VC interview: Kjartan Rist and Denis Shafranik
17 September 2018
Kjartan Rist and Denis Shafranik discuss financing the likes of Airsorted and PayAsUGym, the improvement in quality of European entrepreneurs, and why it’s a great time for a scale-up to raise money.
Concentric is a London and Copenhagen-based venture capital firm, investing in early-stage tech businesses – from seed through to Series B – across Europe. The firm was conceived in 2013 and went live in 2016 with its first fund, having now grown to a team of seven.
The firm has so far deployed €40 million across 19 businesses, working in partnership with 20 entrepreneurial family offices around the world. Here, we speak to Kjartan Rist and Denis Shafranik about financing the likes of Airsorted and PayAsUGym, the improvement in quality of European entrepreneurs, and why it’s a great time for a scale-up to raise money.
What is the vision?
We seek alignment with our investors and investees, and we’re committed to building long-term partnerships. We actively support the businesses we invest in, through our hands-on, straight-talking approach. We’re responsive and proactive with advice on solving problems, whether that’s hiring, tools, strategy or helping to source follow on capital.
We’re also committed to playing an active role in the evolution of the European VC industry, by proactively educating family offices and institutions about why they should invest in early stage businesses.
What are you looking for in an investment?
As you can imagine, we receive a lot of approaches for capital, but as we aren’t a huge fund, we don’t just invest for sake of it. Above all, we invest in businesses where we think we can help, through our knowledge of the market and the space. We have experience and network in four sectors: financial services, real estate tech, marketplaces/retail and industrial automation.
That said, we’re continuously learning and will broaden our investment thesis to new sectors where tech innovation is happening, once we have sufficient comfort that we can make a positive difference there.
We’re not suitable for filling up rounds or being silent investors. The whole team invests in our fund, which means we’re personally involved, and we want to be vocal and active in the growth of every business in our portfolio. Founders should ensure that they’re aligned with our philosophy before approaching us.
How can cash-hungry businesses get themselves noticed?
Well, the best way to get on to our radar is via an introduction from a mutual contact, but otherwise we’re very active on social media, so drop us a line on there. We give priority in our time to our founders and so sadly can’t reply to everybody, however as a young fund, we’re keen to see good companies. So, if a business is in our broad spectrum of interest, we’ll try to reply. Whatever you do, don’t blind email lots of VCs, as the old-fashioned personal approach is definitely better in the investment space.
When it comes to assessing start-ups, we come at it from two angles. At the fundamental level, we have to get into the data and analyse the market opportunity, but it’s also vital to look at the qualities of the founding team, to see whether they are people we can work with. As experienced VCs, we also rely on our gut feel and knack for what could work and succeed.
Entrepreneurs can expect to receive honest, unfiltered feedback and we’ll give you a steer as soon as possible on where you are in the process. Even if we choose not to invest, we want to add value to the companies that we engage deeply with, leaving them with a nugget, something positive that they can take away. Founders risk a lot to do something they truly believe in, so we have to be humble to that.
Of course, we need to do our due diligence. We take extra time on the business model, team dynamics and assessing product-market-fit. But we try to be as streamlined as possible on the technical, accounting and legal aspects – in most cases these due diligence stages are just confirmative that we’ve made the right decision.
What high profile fundraises has the firm orchestrated?
We recently helped put together the £7 million Series A round for Airsorted, the homestay management service, involving Atami Capital as a lead investor. The company is now going for its Series B round and aims to be in over 30 cities around the world by the end of this year.
Another high profile one is PayasUgym, which we originally supported in 2014, going on to help shape subsequent rounds, including its latest Series A round of £6.5 million. As the UK’s largest gym marketplace, the business now provides access to more than 2,500 sites across the country.
We recently led the pre-series A round for Digital Risks, the insurance provider for digital businesses, raising £2.3 million, as well as the recent €2.2 million round for Insly, the cloud-based insurance software.
Other big names in our portfolio include Frontier Car Group, Huckletree and Pockit, all of which are at Series B/C stage.
How was your expertise applied to these?
In the rounds that we orchestrated, we were intimately involved in identifying potential investors, premarketing the opportunity to them and then introducing the company. It’s then a case of staying in touch and ensuring they make it to the term sheet stage. Sometimes you have to help founders decide between investors, by analysing which one will add more value. As a lead investor, you have the responsibility to structure the most optimal round for the business, so you spend a lot of time meeting other investors and assessing best fit with the company.
What market trends do entrepreneurs need to be aware of when seeking investment?
Having worked in this industry for close to 20 years, we’ve seen a huge improvement in quality of European entrepreneurs. We’ve reached a point where talented young people want to work in start-ups over big consulting firms or investment banks, and it’s an accepted profession to go into. This has been helped by the ease with which you can now start a business and increase in tech salaries. Plus, there are so many opportunities out there, with a wealth of new technologies and platforms to exploit. It’s an amazing time to start a company right now.
However, that’s not to say it’s easy. To be a successful entrepreneur you have to have many different qualities, that are difficult to find in one person. You need to have the technical skills to work with innovative technologies, as well as the personal qualities to handle setbacks, stick to your vision and inspire your team. It’s hard work, but for those who have the grit and determination, the opportunities are significant.
How has the VC market changed of late?
The VC market has also been improving year on year for the last few years, which means it’s a great time to raise money. Europe has traditionally lagged behind the US, and while we are catching up, we still need more funds at the later stages. That means we need to keep educating family offices of the value of investing in venture, as well as making the case for institutional investors to commit to the venture ecosystem, so that European start-ups are incentivised to grow rather than sell.
Top tips for entrepreneurs seeking investment from Concentric
Make contact early and keep us posted along the way – even if that means three bullet points every two months.
Be honest and tell us the real story. If you don’t, we will find out eventually!
Focus on building relationships and find out what makes us tick. We are going to be together for a long time, so it’s better to make sure we get on, before any money has changed hands.
Tell us a story that makes excited. Captivate us. If we like you, we’re more likely to invest in you.