The honest answer is: significant. We invest at a very early stage. Sometimes it’s just an idea, not even a company yet. Of course, in the fund’s portfolio, we try to diversify the risk and invest in the next rounds in companies we already know and believe (so-called “follow-on” investments), which we have financially supported at an early stage. Guaranteeing success at this stage of the company’s development would be dishonest.
(*) According to the Act on Investment Funds and Management of Alternative Investment Funds (“Act”), ASIs (alternative investment companies) are classified as alternative investment funds (Article 8a(1) of the Act). This is the form in which we operate. For simplicity, we will use the shortened terms “fund” or “VC fund” in the following sections.
We are heavily invested in the fund ourselves. As general partners, we commit to an individual investment of between 15-30% of the fund’s capitalization.
From investors, usually private individuals, so-called Limited Partners (LPs), who entrust their funds to the managers and receive a return on investment at the time of the fund’s liquidation (usually within 6-10 years).
During the first 3-4 years we are building our startups portfolio. This is the time when the managers, together with the operational team, search for companies in which they want to invest, conduct their verification (due diligence process), and make decisions if they want to invest during investment committees. After this period, the focus shifts to supporting the companies and gradually preparing for the divestment process, also called as the startup exit.
No. The BB2 fund is dedicated exclusively to private investors. In the past, when we managed the first private fund, BB1, we attempted to collaborate with NCBiR under the Bridge Alfa program, but currently we prefer to have more freedom and to work with private investors. In one of the funds with a completed investment period, we had the opportunity to work directly with BGK, and our experience working with them is great.
Simple answer. Yes, that’s true, but our experience and results have shown that we can successfully select companies and perform well even without such support. The presence of public funds can significantly slow down the operation of the startup or the fund. Delay or lack of decisions can block subsequent rounds, thereby limiting efficiency, which is particularly important when collaborating with renowned foreign VCs. Ultimately, we decided that the BB2 fund operates exclusively with private capital. We believe that our experience and ambitious balances the potential benefits of collaborating with public investors, even though private investors usually have a preferential return compared to funds from PFR or BGK.
The fund is directly managed by the Management Team, also known as the group of General Partners (GPs), who are responsible for selecting startups and making investment decisions, as well as actively working with the companies.
Within the Management Team, we have investment directors, an attorney in law, individuals responsible for accounting and finance, and personnel handling administration and investor relations
The fund’s operation is sustained by management fees. Typically, throughout the duration of the entire fund, this fee amounts to a maximum of 20% of the fund’s capitalization. This related to an annual fee of approximately 3% of the assets under management. Larger funds can afford lower fees, such as 2% per year, due to the higher amount allocated for operational costs.
The real reward for fund managers is the performance fee, also known as “carry,” which typically amounts to 20%-25% of the fund’s profit. To simplify: if a fund has a capitalization of 50 million PLN, around 40 million PLN is allocated for investments, and 10 million PLN for management over 7-10 years. If the fund eventually sells its assets for, say, 200 million PLN, it means a profit of 150 million PLN, as the initial investment is returned to investors first. From this profit, a 20% performance fee (30 million PLN) is deducted for the managers. The pre-tax profit to be distributed among investors is 120 million PLN. This means the fund achieved a multiple of 3.4 times the capital invested in companies (170/50). This is a very good result, which also justifies the high compensation for the managers
It is typically an investment in the next round of financing, where a new fund/investor appears. Such a round independently revalues the company. In this case, new shares are issued for the new investor. As a fund that was previously a shareholder in the company, we secure the right to participate in the next round to ensure that the percentage of our shares is not reduced (thus avoiding so-called “dilution”).
We do not always us it. We only do so when we believe that the company has the potential for a significant return on our fund’s investment.
We invest approximately 50% of the collected capital in early-stage companies, usually as the first or one of the first investors. The remaining portion is allocated to more mature companies that we have been observing. These are companies that we believe have a significantly higher chance of success.
We invest approximately 50% of the collected capital in early-stage companies, usually as the first or one of the first investors. The remaining portion is allocated to more mature companies that we have been observing. These are companies that we believe have a significantly higher chance of success.
The BB2 fund operates as a limited joint-stock partnership. Periodically, additional shares are issued, which can be acquired by existing and new investors.
First and foremost, BB2 is currently our only active and investing fund. The others are already in the divestment phase.
When our previous funds were actively investing, they had different, diversified investment theses. Some invested in riskier ideas, while others were dedicated to more mature concepts. Some were focused on a specific region, whereas others, like BB2, had no such restrictions.
Additionally, we take the “arm’s length” principle seriously. If we want to invest with the BB2 Fund in a company that has already received funds from one of our other funds, we must follow an external valuation conducted by an independent entity. This entity is also responsible for negotiating the terms of the investment round and valuing the startup. This way, we always manage the potential risk of a conflict of interest.
