12 Deals in 12 Months. Year One of SMOK Ventures in Review

12 months ago we launched SMOK Ventures, an early stage venture capital fund bridging Central European startups to Silicon Valley and Asia. I’d like to give you an update on how we’re doing.

Year 1 in Numbers

What does a typical SMOK Founder Look Like?

We’ve noticed there are a few things similar across our portfolio.

This is not to say that we’re not looking to invest in first-time founders or entrepreneurs without a history of exits. We’re actually close to signing a term sheet with two such startups just now. But it definitely shows our preference for experienced entrepreneurs. If you’re just starting out, you need to show more traction to get us excited.

SMOK dealflow in 2020

How do startups contact SMOK?

Most startups contact us directly via a cold email. Although I used to be a vocal opponent of cold emails, I slightly changed my mind as three of those actually resulted in deals made. Still, most of the cold emails suck as they are not personalized and feel like spam. A well-written, personalized cold email can be better than a bad intro, though.

Sources of dealflow. SMOK Ventures @ 2020

As for the intros, community turned out to be our biggest asset. More than half of all intros came from our network of founders that we’ve built over the last decade. The second biggest source of intros was from fellow VC funds who either wanted us to co-invest or for which the startup was interesting but too early. Limited partners and portfolio founders contributed to around 10% of intros, and our own events did not make a difference for obvious reasons — we only threw one or two before the pandemic took off.

Sources of intros. SMOK Ventures @ 2020

Gaming, fintech and digital health among top industries for dealflow

As we’re a software-focused, industry-agnostic fund, we’ve seen dealflow from a variety of industries. Some of the leading industries turned out to be gaming and esports (14%), fintech (10%), health (9%), lifestyle and entertainment (9%), foodtech and mobility (9%), e-commerce and martech (8%).

Top industries. SMOK Ventures @ 2020

58% of closed deals resulted from direct communication with the founders

Seven out of twelve deals we’ve made so far resulted from a direct communication between a SMOK partner and startup’s founder. Either one of the partners reached out directly to the founder or the founder contacted the partner directly. Chasing top founders and being up to date is what we love doing at SMOK. We also made sure it’s common knowledge that we like to be the first check in new projects of successful serial entrepreneurs. This communication seems to be paying off.

3 deals were a result of a cold e-mail, namely HiPets, inSTREAMLY and Nibble Games. Although it’s worth mentioning that in all those cases we’ve received a number of positive recommendations from our network of founders before making the final call.

Intros resulted in, surprisingly, only 2 direct deals so far, Smarthotel (thanks Bartek Pucek!) and Gaminate (kudos to Michał Kulka).

Sources of deals made. SMOK Ventures @ 2020

Unconvincing team a top rejection reason

Sadly, we’re in the business of saying ‘no’ a lot. We’ve done it in 98.5% of cases. We’ve decided to track the most common reasons we decide not to invest.

We invest 50k-1M USD into software and gaming startups with at least a subsidiary office in Poland. Interestingly, 50% of startups pitches that we receive is an automatic no because of either no relation to Poland, not our industry focus or wrong stage (usually too late).

Out of the other half, the most common reason we did not get involved was an unconvincing team or product (28% of all cases) and no market validation aka traction (14% of cases). Other reasons involved a bad cap table, COVID-related, a conflict of interest with a portfolio company or simply radio silence on the side of the founders.

Rejection reasons. SMOK Ventures @ 2020

SMOK-backed startups raise follow-on rounds easily

One of the key metrics of success of early stage startups is how fast they raise follow-on rounds of funding, and their valuation multiples.

Out of the first seven companies we backed earlier this year, four have already raised follow-on rounds, 2M USD in total, with valuations growing more than twice in less than 6 months.

inSTREAMLY has just landed a 600k USD seed round from London-based investor Supernode Global, after an introduction from our partner Diana, proving that women VC networks work. HiPets, Exit Plan Games and Sunroof also raised follow-on funding just months after we put our money in. Expect more news on the rest of our portfolio soon.

Co-investing with world’s top angels and funds

We like to be the first check in the companies we back so there usually isn’t a lot of space in those pre-seed rounds for others. However, we will always find space for value-adding angels or specialized industry funds that we respect.

So far we’ve invested together with some of the top early stage funds from Finland, Singapore and Japan. We’ve also co-invested with top global angels, including the founders or early employees of companies like Supercell, Rovio, Pipedrive or Mint.

Highlights from portfolio companies

Exit Plan’s dream team

The anti-portfolio of SMOK

Occasionally we see a startup too late and miss a chance to properly evaluate it before the deal is done (or we don’t see it at all until it’s too late). In other times we love the team, the product, but we’re so ignorant about the industry that we decide to pass and support the startup from the sidelines. In a few cases the founders decide on a Delaware HQ and don’t want a subsidiary in Poland, which rules the startup out.

The list isn’t long and it includes companies like Jutro Medical, Pilot, Spacelift, nomagic, merXu, edrone, Ramp or Stonly. All those startups form an “anti-portfolio” of SMOK. I love those startups and try support them when I can even though we’re not shareholders and I believe each of them can become a huge and successful global business.

Lessons Learned

The thing I worried the most about when we were starting the fund was us missing deals or being outbid by other investors. So how did this play out?

Are you working on a startup relevant to SMOK?

We’re constantly searching for talented founders looking to build global companies. If you read the above and liked what you saw, please read our investment FAQ first and then:

SMOK Ventures is a Polish/American venture capital fund investing between 50k and 1M USD in early stage startups in Poland and CEE. We like gaming and software startups run by serial founders who think global market domination.

I invest in early stage startups in Poland via SMOK.vc. Prev CEO Filmaster sold to Samba TV, co-founder ReaktorX, Startup Poland. Filmbuff. NBA lover.