Rockaway Ventures Fund | Rockaway Ventures

September 13, 2022

Dušan Zábrodský, General partner of Rockaway Ventures: Decline is an Opportunity

The year 2021 was truly an exceptional one for the entire European venture capital ecosystem. Fundraising for growth funds set a new record of EUR 20 billion and venture capital one of EUR 18 billion. Roughly 5300 companies were on the receiving end of the investments, with the vast majority being small and medium-sized ones. All this despite the uncertainty caused by the Covid-19 pandemic.

At Rockaway, we didn’t stay behind. In the fall of 2021 we started the Rockaway Ventures Fund and in April we’d received over CZK 600 million from investors. Building on the success of Rockaway Ventures, which since 2014 has managed to invest EUR 29 million, finish 22 investments and 11 exits, and with an annual IRR of 46 % can boast a portfolio valued at EUR 139 million that includes super-successful Czech unicorn Productboard or the Balkan Gjirafa.com e-commerce platform.

We started the new Rockaway Ventures Fund when company valuations were at a record high. We bet on highly fragmented and hitherto unconsolidated markets that have yet to be digitalized. Some examples are investments into Campiri, a Czech platform for renting recreational vehicles, Spotawheel, a Greek used car sales platform, or the German FreewayCamper platform.

However, within a short time the mood in the economy and on the market has changed radically. The war in Ukraine, energy dependence on Russia, rapidly increasing inflation – these are all critical factors affecting the entire venture capital ecosystem, and much more. The global economy is almost certainly facing stagflation, and so it’s obvious that after the “gold rush” of the last two years, were in for a very unpleasant sobering experience.

FEET BACK ON THE GROUND

This isn’t the first time venture capital has been in such situation. Many of us still vividly remember when the internet bubble burst in 2000, or the mortgage crisis of 2008. So it’s definitely not hard to find historical parallels. Almost ten years later we’re once again experiencing significant economic decline and limited access to liquidity on the market. The generally expected low degree of public consumption indicates that new start-ups will have increasing problems obtaining finances.

With increasing frequency we’re encountering the term “down round”, describing a situation where a company is offering additional shares for sale at a price lower than in the previous round of financing. A shining example is the story of the until recently most highly valued European start-up, Klarna. The valuation of this Swedish fintech company plummeted from 46 billion to 6.7 billion dollars, hence a hard-to-believe 85 %. That’s truly a gigantic drop and I think that we’ll hear more such stories in the near future.

It’s no wonder: tech companies are in a very difficult environment. While when the venture capital market was booming, investors looked primarily at rate of growth, now they’re mainly interested in sustainability and cash flow optimization. Plans for expansion or product development have to be put on hold in many cases, and not only European funds are taking a wait and see attitude that may last until the end of the year and maybe even longer. Nobody knows how far markets may still drop, and companies that were relying on obtaining financing for future growth are suddenly in a situation where they may not get it, and if they do, it will be on different terms than they were used to up to now.

IT’S NOT AS BAD AS IT MAY SEEM

However, from the perspective of a well-prepared investor, this can be an ideal opportunity. Thanks to the general decline in valuation, large European VC funds, including the Rockaway Ventures Fund, have the opportunity to negotiate better terms for new investments and to put together more interesting deals. It’s of course good to be careful, but experienced investors will still be looking for top start-ups, and if they come across a company with a convincing product and a sustainable business plan, from a long-term perspective there’s a great likelihood of high growth.

History tells us that VC funds that achieved up to a tenfold return in their portfolio made their most significant investments during a recession. Venture capital involves betting on the market’s future and smart investors see a decline as an opportunity. Plus if investors remains active even during a recession, through new investments they can help hire top-notch talent while the job market is in turmoil, which in the end lets funds play a more prominent role in directing their portfolio companies.

September 22, 2021

Rockaway Ventures Launches a Fund and Announces its First Two Acquisitions

The investment team behind the Rockaway Capital’s successful investments in start-ups like Productboard, Brand Embassy, Gjirafa, or Storyous is launching a new venture capital fund, the Rockaway Ventures Fund. It will focus primarily on start-ups in Central and Eastern Europe that are digitalizing traditional industries while following ESG (Environmental, Social, Governance) principles. Its first two investments, where Rockaway Ventures Fund invests several million EUR, are Estonian start-up Lingvist and German Vivere platform.

