1Mby1M Virtual Accelerator Investor Forum: With Christian Czernich of Round2 Capital Partners (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Christian Czernich was recorded in May 2020.

Christian Czernich is Founder and CEO at Round2 Capital Partners, a firm that is experimenting with an alternative financing model.

Sramana Mitra: Let’s get acquainted and introduced to our community. Tell us a bit about yourself as well as the fund.

Christian Czernich: I founded Round2 Capital about three years ago. We run a €20 million fund currently. We are investing in tech scale-ups. These are companies that already have a million euros. We don’t invest in equity but buy a share in the companies. 

Sramana Mitra: Let’s understand the model a bit better. It’s slightly different from what we normally encounter. You’re saying that you want to see a million euros in revenue that has been bootstrapped?

Christian Czernich: That’s right. Ideally, the company is fully bootstrapped or it has angel investors. Typically, they are not sponsored by VC firms. We are looking into cases where entrepreneurs have been building the business on their own.

Sramana Mitra: Is there a particular business model that you’re looking for? Is it SaaS or any kind of business model?

Christian Czernich: It’s not necessarily SaaS. We prefer SaaS because the revenues are recurring. There’s some kind of stability in the revenues. The profit margin is very high, so there is not a lot of cost if any. There is no need for working capital. We also invest in other businesses, but they have to have high gross profit margins and low working capital. 

Sramana Mitra: What kind of check sizes do you write into these situations?

Christian Czernich: We write between €300,000 and €2 million. We have invested across all of those sizes.

Sramana Mitra: Give us an idea of the terms. If an entrepreneur has bootstrapped to a million euros and wants to raise with you, what kind of terms are they dealing with here?

Christian Czernich: The major difference is that we don’t interfere with the cap table. Our philosophy is, we really want to help entrepreneurs grow their businesses and let them stay in control.

We fund the companies and we get a share in their revenues in return. The revenue shares are typically between 3% to 5% of the turnover. Let’s say there’s a business that is generating $100,000 per month. We would get $5,000 each month if we get 5% of revenue.

We don’t get it forever. We get this until a certain cap is reached. The cap varies between 1.35x and 2x. If we fund the company with a million, we get a revenue share of 2 million cap.

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Christian Czernich of Round2 Capital Partners
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