1Mby1M Virtual Accelerator Investor Forum: With Milos Sochor of Y Soft Ventures (Part 3)

Sramana Mitra: I have a couple of questions on this one. What is the competitive landscape of something like this when you’re investing in something like this in your local geography?

Milos Sochor: They’re often mistaken with companies that provide Bluetooth and RFID technologies. I would move those more into the consumer space. Savio provides their technology which is called Ultra-Wide Band (UWB). It’s a very heavy-duty and precise solution. It’s way beyond Bluetooth and RFID chips. Those tags are pretty expensive. We are talking about hundreds of euros per tag. You are not able to put it on every box.

It would be for more expensive equipment or workers in the warehouse. They’re in the heavy-duty space. They do have some competition but usually, that competition would be very focused on a specific vertical on a specific thing that they provide where Savio provides the technology and the software integrators and their partners build whatever their customers need based on this technology.

Sramana Mitra: It’s a very interesting company. How do you evaluate the TAM on this company? What is your estimated TAM for this?

Milos Sochor: Since the investment two years ago, Savio has been selling in more than 50 countries. They sell you a small kit to the software integrator. Then they usually find a solution for their clients. Our applications have been so wide that the numbers of the available market are staggering. Obviously, in Western Europe and Asia, Industry 4.0 is a huge theme. I don’t have the numbers off hand, but they also started selling in the United States. They have seen interest from global players like Honeywell and Cisco.

Sramana Mitra: How far has the company gone based on your investment? You invested in the company. The company is selling in 50 countries. What level of revenue have they been able to get to based on your investment and that expansion strategy? The follow-on question to that will be, where is the follow-on financing coming from?

Milos Sochor: We got all of our companies to almost exactly $1 million in two to three years. When we invest in them, our average ticket would be anywhere between half a million to a million dollars. They usually have little revenue. We try to get them to profitability within 18 to 24 months and to $1 million in two to three years. This is a B2B space partner sale. It’s not like an internet project. Your sales cycle is anywhere between 12 to 14 months.

Sramana Mitra: A long sales cycle.

Milos Sochor: Yes, but once you get a customer, you usually sell a five-year contract that is based on subscription plus the sale of hardware. It’s slow but it’s very solid. You build it slowly but surely. We usually like them to double their revenue every year. We’re pretty young. It’s easier in the beginning when the company starts from nothing, but all of them have reached right around a million dollars in revenue in year two.

We never invest in companies that are already looking for the next investment round. We want them to be profitable. We want them to be able to finance their expansion. If the next financing round comes, it just accelerates this expansion. We want them to be independent. Since Y Soft has grown without external financing, we want to follow this route.

Sramana Mitra: Has this gone on for follow-on financing already or is it operating on a profitable basis and not taking more money?

Milos Sochor: Savio was the fastest company that came to profitability. They almost didn’t need the investment. They started generating revenue very quickly. The investment was more of an assurance if they went through hard times. They’re the leader of our portfolio. That’s why I also started with them. They are being more talked about by big companies for acquisitions. It will be too early, but they have already proven themselves and they have partnered with some really large international companies. They are already creating revenues. They might even skip this step actually.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Milos Sochor of Y Soft Ventures
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