When is the right time for founders to take VC capital? Bootstrapping versus VC backing, “building for a flip”, AI, and many other issues were discussed on the startup stage at a recent conference in Zadar, Croatia. Thousands of developers, founders and VCs from Croatia and Central Europe attended the Infobip Shift conference.
One current trend across Central Europe was founders aiming for bigger investment rounds as they wanted their name in the spotlight, according to Jure Mikuž, managing partner at South Central Ventures, which invests across the Balkans and southeast Europe, a strategy which he didn’t recommend.
Conversely, Mikuž said too many startups were also raising rounds too small in size for their strategy and only thinking six months ahead. In agreement was David Clark, venture partner at Tera Ventures, which is based in Estonia.
Clark said a key reason for a startup not to raise VC funding was wanting to be in a top ten list of raises in a country. Clark stressed the importance of founders articulating the reason they want to raise VC money, such as identifying key people they want to hire who will join tommorow if the startup has funding.
On the long-standing issue of VC funding versus bootstrapping, Mikuž said there is no one size fits all approach, saying it depended on the industry and stage of the startups. Clark said there was never a better time for Central European founders to bootstrap their startup, pointing to the helpfulness of tech like vibe coding tools to help offset the need for external funding.
Clark likened VC funding to rocket fuel, which would either take a startup to the moon or blow it up, saying founders “shouldn’t take VC money unless they are going to use it”.
Réka Hidas, pre-seed and seed investor at Portfolion, stressed the importance that founders were taking investment from VCs best suited to three needs and were not just guided by the capital outlay.
She said “it is important to not just take any capital” but to take it from a VC that can offer something extra, like connections. On those founders building their startup with the express intention of selling it, known as “building for a flip”, Hidas questioned this approach.
She said: "If you kind of build specifically to be acquired, then you are solving a problem for them, not solving a problem for the market.”
Mikuž said it was key for an honest conversation between VC and startup at the start of the relationship, about what the startup’s ambitions are.
Like Hidas, Clarke said he was not a fan of those startups setting out from the start with the ambition of selling their company.
He pointed out that at a very early stage, talking about exiting is one of the smallest problems that a founder will encounter. More broadly, Mikuž said that the differences between the Western Europe and Central Europe startup ecosystems were closing.
But he said that a lot of Central European founders "have a romantic idea about the startup journey, but it’s not”. Clark believes Croatia is on the rise as a startup ecosystem, likening to what Estonia was 10 years ago. Most of the VCs agreed that they would prefer to invest in startups that want to achieve global success, not those limiting themselves to country-specific success.
Meanwhile, startups use of AI and the deployment of LLMs was discussed by Florian Binswanger, startup GTM lead, EMEA, Vercel and Nina Trejos, startups GTM executive, Stripe. Binswanger chided those founders for “slapping a chatbot in the right-hand corner” of their product so as to show investors they were “doing something in AI”.
Instead, he said it was better for a startup to make AI a core part of their business and core part of customer satisfaction. Binswanger also said it was key for startup founders not to get locked in with one AI model provider, but to use a router, thereby picking and choosing models for certain tasks.
Trejos said some startup founders were leaving the decision too late to move to an AI credit usage-based approach and that it should be core to their product strategy.
Izabel Jelenić, co-founder and chief technology officer (CTO) of Croatia’s first unicorn Infobip, which was founded in 2006, spoke about some of the lessons he had learnt over the years.
On working with his two co-founders, Silvio Kutić (CEO) and Roberto Kutić (COO), he said: “It was quite important to work with someone who likes something you don't.”
He said, though, it was hard to provide advice to the current generation, as it was a completely different era.
IMAGE: PIXABAY
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