1Mby1M Virtual Accelerator Investor Forum: With Pawel Maj, Investment Director at Warsaw Equity Group (Part 2)

Pawel Maj: We would like to have about 10 to 15 companies in our portfolio at any given moment. We like to get hands-on since our history comes from the private equity market. For pre-seed or seed, we invest smaller tickets but much in larger number of projects to spread the risk. In our case, we don’t have a large enough team to have a large operation to be able to provide hands-on experience for 50 companies. This is why we prefer to invest at a later stage after the product-market fit.

Sramana Mitra: The reason I’m probing this point is, there are a bunch of things that happen between pre-seed, seed, pre-Series A, and Series A. You have to achieve product-market fit, which means you have to get some customers to say that they’re willing to write a check for this product.

Then you have to figure out a repeatable way for doing that over and over again. It’s not one company buying your product. $50,000 ARR, depending on your average sales price, is a small number of customers most likely, unless you’re selling $5 per customer. Then go from five customers to 50 customers, to 500 customers – this is the continuum you’re trying to travel in building a significant company.

In the $50,000 MRR, maybe you are in the 5 to 50 customer range, but you may not have fully figured out the spectrum of how you’re going to go from 50 to 500 customers, or 500 to 5,000 customers.

These are the nuances of questions that you should be asking the investors that are looking at your company. Where is their comfort zone? This is the notion of investor-entrepreneur fit that you’ve heard me talk about ad nauseam. Investors have their own comfort zones. Just like Pawel is explaining, there is a certain sweet spot in which Warsaw Equity Group likes to invest. There is a certain geographical sweet spot. There is a certain stage sweet spot. There are certain industry sectors.

Coming back, Pawel, can we do some examples and case studies of companies that you have invested in? Tell us not only what they do, but also what did they show you when they came to you that captured your imagination to want to write these checks?

Pawel Maj: I would have to say that our portfolio is diversified. As I said, we started as a private equity fund. Over the last two years, we have been rebuilding our portfolio to invest more in startups at earlier stages. In our strategy, we like to invest at least $50 million in the next two to three years.

Sramana Mitra: You don’t have a portfolio yet on this investment thesis that we just discussed?

Pawel Maj: We just started executing this strategy. This year, we have already gone through two investments.

Sramana Mitra: Let’s talk about those.

Pawel Maj: A great example of our new approach is an investment that we did in March of this year. It’s a Polish company named Nethansa. They provide Amazon merchants software to automate their tasks.

Sramana Mitra: The target market is Amazon sellers.

Pawel Maj: Yes. Existing merchants or maybe new merchants that are coming onto the platform. They already had traction hitting over this $50,000 in ARR. For us, it’s a very important criterion. Each investor has its sweet spot. In our case, the segment, industry, business model, and traction are key elements. If a startup has smaller traction, we’d like to keep in touch.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Pawel Maj, Investment Director at Warsaw Equity Group
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