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Why We Invested in Vue Storefront

I’m proud and excited to announce that SMOK Ventures co-led the $1.5M seed round of Vue Storefront. Read the full article to find out why.

What is Vue Storefront?

Vue Storefront is setting the new standard in e-commerce by providing shopping experiences like native apps while boosting site performance. Technically it’s a headless frontend that works with all the popular backends like commercetools or Magento. With Vue you can upgrade your dated e-commerce store’s look & feel without the need to migrate all your products and the backoffice. Vue Storefront is currently the world’s fastest-growing open-source e-commerce frontend.

What do you mean open source? Do they give the software away for free?

Yes! And it’s beautiful 🙂

I’ve always been an open source guy. I’ve used GNU/Linux on my desktop and vim for text editing for the last 20 years. I’ve been on Signal since it launched. I closely followed the growth of MySQL, Git(hub), WordPress, Docker, Elasticsearch, MongoDB, Nginx, Redis and others. I understand the power of open source in terms of community building.

Open source model specifically works when your product is primarily used by software engineers. Engineers put more trust into those tools that they can verify themselves by looking at their source code and documentation. Open source model means free distribution and potentially exponential growth with little marketing. However, it can be a challenge to monetize.

The best companies in this space find a way to provide value to customers with their free product while upselling them with premium features like cloud hosting and storage, add-on marketplaces or services. Vue Storefront is no different here. Its free Vue.js frontend library Storefront UI is being used by 250+ e-commerce stores globally already with zero sales efforts. The company can focus on the bigger enterprise deals while not ignoring the long tail of users who are good with the free version. I think it’s brilliant and very future-proof as a significant fraction of users of the free version sooner or later converts to a premium, fully hosted & supported edition.

Mobile e-commerce market is booming, but still uses legacy desktop-centric software

Currently e-commerce merchants are experiencing a mobile gap. Consumers spend much more time than money on mobile devices. Conversion on mobile is much lower than in desktop browsers. This is caused by shitty user experience as the majority of e-commerce websites are created in a responsive web design paradigm, i.e. the design originally created for desktop is fitted into much smaller mobile screens in a responsive way.

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The Mobile Gap in E-commerce

Vue Storefront is using a Progressive Web Apps (PWA) paradigm. The mobile frontend is created from scratch, using the state of the art user experience and design tricks, previously only known from the native apps. This greatly increases the mobile conversions, making the merchants more money.

PWA also has a huge impact on improving site loading times. 53% of mobile site visitors quit when the site takes more than 3 seconds to load. Vue Storefront makes sure this is never the case.

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If it’s so obvious that PWA gives so many advantages, then why haven’t all the merchants switched to a modern architecture already? Well, the problem is that migrations suck. No one wants to leave the backend tools they are used to, reimplement the products database, or connect the new backend to all the external systems, etc. This is where Vue Storefront really rocks. Vue does not force the merchants to change their backend at all, as the system works with all the popular e-commerce backends like commercetools or Magento. With Vue you can upgrade your frontend to a modern, lightning fast, mobile-first experience while keeping all the good old backend systems intact. And when the time comes, they can still migrate to another backend while keeping the frontend. Decoupling the two and adding flexibility for merchants is why Vue Storefront became so popular so fast.

How have we met the founders?

Vue Storefront is a rare example of a software house spin-off that worked. The product has been incubated by Divante, a Wrocław-based e-commerce agency founded by the Karwatka brothers, Tomasz and Piotr.

I first talked with Tomasz and Piotr about potentially investing in Vue back in October 2019 during one of the founder meetups set in the beautiful region of Jura Krakowsko-Częstochowska in Poland. Pre-COVID times, we do miss you!

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40+ top Polish founders met in October 2019 in Ogrodzieniec to hang out and exchange ideas. Two of SMOK investments were a direct result of the meetup so far!

