Frequently Asked Questions

Looking To Raise Funding From SMOK? Here Is What You Need To Know!

Watch Borys, founding partner of SMOK, describing our strategy (video from 2020)

Where does SMOK invest?

SMOK Ventures invests in early stage startups in Central and Eastern Europe. Our key geography is Poland, but we’ve invested in founders from all over the CEE region: Poland, Ukraine, Belarus, Serbia, Bulgaria, Croatia, Latvia, Bosnia and Czechia.

We prefer to invest in Delaware C-Corp companies with a significant business or workforce in the CEE. We are happy to invest directly in any CEE country that is part of the European Union as well. So far out of 37 investments, 18 are headquartered in Poland, 12 are Delaware C-Corps, 2 are in Estonia and 5 are in other CEE countries.

We are not interested in startups without a significant connection to CEE, i.e. no workforce in CEE, none of the founders is of CEE-origin, and startup is not based in CEE.

What is SMOK’s typical ticket size?

Our initial ticket size is between 100-500k EUR for pre-seed and 500k-1M EUR for seed. Historically our average ticket size has been around 250k USD, but now with a larger fund we’re planning to be doing more seed rounds than before.

How much equity do you typically take?

We’ve taken between 5% and 20% in initial equity investments. On average we’ve taken about 10% in the companies we invested in.

Do you invest in SAFEs?

Yes, in case of Delaware C-Corps at the pre-seed stage we usually invest using standard YC SAFE.

Do you have an industry focus?

We invest in software startups. We like software development tools, game development and artificial intelligence companies — those industries account for about half of our investments.

We’re not limiting ourselves to specific industries, though, e.g. we’ve invested in energy, fintech, proptech, or hospitality before.

If you’re a serial founder of CEE origin with proven track record, regardless of your industry, please reach out!

What’s your fund size and where does the money come from?

Our AUM is a little over $35M USD across two funds. We’re currently investing from fund 2, which is a $25M fund launched in 2023.

Most of our limited partners are entrepreneurs from the CEE region (including Poland, Slovenia, Romania, Czechia, Slovakia) and the US.

Some of our investors include Paul Bragiel (also GP at the fund), Dan Bragiel (venture partner at the fund), Ashwin Navin (founder at Bittorrent & Samba TV), Andrzej Sieja and Marcin Wojtczak (Relativity), Konrad Wawruch (7bulls) and Przemek Żebrowski (K2).

Our sole institutional investor is PFR Ventures, but the money doesn’t come from the EU pocket, so we are not bound by any EU-specific restrictions related to portfolio company location or reporting.

Do you typically lead rounds?

We like to be the early believers and preferably the first institutional investor in your company.

We’ve led around 75% of the startup rounds we participated in. In others we were either a co-lead or a smaller investor.

Do you follow-on investments?

We don’t usually lead the follow-on rounds of our portfolio companies.

However, we try to co-invest pro-rata in the following round if the round size allows us to do that.

What are you looking for when investing in startups? What are your investment criteria?

Team, team, team, team… and then the market and the traction. In that order. We love serial founders and we’re happy to back their projects super early (as in pre-revenue). We are on a constant hunt for cockroach superheroes. If your believe you are one, reach out immediately!

If you’re a first-time founder, we usually like to get to know you a bit before investing (attending our acceleration program ReaktorX is always a good way to achieve that) and we need to see more customer validation and traction (as in first revenues, proof of concept, etc).

In any case, we are looking for companies which have a chance to return our fund multiple times. Our second fund is $25M and we expect to have around 5% of equity in your startup at exit, so you need to aim at selling your startup for at least $500m USD in 8-10 years from now in order to be a match.

What value outside of money do you bring to the founders?

We’re a hands-off investor who gets involved when called for by the founders. Our founders mostly appreciate our help in fundraising and connecting them to people in our network around the globe.

We’re best connected to the tech ecosystems in Silicon Valley, Asia, Western Europe, that’s why 80% of money raised by our portfolio companies comes from those regions.

So far we’ve helped our portfolio startups:

raise capital from funds and business angels based in the US, Singapore, Japan, Scandinavia and London,
get to Y Combinator (twice) by working together on the application and connecting to dozens of YC alumni to arrange fake interviews,
connect with top founders and experts in their industries from all around the globe,
hire top team members in CEE (product and engineering),
add some of the most successful people in their industries globally as advisory board members and / or investors.

How do I approach SMOK?

An intro from someone you actually know that we also actually know and trust will be the best way to get to us.

Examples of good intros:

from our portfolio founder,
from a later stage VC,
from a fellow entrepreneur,
from a former employer.

Examples of not-so-good intros:

from someone you met via Linkedin,
from someone you met at a cocktail party last week,
by a close family member.

However, even though a good intro is always good, a Good Clean Cold Email will do, so don’t run after our friends just to be able to get that introduction – it will be a weak one anyway.

How to write a Good Clean Cold Email?

Good clean cold email is better than a not-so-good introduction. Here is how to nail it.

Make it short – max 3 paragraphs
Grab our attention with the key fact about yourself first.
State:
- who you are and why you are relevant,
- what you are working on,
- how we can help (as in how SMOK and our partners can help),
- end with a call to action
Attach a deck in PDF (see next point)
Make it short!!

How to prepare a quality deck?

