Today, we are excited to bring you a new discussion on all things equity.

We are returning to a known investor from our community, Galina Markova, a corporate banker turned angel investor who is focused on investing in HighTech and DeepTech-led sustainability.

Just a few months ago, we had the privilege of meeting with Galina to discuss impact investing, portfolio diversification, and investment strategies. Since then, the innovation wave in Southeastern Europe tech and the explicit shift in entrepreneurs’ behavior towards creating net positive outcomes led her to widen her investment universe. In her world, HighTech and DeepTech-led sustainability are the new paradigm.

Indeed, the data from her portfolio indicates that c.15% of the startups in Romania, Bulgaria, or Greece have a clear sustainability component, demonstrating that founders actively combine their business strategy with achieving positive stakeholder outcomes. Many of these have been set up in the last five years, evidencing an upward trend.

Today, we delve deeper into the unique perspective of equity ownership for an angel investor like Galina, who is not just an investor but a deep supporter of sustainability investing.

From banking to angel investing

Angel investing became a natural extension of Galina’s experience and bridged the gap between angel investing as a form of diversification and her drive to be part of something meaningful. This allowed her to leverage her financial expertise and support ventures to realize their potential.

Galina mentions how passion played a role in her career and why this was one of the major elements that caught her attention and interest within the startup world. She loves working with founders who build products with passion and vision.

Galina’s journey into this space began when working with private equity, where she realized that smart investing merges financial return with societal and environmental good.

While acknowledging the importance of founders deliberately aiming to create positive change (intentionality), Galina notes that many businesses can achieve a positive impact simply by proactively considering stakeholders and their needs.

Beyond the definition itself, Galina emphasizes two key aspects of impactful businesses:

• Intentionality
• Additionality

Intentionality refers to the founders' conscious goal of generating positive outcomes through their product or service.

Additionality ensures that the impact created wouldn't have existed without this particular business. It fills a unique gap and brings about a positive change that wouldn't have happened otherwise. In many cases, this is effectively the same as identifying a gap in the market and building a product to fill that gap.

Galina expands the concept of sustainability investing beyond its typical association with environmental causes. She emphasizes that a sustainable business model, considering both the company's longevity and the long-term viability of its offerings, is inherently impactful.

To illustrate, she provides two examples: a FinTech app that facilitates financial inclusion for immigrants by digitizing traditional saving circles widely used in Latin America and an application that connects users with discounted, high-quality food nearing its expiry date, thereby tackling food waste and economic insecurity.

Best practices in stakeholder communication

Galina emphasizes the importance of communication, transparency, and collaboration between founders and investors and how cultural differences between regions can have an impact.

For example, founders in the UK are more comfortable with seeking help from their investors than in other regions such as Southeastern Europe. Galina encourages founders to be upfront about their needs and leverage investors' collective knowledge and connections.

Conversely, Galina mentions the importance of founders choosing investors wisely. Investors shouldn't just be seen as a source of capital but as strategic partners who share the company's vision and values.

Founders should seek investors who can offer financial backing, guidance, valuable connections, and industry expertise during challenging times.

Impact of broken cap tables on investors

For investors, understanding the ownership of other investors on the cap table is crucial. Transparency is key to understanding the actual rights of an investor, including the allocation of proceeds from future liquidity events.

Voting power, or who has the power to make which decisions, is crucial to both daily operations as well as the strategic direction of a company. While accepting these discrepancies to an extent, she emphasizes the importance of a balanced risk-reward scenario and clear expectations before entering a deal.

Beyond the cap table, Galina focuses on the rights attached to different share classes. She has even walked away from deals with overly complex or imbalanced structures that excessively favor founders or other investors.

Galina also uses a few examples from her portfolio to illustrate the importance of maintaining a healthy founder share percentage. Data suggests a drop from 65-75% at the seed stage to 45% at Series A, which she also observes in her portfolio.

However, she identifies a broken cap table situation where a founder's stake dropped below 45% due to slow growth and numerous funding rounds. This highlights the risk founders face of dilution if they're not careful about maintaining their ownership.

Plan your equity early on for your ESOP program.

Galina concludes the discussion by highlighting the importance of stock options for attracting and retaining top startup talent.

While this might seem like a requirement from VCs, it's also relevant for angel investors like herself. Strong talent is crucial for a company's successful growth, and stock options provide a valuable tool to incentivize and keep key employees on board.

Watch the discussion between colleague Irina and Galina on equity management best practices, cap tables, and more here.

The interview is part of our #AllThingsEquity content series, and you can learn more about employee stock option plans and equity from our collection of articles and guides.

Connect with Galina:

• Linkedin
• Guest author on The Recursive