Back then Vue was still part of Divante, but the brothers made the decision that the project’s potential was bigger than the company and that the only way to grow exponentially is to go separate ways. I’ve been in constant touch with the team ever since, advising the early founders and former Divante employees, Patrick Friday and Filip Rakowski on product, marketing and general vision of the company. Patrick is an experienced sales & bizdev guy and a previous founder. Filip is an quially experienced product manager and engineer. A match made in heaven! In January 2020 Bartek Roszkowski joined the team as COO. Bartek is a serial founder responsible for the success of startups like mfind and Nexto (both have been acquired). The founding team was set, and now it was the time to do the fundraise. I’d love to say the process was as lightening fast as the Vue Storefront frontend on mobile devices, but the truth is, it was rather long and painful (spin-offs are hard!). However, we were able to add Movens as a co-investor and we quickly agreed on the major terms with the team. We’ve been supporting the team together for most of 2020 and we eventually closed the deal in December 2020.

So, why have we invested, again?

It’s rare but Vue Storefront basically checked all the boxes for a SMOK investment into an early stage startup:

  • amazing founding team in Patrick, Filip and Bartek, best suited to disrupt the e-commerce tools industry,
  • fantastic advisors in Tomek and Piotr who support the founders on a daily basis,
  • phenomenal traction with the open source version of the software,
  • a good commercialization plan with positive early signals from enterprise customers,
  • great access to customers via founders’ network in the e-commerce world,
  • fast-growing e-commerce market with a number of legacy, not mobile-first systems waiting to be disrupted.

Are you working on a startup relevant to SMOK?

If you read the above, liked what you saw, can relate to how we think, communicate and act as a fund and you know of a startup we should be talking to, please read our investment FAQ and send me an email with the deck at borys@smok.vc!

SMOK Ventures is a Polish/American venture capital fund investing between 50k and 1M USD in early stage startups in Poland and CEE. We like gaming and software startups run by serial founders who think market domination.

12 Deals in 12 Months. Year One of SMOK Ventures in Review

12 months ago we launched SMOK Ventures, an early stage venture capital fund bridging Central European startups to Silicon Valley and Asia. I’d like to give you an update on how we’re doing.

Year 1 in Numbers

  • We’ve reviewed just under 1000 startups and made twelve investments, eight of which are public as of today.
  • We’ve covered many business models from game-dev studios (Exit Plan Games, Nibble Games), saas-enabled marketplaces (HiPets, inSTREAMLY), regular saas (Smarthotel, Authologic), direct-to-consumer (Sunroof, Gaminate) and enterprise.
  • Industry-wise we’ve invested agnostically. We’ve funded startups in hospitality, esports, foodtech, energy, pet services, proptech, ecommerce, game development, fintech and digital health.
  • An average ticket size was 260k USD. The smallest deal we made was 50k USD. The biggest was 500k USD.
  • Nine of the deals were in Poland, the other three in the Nordics (Sweden, Finland, and Estonia).
  • We spent ~3.5M USD , i.e. just below 35% of the fund in year 1.

What does a typical SMOK Founder Look Like?

We’ve noticed there are a few things similar across our portfolio.

  • Our average portfolio startup has 3 co-founders.
  • Average age of our founder is 39, and the median is 40. This is significantly more than an average age of a Polish startup founder which is 28 according to Startup Poland.
  • One in four portfolio startups has at least one female co-founder.
  • All startups have been founded by at least one serial entrepreneur. Yep, all of them. However not all our founders have founded typical startups before. Two had previous experience running agency or lifestyle-type businesses.
  • 63% of our portfolio entrepreneurs have founded businesses before, 30% of them more than one, 11% more than two and 5% more than three.
  • 75% had successful exits in one of their previous businesses.

This is not to say that we’re not looking to invest in first-time founders or entrepreneurs without a history of exits. We’re actually close to signing a term sheet with two such startups just now. But it definitely shows our preference for experienced entrepreneurs. If you’re just starting out, you need to show more traction to get us excited.

