Investors usually dig up quite a lot of information about startups, while for startups, VCs still largely remain a kind of a “dark horse.” I think, however, that both sides need to understand the processes and motivation of each other — how they see things and make decisions.
In one of the previous articles, I explained how a typical VC fund actually works. Now it’s time to tell you more about the inner workings of Flyer One Ventures.
One of the main tasks of a VC is to generate a pipeline — the “flow” of startups a fund communicates with. During one quarter, our fund roughly has about 300 startups in its pipeline.
Venture capital is a network-driven industry. And at F1V, we pay a lot of attention to our network, too. Potential portfolio companies can contact us via email (email@example.com), or sometimes we reach out to startups ourselves.
However, the most efficient way for us to get new portfolio startups is through referrals from our friendly VC funds or startup founders. Warm intros are always better, as the prescreening process is omitted in this case.
The F1V investment team does its best to have only the best-fitting projects in the pipeline — the companies that we really want to fund. It helps us avoid cases when we should compromise and invest in a startup that lacks something important.
The investment thesis of Flyer One Ventures defines its focus in investing. It’s essential for startups to read it first and specify in a cold outreach why they are a good fit.
Investment thesis of F1V Flyer One Ventures funds startups with founders from Europe and North America building global companies at Pre-Seed, Seed, and Series A stages. The majority of F1V’s portfolio companies are at the Seed stage. The fund focus includes, but is not limited to B2B & Enterprise SaaS, EdTech, mobile apps, and FoodTech startups. We are industry agnostic, but we only invest in purely software companies and avoid hardware, crypto, gaming, and companies which involve production of physical goods. Companies must have an MVP (minimum viable product), a minimum traction of $10,000 MRR per month (or any other solid proof of product-market fit), and a team of co-founders working full-time.
Read more: How to fundraise if you’re a startup.
Flyer One Ventures’ operations
Like any company, a venture fund has its own business model, product, goals, and commitments. Similar to startups, VCs also fundraise money that they use to fund startups, and they have to bring profit to their investors.
Here’s a step-by-step roadmap of F1V’s operations:
1. Our fund designs a capital deployment plan and raises money from LPs (limited partners).
2. We allocate money — invest it in startups according to the F1V investment thesis. In return, we get shares in these companies. Most commonly, we participate in rounds alongside other VCs.
F1V usually distributes its major equity capital between several companies and has two investing formats: smaller checks for Pre-Seed and bigger ones for Seed stages. When investing, we request access to a company’s data and see how its business works. It helps us make a more informed decision if to invest in the startup again.
3. Then we work with our portfolio companies, helping them grow and solve different issues, including hiring employees and improving their marketing campaigns. For example, after F1V had helped Wectory, the startup’s costs spent on the acquisition of new customers went down by 1.62 times.
Sometimes F1V cooperates with chief-level advisers from Genesis projects and the best industry experts from its own network to support portfolio companies.
F1V also has an internal platform for its portfolio companies with useful educational materials created by the fund’s team. It can be memos or checklists on financial models and unit economics, as well as guides on PR and pitch decks.
4. The next stage for our portfolio startups is raising new rounds. If a startup’s traction is positive, its shares grow in price.
To track F1V’s efficiency, we measure TVPI (Total Value to Paid-In Capital). It shows how many times our share in a portfolio company has grown compared to the initial investment.
5. If a startup goes public via IPO or is acquired by another company, F1V makes an exit — sells its shares and makes a profit. Bankruptcy is also an exit, but a sad one. A successful case is when a VC invests in a company and makes a 10x return on the investment.
Usually, venture funds make exits in 5–7 years after their launch, but F1V had the first one in less than 3 years. It was an exit from Vochi, a video editing app, when Pinterest bought the company in December 2021.
6. Then we return investments to our LPs. F1V has returned its first fund to LPs in two years. After that, F1V became one of the best-performing 25% of VCs in CEE, according to our calculations.
7. The final stage of a VC firm’s life cycle comes in five-seven years after its launch, when the fund sells all of its shares in portfolio companies. The venture fund suspends its activities for a while, and LPs summarize how their investments paid off.
Read more: How VCs look for startups and find treasures.
Superpowers of F1V leadership team
We are lucky to have a well-balanced team of leaders — we complement each other. If you want to pitch your startup, you can reach out to us on LinkedIn.
Vital Laptenok, the general partner at F1V, partner at Genesis Tech (also launched an R&D department there), and co-founder of BetterMe. Vital is a great visionary who has extensive expertise in building IT product companies.
Alexei Yermolenko (me), the principal at F1V. I am good at business modeling and finances (pro in Excel tables!). I have built a career at Deloitte and KPMG, where I worked with audits and M&A deals.
Elena Mazhuha, the investment director and PR lead at F1V. She previously worked at Citibank Ukraine, TA Ventures, and Startup Wise Guys. Her superpower is exceptional networking and management skills.
Alexandra Naidonova, the head of marketing at F1V. She manages a team of marketing & product analysts to help portfolio startups with a full cycle of brand creation.
Ksenia Novikova, the head of operations at F1V. Novikova is responsible for building a community around the fund, supporting its portfolio startups, and building contacts with other VCs.
Anastasiia Kuzmenko, the head of talent acquisition at F1V. She works closely with the fund's portfolio startups, developing recruitment strategies and coordinating full-cycle recruitment for them.