Do US business angels invest in CEE?
1 December 2018 - belgrade

Here at Impact Hub Belgrade, we are actively building a bridge between Serbian start-ups and U.S. market. While we boost the business development and market traction of startups from Serbia, we also actively develop relationships with NY and San Francisco based advisers, angel investors, Fund managers and VCs. This time, we literally hopped into a plane and flew to New York on 13th of November, to host and organize a conference focused on “Angel Investing Opportunities in SEE (South East Europe)”! Besides myself (Gaia) and Nenad, the other panelists included Robert Osborne (Osborne Group), Richard Daničić (Am Cham) and Tijana Dabić (Making Cents) who represent the diversity we are building the bridge upon US-born investors; Serbian born US residents; Serbian born residents of Serbia; women and men professionals, business owners, fundraisers, VCs etc. Together with U.S. based angel investors, we tested a couple of thesis and hypothesis in terms of the readiness to invest in start-ups from our region.

In Serbia, we are ready to build start-ups that can grow into multimillion-dollar companies. On the other side, we are making it easier and attractive for U.S. potential investors to be able to invest in early-stage start-ups from Serbia. Angel investors are very interested in such a scenario.

Our departing points from this conference include:

Serbia is more than an outsourcing economy

Talent in Serbia and in the region is a sure and recognized thing internationally. This is so, especially in terms of engineering, software development, coding, bio-medicine and tech expertise. This has resulted in the last ten years or so in the development of Serbia as an outsource economy for multinational corporations and international companies.

Now experienced and talented engineers want to build their businesses. The outsourcing industry has produced even more developed talents from the region. Not only have tech skills been boosted, but people also started to build local and international networks which help them understand how tech solutions are marketed, placed on the market etc.

They began to see the growing demand for these kinds of products as their contacts with clients, business developers and international markets evolved. Now, adamant to grow further and not necessarily seeing space to do so in their current positions, experienced talented software engineers, coders and tech professionals want to build their businesses and start-ups. The buzz of the emerging ecosystem in Serbia is very much contributing to this situation.

It’s a perfect time to leverage on these learnings and to produce and accelerate business development from Serbia by matching teams of software engineers with business developers!

Women in Serbia build start-ups and companies beyond “small business”

Small businesses throughout Europe such as family businesses are one of the backbones of the local economy. Traditionally, women in Serbia and in the region have been building and or working in small businesses that allowed them to balance their social roles. For example, they could be both care-takers, managers of family matters and, at the same time, run operations for their businesses that would not grow big while still significantly contribute in terms of revenue to the household. Women in Serbia have always been super-women, coping with multi-tasking. It is arguable that it has been socially acceptable for women to run “small businesses” because they would not be seen as the main domain of women, they would not be considered as the bread-winning activity and they would not “threat” the ego of the breadwinners in public.

We support small businesses, businesses that can grow internationally and start-up businesses that by default need to accelerate their fast growth mode. What we do not support is the fact that by-default women are allowed in the space of small businesses. We have proofs that women are great leaders and according to recent research their challenges have gone beyond work-life balance. They are building fast-growth and scalable businesses internationally and acquiring success and recognition. Women in Serbia and the Balkans have the same opportunity now…

Start-up teams with the best potential for growth are gender and skills diverse

We do like to think of dream cofounding teams of “hipsters”, “hackers” and “Hustlers” and we go beyond the cliché.  We match IT/software engineers with business developers. Likewise, we choose the ones with women in decision-making positions in startups such as co-founders, CEOs, CTOs, CIOs, partners, advisers, board members, investors…Because they build better businesses and better ventures!

What were angel investors interested in the most?

The angel investors we met are serial entrepreneurs, lawyers, CEOs, Family Offices managers, professional investors and managers. Their expertise and industries range from:

  1. Music and Arts
  2. Real Estate
  3. Digital Marketing
  4. Machine Learning
  5. FoodTech
  6. International software development, and much, much more.

They are professionals from diverse cultural backgrounds: from U.S. born individuals to second generation transnationals from Serbia. Their interest consists in the opportunity per se and what it brings to them – rather than the geography of the startups. Because what matters the most to them is a demonstrated market of scalability to acquire users and customers in a market of scale in the U.S. or in markets related and of interest to the U.S. economy.

So, they are extremely interested in investing at discounted terms and in legally safe environments in high-growth start-ups that match talent and business development competence. They understand that Impact Hub and Venture Growth Accelerator mitigate their risks and maximizes the potentials by realizing the opportunity through business development in line with the criteria of Silicon Valley.