You simply need to contact one of the fund’s partners, go through a due diligence process where we check AML procedures, as well as your investment knowledge and experience (in other words, whether we can classify you as a professional investor). Finally, you will just need to sign the investment agreement and get certificate of shares. Of course, this must take place during a share issuance period, when we are raising funds for further investments.
The planned capitalization of the BB2 fund is 37 million PLN. So far, more than 20 million PLN has been collected. When one of our portfolio companies is raising another round and we want to join it in the form of a “follow-on” investment, then we issue shares and raise funds from existing and new investors.
Yes, you can do that, but remember that each share issuance has a revalued share price.
The revaluation is based on the valuation of assets, which means that the share price of each subsequent issuance is higher than the previous one. This way, we reward and are fair to the investors who took the greatest risk and did not know which companies we would choose.
At the beginning of the fund in 2020, the share price was 185 PLN. The current price for new investors, as of the end of 2023, is 350 PLN. Existing investors are rewarded with each subsequent share issuance, receiving a 15% discount compared to new investors. Therefore, it is advantageous to start working with us early, as you can risk a relatively small amount of capital, observe how we work, and then increase your investment in the fund.
That’s how most of our investors work with us.
Theoretically, we do not have restrictions on the amount of investment (so-called “tickets”), but due to the amount of work involved in preparing investment documents and later investor servicing, we have decided to accept investments starting from 250,000 PLN. In the past, if we saw added value for our portfolio companies, we were willing to slightly lower this threshold.
First, remember that investing in a VC fund is extremely risky. We advise against allocating a significant portion of your wealth to VC funds or startups.
The closing date for the current BB2 fund is the end of 2028. If there is a justified reason, such as a company being close to its IPO, we can extend this deadline by one year with the consent of the investors. Currently, we do not plan for such a scenario.
Based on our experience from managing our initial funds, we know that there are essentially four positive scenarios for returning funds:
A negative scenario, which is also common in the startup industry, usually involves a total write-off (loss) and agreement to liquidate the company.
A common practice is to offer new investors additional rights during the investment agreement stage, including a preferential position in terms of fund distribution during an exit. In the final sale of a startup, this may mean that “new investors” first receive a guaranteed return, and only the remaining funds are divided among other investors. We try to avoid such situations and use all mechanisms that can protect us, including:
For the taxation of investors from the USA, we recommend one of two options: Passive Foreign Investment Company (PFIC) or Qualified Electing Fund (QEF). We encourage you to discuss with us* as well as consult with a tax advisor. This recommendation also applies to domestic investors. An increasing number of our investors are in the process of establishing Family Foundations. This is a new mechanism but offers many benefits in Poland.
* For the avoidance of doubt, none of the answers in this FAQ constitutes a public offering of shares (either within Poland or outside its borders).
We do not hire external entities for valuations. We conduct them ourselves, but base our valuations on subsequent investment rounds where external, professional entities have independently assessed the company’s value and invested their own funds. We believe this is a significantly better valuation method than theoretical models like DCF or comparative valuation.
No, we are quite innovative in our approach. Of course, nothing prevented investing with us from the very beginning. Most of the early investors in the BB1 fund did exactly that. However, at the beginning of the BB2 fund, we were not sure how deeply we would be involved, we did not have strong market recognition, and at the same time we wanted to start operations as quickly as possible. Of course, all this was done with transparency for early investors.
No, the price cannot be negotiated. Everything must be transparent to existing investors.
We can discuss minor changes to the agreement, the option to observe our work, or joining as a Venture Partner, but nothing beyond that.
For our investors, we offer additional roles within the fund. One of them is a Venture Partner, which involves engaging with founders. If it turns out that the startup is interesting to the investor and she/he can help in the company’s development, and if the founders are willing to work with such an investor, the person assumes the role of a Venture Partner. This is essentially a coaching role for the founders. You can read more about it here.
We do not have a budget to pay a salary to Venture Partners, but we offer the possibility of sharing in the carry for the management team and the fund’s profit resulting from work with a specific startup. Przemek Żebrowski (co-founder of K2) and Bart Roszkowski (co-founder of Vue Storefront) have already chosen to work under this arrangement.
No, engagement is voluntary. It’s an option. Typically, an investor (LP) does not need to do anything after making the investment. We try to organize quarterly meetings at the offices of our portfolio companies where we present their progress. We also send quarterly progress reports. Reviewing these reports and participating in the meetings is optional. We believe it is an opportunity for further development and exchange of experiences among a group of very interesting people.
Hm… not always. In startups, a quarter often doesn’t bring significant changes. However, we strive to keep our investors reasonably up-to-date on the progress and development of the companies. In other words, each quarter, you will receive a fund activity report containing the most essential information.
Probably you will also receive additional information about the companies when there are significant changes in their operations, such as securing a new funding round, acquiring new and important clients, receiving awards, etc.
