Original interview was published in Forbes (Slovakia) in May 2022. This is a translation.

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Vestberry, a fintech Saas startup by three Slovak founders, offers Venture investors a tool for analysing their portfolios.

The volume of annual investment in the global Venture Capital sector is typically estimated to be hundreds of billions of dollars. Such a pile of money, especially in an industry focused on digitizing the whole world, will surely be managed by the most advanced software in the world, right?

Apparently not. 

“When I worked in Private Equity & Venture Capital in Southeast Asia years ago, I noticed that the main tool used in this industry was Excel,” recalls Marek Zamecnik, CEO and co-founder of Vestberry. He adds that although Excel has its perks, if an investment firm that uses it needs to “set up a workflow and streamline processes,” it is not quite ideal.

After returning to Slovakia from Asia, he and the designer and current Chief Product Officer of Vestberry, Matej Pavlansky, were looking for a product they could offer investors. “We were thinking about a co-investment platform where investors could meet and close deals, but we found out that the tools for management, reporting, analysis and presentation of the investment portfolio data are weak. We latched on to that; it was natural feedback from the market,” recalls Zamecnik.

Vestberry closed an investment round in May 2022

About five years later, Vestberry has already closed an investment round in May 2022 for almost one million euros. In total, the investors invested nearly two million euros in the startup. Vestberry’s software helps manage investments in over 1 000 startups totaling more than 6 billion euros.

“In 2022, we are going to expand from Europe to Southeast Asia, as over two thousand investment funds operate in the region,” says Zamecnik. “The next stop will be North America.”

The goal of Vestberry is to reach one million euros in ARR (Annual Recurring Revenue) by the end of the year and to maintain the current month-over-month growth rate of 15 %, says Zamecnik. Sales so far have been primarily organic, with most customers coming from London.

Vestberry’s software helps manage 6 billion euros invested in over 1 000 startups.

“In order to maintain the current growth, we also need to expand to other regions. In the last four months, we grew the sales team from one sales manager to five. In 2022, outside of Europe, we will open a branch in Kuala Lumpur, where we will send a small sales team for a gradual kickoff,” says the CEO.

In connection with the upcoming expansion, Vestberry works on yet another investment round. “We are already actively working on the Series A,” says Zamecnik. “We would like to have some of the big names among European Venture Capital funds among the investors in this round. Several of our customers have also expressed interest in the opportunity to invest. We would like to close the round by the end of the year.”

Angel investors

Besides the first investors, such as businessman Ján Kmeťo from KB-Soft Holding or Martin Hauge from the Swedish fund Haflo (also known as one of the first investors in Spotify), three well-known personalities of the CEE startup community also invested in Vestberry – Šimon Šicko, co-founder of Pixel Federation, Andrej Kiska jr., partner of the Credo Ventures fund, and František Krivda, co-founder of the Slido platform.

“Behind Vestberry’s success so far are angel investors who were enthusiastic about our solution,” says Matej Pavlanský. “Thanks to their support, we were able to grow not only product-wise but also in regards to the team,” he adds and points out that not only investors from Slovakia but also from Scandinavia and Malaysia put their trust in the startup.

It’s also thanks to them that Vestberry has developed into a cloud platform that enables investment funds to automate analytics and data processes in portfolio management. It thus replaces “manual” analyses and calculations in Excel and saves investors invaluable time, which they can use for more productive work. “Funds can thus react with more agility to the development of startups in their portfolio; make faster and better decisions based on data and increase the profitability of investments for their investors,” says Ján Káčer, Chief Technology Officer (CTO) and co-founder of Vestberry.

Replacing Excel

Among the greatest added values of the software is that it calculates the key metrics that fund managers evaluate in real-time. ” An example could be the internal rate of return (IRR), which changes over time, and the managers had to recalculate ‘manually’, adding additional inputs to the equation,” Zamecnik explains. Due to a large number of investments in the portfolio, the ‘manual’ work with the tables could occupy the manager for entire days. “With us, real-time reporting is possible within hours, i.e. on a daily basis.”

Venture investment officially begins when startups and investors reach an agreement and when the decisive provisions of the agreement are noted in contracts. The investor’s ability to quickly ‘extract’ the crucial data from hundreds of investment documents and continue to work with them is the basis not only for good reporting but also for analytical work with the entire investment portfolio. “When we do the so-called gap analysis for clients, we find that some funds are missing parts of the data in the systems. Sometimes they tell us that it is too laborious for them to maintain all that data through Excel,” says Pavlanský.

The peculiarity of this segment is that it is not too strictly regulated. After all, in the case of Vestberry, it is software intended for internal use. “Regulation in this area exists, but it is rather based on recommendations and best practices,” says Zamecnik. “Business is done privately in the boardroom. There is a high level of confidentiality in the sector.”

Automation vs. flexibility

Therefore, the trio of Vestberry founders faced the challenge of creating software that could automate routine procedures while providing sufficient flexibility. “If you create accounting software, you read the law and translate it into the user interface,” explains Pavlanský. “In our case, there is no such decisive law, so we had to do not only a thorough analysis of the extended procedures but also to generalise them to decide what molecules to program into the software to make it scalable.”

