Series A Academy: A chat Akis Bratsos, Partner at Lakestar

At our recent ‘Series A Academy’ event with Akis Bratsos, a partner at Lakestar, attendees had the chance to interact directly with him during an open Ask-Me-Anything session, where they could ask any questions they had about fundraising in real time.

Akis provided a wealth of insights into Series A funding, elaborating on the current investment landscape, offering strategic advice to founders, and shedding light on Lakestar’s decision-making processes. Below, we’ve compiled the questions raised by attendees, capturing the essence of the discussion and the expert guidance provided by Akis.

Founders: What specifically triggers a Series A Fundraise? Which KPIs do you need to achieve, and when do you know you’re ready to start your Series A fundraise?

Akis: The trigger for a Series A Fundraise is robust evidence of product-market fit, demonstrated through solid revenue figures and significant growth metrics that confirm the scalability of the business model. For Key Performance Indicators (KPIs), the precise metrics vary by industry, but typically, a startup should aim for $1.5 to $2.5 million in Annual Recurring Revenue (ARR). This marks a shift from earlier standards (less than $1 million ARR), reflecting increased expectations for performance and growth. Founders should consider launching a Series A to strategically select investors that align with their vision, ideally when they have a substantial runway to ensure they are not fundraising under pressure.

Founders: What norms have you observed for year-on-year growth before and after the Series A round?

Akis: Typically, successful startups showcase rapid year-on-year growth before a Series A round — usually 3–4x and above.

Founders: What does a startup need to do to impress you? What’s your decision-making process like?

Akis: To impress us at Lakestar, a startup must demonstrate a profound understanding of the market, possess robust and defensible technology or product, and present a scalable business model. Our decision-making process involves different stages of due diligence that include evaluations of the market size, product innovation, team capability, and comprehensive financial metrics. We engage deeply with potential investments through discussions and meetings to fully comprehend their business models and strategic alignments. Startups need to articulate a compelling story that underscores their potential for growth and competitive advantage, ensuring they align well with our investment criteria and overall strategy. This thorough process helps us assess whether a startup stands out in its field and aligns with our long-term investment goals.

Founders: What are some common mistakes to avoid when fundraising for Series A?

Akis: Entrepreneurs should avoid several pitfalls: underestimating the funds needed, which can lead to a shorter financial runway, and presenting over-ambitious valuations without substantiating growth metrics. A lack of clear business differentiation and a scalable business model are significant drawbacks seen during pitches. Founders should approach investors with well-prepared, realistic plans and data-driven projections to survive rigorous evaluation.

Founders: Once the investment is made, how do you work with companies? What’s your main goal as a board member?

Akis: As a board member, my primary objective is to aid in strategic decision-making, tackle significant challenges, and help secure key hires and essential partnerships. My involvement typically includes refining business strategies to enhance growth and market penetration, ensuring the company’s governance structure is robust enough to support scaling operations effectively. This typically also involves helping with hiring through our talent team but also in GTM strategy through our executives in residence.

Founders: Does the origin of a Seed round, whether from local VC or Western EU/US VC, make a difference for Series A?

Akis: The geographical origin of Seed funding doesn’t fundamentally impact the criteria for Series A, but it can affect the startup’s visibility and initial screening phases. Startups that have secured Seed investment from well-known Western VCs may attract more attention due to these investors’ valuable networks.

Founders: How do you measure whether founders have reached Product Market Fit (PMF)?

Akis: PMF is indicated by robust user engagement, rapidly increasing sales, and efficient customer acquisition costs, which together demonstrate the market’s demand sustainability. Strong customer retention and active referrals are clear signs that the product delivers significant value to its users.

Founders: Do you invest in vertical solutions? How do you feel about vertical software?

Akis: We actively invest in vertical solutions, especially those that incorporate deep tech elements to innovate traditional industries. Vertical software that efficiently solves specific industry challenges and can scale significantly within its market segment is particularly attractive, as it tends to establish strong competitive moats and capture extensive market share.

Founders: Being a thesis-driven VC, what does that mean for Lakestar?

Akis: Being thesis-driven means we make investments based on a long-term, informed viewpoint about certain technologies, business models, or market trends. Our approach is backed by extensive research and a deep understanding of the sectors we focus on, enabling us to make decisions that align with our strategic goals and the evolving dynamics of the markets.

Founders: Regarding AI/ML investments at the Series A level, how important is having a moat against competitors?

Akis: In AI/ML investments, having a substantial technological moat is critical. This could be in the form of unique datasets, innovative machine learning models, or strong network effects that are difficult to replicate swiftly, providing sustainable competitive advantages. The presence of these moats is vital for defending a company’s market position against rapidly evolving technological advancements.

Founders: You mentioned investing in 1–2 companies per year. Why is that, and how do you spend your time with the companies you invest in?

Akis: Limiting my investments to 1–2 companies per year allows me to provide intensive, tailored support to each company. This approach includes close collaboration with the founders, strategic oversight, and direct involvement in operational challenges, thereby fostering deep, value-adding partnerships.

Founders: What are patterns of success among your portfolio companies? Do you provide all support in-house?

Akis: Successful companies typically exhibit effective leadership, a clear strategic direction, and robust execution abilities. We offer comprehensive in-house support, which includes strategic planning, operational scaling advice, and market entry strategies, ensuring our companies are well-equipped to thrive.

Founders: What are the areas you are focusing on currently, and what types of products or companies excite you the most?

Akis: I am particularly interested in AI/ML applications and digital transformation technologies poised to significantly disrupt traditional sectors. Companies that introduce innovative solutions to complex challenges, demonstrate clear customer benefits, and have scalable potential are especially compelling.

Founders: What are the key factors and main challenges when expanding in the US for startups selling to enterprise clients?

Akis: Critical factors for successful US expansion include a clear understanding of local market dynamics, a robust local presence, and a product adapted for local needs. Main challenges include navigating competitive pressures, efficiently scaling operations, and managing cultural differences effectively.