Active Venture Partners’ headquarter is in Barcelona, but their investments reach far beyond Catalonia. The Active VP portfolio features tech start-ups involved in mobile analytics, online auctions, e-commerce, social networking, mobile apps and software. The start-ups operate from out of Spain, German-speaking countries and Scandinavia.

An unwritten venture capital rule states that investors usually invest within a geographic radius of 300 kilometers – where they know the market and the cultural environment. To expand their radius, therefore, Active VP have an office in Hamburg, Germany. Moreover, two of the five partners are German, one is half German and half Dutch, one is from Sweden and one from the UK. They all worked years abroad and gained experience at different locations around the globe, including Silicon Valley.

Investment characteristics

As of November 2014, Active VP manages two funds: one with 20 million, the other with 54 million euros. In exchange for minority shares they invest 1–5 million euros in revenue-driven start-up stage businesses who have 500,000 € revenue per year and rising, or in those who don’t have revenue yet, but an ambitious vision instead. On average, Active VP hold their shares 5–7 years before they exit.

As of 2014, Active VP solely execute equity investments. They are not involved in mezzanine financing. The two existing funds aren’t involved in seed stage investments, as newborn start-ups don’t have a proof of concept in terms of first revenues, for instance. Therefore, it makes more sense for seed stage start-ups to contact business angels.

Investment criteria

Asked about their investment criteria, Active VP’s investment associate Esteve Jané explains that about 80% of their investment decisions are based on team – their key criterion. Active VP search for teams with complementary talents and competencies, including previous experiences gained in other start-ups.

They want to ensure that the team can manage the challenges faced when managing rapid growth and marketing untested value propositions. For this reason, an experienced team excelling in execution with a less overwhelming idea is more likely to receive funding than an unexperienced team with an overwhelming idea.

Market potential is the second major factor. The market should offer the opportunity to grow big very fast – in revenues first and later on also in profits. Growth is more important for a start-up than absolute revenue figures. The start-up basically has to follow the so called big money model, because the best financing resource is to serve as many paying customers as possible on a huge market. Accelerating growth is key to become the number one player in the market and the most powerful barrier of entry for competition.

Another investment criteria is of course the product or service itself: an overwhelming “wow!” factor and a significant WoM (Word of Mouth) factor promising viral growth help to get Active VP interested. The wow! and WoM factors come with innovative products or services, because innovation offers much better opportunities to grow big fast than business models based on imitation.

Investment process

Unlike other funds, Active VP sometimes invest in a matter of weeks rather than months. But in general, it takes about 6 months to close an investment round once you send the first pitch to professional investors. Therefore, start-ups should be aware to kick off the funding process with at least 6 months of cash runway and provide a compelling equity story for investors. A successful closing should provide 12–18 months of runway, broken down in 9–12 months of solely focusing on core business and growing, building a new equity story, and then 6 months for roadshows and fundraising the next rounds.

Start-ups begin the investment process by presenting their business idea with an executive summary. The format doesn’t matter so much, says Esteve from Active VP, as long as the message is clear. The exec summary should include the market opportunity, validated value proposition, team, growth plan, a simple financing plan, a description of the team and of the product or service.

Added value

Active VP provides operational value, which levers their investment through a pan-european network of industry experts in the Nordics, Deutschland / Austria / Switzerland (DACH) and Spain / Latin America. Additionally, every year, the so called portfolio days take place: roundtables bring together start-up CEOs, CTOs and CFOs with industry champions. This helps portfolio start-ups not only identify best practices, but also to gain international exposure and to meet investors, tech buyers and serial entrepreneurs.

In general, when looking for VC investments, start-ups should always do their due diligence seeking perfect alignment with their vision. Due diligence should take a close look at the partner leading the case e.g. investments performance, dealsheet and network; and, whether the fund provides smart money and operational value.

How to get in touch

It helps more to “wow” a partner directly rather than someone else in the company – who then would have to get his or her boss interested. Thus, following a top-down strategy is more effective than a bottom-up strategy. So it’s better get in touch with one of the partners and try to overwhelm her or him with your idea, your team and revenue figures – or projections. The best way to get in touch is a brief introduction by someone who already knows one of the partners personally.

Or simply connect with them on LinkedIn or do it like Buildership and start the conversation by dropping a line to Esteve.

[November 2014, image credit © Active Venture Partners]