Fortech Investments is a Romanian private investor and strategic partner focused on seed and late-seed startups in healthcare, energy, automotive, manufacturing, and fintech. The firm has invested over €5 million in 17 startups from 7 countries, including companies in the UK and US. With a solid technical background, a data-driven approach, and an understanding of startup needs, the fund provides support to founders whenever they need it, in addition to its investment.
Valentin Filip, Managing Partner at Fortech Investments, told Vestbee more about the fund’s strategy and investment approach.
Fund strategy overview
Geography: based in Cluj-Napoca, Romania, the fund invests throughout the entire CEE region and has a few startups in its portfolio from other countries as well, including the US and UK
Preferred industries: energy, health, manufacturing, automotive, fintech
Investment ticket: €300,000-€500,000
Company stage: seed and late-seed
Product type: software
Product stage: seeking PMF
Revenues: €40,000 MRR
Q&A with Valentin Filip, Managing Partner at Fortech Investments
What are the 5 main things you look for in a startup?
- Great team. We don't look for the best pedigree, but we like to see founders with the right domain expertise, followed by complimentary skills from the rest of the founding team.
- Big market opportunity. This is a must in VC, as we need start-ups with lots of room for expansion, to reach valuations big enough for us to be profitable at exit. Most start-ups won't get there, but we need to see that there's a real opportunity for all of them.
- Great understanding of the market. That's where the founder's domain expertise comes into play. We need people who understand the dynamics of a market, the pains of their customers, and how to solve them most efficiently. Of course, there are a few exceptions but the founders that have worked in the industry for some years have bigger chances of success, based on what we've seen.
- Founders who know what they need. I'm talking about the value-add here. I've seen founders who know very well where they need support and they approach fundraising from this perspective - to find the investors that can open the right doors for them. When a founder does this, it shows a deep understanding of their context and that we can work together well.
- Founder-investor fit. On one side, we're talking about the personal aspect of it — of course, we're looking for people we can get along with to help them bring their vision to reality. On the other hand, as I mentioned above, we work best with founders that we can help best, those that can benefit from our value-add.
What disqualifies a startup as your potential investment target?
Founders that are not ambitious enough disqualify a startup, lack of experience to implement the vision, or if they are too far from our thesis. Finding the balance between dismissing a startup for lack of signals and trusting the potential is a complicated exercise, but we try our best to trust our expertise and research.
Communication is also essential, both with investors and clients. We can’t support founders that don’t see communication as essential, or don’t focus on developing this area.
One last thing would be lack of domain expertise, as we need founders that feel firsthand the problems that they are now solving with their solutions.
What in your opinion differentiates the best founders from the rest?
Good founders have a skillset that helps them tackle all the challenges that inevitably arise.
Great founders have those skills but also know what and when to delegate.
The best founders, though, have one more thing in common, from what I've noticed: They walk a fine line between extremes - They have a grand vision, but they're grounded in reality. They know the industry inside-out but are always open to new perspectives. They are confident and humble. They see the big picture while being detail-oriented.
This characteristic also allows them to understand their different audiences (investors/clients/team) and position themselves according to the audience, while presenting the same information. Perspective makes perception and the team or the clients need a different one than the investors.
What startups should take into account before making a deal with a VC fund?
I think it’s extremely important for founders to understand the VC game. A lot of them barely start working on their start-up and immediately think of VC funding as their one and only option. And after a while, they get frustrated because of the process and the high requirements.
I know where this comes from, it’s normal, especially in our region. Everyone wants to build the next unicorn. But VC is not the only path, and lots of start-ups can be more successful (and founders would be happier) if they take a different path.
What is your approach to startup valuation and preferable share in the company?
We don't have a strict approach when it comes to shares or valuations. We don't necessarily insist on being majority investors, we try to approach valuation in a way that's profitable both for us and the founders, and we take into account a lot of the industry comparables.
We also use simple methods when the startups are in the initial phases of revenue generation, by employing a multiple on their ARR. This makes it easy to have a starting point in this conversation.
How do you support your portfolio companies?
In the beginning we had a bit of a different approach, where we provided founders with a lot of technical support and partnerships, through tech-for-equity deals. Now, since we started investing in more mature start-ups, we try to help as much as we can in the growth and operational areas, as well as with fundraising.
We have an extensive network that we try to tap into whenever a founder needs it – whether it’s other investors, experts, new hires or potential clients and partners. As a small parenthesis, we are currently developing a tool to facilitate and automate the intro part, so founders can basically tap into our own networks themselves, based on what they need.
We are also active board members in some of the start-ups we invest in and not once did I need to make some harsh decisions. Whenever that happens, I try to do it in favor of the founders, especially when I understand and support their long-term vision.
What are the best-performing companies in your portfolio?
A few of them, in no particular order, are UpLyft, FindMeCure, SalesPartner, Synaptiq and SaleSqueze. We notice that the successful start-ups in our portfolio also have the greatest impact for their customers, especially the ones in health-related industries.
What are your notable lessons learned from investments that didn’t work out as expected?
One of them would be that a founder’s pedigree isn’t a direct indicator of future success.
Other important lessons that we have learned in the past years, although not related to failed investments, would be to understand the profile of LPs, in order to create appropriate reports, to invest or pass on an investment with more conviction, and how much added value can be scaled with technology, as we have recently started to use more tools or develop our own.
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
I wouldn’t say that our industries of interest are exactly hyped right now, and that’s a good thing. Since we talk about industries like energy, healthcare, automotive, fintech and manufacturing, they are already established, are essential industries that will not stop innovating too soon.
On the other hand, I can’t not notice the boom of AI, and how almost everyone is integrating it. From what I’ve seen in our founders, they were very pragmatic about this integration, not doing it just for the hype.
In your view, what are the key trends that will shape the European VC scene in the coming years?
One thing I notice now is the lower appetite for risk from VCs, who are now looking to invest in more profitable start-ups. Although this was a global shift in the past year, I think that in Europe it is more noticeable. Another thing I see is a bigger and bigger focus from European VCs on deep-tech start-ups and the area of university research, compared to the commercial focus of US VCs. I really like this direction as I think there's a lot of potential here that hasn't been fulfilled. Overall, I think the European VC scene is simply becoming its own self, developing a more defined identity, and the things I mentioned above will play a big part in the formation of this identity.
