Andrej Kiska Jr.: Lack of success stories is our biggest weakness


He tries to support the startup environment in all the ways possible. He gives feedback to every business plan he receives, educates the startup founders through articles and presents our region wherever he goes. One of the most famous and favourite investors in our region shares his views on approaching investors, changing the mindset, building a global startup and improving the whole environment. Andrej Kiska Jr. from Credo Ventures.


Do you remember your path to startups?

It was mostly luck and chance. I started in 2009 in Benson Oak Capital that invested in AVG and grew from 3 mil to 330 mil in revenue. I thought “Well, if one company could make it, more companies can make it”. Then Credo Ventures came along and now we are on the mission to build as many AVGs as possible.

How are you accomplishing the mission?

There´s no AVG from the point of a billion dollar valuation but we have portfolio companies like Represent that was sold at 100 mil USD valuation or Cognitive Security that was sold successfully to the Cisco. So I think that over the past five years Credo has proven that Central European startups can build very successful businesses from here.

What do you think is the most promising startup from Slovakia at the moment?

I am going to promote our recent investment, Photoneo. The reason for that is that they are on a path to create the fastest 3D camera with the highest resolution. They have invented a new way how to sense objects in 3D. It´s a great example of guys putting together a very unique piece of technology that can be ten times better than anything else on the global market. And that´s the kind of team we like to back. I often hear people saying that Central European investors are not going to invest until you have a finished product and revenue. The truth is that Photoneo received 2 mil EUR investment at the stage when they are a year, year and a half away from the final product. They are a great testament to the fact that if you have a product that truly has the potential to be globally disruptive you can raise a lot of money very early on.


Startup Pitches

What annoys you the most when startups approach you and try to pitch you the idea and raise money?

That´s a tough question. What annoys me the most is when people don´t take the time to study what the fund does and still try to ask for money. We present very specifically that we invest in early stages, into companies with a global potential based in Central Europe. What is going to annoy me is if you are not from Central Europe or you do not have global potential or if you are not an early stage startup. If you don´t take time to read my website why should I take the time to read your business plan or to meet you?

Well, everyone thinks they have the product with global potential, isn´t that right?

I don´t think everybody thinks they have a global potential. And it´s fair to come to the investor and ask whether they believe it has a global potential. What annoys me as well is when people ask for opinion, you give them the opinion and then they are just not going to take it and try to prove you are wrong. It´s fair not to agree with the investor but then let´s just agree that we disagree. It´s very hard when you come back to an investor and say “No, no, no, you are wrong” and assume that at the end of the day the investor will say “You are right, I give up, I will give you the money.” That´s not typically how it works and many times it actually makes it more difficult for entrepreneurs to get relevant feedback from VC, especially over email. For example when I´m rejecting a business plan I try to provide valuable feedback. But on the other hand I don´t want to provide too much feedback because I know that some of the entrepreneurs will come back and say they don´t agree. And I don´t want to have a lengthy conversation about that. You asked for feedback, I gave the feedback, that´s the end of the transaction.

Do you answer all the emails?

We have a rule in Credo that we try to reply to all the business plans. When I feel like somebody took a time and has a good business plan, the least I can do is to “reward” him by giving a comprehensive feedback.

What´s the best way to approach you then?

Let me start with the worst way. Do not write at info@. More efficient way is to get introduction via our network, especially our founders. We typically use our founders to do screening of the new investment opportunities anyways. We have approximately 25 portfolio companies right now which means there are lot of sectors we cover and each of the founders can give us very valuable opinion. Very good way to get introduced is to approach our founders that can understand your field and give the recommendation.

Or you can flag us down at events we are constantly participating on and talk to us for 5-10 minutes so when you send us an email we would already remember you. If an investor can put a face to an email there´s much higher chance that you create better connection. That connection and trust is very important because at the end of the day we invest primarily into people.

What do you want to hear in those 5-10 minutes on the event when someone approaches you?

There are three most important criteria for us at the seed and series A stage – the quality of the team, the product and the novelty of the idea. People usually get rejected because the product is not in any way disruptive. It´s not ten times better than what competition is doing. It might be marginally better which means I have one extra feature compared to what the product does. That proves immaturity of the team because they don´t understand the switching cost from one product to another.

Let´s take an example of Facebook – if somebody pitched Facebook with an extra feature like video chat and he says that people will leave Facebook because he can do video chat on his platform, it´s not going to happen. There are big switching costs associated with giving up your friends, giving up the photos, etc. The product must be truly revolutionary so the user changes the habits.

What about the team?

