Y Soft Ventures was established in 2014 with a clear and simple strategy: support local Central European startups that a) focus on the B2B market, b) offer a service or product that integrates both software and hardware, c) offer a multi-vertical targeted product or service, and d) have the potential to do business on a global scale.
If that strategy sounds familiar, it is not a coincidence. That is exactly how Y Soft conducts its business. One could argue that such a narrow focus would make any venture capital program ineffective, but actually, for us, it is a pivotal part of Y Soft Venture’s strategy.
Let’s be clear, though. Y Soft Ventures wasn’t founded to look for unicorns and quick exit opportunities. Honestly, in the beginning, it was just fun to support young companies as it reminded us of our own startup roots. It also reminded us of lessons we learned the hard way that can now be shared easily with young entrepreneurs and help them grow.
WHAT IS “SMART MONEY”
That is why we started collaborating with young companies with similar DNA. We are able to primarily support their growth, not necessarily just their cash flow. These companies can grow faster from our other assets: for example, from sharing our manufacturing capabilities, our established global business channels, or just our know-how through consulting with our various teams.
It has been an unorthodox approach in the venture capital world, but we see more and more VC firms taking it. At Y Soft Ventures, we call this approach Smart Money, and we believe it could substantially multiply the effect of our financial investments. It is still very unorthodox for a corporate VC, like Y Soft Ventures, to include financing and knowledge sharing from external partners.
Take a look at the graphics below (or download them
here as a PDF). In the last three years, our portfolio companies have achieved an average compound annual growth rate (CAGR) of 175 %. (Did you know that the usual VC industry standard is to multiply the portfolio's value 8x over the course of 8 to 10 years, which requires a CAGR lower than 31%?)
Financial performance is not the only factor proving the effectiveness of our approach. Our portfolio companies work with the biggest customer and partner names. Just last week, ESET, a global leader in cyber security solution providers, announced that GreyCortex has become the newest member of the ESET Technology Alliance.
WHY WE DO "SMART MONEY"?
If we are not looking for quick exits and have a long-term approach, what is our investment strategy? It really is no secret. Just take a look at the areas Y Soft Ventures startup companies are focused upon: a unique RFID solution by Sewio, artificial intelligence-driven network security analysis by GreyCortex, or intelligent video mapping for public building interiors by Lumitrix. While the information in the graphic covers our activity through 2016, this year, we added Sensoneo - smart city solutions for efficient waste management -- to our portfolio. These are the most recent examples of companies that are using Y Soft Venture’s Smart Money.
Our portfolio companies are chosen carefully for their potential to bring a significant return on investment. As a corporate VC, however, these companies also bring new business opportunities in IoT, Industry 4.0, Retail 2.0, and the Smart Office to Y Soft, where there are synergies that may bear fruit in the long term for Y Soft’s future.
Either way, we are able to learn a lot. We are also able to support local Central European entrepreneurs… The fun of that alone brings us great joy.