What is needed to achieve successful collaborations between Serbian start-ups and U.S. investors?

Although Serbia does not have yet a wealth of experience in terms of exits, the local entrepreneurial ecosystem is emerging and has been developing the seed scene with supporting mechanisms from idea to prototype and market including the pre-seed grants and investments. The gap we are experiencing is at the level of early-stage start-ups that test the market and need to launch their solutions fast in the ideal markets of scale internationally.

So, since the U.S. and Latin America are target markets for a good number of start-ups from our region, building relations with mentors, advisers, potential partners and investors in the US is crucial. This practice is definitely increasing and there are angel investors networks such as the Impact Hub Angel Network and the Serbian Entrepreneur network that connect trans-national start-ups and angel investors from Serbia and the U.S.

How could Serbian start-ups come closer to U.S. market? Is there a need for improvement and where?

In general, the overall impression of US-based mentors, advisers, investors with whom we have been closely collaborating since we opened the Impact Hub Belgrade is that startups in Serbia are slow in their development. Furthermore, during the pitching Demo-Days and closed-door Impact Angel Investors Days, where start-ups pitch for selection for the Venture Growth Accelerator and for impact angel syndication, progress in presentation skills was measured and noticed by U.S. advisers and angels. Nonetheless, refining communication skills and understanding of the market and of the buyer, those remain the top priorities for our Acceleration of start-ups.

The aim is to demonstrate high-growth metrics in terms of customers and users acquisition as well as the size of the market that the startups address that makes the investment a real opportunity.

While these are the basic prerequisites for start-ups to fulfil and demonstrate in order to be taken into consideration for investment, obviously they are not a guarantee that the investment will take place at all. On the contrary, every investor reserves the right to turn down the investment opportunity at any time, even when the negotiations have gone so far as to sign term-sheets. This is why the data and the metrics are definitely very important, but even when the numbers show the greatest opportunity of all times, the opportunity to invest in the next Google or Facebook, the founders make all of the difference.

If the founders, the CEO and the team, fail to build trust relationships and show that they are able to execute and maintain fairness in relations and terms, everything can fall apart without many explanations. So, sometimes, relationship building needs to be prioritized over transactions…

This is where our Venture Growth Accelerator comes in, to strengthen and accelerate credibility, competence, validation and relationship-building between the investors and the founders/executives in start-ups.

Our most important impressions from New York conference were…

  • Relation-building and transactions. What an amazing matching in New York! In our emerging start-up ecosystem in Serbia we know that building relations is embedded in the growth strategy and it is a mindset that comes from a place of abundance which creates value for all involved, in a paying-forward manner. It is an investment. So, you don’t see the concrete benefits right away, rather you build the opportunity for them to happen – constantly, regardless of the stage of development of the business. But definitely it is a must at a start-up stage, when a product is a promise rather than a reality. At the same time, hot air is not enough to survive… Hence, transactions need to be secured through business operations securing sustainability.
  • New York has a viral energy, one that is similar to Belgrade. It’s raw, direct, often merciless and incredibly fascinating. New York takes from you but also gives a lot back – it’s focus, action and inter-connectedness you score with purpose.
  • The new Economy is based on Data as opposed to Money. “Don’t embarrass me paying with a 100$ bill – let me take the check with my credit-card” said one of our impact angels. She is from Belgrade and has been living in the East Coast for the past 19 years. Data-driven economy is what we saw, experienced and felt in New York. And it’s more than a transaction, it’s relational and transactional at the same time.
  • Great enthusiasm in the response and in the feedback prior to, during and after our event validates the higher concept and the thesis we have yet to test. The entrepreneurs and angel investors look for the next opportunity and our VP highly resonates with them.
  • Besides New York, Washington DC is an ecosystem based on context and connectedness. People are extremely educated and informed about world issues and focus on the risks and challenges that we are facing globally. They do have an advantaged viewpoint from this perspective but at the same time this same advantage sort of immobilizes action.

Together we can make a more direct bridge to the US market!

Start-ups with high and fast growth potentials looking at the US market may lose speed and momentum going through investment rounds in Europe where money is slower, markets more closed and small, and early-adopters fewer.

Want to find out more about our NY and DC events? Join us on December 11th from 18.00 – we will be answering questions and talking about our next steps and we will be in the great company of startups that are already gaining traction in the US market