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SMOK dealflow in 2020

How do startups contact SMOK?

Most startups contact us directly via a cold email. Although I used to be a vocal opponent of cold emails, I slightly changed my mind as three of those actually resulted in deals made. Still, most of the cold emails suck as they are not personalized and feel like spam. A well-written, personalized cold email can be better than a bad intro, though.

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Sources of dealflow. SMOK Ventures @ 2020

As for the intros, community turned out to be our biggest asset. More than half of all intros came from our network of founders that we’ve built over the last decade. The second biggest source of intros was from fellow VC funds who either wanted us to co-invest or for which the startup was interesting but too early. Limited partners and portfolio founders contributed to around 10% of intros, and our own events did not make a difference for obvious reasons — we only threw one or two before the pandemic took off.

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Sources of intros. SMOK Ventures @ 2020

Gaming, fintech and digital health among top industries for dealflow

As we’re a software-focused, industry-agnostic fund, we’ve seen dealflow from a variety of industries. Some of the leading industries turned out to be gaming and esports (14%), fintech (10%), health (9%), lifestyle and entertainment (9%), foodtech and mobility (9%), e-commerce and martech (8%).

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Top industries. SMOK Ventures @ 2020

58% of closed deals resulted from direct communication with the founders

Seven out of twelve deals we’ve made so far resulted from a direct communication between a SMOK partner and startup’s founder. Either one of the partners reached out directly to the founder or the founder contacted the partner directly. Chasing top founders and being up to date is what we love doing at SMOK. We also made sure it’s common knowledge that we like to be the first check in new projects of successful serial entrepreneurs. This communication seems to be paying off.

3 deals were a result of a cold e-mail, namely HiPets, inSTREAMLY and Nibble Games. Although it’s worth mentioning that in all those cases we’ve received a number of positive recommendations from our network of founders before making the final call.

Intros resulted in, surprisingly, only 2 direct deals so far, Smarthotel (thanks Bartek Pucek!) and Gaminate (kudos to Michał Kulka).

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Sources of deals made. SMOK Ventures @ 2020

Unconvincing team a top rejection reason

Sadly, we’re in the business of saying ‘no’ a lot. We’ve done it in 98.5% of cases. We’ve decided to track the most common reasons we decide not to invest.

We invest 50k-1M USD into software and gaming startups with at least a subsidiary office in Poland. Interestingly, 50% of startups pitches that we receive is an automatic no because of either no relation to Poland, not our industry focus or wrong stage (usually too late).

Out of the other half, the most common reason we did not get involved was an unconvincing team or product (28% of all cases) and no market validation aka traction (14% of cases). Other reasons involved a bad cap table, COVID-related, a conflict of interest with a portfolio company or simply radio silence on the side of the founders.

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Rejection reasons. SMOK Ventures @ 2020

SMOK-backed startups raise follow-on rounds easily

One of the key metrics of success of early stage startups is how fast they raise follow-on rounds of funding, and their valuation multiples.

Out of the first seven companies we backed earlier this year, four have already raised follow-on rounds, 2M USD in total, with valuations growing more than twice in less than 6 months.

inSTREAMLY has just landed a 600k USD seed round from London-based investor Supernode Global, after an introduction from our partner Diana, proving that women VC networks work. HiPets, Exit Plan Games and Sunroof also raised follow-on funding just months after we put our money in. Expect more news on the rest of our portfolio soon.

Co-investing with world’s top angels and funds

We like to be the first check in the companies we back so there usually isn’t a lot of space in those pre-seed rounds for others. However, we will always find space for value-adding angels or specialized industry funds that we respect.

So far we’ve invested together with some of the top early stage funds from Finland, Singapore and Japan. We’ve also co-invested with top global angels, including the founders or early employees of companies like Supercell, Rovio, Pipedrive or Mint.

