1Mby1M Virtual Accelerator Investor Forum: With Pawel Maj, Investment Director at Warsaw Equity Group (Part 3)

Sramana Mitra: Sometimes when you’re in a fundraising cycle, you may not be quite ready for the investor to write the check, but you build the relationships and show traction. At some point, it will converge potentially if you know what your target is. Pawel is explaining that the target is $50,000 MRR.

If you start the relationship when you’re at the $10,000 point, you have to inch your way up to $50,000 MRR before the investment is going to happen. Investor relationship management is important. If the market is of interest and the team is of interest, sometimes investors just take a little bit of time to see how you’re performing. That is the notion of investor-entrepreneur fit.

Pawel Maj: Exactly. Often even though there is not enough traction, something I don’t see often that I’d like to see much more often is the founders doing an investor newsletter. Maybe keep sending updates every month or every quarter. It’s a great way to keep in touch. Once you hit the sweet spot, the investors will come back by themselves.

Sramana Mitra: In that process of covering that ground if you are below the threshold, try to also develop the strategy and repeatability notion. The whole game in B2B SaaS is the repeatability of customer acquisition at reasonable unit economics.

There are a number of factors that you have to take into account to pass due diligence. Those are repeatability, unit economics, and reasonable customer acquisition costs. Let’s talk about what’s happening in the region where you are working. What kind of deal flow are you seeing in B2B SaaS? Is B2B SaaS active? How many companies are there?

Pawel Maj: It’s a great question. I would say we have between 5,000 to 10,000 startups in B2B SaaS in eastern Europe. B2B SaaS dominates the venture capital deal flow. This is where most of the investments happen. This is the business that is easiest to scale internationally. The local investors have smaller tickets, so it’s much more difficult to scale a hardware business. It’s much more difficult to scale platforms or marketplaces. B2B SaaS, especially for early-stage investors is the most preferred investment.

Sramana Mitra: How are you viewing exit strategy? What are you thinking? Are you thinking of earlier exits? What kind of investment thesis are you working on?

Pawel Maj: In the case of Warsaw Equity Group, we are not in the game of unicorns. We are looking at startups that we believe can increase the value of our investment tenfold or more. It doesn’t have to be unicorns. As we look at the market, we see too much capital chasing increased revenues with metrics that do not make sense. We are keener to look at businesses that have great metrics. For us, it’s good enough if they have the ambition to maintain 100% growth year-over-year for the next five to 10 years. This is the kind of business and founders we are looking for.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Pawel Maj, Investment Director at Warsaw Equity Group
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