What it means to invest with high conviction
The strongest bond we share with the founders we partner with is that, like them, we’re also in the early days of building our business. While the “products” we’re selling might be very different, the startup experience is the same and the fundraising journeys are uncannily similar.
When we went out to raise Fund I, we had to ask investors to buy into our vision, believe in the market and to take a leap of faith on us. No different from a Seed pitch. We said Fund I would be our opportunity to prove to them we could deliver all we were promising. We asked investors to trust and support us wholeheartedly.
Our Fund II deck was almost an exact copy of our Fund I deck; except now with the addition of actual stories of the eight incredible teams who we’re fortunate to be supporting in their journeys. We’d successfully accomplished what we promised and now we were ready to scale up. It was our version of demonstrating product-market-fit at a Series A.
We constantly remind founders that they are the customer when it comes to raising money. We should expect them to be as curious and demanding as our investors. It occurred to us, therefore, that it shouldn’t just be our investors we pitch. Today, as we announce Fund II, we’re excited to share our thoughts and plans publicly and transparently with founders all over, especially if the ideas resonate. So here it goes:
1: Find the founders
Investing is like finding a needle in the haystack; a diamond in the rough. That unfortunately means quickly saying no to 99% of potential opportunities so we can be free to spend time on the 1% of opportunities we believe will matter.
Ambitious, talented founders are to be found all over Europe. We constantly deliberate which sectors and countries we want to prioritise. We use data science to help us find those unique gems where we may not be looking regularly. Once found, we certainly don’t rely on founders to come to us (nor do we want them to!) — we go to them. In the past two years, we’ve visited 188 companies at their offices — from Dublin to Bratislava to Athens — and have invested in five different locations. There isn’t anywhere we wouldn’t go.
2: Decide quickly
As founders ourselves, we know that every moment is precious. At the early stage, a founder wants to be with their team and building product. Fundraising is a necessary part of a founder’s job, but that doesn’t mean it should be a distraction from the day-to-day. For precisely that reason, we move fast and allow teams to get on with what they need to focus on. We pride ourselves on an efficient and smooth process.
We can commit to this because we have strong theses about the future of sectors we’re actively investing in and a clear idea of the types of founders and companies with whom we want to partner. Most importantly, it’s because we are a small, close-knit team who can make decisions fast.
Looking back at our investments from Fund I, we reached conviction on average with just two (in person) meetings.
3: Deliver immediate value
Whether we invest or not, we want to be impactful from the first meeting. It may not be the right time for us to invest, but we see it as the starting point to begin working together and building a longer term relationship. For that reason, we keep our investment team very small; a team of three full-time investment partners. We have long experience of investing and operating across product, data science and growth. We also have a huge network of experts on hand to help any time. Building is our passion.
Our LPs often joke that our team’s skill set resembles more that of a startup than a traditional European VC. We believe having the practical skills to help startups is our super-power.
4: Take risks and make them count
In Europe, only 4% of Series As go on to become unicorns.
In venture, we know only a finite number of companies will ultimately end up being transformational companies. Taking a look at the maths we believe that only 20–30 companies a year in Europe will have significant outcomes.
Our focus, therefore, should be spending every minute finding and supporting one of those special few. Concentration is not normally a word you hear when it comes to venture, and we were certainly met with scepticism when we told investors we were building a highly concentrated portfolio. But, in our view, any moment not spent on one of these potential unicorns would be dilutive to returns.
5: Be a long-term committed partner.
This concentrated approach enables us to promise and bring to our founders an unprecedented level of support. Whether it be operational advice, emotional therapy or fundraising, we promise to be on hand no matter what time of day. We’re on site with our founders at least once a month; we have Whatsapp groups with all of our teams. We want to hear the bad news fast and respond even faster.
We can only deliver on this promise by ensuring we have the bandwidth for our founders. That’s why we restrict our number of investments to five a year.
As the companies grow and enter into their next phase of scaling, we’ll bring in the best growth investors from the West Coast for their Series B who can bring support in different ways from us. This frees up our time for the next cohort of Series A companies we invest in. Our focus will never be divided among a huge portfolio of 50+ companies.
Having a small portfolio also means every company counts. We don’t use our portfolio to de-risk and diversify. It means if we invest, that one company is as important to us as the rest. We don’t jump ship or abandon our founders when times are hard because it matters deeply to us. Our founders’ successes and failures are truly our successes and failures. We’ll do everything we can to support them through good times and bad.
6. Investment criteria
So what do we think the 1% looks like? We have six criteria which we believe a team and product must exhibit at the early stage for the company to at least have potential to become a multi-billion $ category-defining business.
While the sectors we’re excited by might change or even the platforms we invest in, we don’t expect to ever deviate from these six overarching criteria.
1: the percent of opportunities that matter
2: the number of meetings it takes for us to get to an investment decision
3: number of full-time investment partners
4: % of Series A that will go on to be $B+ companies
5: number of investments we’ll make each year
6: our investment criteria
200+: the number of investor meetings it took for us to reach this milestone. Building a startup isn’t easy and the path is never straight forward. But focus and determination goes a long way. We are hugely grateful to all our investors who took a leap of faith in us early on, and to those who have come in to support us now in our growth. We couldn’t have done it without you. We owe the same level of thanks to Asim, Chaz, Eoin, Eirini, Guillaume, Steve, Owen, Pierre, Roger, Rosie, Tom and Thomas for also believing in us. We hope to be welcoming more founders like you to the Blossom family soon!