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Наталя ХандусенкоMoney
23 December 2024, 10:24
2024-12-23
“There are very few quality teams in Ukraine, and this is holding back the development of the market,” the managing partner of the Angel One fund shared the key criteria for selecting startups for investment.
Venture fund Angel One recently made its fifth investment, but before that it hadn’t invested for almost a year because they couldn’t find a team that met the fund’s criteria and got approval from the investment committee. So what does a startup have to be like to get investment from Angel One?
Venture fund Angel One recently made its fifth investment, but before that it hadn’t invested for almost a year because they couldn’t find a team that met the fund’s criteria and got approval from the investment committee. So what does a startup have to be like to get investment from Angel One?
Angel One
The Angel One venture fund was created in 2022 by the Ukrainian Catholic University (UCU) Foundation. Over the entire time, about 1,200 applications have been received. The fund has now grown to $2.5 million.
So far, $850,000 has been invested in 5 civil startups: Zeely, GO TO-U, Rozmova, Mosqitter Grand. The fifth startup has not yet been announced. The average investment check is $150,000 -175,000.
The fund also invests in defense startups: 7 have already been invested, including Buntar Aerospace, Swarmer, and Mantis Analytics. The average check for defense startups is smaller — $100,000. Because the teams are at an early stage and need less money.
«There are very few quality teams in Ukraine, and this is holding back the development of the market,» said Ivan Petrenko, the fund’s managing partner, in an interview with Mind, explaining what a quality team means for Angel One.
The key is the startup’s focus on foreign markets.
«The vast majority of Ukrainian teams continue to focus on the Ukrainian market, hoping to later enter the international market. This is a standard situation when a startup says: „We have 5, 10 or 15 clients in Ukraine, next year we plan to enter the US or European market.“ But it is worth understanding that the Ukrainian market is not solvent at the moment and, accordingly, not very interesting to investors,» Petrenko explained.
The fact that the team managed to attract a few clients in Ukraine absolutely does not guarantee success in the US or European markets.
«We often tell startups: ‘It’s great that you have 10 clients in Ukraine and even one in Europe or the US, but we’ll wait until you attract 10 clients in the US market.’ Only then will we be ready to talk further. It’s important for us to see that the product is interesting specifically for key international markets. One client in the US doesn’t mean anything. That’s why we’re waiting,» he adds.
Focusing on external markets, real results, and sales are mandatory conditions.
«Currently, there are about ten teams in the pipeline that look interesting. But until we see customer growth in the main markets of the US or Western Europe, we are not ready to take risks. Focusing on foreign markets, real results and sales are mandatory conditions. We pay attention not only to the volume of monthly or annual sales (ARR or MRR), as other funds do. The key is monthly growth. We want to see the team increase sales or the number of customers every month, and this growth should be at least 10–15%. Unfortunately, there are very few such startups,» says Petrenko.
In addition, among the selection criteria:
founders must have a vision for the development of the startup not only for the next 6-12 months, but also for 3-5 years;
A discipline that is a challenge for Ukrainian founders is the ability to maintain a stable level of communication with investors — both potential and those who have already invested.
«Unfortunately, about 70% of the teams we are interested in do not pass this stage. We often tell them that we are not ready to invest now, but we want to monitor their development. We expect regular updates — monthly or quarterly. However, most founders ignore this, not seeing the point in it. Everyone seems to understand that building relationships with investors is a long process that takes from 3 to 6 months. Many compare it to marriage. But not everyone is ready to make the effort for this. Therefore, two key things for us are strategic vision and discipline. They are crucial in selecting teams for investment,» notes the fund’s managing partner.
What startups are interesting to the fund?
Petrenko says that he sees great potential in Ukraine in AgriTech, HealthCare, MedTech, and Defense. All such startups are interesting to the fund, except for gambling, gaming, cryptocurrency, and blockchain, which do not coincide with the fund’s values.
Regarding the stages of development, the most interesting is the early seeding stage. «We want the team to already have its first sales, the customer base or number of users to be actively growing. Ideally, this traction lasts at least half a year: 5-6 months, so that we can assess how the team is developing, sales and customer base are growing,» said Petrenko.
There are not enough beta users of the fund. They want to see real income if it fits the business model.
Plans for 2025
«We plan to start the process of attracting new funds in the spring of 2025. We want to raise $3 million, but everything will depend on the situation. Investors are now mainly waiting for January 20, the inauguration of the newly elected US president. It is still difficult to predict what his course will be and how it will affect the situation, in particular, the war,» Petrenko says about the plans.
They hope to make more than six investments in 2025: 6 investments in new teams and possibly two follow-ons — investments in portfolio companies in subsequent rounds.
