Julia Sohajda: We invest mlns of dollars in Hungarian startups

Many people know that a venture capital fund invests its capital in startups but it is also worth mentioning that there are organizations, such as Vespucci Partners, that try to support the companies in their portfolio in other ways, such as with smart capital, so that they can move from one level to another as quickly and smoothly as possible, i.e. to keep developing and growing.

Startups can easily apply to Vespucci Partners for venture capital funding

Of course, this sounds simple, but in practice the selection process itself is a complex, complicated and lengthy procedure. In case of Vespucci Partners, if a startup wants to take on the challenge, the most practical way is to use the link on their website (DATA ROOM) to fill out a one-page long English-language questionnaire to help assess the startup at this early stage. On the other hand, by completing the questionnaire, the applicant will also be closer to answering the question of whether Vespucci Partners is the right investor for them. If both parties are open to the next step, a face-to-face meeting will follow, where the representatives of the company will give a presentation and then the capital fund's experts will ask them a series of questions to get to know their goals, team dynamics, etc," said Julia Sohajda, introducing the presenter and the listeners to the details of the selection process.

Hungarian venture capital fund Vespucci Partners operates using a hybrid model

As a Hungarian-American hybrid venture capital fund, Vespucci Partners seeks to find startups, to give opportunities to companies that develop their solutions in Hungary but are able to sell their product or service in the United States. "It is a highly competitive business model. Just think how much cheaper office rents are in this country compared to Silicon Valley, for example. However, U.S. market players are more open to innovation and on both the user and business sides there is a much bigger purchasing power. Additionally, compared to the fragmented CEE market, the U.S. market is large, where a startup can grow for a long time and continuously," added the founder of Vespucci Partners.

Startups with a strong deep tech focus have advantage

It has also been revealed from the discussion that the pressure on the capital fund's experts is great, as entrepreneurs from Hungary and neighboring countries are constantly applying, and an idea that is considered good in itself is not enough.

"On the one hand, it's important that each investor has its own investment thesis, so it's essential for each startup to find the best matching investor for their purposes. Just as the other way around, we are looking for startups that meet our own investment thesis: our first criteria is a business model that is globally scalable, so that the startup can grow fast and even bring us a 10x return at the end. An example for this could be a software as a service solution." 

"On the other hand, we specifically look for projects that could be competitive in the U.S. market with their product / service. That's why we work with American mentors and consultants from different industries, who know the specific markets locally, know exactly what the target market needs and what local investors are open to. As such they can help us evaluate whether a given project would be competitive on the U.S. market. From the second one comes our third criteria: we are looking for startups with a deep technology. We believe that starting out from the CEE region, it is quite hard for a platform or marketplace startup to compete with U.S. startups in terms of getting more users faster. Funding rounds are smaller here, startups have less capital to burn on customer acquisition and the marketing knowledge is lagging behind that of the U.S.’ as well. On the other hand technology innovations are very strong here and we see the competitiveness of startups through that," said Julia Sohajda.

And speaking of a strong deep tech focus, the radio show also revealed what is hot in the circle of startups and venture capitals. A good example is biotech, where there are a lot of ongoing ground-breaking research projects, and it turns out that this industry also has the highest exit returns, so these are projects that can be sold for the highest returns.

Hungarian startup Poliloop is also in Vespucci Partners' portfolio

Julia Sohajda mentioned the Hungarian startup Poliloop a successful startup in Vespucci Partners’ portfolio, as a first example, whose innovation is a biotechnological process that can break down lightweight, typically single-use plastics (PET bottles, food packaging...) into organic sludge, compost, in just six to eight weeks, without releasing any harmful substances such as methane. As she explained, degradation is a great achievement in itself, as single-use plastic is one of the biggest polluters, but the real speciality is that the material produced during degradation can be reused to make bio plastics, for example, thus joining a kind of circular economy.

Poliloop, led by Liz Madaras and Krisztina Lévay, received a USD 2 million investment from Vespucci Partners, but they also helped them get into a large international accelerator program that helped early-stage startups meet investors. As a result, US Techstars has also invested in the company, while brands such as Pepsi are waiting on their doorstep to collaborate.

More biotech companies in the portfolio of the Hungarian equity fund

Similarly, Inpamac is off to a good start in the pharmaceutical industry, committed to more efficient protein production, a crucial area in the face of the coronavirus pandemic, as most current vaccines are based on proteins. But the portfolio also includes startups in software, robotics, artificial intelligence or healthcare technology. To answer the question of what kind of startups Vespucci currently has in their portfolio, Julia Sohajda told us that an underwater robotics company and a space tech startup have recently piqued their interest.