Highlights from portfolio companies

  • Sunroof already made their first acquisition. They acquired a Swedish software company Redlogger to accelerate their bet on becoming an energy marketplace. Sunroof Germany also launched with an ex-Tesla director as country manager.
  • inSTREAMLY was not just the fastest to raise a follow-on round, but also quadrupled their revenues and won two important pitch events: Pirate Summit and Pitch To London (previous winners were Packhelp and Symmetrical).
  • Gaminate made more in revenues in their first four months of operation on the Polish market than we invested into the company back in April. They also just entered the German market and, if they show similarly strong numbers there, they will actually have a chance to become a top European brand for gamers.
  • Exit Plan Games were able to build a dream team of ex leads from CI Games, CD Projekt RED and Techland. Can’t wait to play their first game next year!
  • Smarthotel is now available in 100+ hotels and 1000+ apartments in Europe and Africa. More than 20k guests have already used Smarthotel for remote check-in and safe, contactless communication with hosts and hotel’s reception. This one I’m the most proud of. Given the circumstances and the impact of COVID on the hospitality industry, Smarthotel’s progress is simply breathtaking. I can’t even imagine what they are going to achieve once the coronavirus mess is finally over!
  • Authologic, our most recent public investment, launched only 3 months ago, but already has 2 corporate customers which launched their identity verification widget on production and 6 more agreements have been signed, pending implementation.
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Exit Plan’s dream team

The anti-portfolio of SMOK

Occasionally we see a startup too late and miss a chance to properly evaluate it before the deal is done (or we don’t see it at all until it’s too late). In other times we love the team, the product, but we’re so ignorant about the industry that we decide to pass and support the startup from the sidelines. In a few cases the founders decide on a Delaware HQ and don’t want a subsidiary in Poland, which rules the startup out.

The list isn’t long and it includes companies like Jutro Medical, Pilot, Spacelift, nomagic, merXu, edrone, Ramp or Stonly. All those startups form an “anti-portfolio” of SMOK. I love those startups and try support them when I can even though we’re not shareholders and I believe each of them can become a huge and successful global business.

Lessons Learned

The thing I worried the most about when we were starting the fund was us missing deals or being outbid by other investors. So how did this play out?

  • Missing deals or being outbid almost did not happen. We’ve seen over 90% of the startups that raised funding in Poland during the year and only in 2 or 3 cases we might have invested if we learned about the deals earlier. Missing those still hurts, don’t get me wrong. But the reality turned out way nicer than I anticipated.
  • Speed counts. Almost every deal we made was competitive, i.e. startups had multiple offers on the table. We were able to close some of those deals strictly because we were faster and more committed than others.
  • Terms matter but fund’s reputation and culture-fit matter more. In exactly zero deals that we made we have offered a higher valuation than competitors. However, in all of those deals we did offer a clean, well-communicated and easily understood process with specific deadlines we thrived to honor.
  • Communication is key. Founders want to know where they are in the process, and how fast they will know our decision. Once we both agree to a deal, they want to understand what the process looks like between a term sheet and the wire. 100% of the misunderstandings we’ve had have been a result of poor communication on our side.

Are you working on a startup relevant to SMOK?

We’re constantly searching for talented founders looking to build global companies. If you read the above and liked what you saw, please read our investment FAQ first and then:

SMOK Ventures is a Polish/American venture capital fund investing between 50k and 1M USD in early stage startups in Poland and CEE. We like gaming and software startups run by serial founders who think global market domination.

SMOK is hiring an investment team in Ukraine

Last updated: October 2021

SMOK Ventures launched in 2019 to disrupt early stage venture capital investing in the Eastern bloc by connecting top local founders with VC and tech leaders in Silicon Valley and Asia. Now the fund is expanding to Ukraine, Belarus and the Baltics and we’re looking to add first team members outside of the founding group. Someone like you, perhaps?

Who is behind SMOK?

We are a team of entrepreneurs and community leaders with the aim to help early stage startup founders build multi-million-dollar global software enterprises from Central and Eastern Europe.

