Hi Karel, so how did you start angel investing?
My background is computer science, I was developer and eventually CTO and CEO of a global business. We built one of the global unicorns coming from Central Europe.
As an CTO I was heavily involved in many business aspects, making a lot of business decisions.
Along the way I got involved in corporate development, M&A and investment side, which I found to be an interesting combination with my technical knowledge.
After the company went public, I was considering what to do next, and angel investing seemed a logical next step. As my background was in cybersecurity, I focussed on that industry.
Since then, I joined Evolution Equity as General Partner. I still maintained my angel investment presence especially in the Czech Republic in a very small capacity, when there is no conflict our fund.
Most importantly, I am trying to give back to my home country and support the angel community there, as I feel that the central European ecosystem is not as developed as it should be.
In general, it has been great fun for me to do angel investing, primarily in technology startups.
So how did you come into networks, and some point in a federation as president?
The ecosystem is not very developed network wise, lots of the local angels are involved as family offices. There are quite a few successful businessmen and businesswomen who built great companies and have sufficient assets in Czechia but there is little general knowledge about the whole concept of angel investing.
With couple of friends, we launched a business angel club in my hometown. But there has not really been any association for country-wide cooperation and networking.
After discussions with friends in Prague and other parts of the country, we felt it was time for a national platform to improve conditions for angel investing. I felt that this would help the Czech republic and its economy.
What are some of the priorities you’d like to achieve with your national association?
We are in constant discussion with our members to help them and also to attract new members, so that the platform can actually flourish.
Raising awareness about angel investments is one such major goal, that the members want us to do. Answering questions like “What is angel investments, and what are its pros and cons?”
Secondly, we represent needs of our members towards the government, regulators and lawmakers. Our main focus now is better legal support for employee stock options, we would also like to help introduce incentives for angel investments. We strongly believe that this would be beneficial to the whole economy.
Third pillar of our efforts is to foster international cooperation, learning what works and what doesn’t in other countries in Europe. Learning from best practices. We are all in the EU, while the laws and tax systems are slightly different, the overall environment is still very similar.
Back to the first, raising awareness. What is the goal of raising awareness? And is there something particular to the Czech case?
First goal is indeed to attract people who can invest to the basic concept of angel investing.
The other part, which is a bit specific to the CEE countries is to raise awareness in the whole environment where people are not used to investments in general. Some people don’t understand what it is, they think it’s buying whole businesses. Another popular assumption is that building startups equals to receiving grants and subsidies from the EU.
What we really need is to make the general public aware of what angel investing is actually about.
Furthermore, we would also love to have some smaller family offices join our association. Some of them see themselves as VC, therefore they might be better represented by the CVCA, but we think that especially the smaller ones will benefit from working with other business angels, through our platform.
Could you tell us a bit about the Czech ecosystem?
Historically, and especially since the inter-war period, Czechia has been really strong in engineering, textile industry or even weapons.
But now is the time to make shift to knowledge economy. We are getting there, but in many aspects it is taking longer than what we hoped for. I am happy to see that many Czech universities are improving, there is great chemical and medical research, nanotechnology. And of course, quite strong IT industry, which is closest to my heart.
Unfortunately, there are still many people who think that only tangible things matter – the concept of knowledge and digital economy still is new to many, and this needs to change.
Geographically, we see the two main centres being Prague and my hometown Brno. Ostrava, close to the Polish border, is also a growing IT hub. Brno, which only has 400 thousand inhabitants, is home to over 10 universities, which makes the city very young and vibrant, with lots of international students. Its close proximity to Vienna makes it also easily accessible from anywhere in the world. All this combined, in my opinion, makes Brno a city with huge growth potential.
Of course, Prague with its concentration of capital, excellent schools, such as the Charles University – one of the oldest universities in Europe, and proximity of government and other official institutions, is home to most startup incubators and companies with global ambitions. I think that the healthy competition between Brno and Prague is also very good.
Where do Czech startups normally scale up?
For many businesses the first international expansion typically leads to Germany and Austria as there are strong historical and especially economic links. Poland is also attractive for some startups, because of the size of the market and cultural as well as language proximity.
Then there is the United Kingdom, also very attractive, especially for IT and fintech startups and as a first step to global expansion. Some companies also head directly to the US but that can be quite expensive and not many startups at the very early stage can afford to invest $2-3 million into this.
What would be a thing that you would have loved to know before you started angel investing? Do those rules mirror what you tell to starting angel investors?
There was one thing that I knew well from the beginning that I should have followed myself, and that is: If you hesitate about an angel investment, it should be NO.
Unfortunately, I did not follow this tip myself.
Maybe FOMO, sometimes friends told me into it … different reasons. Always bad.
My second tip: you are investor, you do not run the company. Your task as an investor is to support the founders. You invest and let them run the company.
Third one: investment is like a marriage. For some maybe even more binding. You cannot step out of investment, it is a long term relationship. Therefore, team is critical, you need to get really well with the founders. The chemistry must work and there must be relationship of trust. Even if the business looks stellar, if the chemistry between investor and founder does not work, they should not work together. It is very important, because there will always be challenging times ahead.
What are your sources of knowledge and insight? What should we read and who should we follow on angel investing/entrepreneurship?
I also try to stay on top of technological advancements, especially in my area of expertise – so various cybersecurity and IT focused websites and media, really specialized. I also follow number of my friends from the VC community, Kauffman Fellows network is very valuable for me
Finally, which of your startups in your portfolio is ready to scale in Europe (which one would you like to put in the spotlight)?
From my “historical” portfolio, I am passionate about Freedomky – not an IT technology startup but rather modular sustainable housing with great design. They also sell to Germany, Austria, Switzerland and recently been expanding nicely.
Then there is AgData – a Czech startup providing smart agricultural solutions for small and medium farms. This is where the local BA club that I am member of invested.
And the last one, also invested by the local BA club, is KeyGuru a key management system, that is designed for hotels, apartment houses and integrates well with their existing reservation systems and customer care portals. It actually works well also for other places where it is necessary to exchange keys, without the need of physical contact, such as car sharing or car rental services. They are now established in the Czech republic and starting expansion into Austria, Germany and other neighboring countries.