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Frequently Asked Questions

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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 a few months after launch of fund 1)

Where does SMOK invest?

SMOK Ventures invests in early stage startups in CEE. Our key geos are Poland, Romania, Ukraine and the Baltic countries, but we’re happy to invest anywhere in the CEE region.

If you’re based elsewhere in the European Union, or globally, there usually needs to be a good reason why you want to raise capital from SMOK, e.g. you’d like to take advantage of our network in the region.

We prefer if the HQ is in the European Union (we love Estonia, btw!), but we’re also OK with occasionally investing in Delaware or London-based companies with a significant business or workforce in CEE.

So far we have 16 investments HQ-ed in Poland, 4 in Estonia or Nordics, 1 in Latvia, 1 in Czechia, 1 in the UK, and 5 in Delaware.

What is SMOK’s typical ticket size?

Our initial ticket size is between 100-500k USD for pre-seed and 500k-1.5M USD 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 investments. On average we’ve taken about 12% in the companies we invested in.

Do you have an industry focus?

We like software and gamedev and we prefer simple business models (e.g. saas, marketplace, straight-to-consumer) vs enterprise sales.

We’re not limiting ourselves to specific industries, though, e.g. we’ve invested in energy, food tech, hospitality before –  which are outside of our main scope.

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

Where does the money come from?

SMOK is a US fund and our capital comes from 50+ founders from Poland, Slovenia, Romania, Czech Republic, Slovakia, US and elsewhere across the globe. 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), Wiktor Schmidt (Netguru), Konrad Wawruch (7bulls) and Przemek Żebrowski (K2) – our Limited Partners. We’re proudly supported by PFR Ventures as our sole institutional investor in fund 1.

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).

If you’re a first-time founder, we usually like to get to know you a bit before making a call (attending 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).

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?

A pitch deck is a basic set of information which will help us quickly get to know you and validate if your project is interesting to us. Quality decks:

  • are clean,
  • and short (10 slides is optimal),
  • cover the key areas:
    • Team
    • Problem
    • Solution
    • Why now?
    • Traction
    • Market
    • Business model
    • 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?

  1. We receive your deck via email.
  2. 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 week – we don’t always succeed, so ping us once if we don’t get back)
  3. We either ask a few questions via email or book a meeting with a founder.
  4. Once we meet we discuss the startup among the partners and make a decision whether to continue the evaluation.
  5. If we decide to pass, we send an email, usually with a short explanation of our decision. Otherwise we book another meeting with one more partner (usually Paul or Dan).
  6. We discuss internally and make a call. If we like the startup, at this stage we usually consult experts from the industry, analyze the materials and come back with follow-up questions. This should not take more than a week.
  7. We come back with either a term sheet or a pass. If it’s a pass, we tend to provide a more elaborate explanation of our reasoning at this point.
  8. 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 passed after signing the term sheet due to something that came up in DD. We’ve successfully completed all the investments we signed the term sheets with.
  9. Once DD is over, we book an investment committee (a formality) to approve the investment.
  10. A few days after the committee we 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 2-4 weeks, depending on your speed in providing the necessary documents for the committee and due diligence.

The fastest process from initial meeting to the wire was four weeks so far. The longest was around three months. We’re doing our best to make the former a standard rather than the latter.

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 (more on that later)
  • Not thinking big enough
  • Market too small
  • 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)
  • Too late (e.g. series A stage, raising at a valuation bigger than $10M)
  • Not our industry focus (it’s tricky though as we would invest outside of our focus if we really like the team and market)
  • Not based in CEE or EU (this is a hard requirement, we can’t invest directly in a startup without an office in CEE, although it doesn’t have to be the HQ)
  • 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.

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

We’re proud to be early investors in 24 amazing companies so far (as in June 2022). 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.

Just like we do 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, Belarussian (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.

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