From Value Add to Investment Strategy: A Snapshot on smart Venture Capital
Working in startup ecosystems of different sizes on three continents in the past 7 years, we learned one thing: It’s hard to attract the best startups and entrepreneurs out there. No matter if you’re an accelerator program in a small hub like Mannheim or a VC in a global powerhouse like Tel Aviv or Silicon Valley. As old as the competition for the best startups is the discussion about smart money: The added value of VC companies. For a few years already, VC funds are shifting from pure investment and try to generate more value for their portfolio companies. In this blogpost we share our concept of smart money with you and explain how we derived our investment strategy from our unique value add.
The race for smart money
The competition for good startups is higher than ever. The market is flooded with money, valuations are rising and VCs are investing earlier year over year to secure their returns. Under such circumstances the best startups can choose their investors. This decision is rarely based on pure money anymore. Exceptional founders expect more than just financial investment from their shareholders. The race for the smartest money has just started. Especially as a first time investor, like Styx Urban Investments, you have to have a strong value proposition for the startups you want to work with. You simply can’t afford to be not on top of that game.
Developing a value add — The Styx Living Lab
It was important for us to launch Styx Urban Investments with a strong value proposition for early stage founders. On the one hand side, we all know the challenges of an early stage founder from our personal experience as entrepreneurs. On the other side all the members brought different skillsets and resources from their previous careers to the table: international startup networks, ecosystem building, scale up and growth expertise and a hyper-local real estate portfolio in Mannheim, Germany. By combining all those ingredients we wanted to create an environment where startups get access to real customers, data infrastructure and industry expertise. We believe that such a habitat addresses many hurdles of the early stage and gives startups a competitive advantage whilst striving towards product market fit. The idea of the Styx Living Lab, our unique value add was born.
What’s the magic behind?
After validating our approach with other investors and serial entrepreneurs it was about the time to start the reality check: Our first investment in Mateo was the perfect match for that. With their property management SaaS solution we had the opportunity to test their solution in a quick pilot just before we closed the round with them. Adding this as another layer of due diligence to our process increased our confidence in the team and encouraged us even more to invest in such an early stage (learn more about the investment here). From then on, the methodology of the Styx Living Lab started to play out at full force:
While working closely with the property management company operating our 150+ buildings in the Styx Living Lab, Mateo benefited from real world industry insights from day one. After 2 months of close shadowing, collaboration and feedback loops they launched a closed beta version. Six weeks later and backed with a first success story Mateo started to sell the product. Today, just four months after the launch of the closed beta, Mateo works with 12 clients — two of them are part of our partner network of 25+ mid-sized real estate companies.
From value add to investment strategy
Mateo is a great example and a key moment for Styx Urban Investments and for sure more than our first investment. It gave us initial proof that we can build an investment strategy around our proprietary testing environment. Over the past six months we met with hundreds of entrepreneurs who wanted to show us how they can leverage the Styx Living Lab to grow their companies. Interestingly enough, it became quite evident over time that our startup habitat can be relevant for verticals beyond proptech. Including topics like local commerce, micro-mobility or greentech our living lab can be seen as a little city of its own, providing space to address some of the most pressing issues of our time. Styx Urban Investments is only investing entrepreneurs who reimagine urban life and gain substantial competitive advantage from the Styx Living Lab.
Coming from a strong value proposition for startups along with a very narrow focus area, we formulated an investment strategy that is purely centered around the value add and not the money, that we’re investing. For us, money is a necessity to leverage our value add, not the other way around. The Styx Urban Investments model emerged under very unique circumstances and is driven by an entrepreneurial approach. It surely anticipates a many of the current trends in the startup and venture capital industry. The future will prove if it’s also going to make it more sustainable. We believe it does already.
About:
Styx Urban Investment is a German early stage VC investing in entrepreneurs who reimagine urban living. Our own testing environment, the Styx Living Lab, encompasses real infrastructure, data and access to more than 25 relevant mid-size business. We invest in hand selected startups gaining a competitive advantage from our living lab.
