Ventu.rs discussed everything from how companies get investments to how working with a VC partner can benefit the company with our Investment Manager Pedja Predin. Read the interview in English or read the original article on Ventu.rs.
Pedja Predin is the investment manager of South Central Ventures, the leading investment fund in the region with offices in Belgrade, Zagreb, and Skopje. This fund is primarily engaged in high-tech entrepreneurship and investing in startup companies that are at the beginning of their journey.
Why do you invest?
Investing in small technology companies at an early stage of development, according to Pedja, has many benefits: “The first is the opportunity to enter a beautiful story very early, which has the potential to make a big impact, especially if they are built with a mission to solve some of the biggest problems we have. Another reason is to support the most talented people we meet. In addition, contact with the network of investors and entering the ecosystem of startups and companies at an early stage is a very nice thing and especially learning from them about things that can be applied to investors. In the end, there is the possibility of great financial success, even though these are risky companies in the early stages of development.”
Which companies are eligible for an investment?
When it comes to deciding whether someone is a good candidate for investment, according to Pedja, there is a set of qualitative and quantitative elements that are taken into consideration. Typically, South Central Ventures invests in companies that have a developed product, have some revenue, and some customers to validate that product. “The starting point is the quality of the team, the vision and mission they have, how they function together, and whether they can achieve the set goals. In addition, I personally like to see that the team has a certain advantage that others cannot copy. These can be production items, intellectual property, brand, or anything else. The other thing is the market, how big it is, what the trends are, what the competition is like, etc. After that, the focus is placed on the product or service that the company offers, where we observe the traction and growth projection and how much we believe in it all. If we think we can make a profit in the planned time frame, then we continue,” explains Pedja.
How do you help startups?
In addition to the money, the businesses in which South Central Ventures invests, get some other things as well: “We provide support in several fields such as recruiting new people, building an organization, developing plans, business analysis, market entry strategies as well as some financial issues. For example, if additional capital is needed later, how is it raised or what should the structure of all investors look like in order for it to be attractive in further stages of development. In addition, we are very proud to enable domestic small companies to work with investors who can help them expand and make the transition from Belgrade or Novi Sad to Berlin, London, USA, or anywhere in the world, through a network of investors and sharing strategic business advice.”
How can companies in the region improve their fundraising skills?
When it comes to domestic companies and startups that need investment to grow, Pedja says there are two things we most often need to pay attention to: “Our companies are mostly not ready to get an investment. Firstly, they must have regulated legal elements – for example, the legal entity behind the solution, and secondly, everything should be clean from the bookkeeping side. It is the first requirement so that the investor would have confidence in their organization. Another element, which is only related to technology companies, but is also a broader issue, is that organizations put too much focus at an early stage on the product they have in mind. They have a great technical team, but they do not have validation from the market side because they start talking to customers too late in the process. The same goes for developing a pricing strategy and talking to suppliers and distributors and that is why a lot of time is wasted in the end. The reason is, that the small companies cannot attract people who are qualified on the business side and are ready to accept a small salary at an early stage. We are trying, as an investor, to help in this area, but it is important that this process is run by a company that wants an investment.”
What do you advise the companies in the COVID-19 current situation?
The situation caused by the Covid-19 pandemic has led to a reduction in the possibilities of raising additional capital: “Health is definitely in the first place. What we advise companies to do is to optimize so that they become profitable as soon as possible. There is a best practice application of the zero-based budgeting process. In addition, it is necessary to maintain a close relationship with business partners and clients who are also going through the same problems. Good teams come out of the most difficult crises stronger than they used to be. ”
How does working for a Venture Capital Fund look like?
Pedja also described how the business of the investment fund, in which he works, looks like: “Venture capital funds have life cycles of some 10 years and that is the period in which they have to invest in all the companies they want, but also to make an exit from them. We buy a stake in these companies and exit them either by selling our stake or by going public. So, in a period of 5-7 years, that company needs to build an organization, grow, expand globally and reach a point where it is attractive to a strategic player or another investment fund, for example, private equity which buys a majority stake in the company or to be ready to go public which is not a common model. Because of all these factors, we prefer that if someone has a business idea to present that they contact us as soon as possible, and they can even do it directly through our website. The decision-making process itself takes 3-6 months, so it is recommended that they get in touch with us as soon as possible.”
In conclusion, Pedja mentions seeing Ventu.rs as a great potential partner: “Let’s say some companies that get money from the Ventu.rs crowdfunding platform may be interesting to us for a later investment, while the companies we have invested in may be a good fit for you.”