Quality decks:

are clean,
and short (8 slides is optimal),
cover the key areas:
- Team
- Problem
- Solution
- Why now?
- Traction
- Market
- The Ask, i.e. how much you are raising
help us understand the industry at a glance
don’t make us think!

The deck is here to get us excited about your startup, not to tell us the whole story or answer all our questions. We’re going to spend about a minute looking at your deck and then make a decision whether or not to book a meeting or ask some questions by email first. So make it attractive and make us want to know more!

How does the investment process at SMOK look like?

We receive your deck via email.
One of the partners (usually Diana or Borys) reviews the deck and responds to the founder via email. We try to give you a response in less than a two weeks – we don’t always succeed, so ping us once if we don’t get back.
We either ask a few questions via email or book a meeting with the founder.
We discuss the startup among the partners and make a decision whether to continue the evaluation.
- If we decide to pass, we send an email, usually with a short explanation of our decision.
- Otherwise we book another meeting with another partner (usually either Paul or Dan).
Meanwhile we start unofficial due diligence where we:
- consult experts from the industry,
- analyze the market,
- come back with follow-up questions.
We discuss internally and make a call.
- If it’s a pass, we tend to provide a more elaborate explanation of our reasoning at this point.
- If it’s a yes, we come back with a term sheet.
Once the term sheet is signed we go through a due diligence (DD) process (usually up to 2 weeks) and work on the investment agreement in the meantime. So far we’ve never backed out after signing the term sheet. In due diligence we tend to:
- talk to people who previously worked with the founders,
- analyze the financial statements (if any) or the company + look into the cap table and company structure (if there is history).
We book an investment committee (a formality) to approve the investment and send the wire.

The whole process from initial meeting to sending a term sheet can take anything from a week (this has actually happened a few times already) and a month. Once we sign the term sheet, the money lands on your account in 1-4 weeks, depending on your speed in providing the necessary documents for the committee and due diligence.

What are the common reasons for a ‘no’?

VCs say “no” a lot and SMOK is not different. We say “yes” to about 1 in 100 projects that apply for funding. Here are some common reasons we don’t invest.

Broken cap table (see more on that later).
Not thinking big enough.
Market too small (no chance to return our fund).
Focused on a local (e.g. Polish, Romanian, CIS) market only (no global mindset).
Founders not 100% focused on the company.
Too early (e.g. just an idea, no customer validation, no traction, no founding history).
Too late (e.g. series A stage, raising at a valuation larger than $15M).
Not our industry focus (it’s tricky though as we would invest outside of our focus if we really like the team and market).
No relation to CEE.
Burn rate suspiciously big for your stage.
Bad reputation of the founding team.

What do we mean by a broken cap table?

We hate broken cap tables. Here is what we mean that it’s broken.

Investors own more than 25% after round I.
Investors own more than 40% after round II.
Dead equity (non-operational co-founder with equity).
Software house owns a large chunk of equity (spin-off done wrong). Note that we’re not against spin-offs, but we need the founders to own at least 75% of equity, and ideally closer to 90%.
One co-founder owns significantly more equity for no good reason.
No ESOP implemented or planned.

We’ll be unlikely to invest in your startup unless you fix the above issues.

Do you sign NDAs?

No.

What’s in your term sheet?

We’re not hiding anything from the founders and we’re happy to share the terms we offer to entrepreneurs.

Our typical term sheet includes the following rights:

non-participating liquidation preference 1x,
participation right,
tag-along right – under the same terms and conditions, including the same Sale Price per Share, and with any other economic benefits,
drag along right (50%+1 including the investors)
anti-dilution protection – in case of a down round,
founder lock-up – until SMOK is a shareholder
pre-emption right,
right of first refusal,
one member in the Supervisory Board, if created,
right of approval of key decisions that significantly change the company.

You can download our draft termsheet and review specific clauses here: SMOK Term Sheet.

In case of Delaware C-Corp companies we would usually go with a standard YC SAFE.

Who have you backed before? How can I contact them?

We’re proud to be early investors in 37 amazing companies so far (as in February 2024). Check out current SMOK portfolio on this website.

If you’d like to chat with one of the founders we backed, like Lech Kaniuk, Wiktoria Wójcik, Jarek Sygitowicz or Dorota Rymaszewska just contact them directly or ask us for an intro to any of the founders. Just like we do a reputational due diligence on you, you should do due diligence on your investors before deciding to accept them into your cap table and we’re happy to help.

What does SMOK stand for???

Haha knew you’d ask this one. Smok simply means “dragon” in Polish, Belarusian (цмок) and a few other Slavic languages. And “dragon” is “an investment that returns the fund”. Not that we knew about it when naming the fund but it’s a nice coincidence.

What we definitely did not know is that “smok” also means “a small kiss” in Albanian and “a bowl or hair” (sic!) in Romanian. We’re still not sure what to make of those findings.

What does it mean that SMOK is part of the Bragiel network of funds?

SMOK is part of a global network of funds with over $400m under management co-managed by Paul Bragiel and focused on developing markets which includes Golden Gate Ventures (Southeast Asia), Niu Ventures (South America), Bragiel Brothers (North America), Savannah (Africa) and Sisu Game Ventures (gamedev focus).

Each of the funds has a separate entity and local managers, but we’re interconnected by the presence of Paul Bragiel as a GP in each of the funds.

In the network, we share limited partners, investing standards, we often co-invest in companies that match the investment criteria of more than one fund. We also run 101 Fellowship together to attract the best young people to venture capital globally.