SeedBlink Blog

We begin with a clear distinction between the types of enterprises: There are companies built to last forever and companies built to be sold.

In the first type of profitable company, investors benefit from dividends and have a constant return, recouping the initial investment in 7-8 years. The philosophy is to have a constant income from these dividends. These companies tend to grow slowly as they do not reinvest the profits but pay them out as dividends.

Diametrically opposed are companies that are bred for sale - so-called "high-growth" companies. These are very fast-growing companies whose profits are reinvested - they tend to be unprofitable until the liquidity event. They build value very quickly, except for dividends. The profit occurs at the time of sale, when someone buys the company and pays the shareholders: the founders and investors.

Both VCs and SeedBlink investors are more likely to invest in the latter model.

The value created by the company is monetized at some point: one shot. That monetization in the form of a sale is perceived through the prism of emotion and attachment to the company on the one hand, and the prism of what you are building and the need to understand who will buy and for what on the other. Either way, whether you are a founder or an investor, whether you are looking for profitability or exit, you want to build a good company. A serious company. That makes the world a better place.

Players at a startup's table

Many players are involved in the development of a company with ambitions for accelerated growth.

The founders are in the driver's seat, steering the vehicle with their hands on the wheel.

Basically, you are investing in the founders, in their idea, their vision, their strategic, tactical and execution skills, in the vehicle they are building.

In the co-pilot seat are the active investors who are willing to help the company with their expertise, energy, time, relationships and skills - those who are actively, consultatively and benevolently involved in the development of the route.

In the back seat are many other investors who join in for the ride, because they appreciate the qualities of today's car, the driver, and the route potential of the vehicle - they pay for the fuel.

We put ourselves in the shoes of the founder - the company is like a child with whom there is a great emotional attachment, in which a lot of energy is invested (if they are the right founders) and which is somehow passed on to the investors. Most of the time, investors feel both emotionally and financially connected to the companies they invest in (except for purely financial ones).

This is also true for SeedBlink investors - it is not only money that is invested, but also a lot of emotions and a strong desire to be actively involved in the success of the companies.

The best time to sell

I am often asked when the best time is to sell a business.

The optimal time is when you have an offer that makes sense at that time.

Businesses can be bought for a variety of reasons - revenue, profit, technology, customer base, market, team - but it's important to understand why, when how and what the opportunities are.

We cannot critically analyse from the outside whether selling a company for X amount of money is good or bad - it's about the opportunities the company has to grow further, the speed of growth, the prospects of the founder. It's important to understand that the driver sees the opportunities differently than the co-pilots or those who are just there for the ride. His unique perspective is entitled, he knows the strengths and weaknesses of the company. On the other hand, there are subjective elements of the driver that can influence the decision. Investors are there to give advice, to help, but the decision and the steering wheel undoubtedly rest with the founder.

Sales opportunities are not necessarily predictable, as the SanoPass example shows. SanoPass is a very good, growing company with plans for further rounds. Such an opportunity arose that the founders could not turn down, and I don't just mean financially.

The role of VCs in an investment

There are three key elements to why we want at least one VC in the loop:

1. Setting the valuation: a VC is in a much better position to establish the value of a company. We have our own opinion, and if VC negotiates a price we cannot confirm, we won't launch the opportunity on the platform.
2. VCs perform professional Due Diligence.
3. SeedBlink adheres to the same investment terms as VCs, nothing is negotiable. The only differences are the board members (SeedBlink has none), but the rights like minority rights, follow-on rights, drag along, tag along, valuation, are strictly identical. In case of an exit, we have more power to negotiate different elements if we invested alongside a VC.

The presence of a VC in a round is mandatory because such a round is much better structured in terms of management, backing and negotiation.

SeedBlink's role in investments and liquidity events

On the one hand, SeedBlink's role is to ensure that the investor group has as accurate a picture as possible of the companies throughout their life cycle. On the other hand, the investors should be contractually given as many opportunities as possible so as not to be left out and treated like VCs to benefit from the maximum opportunities, with the decision resting primarily with the founders. Investors who lack the ace up their sleeve of the final decision have another - the ability to be the first to benefit from the opportunity: the guarantee that they have the full pocket.

That's what SeedBlink investors are paying for. The entire syndicated investor group benefits from SeedBlink's participation, so that in a sale opportunity where the decision rests with the founder, their interests are considered as much as possible and to the best of their ability. Investors have a say through the voice of SeedBlink. The reality is that business angels can say just a bit. Investors syndicated through SeedBlink can say significantly more, but they can never force the founder to make one decision or another. And in reality, neither can a VC.

In the 2.5 years since SeedBlink has been around, we have invested in nearly 100 companies. The average duration of investment until a liquidity event of any kind is 5-7 years. But for those companies that closed a funding round 2 years ago, opportunities are already presenting themselves - either to exit, where the goal is to maximize returns and ensure investors' rights are respected; or to launch a new follow-on round, where you have the option to reinvest or sell a portion of your shares on a secondary market.

SanoPass exit

Two investments were made in SanoPass through SeedBlink, in 2020 and 2021. The exit occurred recently after the second investment closed. The investors in the first round made an honest exit: over 2x after 2 years, or those who invested in the second round had a much lower exit, within a year of investing. If I were among them, I would be a bit disappointed: I did not join for a few months and a small return, but for several years and higher returns. But the driver decides. We, SeedBlink, made sure it was a fair deal - meaning that the numbers were right, that the due diligence process was done professionally, and that we got the best deal on the table.

This is the first time we have had an exit with a significant return 2 years after the first round. This exit is a decision of the market, the context, the founder, and a fair valuation that teaches us and investors to look at the whole cycle: Investment - Follow-on - Exit. Let's understand what drove the founders to make this decision. How the company worked with its good and bad sides. What we, SeedBlink, have learned.

SanoPass is in the middle of the spectrum of opportunities that arise at SeedBlink. Sure, unfortunately, there will be companies that fail and lose money. But there are also great companies that will provide investors with returns of 10-15-20x (even 1000x for companies like UiPath). Our job is to provide such opportunities to our investor partners, and we already have companies with such horizons in our portfolio.

We want to build a community where companies do not just look for money but get help from SeedBlink on behalf of investors. Out of 70 investors in a startup, 2-5 can definitely help the company. If investor X helps a company, investor Y helps company Z, the whole community benefits.

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Editorial written by Radu Georgescu. Radu has over 30 years of experience in founding and developing software, internet and e-commerce companies. Successful exits include the acquisition of RAV Antivirus technology by Microsoft in 2003, the ePayment business by Naspers in 2010, Avangate by Francisco Partners in 2013 and Fitbit's Vectorwatch technology in 2016. Radu is also a board director and advisor for a series of technology start-ups and mature companies.