When it comes to the team, typical weakness we see is in the go-to-market strategy part. It is not only that I say “I am going to get a million users with my product” but it´s “I am going to get a million users with a go-to-market strategy in which my cost of acquisition of a user is at least a one third of what a lifetime value of that user is”. So that equation between  cost of acquisition and lifetime user is typically not understood by the team because they have not been exposed to how to do go-to-market strategy for a global startup before. That´s why one of the things that has worked very well for us are these heavy technology or enterprise level focused startups.

Can you give an example?

Imagine Photoneo, if it installs one of its cameras into a factory which can pay between 50-100K EUR for it. If I have a lifetime value of 100K EUR annually for 3-4 years, so that´s 400K EUR, my cost of acquisition is 100-150K EUR. If I can spend 100K EUR to sell my product to a company, I can hire a very good sales person who is going to pitch it to them. It´s a fairly easy go-to-market strategy if you can sell a product at such a high price point. If you can have that price point we can help you to build that sales team.

If you have a lower price point, if you are going after small businesses and freelancers, your price point is probably more around 100-1000 EUR . If it´s 100 EUR and your lifetime value is 3-4 years, you get 300-400 EUR and your cost of acquisition needs to be a 100 EUR. And that is very tough to do. That´s why a lot of Central European businesses that aim at the small businesses don´t understand the cost of acquisition.

Let´s take the example of Apiary. It raised 8 mil USD and we gave them the first money when they did not have basically any traction but Jakub and Jan, the first and second employee of GoodData, left GoodData and had a very good idea of how the product should look like, how it´s going to be ten times better and how to get to a large amount of API users. That´s why today, 2-3 years after we invested, they have more than 200K APIs from more than 150K users at a very low cost of acquisition. So these are super important things that our founders in Central Europe tend to underestimate or don´t have experience with.

You wrote a series of articles on Medium which was later transformed into a book. Do you think it somehow changed the approach of startups to you as investors?

Actually, writing the book was pretty selfish from my point of view because I just wanted the entrepreneurs to come to the first meeting as educated as possible about what that first meeting would look like, what kind of questions would be asked, what kind of answers we would be looking for, etc. They are not ready for the questions, many times when it comes to termsheet they don´t understand what to expect. So I tried to build a guide which they should read before our first meeting so that it is more efficient and less surprising for both sides.

Do you think it helped? What´s your experience?

It´s tough to say, I really don´t know. Lot of people who have read the book told me it´s useful and it helped them to shape the business but I know that the founders we invested in haven´t read my book before. It´s hard to measure. In general the quality of the first meeting is getting better and I think our startup community has done a lot of progress over the last five years. So entrepreneurs have much more resources to go after, there are accelerators, advisors, everybody is trying to educate the startups. I do hope that my guide helped a little bit but I know that it´s just one small part of the ecosystem.



What´s your take on Slovak startup environment? Where do you see challenges and what are our competitive advantages?

I have a presentation on this that I try to give when I travel to Slovakia, especially to university students. I think it´s the lack of success stories which is our biggest weakness. We have ESET as one big flagship then we have Pixel Federation and Sygic as couple of examples. But if you compare it to Czech Republic, there are a lot more success stories produced and those tend to produce a lot of founders of the next startups. Because that´s where the founders learn how to fundraise money, how to think about building a global business. That´s why GoodData produced 3-4 startups, Apiary being just one of them.

There is not a strong culture of people leaving successful startup and building their own. Lot of our founders do not have that experience with building a global startup which means that when you talk about that long tail we discussed earlier – that you need to understand go-to-market strategy and the product – it´s very tough for them to build a competitive idea.

And where do you see advantages?

On the other hand what we are good at, and Phonteo is a good example, are heavy tech companies. They also don´t necessarily understand go-to-market strategy but they are so good in their respective field that they are able to create a revolutionary product and an investor can help with structuring that go-to-market strategy for them. I think our strong side is that we do have inventors who are able to come up with breakthrough things. And it is the role of investors to help them with the go-to-market strategy, sales and marketing.

Do you think we also need to change the mindset?

I think the mindset is good in terms that lot of people have ambition to build something global. In Czech Republic people will tell you “No, I am building just something for Prague and Brno.” And that´s also ok, it can be a valuable business. There is a strong investor community in Czech Republic that focuses solely on execution of local or regional businesses. When you look at miton, eneRn, rockaway, they focus on local, predominantly e-commerce things that still can generate a lot of value but the skillset required for that is different – you are not as product-centric company as you are a sales and go-to-market execution-centric. You have to be perfect in nailing the logistics and the execution of marketing on the local level whereas with the global startups you must think a lot more about a) how to make the product unique and b) how to find the value proposition for the customer. From this perspective I think the mindset is good in Slovakia. It´s not so much about the mindset as about experience. And that´s why we started the non-profit organization called Starlift. Our thesis is to go and see how the big startups in Silicon Valley do it for one or two years, be exposed to an environment where the best ideas are currently created and sit next to entrepreneurs who are able to fundraise money. Learn how to do that, then come back home and take advantage of a much more favourable market situation with a lot more technical talent available and lot more money from investors.