Rockaway Ventures is one of the first venture capital funds in the Czech Republic, as well as in Central Europe, to assess investments in start-ups based both on their future revenues and whether they have a positive environmental and social impact and responsible and transparent corporate governance. It was one of the first venture capital investors to implement formal ESG rules in the CEE region and this year it will subscribe to the UN’s Principles for Responsible Investment (UN PRI).

“We pay great attention to economic, environmental, and social sustainability. We’re firmly convinced that an active ESG approach to investments is not only socially responsible but also increases value for investors in the long term. In Central and Eastern Europe we see many young innovative companies, and the role of our new fund is to help innovators grow,” says General Partner Andrea Lauren who together with Dušan Zábrodský heads the Rockaway Ventures Fund.

The fund’s ESG approach is also closely related to the theme of digitalization, which not only allows society to operate more efficiently, but also to grow sustainably. In selecting its investments, Rockaway Ventures focuses primarily on areas such as e-tailing, logistics, media, fintech, digital medicine and education, or cyber-security. “We’re looking for start-ups that disrupt the established order in traditional industries through digitalization, which in our opinion means speed, accuracy, efficiency, and finally progress. Its successful implementation is the key to success,” says Dušan Zábrodský.

The new fund follows in the track record of venture investing done by Rockaway Capital and its founder, Jakub Havrlant. Since 2014 Rockaway invested more than CZK 675 million in 22 venture capital investments, with 11 of them already fully exited and more than 100 % of invested capital returned. In mid-2021, the total worth of Rockaway’s venture portfolio was CZK 2.4 billion.

Building upon the foundation laid by previous investments, the Rockaway Ventures Fund will continue to focus much of its activities on Central and Eastern Europe, including the Baltics and Balkans but also DACH, where the Rockaway Capital Group has a growing presence. “In recent years we have been watching the Central European start-up scene mature – venture capital investments in 2016-2019 recorded a combined annual growth rate (CAGR) of 65 %, which is double the European average. This facilitates larger investment rounds and exits, and the region is thus becoming more attractive for leading global VC investors as well,” says Lauren.

This is also underscored by the fund’s first two investments – the first is the fast-growing Estonian start-up Lingvist, which has developed a language learning platform that effectively reduces the time needed to learn a new language. The project, founded in 2013 by former CERN nuclear physicist Mait Müntel, allows the same technology to be used in other areas of education too. With its investment, Rockaway Ventures has participated in the Series A+ investment round alongside Dutch fund Rubio Impact Ventures and Metaplanet Holdings of Jaan Talinn, the co-founder of Skype.

The second investment is in Vivere, a German company that incubates, develops, produces and sells innovative FMCG products based on comprehensive demand and trend data analysis. Vivere currently markets roughly 200 products under ten brands. In Vivere’s latest investment round, Rockaway Ventures invested alongside prominent Swiss investor and tech entrepreneur Daniel Aegerter and leading Swiss VC fund Redalpine.

“With Lingvist and Vivere we are commencing investment by the Rockaway Ventures Fund, which will focus on slightly larger, European projects with an interesting product proposition and dynamically growing revenues. We’re glad that in both cases we can co-invest with renowned European VC investors,” says Andrea Lauren, General Partner of the Rockaway Ventures Fund.

The new fund has an active management style, offering founders assistance in creating and testing business strategies and building the teams that will help implement them. “We want to focus our investments primarily on start-ups that have already developed and launched their products and services to market and generate dynamically growing revenues,” adds Zábrodský. “We are prepared to invest up to EUR 15 million into each company. We want to build lasting partnerships with companies and their founders that are about more than just money, and actively help them manage growth and achieve their visions.”

About Rockaway Ventures Fund
A venture capital investment fund with a target value of EUR 100 million that focuses on investing in the digital economy according to ESG principles in Europe, especially the Central and Eastern European region. The fund is headed by its General Partners, Andrea Lauren and Dušan Zábrodský, and Rockaway Capital of Jakub Havrlant is one of the fund’s main investors.