It helped the founders that they came to the market at the right time – although there were already several pieces of software, there was no market leader yet. “Of all our customers, we had two migrations from an existing tool; all other clients switched to us from Excel,” says Zamecnik.

The competitive advantage for a specialised investment software project is that large corporate software systems cost hundreds of thousands of euros – and specific metrics from the world of Venture Capital still need to be painstakingly modeled into them. Some large investment firms solved this problem with their own resources, but employing programmers is not very profitable – especially for smaller funds.

Less than five years ago, the success in the Swiss fintech accelerator F10 gave founders the courage to fully dive into work. They got selected among twenty-five companies out of several hundred applicants from all over the world. The consecutive first investment round with four angel investors was not very big financially. “We said to ourselves that we would start small; we didn’t want to rush anything,” says Zamecnik. “We only needed money for proof of concept and validation with investors. The response from potential clients when we showed them the first interface was often – and where can I buy it?”

First clients

That’s when, in 2018, they founded the company and, after about nine months, got their first client – a fund from London. “The software wasn’t completely finished yet, but we found excellent advisors, be it CFOs or fund managers, and we gradually added other things to it. We also started to build a team, first focused on development, gradually more and more on software testing, sales and client care,” continues Pavlanský.

Currently, there are thirty-five people in the company, and ten to fifteen more should join by the end of the year. “Working with us is an opportunity to work on something interesting from Slovakia,” says Pavlanský. “This area has almost no history in Slovakia. There are only a few people who know what exactly are we doing. So it’s interesting to get this chance. For people who like a challenge, it’s motivating.”

Convincing a client from the Venture Capital sector to buy software for portfolio management, of course, isn’t easy. “It’s not a migration that can be done in a day or two. The funds have a large volume of data,” says Káčer. Therefore, the approach to clients is very individual – from the moment they approach a potential customer, it takes about half a year to actually become Vestberry’s client.

Investors gradually check individual tools, send security questionnaires, and even comment on the software. “Conversion is relatively good. The number of clients responding to the outreach shows that they are interested in the solution,” Pavlanský sums up. “The market is not yet saturated. Clients often tell us that when they have a new fund with hundreds of companies, they won’t make a move without the software.”

The basic balance that the creators of any software – and custom-made software in particular – must find is the balance between universality and uniqueness. “We try to avoid explicitly tailor-made solutions because these are not scalable,” explains Káčer. “The entire software is essentially one homogeneous solution, but we already have parts that have their second or third version. It’s a bit of a challenge for development because you have to maintain the integrity of the data from the old architecture even after the redesign, so your hands are partly tied. However, if the architecture on the backend is set up well, you can make changes with flexibility.”

Business model

Vestberry’s business model is an annual subscription, while some clients even have contracts for several years. “The standard of the entire industry is that it is paid for a year in advance, which is very good for a startup from a cash-flow point of view,” says Pavlanský. “It is also good that high financial discipline is a matter of course for investment professionals.”

Vestberry’s priority for the near future is growth rather than profit. “Currently, push for profitability is not an optimal strategy from the point of view of the company’s future. It makes much more sense to invest as much as possible in future growth,” says Zamecnik. “It’s more important to get enough market share and build a team to take care of those customers than to pay out a profit.”

This approach creates a need for external capital. “However, we do not want to work in such a style that would burn money on a large scale. We try to justify every single euro. When we grow a company department, we consider whether it will bring an adequate benefit,” says the CEO.

The foundation for Vestberry’s future success, the founders believe, is that the market is young and appears to be healthy. “The company has the potential to grow into a very interesting, one could even say prestigious business,” says Pavlanský. “We believe that we bring real value because Venture Capital is an ecosystem that drives a lot of innovation in the world. Many of the solutions that we take for granted today, like having the cloud and not having to go to a computer with a portable disk, came about just because someone in Venture Capital was willing to take a risk and invest in the idea.”

So far, Vestberry is a company that has grown thanks to angel investors; that is, not investment professionals, but people who give something back to the business after building their own successful companies. “Vestberry convinced me with its results,” says Šimon Šicko about the decision to invest. “In less than eighteen months, they grew significantly – they expanded their customer base almost five times and built a team of experts passionate about the product and the industry. Shortly after the product was launched, they acquired the second largest Venture Capital fund in Europe, Atomico, which manages investments in companies such as Klarna, Supercell, Telegram, Wolt and Pipedrive. I believe Vestberry is on its way to becoming a leader in its industry.“

So far, they have received all investments from investors personally, not from their venture companies, says Zamecnik. The investment round that Vestberry is planning this year should move the startup into the phase of cooperation with VC investors.

The agreement with Venture Capital changes the dynamics in the company. “In the beginning, we wanted to give the startup a little more freedom, which was also possible thanks to angel investors,” says Pavlanský. “Today, however, our product already has its shape, and the way to scale the company is relatively clear, so the time has come for discussions with Venture Capital investors.”

The original interview was published in Forbes (Slovakia) in May 2022. This is a translation.