A Venture Partner from the Fund for Balkans reveals how they choose startups to make an investment – By Gordana Grgas written for Jutarnji.hr
South Central Ventures (SCV) closed the first € 1 million investment in Croatia in the agritech startup Agrivi. The intention of the Fund is to invest in 20 more startups in the next 4 years, announces Domagoj Oreb, Partner of South Central Ventures, manager of Enterprise Innovation Fund (ENIF,) a € 40 million Fund.
The inception of the Fund is followed by an intensive search for talented teams across all markets in the region: from Croatia, through Bosnia and Serbia to Macedonia, Montenegro and Albania. The Fund broke the ice and closed the first investment in the Novi Sad startup drytools few months ago. As SCV’s Partner Jan Kobler explained for the Forbes magazine, drytools created a tool for companies that develop software that significantly reduces the time needed for writing code.
Oreb reveales that currently there are a dozen tech companies and startups being screened in Croatia. A total of 80 leads are in the pipeline, but he is not revealing which those companies are.
“The focus is on companies from tech and IT sector with a good team, interesting products and services and high growth potential on international markets” explains Oreb. He adds that SCV began its operations in September last year, and the investors in ENIF are the European banks, insurance companies, governments, private companies and individuals. One of the individual investor is the Croatian entrepreneur Nenad Bakic.
Why Agrivi is the first € 1 million investment?
The simple answer is because SCV believe in them. They considered that Agrivi have great potential, an outstanding team, and visible traction: today the web, iOS and Android applications are used by more than 15,000 agricultural producers from 150 countries. “Agrivi has developed a software that will, by using IT, enable farmers from all around the world to achieve efficient, profitable and sustainable agricultural production” explains Oreb. The initial contact and discussions with the startup founded by Matija Žulj started about a year ago. After the due diligence, SCV decided to support the Agrivi’s team vision to expand to new markets in the EU, but also globally, as Agrivi already established itself as one of the leading players in the industry .
The SCV investment focus is almost always on tech companies that require support to complete the product, strengthen the business development and increase sales in foreign markets. The investment selection process is anything but simple. Despite all the discussions and due diligence, the ultimate investment decision is kind of a lottery, literally a risky investment.
“In recent years, the startup scene in Croatia woke up. It’s nice to see young people coming to us, presenting interesting ideas and open thinking. Many are missing parts of the ‘puzzle’ that are necessary for success. Nevertheless, there is a visible desire to learn and succeed, which is very important” says Oreb based on his experience so far.
“Young teams, inspired by successful startups stories from the developed markets, have unrealistic expectations about the valuation, .ie., the present value of their companies. It is important to stay with one foot on the ground and try to work out the company growth and profitability, instead of only collecting ‘Likes’ and good comments” he says.
We asked Oreb what the most important criteria when deciding which company to invest in is? After all, a million euro is not a small amount. “In a situation when we have young teams and early stage investments, the most important criteria is the character of the founder and the team. After that comes the technology, product and market. Specifically, markets, trends and technology are rapidly changing. A startup will most likely fail with a bad team even if they have a fantastic technology. Behind the startup there must be a person/team that is smart enough to recognize changes and have an appropriate reaction. If we get a good feeling and ‘click’ with the team, then we can work together” reveals Oreb.
So we hope SCV will find the ‘click’ with new starups and tech companies soon. There really are no other risk funds interested in the region, including Croatia.