasize that those talents can be found everywhere, so if one doesn't want to miss out on the opportunity, they should be just open for talent hunting, and scan the market as a whole.
In your view, what are the key trends that will shape the European VC scene in coming years?
Obviously, the current COVID and economic crisis are going to reshape the European market, in fact the whole world, in many ways. First of all, we can expect accelerated mass digitization and online adoption. The process which would probably take 4-6 years, has taken place within just a few months. This is going to influence and boost many categories that have already been digitized, such as the grocery retail market, food delivery, e-commerce in general, etc. But more importantly, many sectors that have so far been more or less resistant to digital transformation, such as administration, education, logistics and healthcare, are going to be digitized. I also expect some imbalance between supply and demand in the VC world. VCs will be more cautious when it comes to new investments. They will also spend more time and resources on the current portfolio. This should temporarily affect valuation levels.
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