Open Circle Capital: ‘We have no doubt about the success of Lithuanian start-ups’
They manage multi-million euro investment funds, in which the state also invests, and are not afraid to take risks. Returns and profits do matter, but it is increasingly important to want to contribute to a specific problem, not just to make money from a unique business idea. Today, venture capital fund managers are trusted and trusted by public authorities, business analysts and economists alike for their insights into financial matters.
Audrius Milukas, Partner at Open Circle Capital (OCC), explains:
We do not expect to get rich quickly. Typically, venture capital funds operate for 10 years, which means that they are making long-term investments and accordingly, such investors do not expect a very quick result. This asset class is unique; not only does the investment help to create unique products or services that solve global problems but also, according to statistics, it generates higher returns for investors than other popular asset classes.
According to Milukas, in recent years everyone in the world has invested in start-ups, including those who have neither the experience nor the time to carefully evaluate their investments. In the long run, it is likely that such investors will ‘burn out’, and the goals of experienced venture capital funds both in Lithuania and globally have been, and will remain, similar: first, to find entrepreneurs at an early stage, to find their technology businesses that solve a specific problem, are unique and can expand in international markets. Second, to help them grow by providing initial investment and expert support. And finally, once the businesses have grown, to sell them on the international market, generating solid returns for both the founders and the fund’s investors.
No doubt about the success of Lithuanian start-ups
OCC manages a fund of €20 million and is set up under the financial instrument ‘Early Stage and Development Fund I’ with €13.8 million from the INVEGA fund. In this way, the state invests in innovative businesses through INVEGA. In five years of operation, these managers have invested in 16 early-stage start-ups developing technologies in software, e-commerce, artificial intelligence, robotics and other areas. According to Milukas, it is not just one or two start-ups that are showing progress:
Whatagraph develops one of the most innovative tools for automated tracking and reporting of online marketing activities. We first invested in Whatagraph 4 years ago, when the company was earning €30k, when Whatack earned USD 30 million in monthly recurring revenue. Since then, it has grown more than 10-fold, and the company successfully raised a €6.1 million investment in 2021 for further expansion from our fund, Finnish venture capital fund Inventure, LcX Opportunity Fund and private investors. We support and invest in Billo, a start-up offering video content to US e-commerce businesses. It offers an alternative to the collaboration between businesses and creative agencies: on the Billo platform, businesses post assignments to a community of video content creators who are paid for authentic content. Billo grew by nine times in 2021 and has established itself as the market leader in its field in the United States.
OCC has made investments in five start-ups working with AI technology. One of them is Pixevia, a company offering AI-powered stores to the market. The company opened its first store in Europe in 2019, and in Lithuania, the retail chain IKI can also boast one. Perfection42, a start-up that combines AI solutions with gaming, animation and architecture, is making good progress. Our portfolio also includes Solarbank, an energy technology start-up that enables consumers and businesses alike to buy a share in a remote solar power plant and thus pay around half as much for the electricity they use. The technology and business model of this start-up has been very successful in Lithuania.
Start-up stars create new talent
OCC investors are very positive about the current situation of Lithuanian start-ups. Two unicorns, around 20 companies that have raised more than €10 million; around 80 ‘rising stars’ – start-ups that have raised more than USD 1 million in funding or have more than 200 employees. Milukas expands on this:
We are confident that the number of quality start-ups will only increase as companies such as Vinted, NordVPN, Hostinger, Kilo Health and other local tech leaders will grow dozens of highly skilled entrepreneurs who will have the experience and capital to develop successful tech businesses. This has happened in Estonia (the Skype phenomenon) and other countries. We have no doubt that it will happen in Lithuania as well.
Most investment managers emphasise the importance of the team that builds the start-up. OCC is also the most focused on this and is looking for serial entrepreneurs and/or professionals with extensive experience in a specific field. Milukas:
We are impressed by people who are ready to fight and have very ambitious goals. We also look at business aspects such as market size, product technology and how it can solve a specific problem, the logic of the business model, the speed of growth, the potential for successful expansion in foreign markets, etc. We are particularly interested in early-stage start-ups that are able to demonstrate leadership in a specific niche international market. These are the start-ups that large Western European or US venture capital funds typically look for.
Consult sector-specific professionals before investing
OCC’s portfolio companies have raised a total of more than €36 million from more than 80 investors, and experienced investor Milukas knows when to collaborate:
We don’t pretend to be omniscient, and we always look for opportunities to consult with experts in a particular technology or field. We engage with AI and robotics associations and other experts in our field. We also invest actively with other venture capital funds, entrepreneurs and professionals (business angels) in various fields.
Lithuania was recently named ‘Innovation Champion’ along with 23 other countries at CES 2023, one of the world’s largest technology trade fairs in Las Vegas.