Interview with Marek Kiisa on angel investing
Former formula driver Marek Kiisa, co-founder of engineering firm Astrec Baltic, is one of the 25 founders of the Estonian Business Angels Network. The most prominent company in his portfolio is GrabCAD, a collaboration platform of half a million engineers around the world. The company has so far raised $14 million, the most among Estonian startups.
What excited you most about GrabCAD early on?
There were a few things I really loved: one was the team, the passion in their eyes and their will to fly; the other was the industry, which I knew thoroughly – this guaranteed my trust. These two things have to be there for me to invest - I know the field, I can help with my thoughts and expertise, and at the same time I click with the team and trust that they are the ones that can make this thing take off.
How many companies do you have in your personal portfolio?
There are nine – half of them are shining, the others ... shine less, and of course in the end there are some which might have had a good idea, maybe a spark, but which have not had the team.
Do we just lack talent?
I quote Kristjan Kalda, Investment Director at BaltCap, who has said we have to internationalise the management of our companies in order to make the companies breathe differently. Of course the leader does not have to be from the outside, but he can be, that way the teams also become more international.
Have you made any exits?
My portfolio is too young to speak about exits. I dream of my big story, but it’s too early.
Isn't GrabCAD, at the very least, on its way to being that story?
I would like to quote futurologist Alexander Bard (@Bardissimo) – the teams will move to the internet, the communities will move to the cloud and these communities will start to co-operate in some vertical. GrabCAD is a great example here, half a million mechanical engineers are already on the network. They will make their own teams who will solve the upcoming challenges. This kind of method, which groups specialists across the world, gives enormous power to the industries and enables them to fasten the output of their products. The engineering side has been cumbersome and time consuming but now the collaboration can speed it up 10-fold and in some cases even 100-fold.
Why is an Estonian angels network needed?
To become a great business environment, one of the top five globally, we have to change our thinking when it comes to investing. Previous generation built houses, the physical infrastructure, today we have to shift up a gear to come up with new and innovative ideas. We have to inject innovation, positive thinking and creativity. We have to train these people somehow, and investment in them – in the longer term we need success stories like Skype. In a success story like that, when there is also a group of angels involved who have put their money together and fed the company with ideas and know-how, then it will spread like cancer. A good cancer. Money you can get from a bank, but know-how and advise comes only from people.
What are the key criteria for you to invest?
I really enjoy the commitment of the teams, the spark in their eyes, this also pushes you to act and think differently, and then also to help them in some way. You don’t even need a contract, but the personal chemistry has to be there. It’s like going to the doctor, with some of them you click, with others you don’t. And when you don’t then, as a rule, you should change the doctor. It’s exactly the same with passionate entrepreneurs. I have to have that click, the trust. I have my own plan – including whether these people are committed and ready to go on with this firm for 10 years. If there is any doubt then I say no.
What else is in that plan?
The idea is definitely there, but that’s the number two priority. All ideas can be made great and cool if you have a good team. Somehow I also have to know that idea, the sector.
What’s the most important quality for an angel?
The art of engineering human minds. Being able to keep that team alive through the tough times. Some of the angels are even picked so that they would come and bring the light and create contacts.
What are the downsides?
Disappointment in people. When you are betrayed – either financially or the people lose commitment, that’s one of the worst cases. It’s like being betrayed in your personal life.
Has it happened?
Of course. In a way I am a learning angel, too young to have seen it all. Those things always teach you, capping the optimism, adding the reality. If people say, hey this was the risk capital, we have taken the risks and used it all – then you feel like someone has spat into your soul. Also the angel's money has been earned with blood - when they put it in a syndicate, they are not throwing it away.
Do you prefer to invest alone or in a syndicate?
I have done both. When you syndicate, the division of power has to be very clear. When there is a syndicate of 10 then they should pick the most competent one in the syndicate to be responsible for the investment. He should have the full license to operate. If others become nervous and start to act like a shadow board it can break the syndicate and the whole company.
Why is it so difficult to raise an A round in Europe and Estonia?
As a rule of thumb you need to reach a valuation of 4 million euros or dollars for an A round and then you raise around 1 million. For a while we cannot make the A rounds in Estonia, maybe we can do them in Europe or Nordics. When you feel the right place for the firm would be the Unites States, then you should likely move the headquarters there, just as GrabCAD has done. Their headquarters are in Boston, office is in London and the work is actually done in Estonia. Just as with Skype. If we can keep the work here, we have done well.
Isn't the latest Estonian startup fever running ahead of reality?
There is always a risk of overheating, but the underlying issue here is about changing the mindset. We should get the youth really interested in this. Even an elevator pitch should be taken seriously. When you notice you are in an elevator with an angel – talk his ear off, make him interested in you.