Investor of the Year: Startups not shaken by economic slowdown

Gerri Kodres, who in recent years has dedicated himself to developing venture capital fund United Angels VC, said in the morning program at Äripäev Radio that startups founded in Estonia have been able to quickly achieve positive cash flow.

"Not everyone succeeds and they don't always need it, but with more success stories, Transferwise is already making a profit, Bolt is close to profitability in two-thirds of the markets, and Cleveron, for example, is already very decent," listed Kodres.

Kodres noted that his startup portfolio includes several mid-sized companies that are not yet in superstar status but are also experiencing positive cash flow with rapid growth. "This is a very good moment for the entrepreneur, where he can expect a new growth curve and not have to worry about meeting his cash-flow targets or changes in the economic climate," Kodres explained.

According to Kodres, who has worked in technology companies since the early 2000s and has been an investor for the last nine years, the Estonian startup sector has also been fortunate. “It is quite unique that a country with such a small population and little resources has been so successful. Perhaps only Israel is comparable in this category, ”said Kodres.

The reason for this success has been the wave-formed growth of the startup community. “After the success of Skype, there came another wave of startups that have now grown up, such as Transferwise, Pipedrive and Bolt, where people with Skype background among the founders or key executives. Recently, we are seeing a third wave of early-stage entrepreneurs where people who have experience working in the second wave of successful startups are founding their own startups, ”said Kodres

Founding teams with such a background are top quality from an investor's perspective, Kodres said. "The founders are experienced, teams have worked together for a while, and they often want to solve a problem that they've already encountered as professionals," Kodres explained. He brought, for example, Salv, Klaus, Pactum and Supervisor, all of which have already attracted over $ 1 million from renowned investors in the first round of funding this year.

Founders of this type usually have a very clear vision and often have enough time, resources and experience to develop a product partly before the first funding round. As a result, they can choose who to engage as an investor.

"This means that often a European venture capital fund, and only very select funds and angel investors from the local market, are already involved in the first round of financing," Kodres explained.

Kodres predicts a trend in the coming year, that we are going to see more of these startups with experienced specialist founders who will be heard by the general public for the first time only after the first round of funding. In addition, Kodres is pleased that, in addition to successful technology angel investors such as Jaan Tallinn, Rain Kivisik or Ragnar Sass, who have been active for many years now, for example, Taavet Hinrikus and Martin Villig have begun to invest more in early-stage companies.

Kodres has invested in 30 companies throughout his career as an investor. Of these, only two have failed to date. According to Kodres, he has been fortunate enough to fund a significant portion of Estonia's current success stories, but on the other hand, success shows that the founders of Estonian startups are very consistent and stubborn leaders.

“We have seen companies in our portfolio that are in a very difficult position, but their founders are still making efforts even when there is no money. Many founders have been able to withstand times when the company finds new growth opportunities and has since become very successful. In a difficult situation, investor support is especially important for the entrepreneur, ”said Kodres.

A successful startup is recognized by the founder's character at an early stage of growth. "There's usually nothing to do with Excel analysis, and the cash forecasts are always the same - 10 million in three years and 100 million in four years," Kodres joked. "In essence, you make the decision based on the entrepreneur and how important the idea is to solve the problem," he said.

After graduating from Stockholm School of Economics in Riga in 2000, Kodres began a career in technology, selling Reach-U's (Regio mobile technology arm) mobile positioning platform to mobile operators around the world. Since 2011, Kodres has been a board member and head of business development at Fortumo, helping the company expand internationally, concluding contracts with mobile operator groups and large companies like Google, and helping the company grow into a world leader in its field.

The first angel investments were made by Kodres 8 years ago with his business partner Riivo Anton, early investments include Monese, Vitalfields and Comodule, and a little later Veriff, Xolo and many more. Due to his background, international sales are also the area where he can best advise portfolio companies

In 2017, Kodres, along with Anton and Indrek Kasela, founded the United Angels VC venture capital fund, the first of which is worth € 16 million. The fund has invested in Bolt, Starship, Click&Grow and many other Estonian technology companies.

In addition to United Angels VC, Kodres has several other companies involved in business consulting, real estate leasing, fund management, and even R&D in science and technology.

Gerri Kodres is one of the most active investors in the Estonian seed sector. He currently invests in about 10 startups every year. In 2019, he invested in Estonian startups such as Salv, Fractory, Supervaisor, eAgronom, Fooddocs, Vumonic and Gridio, as well as several startups outside Estonia.

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