We’re led by Paul Bragiel (https://en.wikipedia.org/wiki/Paul_Bragiel), entrepreneur turned investor. He has advised or invested in the seed rounds of 200+ companies which includes holdings in twelve unicorns including Uber, Niantic (of Pokemon Go fame), Stripe, Unity, GoJek, Carousell & Zappos. Paul has founded and oversees 7 funds with over $400m under management across 4 continents.

Diana Koziarska and Borys Musielak form the Warsaw-based part of the founding team. They’re both entrepreneurs and community leaders. Before SMOK they co-founded ReaktorX, an acceleration program which helped 150+ founders launch their first businesses. Borys also built a media & AI startup Filmaster and sold it to San Francisco based Samba TV.

We’re also supported by San Francisco-based Dan Bragiel, a venture capitalist and angel investor with an angel portfolio including a number of hyper-growth startups like Opendoor, Virta Health, ShipBob and Playco.

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SMOK.vc team: Paul (left), Diana, Borys (right)

What’s our track record?

As SMOK we’ve made 12 Deals in 12 months (and added 6 more since writing that article) backing some of the top Polish entrepreneurs like Lech Kaniuk of the Delivery Hero fame, Dorota Rymaszewska, a former VP Sales at Booksy or Maciej Prostak, Maciej Sawicki, and Jarek Sygitowicz who all sold their previous businesses generating profits for their investors.

11 out of the first 12 companies we backed in 2020 have already raised follow-on rounds, with valuations growing more than four times in less than 12 months.

We’ve co-invested with top global seed funds from Finland, Singapore and Japan as well as top global angels, including the founders and VPs of companies like Supercell, Rovio, Pipedrive or Mint. Top European funds like Creandum or earlybird backed our seed investments in Series A stage.

Those were good two years, against all odds 🙂

Why Ukraine?

In a very short time we became the go-to fund for serial entrepreneurs launching their new businesses in Poland. We’re committed to take it to the next level now, with the Central and Eastern European expansion.

When we were deciding on the next countries, we took three things into account:

  • engineering talent pool,
  • startup founding experience,
  • proximity to Poland.

Ukraine is an obvious choice. The country is as big as Poland in population and its engineers are famous worldwide and are already fueling the growth of Silicon Valley’s top companies as well as creating its own unicorns like GitLab, or Grammarly.

We already have dozens of Ukrainian founders in the pipeline, so all this combined, the expansion east sounds like the natural move for SMOK.

Who are we looking for?

Working at SMOK is a lifetime opportunity to break into venture capital and together build one of the top VC funds in Central and Eastern Europe, one country at a time.

You’ll be working on:

  • building the deal flow and community around SMOK in Ukraine, Belarus and the Baltics,
  • analysis and due diligence of our investments in all markets,
  • supporting our portfolio companies,
  • attracting new LPs to the fund,
  • writing, talking and screaming about SMOK in our blogs, social media (we already started building online communities with the CEE Valley group on Facebook and on Twitter), press, meetups and conferences.

Basically, the same stuff we as SMOK founding partners currently work on. We’re a small team with huge ambitions and we require the same from our early team members.

The position is remote-friendly, but the preference is that you are based or prepared to move to either Kyiv, Lviv or Odessa and in the future travel a lot across those countries and potentially the rest of the CEE markets once it’s finally safe to travel, obviously.

How to apply?

We want the process to be transparent and simple.

  1. First, think deeply about why you want to work at SMOK, how does it fit your long-term career goals. We want those to be aligned with ours.
  2. Secondly, read our FAQ, specifically the investment criteria, and find us 3 top early stage deals in CEE that you believe we should invest in. Be prepared to justify your choice.
  3. When ready, apply via this form: https://docs.google.com/forms/d/e/1FAIpQLSeJi3CYh7ryIyeG4H2ROQYi0ybXmz2iDpGdlxA3RmNqf8bVSA/viewform
  4. Ping me via borys@smok.vc when you’re done!

Good luck!