Smartsupp received an investment and reached 2 000 paid users
I have originally planed this article to sum up 1st half of 2016, but I kind of missed my own deadline. Anyhow, interesting stuff is happening in Smartsupp. We have reached 2 000 paid users, 52 % of them is outside CZ/SK, managed to raise seed capital and our revenue hit 40 000 EUR per month.
2 000 paid users
We hit the milestone in August. At the time of writing this article we had 2050 paid users and 18 931 active users. To celebrate this sexy number, I took the liberty of creating a small infographic, which shows a breakdown of our paid users by language and acquisiton channel.
Create pie charts
I did this breakdown also a year ago for 1 000 paid users and there is a nice trend coming out of the data. Share of our direct traffic grew by 5% at the expense of Google PPC. We are becoming less dependent on paid marketing to atract new users, our brand does the work for us free of charge.
Growth of paid users is connected to another thing. In August we have reached 40 700 EUR in monthly revenue. (that's more than 1 million CZK, so it's kind of a big deal for us). We have started this year with 24 000 EUR in monthly revenue in January. That means 8 % MoM growth in revenue. Not bad for a Czech startup, I think. And we have finally tipped the scale in favor of foreign users in ratio of 48 % CZ/SK users vs 52 % abroad. Hurray! We have also expanded our team to 11 full-time guys, that's us below at a paintball teambuilding. Unfortunately still no girls, but we started to do a bit of office cleaning ourselves, so I think we will survive.
Investment
In August we have successfully closed a seed investment round and raised 370 000 EUR from Webnode and Spread Capital for 15 % share of the company. We have received half of the money right away and another half is in a form of a tranche, which gets unlocked if we reach 110 000 EUR in monthly revenue by July 2017.
I feel there is not too much supportive information for startups fundraising in Czech, so I decided to write down a few key points I took from the whole experience. We were lucky to successfully raise money with really great investors, in my opinion one of the most experienced in Czech. But the raising process was no walk in the park. We have traction, profitable product, cash, good team, successful expansion in progress and we approached only a small circle of investors which I know personally and have good relationship with. So I assumed raising would be an easy process that would take 2 months max. Well, I have to say, we got schooled. From 1st meetings with investors to money in the bank it took us 7 months. Only much later I have realised that raising money is a skill of its own and we were only a bunch of rookies in this game.
The valuation maze
There are no clear guidelines on valuation. I have done a bit of my own research before we started raising money and there is nothing to hold on to. There are startups in Czech with 550 thousand EUR in yearly revenue and valuation 3,7 mil EUR. And then startups with zero revenue that get invested at 7,4 mil EUR valuation. It's a jungle. From what I heard, in Silicon Valley valuations are more or less streamlined and 10 000 USD in recurring revenue gets you a 4 mil USD valuation. At the time of raising we had 30 000 USD, so by SV metrics I should ask for something around 12 mil USD valuation, right? Well, Czech Republic is not Silicon Valley. In Czech currency it is 300 million, which sounds a bit crazy when you say it out loud, and investors will tell you the same (unless you have sales skills of Steve Jobs). So don't get carried away by looking at US valuations and rather check some local startup investment numbers on Czechcrunch. More on that below.
Timing and presentation skills
Raising money is not just about the product, but also about how good can you pitch it, present your vision (and uphold it in follow up argumentation) and also timing is important. Most of the time, the investor is a busy guy, who doesn’t know about you or your product. So your ability at how good can you pitch your startup to him in 15 minutes on a personal meeting mostly determines your success (and valuation).
Timing is important both from a product point of view (pitching something sexy at the moment makes things easier for you) and from investor-cash-flow point of view. For people outside the “raising money game”, which was my case too, it seems investors are people who are continuously watching out and investing in new interesting projects. There is one important variable here - how much cash does the investor actually has on hand. Investors usually become investors at point they obtain some notable sum of money, e.g. from a recent exit. This is the best time to pitch to them, because they are in the “looking for projects to put money into” mode. If the investor already used his "risk money stash” on other projects, he is probably not going to sell his house no matter how good your project is. Same goes if his mind is preoccupied with other big deal. Best way how to avoid bad timing is to talk to as many investors as possible, so you increase your chance of finding the one who has both time and money on his hand.
Another thing influencing the deal, and in my opinion the most important, is how you click with the investor personally. Luckily for us we clicked with Webnode and they are not a typical investor. They are product guys like us. Since we have a lot of synergies, the deal was primarily about smart money for us. And a good thing with good investors is that they know other good investors. And Webnode knows Spread Capital. So here we are with two top investors.
Where to look for info when raising money
I found out it’s quite tricky to get some useful info if you are raising money in Czech. Investment tips from Czech investor are scarce and often vague. A good article on valuation calculation is written by Adam Kurzok on his blog. When you look for valuations or sizes of investment rounds in Czech, you find out that most articles don’t mention any concrete numbers, because startups and investors don’t publish them. Also most Czech private companies or startups don’t have their financial results available in the Czech public business registry (justice.cz). The only SaaS startup I can think of who published both their investment size and financial results is Shoptet (thanks guys). You can check the article and look up their latest financial results on justice.cz.
You will find plenty of fundraising articles in English. Problem with those is that most of them is from the US and thus not applicable here. What I did and would recommend is to read articles that explain basic investment terms, because they will come up at the meeting and you will look like an amateur if you don’t know them. Especially read in detail what is a tranched investment and convertible note. Both of those are commonly used by Czech investors for startup investments (the same English terms are used in Czech). Overall the best sources for any startup fundraising advice are Fred Wilson’s blog (famous american investor) and Quora. Also feel free to email me at [email protected] and ask any questions.