Through referrals. We do not engage in massive market searches, nor do we rely heavily on email proposals. What works best for us are recommendations from one of our founders or from other funds, which often ask for our assistance with technical due diligence.
Yes, we occasionally help with that and we enjoy it very much. We have done this for some of our co-investors. Perhaps this is what sets us apart from many other funds. We believe we have valuable technical expertise. This builds our credibility in the startup and scientific communities in Poland.
Co-investors in our companies include VC funds and business angels from Poland and abroad, such as Khosla Ventures, DN Capital, Giant or First Minute Capital.
You can read about that here.
When choosing a startup, we follow our investment strategy and evaluate four elements:
Yes, the investment agreement does not prohibit this. It happens that BB2 LPs invest in our portfolio companies and additionally assist them in a specific area. Of course, such an investment does not always have to be connected with personal time engagement. It depends on the stage of development, current needs of the company, and the investor’s own capabilities. By becoming an investor in a particular company, you will receive direct reports from them about business development (independently of our quarterly fund reports).
Initially, we usually invest between $50K and $100K. If the startup develops according to the planned milestones, we have the possibility to increase our investment up to $1M.
We try to avoid such decisions, but it does not mean they are impossible. Sometimes, if a company convinces us (see our criteria for selecting companies for investment), we are ready to invest more at the very beginning.
We have already described this in the investor section.
We invest in so-called resilient tech/deep tech. Unique technology is essential. We do not invest in areas that we do not understand or do not like because, in our opinion, they do not add much value to our lives. These include blockchain (because it does not work as efficiently), marketplaces (because their success mainly depends on the size of the investment in PR and marketing), and gaming (we enjoy playing, but achieving success in this industry requires an exceptional amount of luck, as the creators of Angry Birds once said). There are others better than us who cover these areas, such as Market One Capital, or Smok Ventures.
After receiving a pitch that fits our criteria, one of the partners begins managing the transaction. They meet with the founders and enter the startup’s data into our database, noting everything they consider important and what they have gathered from the founders and the market so far. We evaluate projects every two weeks. If the majority decides it is worth discussing further or learning more, two partners meet with the founders to understand the project’s competitive advantage and gather additional materials. This usually takes about one month.
After this stage, we have an internal discussion and try to make a decision. If we are in favor, we prepare a preliminary term sheet and start working on the investment agreement. The entire process takes up to three months.
It’s probably easier to say what we don’t require 🙂 We don’t require spreadsheets and P&L projections. We always start the company analysis with a simple pitch deck, and then, depending on the type of project, its stage of development, and needs, we request additional documents. Typically, it is good to have a Data Room prepared, which is a cloud-based space where you upload essential company information and documents (assuming the startup has already been registered).
It’s also beneficial to include:
In general, it’s a good idea to divide the Data Room into four areas:
Each area should have documents describing that aspect of your business. It’s important not to add confidential information, as the documents in the Data Room may be shared with various people during the due diligence process.
Well, we are doing our best. We try to get back to every founder with feedback, but unfortunately, we don’t always manage to do so.
We suggest not getting discouraged right away and sending a follow-up email requesting feedback
Our main task is to work with the startups that we see the most potential in at any given moment and that need our help the most. Our team is small, and we receive quite a few submissions, so we have had to clearly prioritize our tasks.
Yes, that’s correct. We know that most funds offer smart money. Unfortunately, in practice, many of these promises end up delivering only money. Our fund is created by startup founders, and our partners and investors are people who have already made their exits, some of which were quite spectacular.
Usually, while working with a company, we know what to focus on and what lies ahead for the founders in their journey as entrepreneurs. This distinguishes us as partners. We are not financiers, bankers, or consultants from the Big Four. We have personally experienced the challenges of running a unique type of company, which is a startup. We have faced loneliness, the hard fight for the future, and negotiations with investors. We share this knowledge.
We often try to provide individual support to our founders. Additionally, we regularly organize workshops that help with the fundraising process, communication, and pitch decks preparation, etc.
We run them ourselves, along with our investors and more experienced founders. We believe in and strive to accelerate collaboration among founders. Following the best early-stage accelerator programs, there is no better support than people who are experiencing or have just experienced similar challenges.
No, one of our partners is Robert Chang, who lives in New York and is very familiar with the local environment there. He helps us prepare our startups for more global operations.
Generally, no. It doesn’t look good when we, as investors, introduce our company to other VCs. However, we can certainly provide our recommendation or opinion, which we do quite often. We also encourage discussions with other founders in our portfolio. They are better gatekeepers to other VCs than we are 🙂
We strive to balance the process so that both we and our investors have up-to-date information about the company, without the reporting becoming a significant burden for the founders. Typically, we request an update once a quarter. We have a prepared form for this, and we expect information regarding technological progress, data on any sales, progress in subsequent funding rounds, and areas where you expect assistance.
Typically, through email or LinkedIn, but the best way is through the founders of our portfolio companies.