VC Of The Month: Logo Ventures
Logo Ventures is an early-stage venture capital firm, investing in innovative high-growth technology startups with the potential to scale globally. They partner with exceptional teams with bold ideas aiming to join forces and build the future through technology. Logo Ventures team focuses on the CEE, Baltic and Turkey region supporting companies with the prospects to transform into established players within their industry.
Fund Strategy Overview
Geography: CEE, the Baltics, and Turkey
Preferred industries: B2B SaaS, AI, Fintech & Cybersecurity
Investment ticket: $100K – $1.5M
Company stage: Seed through Series A
Product type: Software and tech-enabled
Product stage: Post MVP
Revenues: Post Revenue
Q&A with Merve Zabci, Managing Partner
What are the 5 main things you look for in a startup?
While looking for the right startup, our team is focused on the following aspects:
Founders/Team: Founders and the team is the first and foremost element critical to success. A sound startup team should have complementary skill sets and a shared vision and drive. Unless you have what it takes as a team, it is highly unlikely for a company to realize its aspirations and reach its full potential.
Market Size / Market Cycle: In evaluating opportunities, we try to understand market dynamics and see if there is a sizable market and demand. Where the industry in its lifecycle can be a crucial factor for a business, both in a good and a bad way. Hence, we try to dissect industry growth variants and understand each market`s trajectory as growth for emerging trends is not typically a straight line.
Value Proposition: There should be a clear solution to a major problem faced by customers. This way, the company can either create a new category or differentiate itself from its competitors and rapidly gain market share.
Scalability: The business/product should be able to scale from a handful of customers/users to triple-digit figures across geographies.
Our Value Add: We assess our potential value add and what incremental drivers we can bring to the table in building and growing the business. Our role beyond capital is an important factor for us and for our portfolio companies to succeed.
What disqualifies a startup as your potential investment target?
We don’t want to be involved in situations where founders and the team lack sufficient experience or domain know-how and do not hold a vision/drive that can carry the company to the next level. Also, we are not looking for companies operating in declining markets and/or with unprofitable unit economics. Additionally, cap table complexities when a large chunk of the equity is owned by a single investor and/or different investors have different agendas for the company is another red flag for us – we want to make sure that everyone is incentivized and all stakeholders are aligned.
What in your opinion differentiates the best founders from the rest?
Perseverance and drive are the most important qualities of a good startup founder. They need to be disciplined towards their vision, insanely focus on the quality of execution and be able to adapt and modify quickly when needed. From an execution standpoint, two of the most important differentiating capabilities are making sure the company is not underfunded and recruiting and retaining the best talent.
What startups should take into account before making a deal with a VC fund?
Founders should definitely do their own due diligence before letting anyone in their cap table. They need to be aware of the fact that they are entering into a long-term partnership, so questionning investors’ capabilities should be even more important than financing per se, i.e. ability to spare time and resources and chances of participating or leading following rounds.
What is your approach to startup valuation and preferable share in the company?
We have a holistic view that valuation should be at a level where it makes sense for all parties involved and for the business prospects. It is important for founders to avoid getting too much equity dilution in a single round while ensuring the round allows for a sustainable runway.
For us, it is a function of our ownership stake and conviction in the business that it can realize our investment thesis. We typically aim for stakes of at least 5% and can either lead a round or co-invest with other investors.
How do you support your portfolio companies?
We are a pretty hands-on team aiming to provide portfolio companies with on-demand support to accelerate their transition from new ventures to industry-leading companies.
Moreover, we leverage the know-how and expertise of our anchor investor Logo Yazilim, one of the largest publicly traded software companies in Turkey and a leading ERP software provider in Central Europe, in technology and product development as well as building sales channels.
Last but not least, we open our global network of industry experts, executives, investors and advisors to our portfolio companies. Our network allows for knowledge transfer and diverse business opportunities helping entrepreneurs on each step as they expand and build their ventures.
As a team, we help startup founders navigate in building sustainable and scalable businesses through;
Product Development: We have a 3S product development model ensuring Scalability, Sustainability & Security of the product is addressed in the technical roadmap.
Strategy / Growth: Assisting founders from expansion into new markets to launching new products and building sales partnerships/channels
Operational Support: HR, establishing a governance structure and financial reporting and tracking
Event-Driven Support: Fundraising, capital allocation decisions, and strategizing and preparing the company for an exit event etc.
What are the best-performing companies in your portfolio?
We launched our second fund in Q2 2021, so our investments are very young. Our portfolio companies are on track to realize their targets for 2022. Wask, a digital marketing platform, has more than tripled its MRR since we invested last summer. Our two other investments SportsErp, a sports club management software, and Inooster, a gamification-based employee engagement/productivity platform, are already leading players within their verticals in the Turkish market and will close their first overseas customers in Q1 2022. Evreka, a waste management software provider, is rapidly growing its customer base across Europe, Asia and the US and is expecting to open two global branch offices by Q2 of this year.
What are your notable lessons learned from investments that didn’t work out as expected?
Community building and networking effect are harder done than said. Reaching out to people is not the hardest part but continuously engaging customers and creating a loyal base is very hard and takes time to build.
Another piece of advice worth remembering is when the interests of all the stakeholders are not aligned then longer or sooner some critical problems will arise, assuming otherwise would be just wishful thinking.
What are the hottest markets you currently look at as VC and where do you see the biggest hype?
We are a predominantly B2B focused fund given our expertise and know-how within the space. Some of the verticals we see the biggest hype include DevOps tools continue to see significant tailwinds as it is getting more expensive and harder for companies to hire and retain talented developers and Fintech that has been going strong in the past couple of years and there are still ample development opportunities in the space. We think that by slicing the product offering in specialized products, the re-bundled fintechs will get unbundled once again. Also DeFI has become a stable subject of interest for us.
Sustainability is another theme that we are looking at given the increased changes in the regulatory environment creating a huge catalyst for new emerging technologies, especially in Europe.
In your view, what are the key trends that will shape the European VC scene in the coming years?
The European VC ecosystem has spurred in 2021, indicated by the increase in the number of unicorns and venture investments almost tripled in size. In 2022, we expect there will be more VC exits and, especially, an increased number of large-scale acquisitions in Europe.
We expect increased VC activity in the CEE region this year. Even though 2021 was quite a good year for the region, it still received only around 5% of the total European VC funding, despite its 10% share in the European GDP and having the highest population share.
Also, more thematic VC funds will emerge in Europe as the ecosystem attracts more investors across the globe and gets more competitive. Fund managers need to specialize by either having different industry groups within their teams or launching specialized funds. Having domain expertise and being able to provide industry-specific support have an impeccable effect on driving incremental value and realizing portfolio-wide synergies for fund managers.
Merve Zabci, recently spoke with Economist about 2023 plans. At Logo Ventures, we focus on creating sustainable value creation and supporting our portfolio companies as they transition from start up to scale up.
Logo Ventures brought together the startups it invested in with the Founders Night event it recently organised and created an atmosphere where the participants could get maximum benefit and share productively with each other.
TechOne Venture Capital and Twozero Ventures brought together the founders of the startups in their funds at an event called Founders Night, held at Hamam Arts Hub.