If you could change immediately one thing in our startup environment what would it be?

It might sound self-promoting but I really think that our entrepreneurs lack the necessary experience and I would just send all of them for 1-3 years to Silicon Valley, then bring them back home and make them start a business. Their thinking would be so much different about how it really works and how to develop the ideas.



What do you think has changed over the years in the field of VC? How has the venture capital evolved over the years?

I think it´s an incredible growth. Back in the day when Credo started in 2010 there was no accelerator, nobody knew what the word startup was, we had to explain everybody what venture capital was. Today the situation is totally different. There are accelerators, entrepreneurs are lot more aware at least of the basics of the ecosystem, there is a lot more money available. It has grown tremendously. I keep on saying that Slovakia might be the best place to start a startup in the entire Europe because there is so much capital available at the seed level and there is still so much talent compared to especially Western Europe.

Can you share with us the worst investment decision you made and what have you learnt over the years?

That´s pretty easy – when you get attracted to the idea more than the team. It´s the equivalent of going on a first date with a super hot girl. All you see is how beautiful this lady is. She represents that very good idea. You are sitting on the first date and thinking – well, there is something weird about her, maybe she is arrogant, but she is so hot. I´m just gonna go and marry her. That´s a metaphor for preferring very good idea over a strong team. Sometimes, especially at the very early stage, the team can come up with an idea that sounds revolutionary but you run into the defect that the team does not have a history together, they are getting into arguments, they don´t listen to each other, and finally falls apart. Number one reason why our startups fail is that the team falls apart or is not able to attract the key talents needed. So the biggest investment mistakes we have done are those where we did not pay enough attention to the team and where we were just so mesmerized by the idea and invested anyways.

On the other hand what decision you are really proud of?

I am really proud that Andrej Pancik and his team made it. I think we should read about Andrej and his story until everybody knows it and we are sick of it because everybody needs to learn that if you are smart and execute well, you pull it together, in three years you can build a 100 mil USD business out of Central Europe. I am not necessarily proud of the decision because it was an easy decision to make. The decisions I am most proud of are the decisions where things are not clear, when our team is internally arguing whether it will work out or not.

Where do you see differences between Central European and US VC environment?

First, the biggest difference is obviously the deal flow. We see one thousand business plans, they see tens of thousands business plans a year. And every one of those business plans is of higher quality than ours. Lot of people criticize Central European investors for being conservative and investing too little in terms of investment size. But truth is that most of the startups that try to fundraise in the United States do not raise there any money and come back. Then they ask for money from Central European investors who tend to invest. The reason for that is that if you are an American investor, you are looking for a team that is close to you, you are looking for a culture that understands you, that understands customers. That´s why they tend to invest into the teams that are partially Anglo-Saxon.

But if it´s a bunch of guys with Central European accent coming to Silicon Valley and want to raise money from Andreessen-Horowitz – if you are not Roman Stanek who is the only one who did it with his third business – you are just not going to make it. Here we are forced to take bigger risks with teams that have no experience with building global startups. That´s sort of the only thing we have here. We don´t have Roman Stanek waiting here around every corner for an investment.


Secondly we have very different dynamics here in Central Europe about who invests in startups and where their money comes from. There are state funds, there are EU funds, there are the big financiers from finance groups. There are fewer people with the mission to raise money from all sort of technological entrepreneurs and then work with other technological entrepreneurs helping them build a global startup.

In America the biggest sources of investors are big pension funds who invest into very mature teams. Even when you compare it to Western Europe, the LPs of American VCs will tell you that number one or two teams in venture capital in Europe would barely make it to top ten in the US.

How does your daily job as an investor look like?

I try to see about three pitches per week. Of course I have to screen a lot of them beforehand. In general the work of a venture capitalist is split into three pillars: pipeline generation, portfolio management and fund activities and administration.

Pipeline management basically means you are doing some marketing activities and processing the investments. I write blogs, go to startup events, read business plans. Another third of my time is portfolio. We try to meet and interact with our founders pretty often. That´s our top priority. If a founder needs two hours of my time, I spend two hours with him. And the third part is sort of fund administration which is more about operations of the fund itself – internal meetings, hirings, lot of other duties.

Photos: Andrej Kiska


Read next