Our Journey Launching an Early-Stage Startups Venture Capital Fund

Egor Savvin

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Published: December 4th, 2023

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Egor Savvin

Founder, Alfin Ventures

Founders

Employees

Alfin Ventures

alfin.ventures

from London, UK

started January 2023

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Employees

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I am Egor Savvin, and I am a partner at the venture capital fund Alfin Ventures.

Alfin Ventures is on a mission to foster innovation, drive growth, and propel businesses to scale new peaks of success. We are passionate about supporting visionary entrepreneurs who are developing breakthrough technologies, and that have the potential to reshape industries and disrupt the way we live and work, making the world a better place.

We start with a check size of $100-500K, however, we have larger investments, up to $5M.

But at Alfin Ventures, we know that to be a competitive investor and be able to access the best deals, we need to bring more to the table than just money. This is why we aim to become a trusted partner for our founders, helping them gain invaluable insights, guidance, and access to an extensive network that can boost their odds of success.

From the moment we write our first check, we become a hands-on ally, creating a supporting space for our founders to work through whatever struggles they might be experiencing and acting as a catalyst that is ready to act when they expand to fresh markets, launch new, groundbreaking products, and much more.

In addition to funding, our startups can count on tangible support including access to innovative technology stacks, introductions to prospective partners in international markets, and much more. We know that we only win if our founders win, so we are 100% dedicated to their success, which is ultimately ours.

Since we launched Alfin Ventures, we have made eight investments, with one more in the pipeline as we are in the process of signing the term sheet with the startup’s team. Of our portfolio companies, three have successfully raised follow-up funding rounds at higher valuations within a year of our investment, and two more are raising fresh funds.

This has resulted in substantial growth of our portfolio’s valuation, which has increased by approximately 50%.

The best deals usually come from our partners and founders of our portfolio companies.

What's your backstory and how did you come up with the idea?

I am a seasoned investment professional with over 12 years of experience in private equity and venture capital. During these years, I conducted several M&A transactions and developed greenfield investment ventures spearheading every step of the process, from developing a comprehensive investment thesis and business strategy to fundraising and determining the venture’s legal and financial structure. Throughout these years, I also had the opportunity to advise many high-net-worth and Forbes-listed individuals.

I have been involved in numerous deals involving large, capital-intensive projects (in industries like natural resources, infrastructure, and renewables), and have also invested in numerous high-technology companies. Some of these deals have resulted in successful exits. While, a few years ago, I was focusing simultaneously on both verticals, my focus shifted as a result of the 2020 global pandemic, as I witnessed the skyrocketing valuations of software technology companies like Zoom and Take Two Interactive Company, which highly surpassed those of large corporations operating in the commodities and industrial sectors.

Therefore, I decided to focus on investing in high-tech companies.

This was a natural fit for me since my background combines a degree in Applied Mathematics and Informatics from Moscow Engineering Physics Institute, and I have experience in software development, so it was a natural fit to place my focus on high-tech software companies. It was when I was pursuing this degree that I started to get involved in the world of finance, especially since many of my peers were venturing into the field. I realized that I could apply my deep mathematical and informatics knowledge to the financial world, and this led me to further my education, and I obtained a Master’s degree in Finance and Risk Management from the University of Wales in the United Kingdom.

I started my professional career in 2012, by taking a position at EY, one of the Big Four global advisory firms which I joined as a financial analyst. At EY, I was responsible for building comprehensive financial models in order to both value companies and assess risk levels for prospective project finance deals.

I also participated in structuring large-scale financing transactions within the CIS region. One of these transactions was the $2 billion award-winning dea l involving the construction of the Western High Speed Diameter, a groundbreaking project that transformed the region’s infrastructure. In addition to this, I evaluated potential renewable energy investments and developed a related program for the International Finance Corporation (IFC).

Also during my time at EY, I was a member of an expert panel within the Investment and Infrastructure Taskforce for the World Economic Forum in Davos-Klosters, Switzerland.

After EY, I transitioned to various well-known organizations, including some of the largest financial institutions in Eastern Europe. During my tenure, I focused on leveraged finance deals, and some of my landmark transactions were a successful transfer of risk for a $1 billion sovereign credit facility and a $100 million structured mezzanine facility for the international fleet operator Gett Taxi.

This led to a critical turning point in my career, which happened in 2017 after I joined Marsfield Capital, a London-based private equity advisory firm. Here, my scope of work considerably expanded, and I was tasked with advising on direct investments within the private equity and venture capital spheres.

At Marsfield I advised on several successful transactions such as the provision of a venture loan to one of the global leaders in urban electric van production and a purchase of a controlling stake in a developer of innovative smart city solutions. My contributions at Marsfield resulted inter alia in advising a company, OKKO, a leading VOD platform. As a result of my hands-on approach and strategic contributions, we were able to grow OKKO’s valuation by 3x in three years, after which the company was successfully sold to a strategic investor.

In 2020, after concluding a successful career at Marsfield, I assumed the position of Head of private equity and venture capital at Alfin Asset Management. This was yet another turning point in my trajectory.

At Alfin Asset Management, I played a key role in building the firm’s venture capital arm from scratch including the development of the concept and business plan, establishing an investment thesis, and hiring a team of dedicated investment professionals. I feel very proud that I was able to grow this venture from zero to a leading player in the industry, and to launch of a new venture capital fund called Alfin Ventures.

In addition to me, Alfin Ventures is led by my partner, Dmitry Kupriyanov, who has extensive strategic and operational advisory experience backed by a successful career at international management consulting firms. Dmitry is an expert at helping companies improve their operational performance, increasing efficiency and productivity. Therefore, he oversees the development of Alfin Ventures’ growth-stage portfolio companies.

Dmitry and I have worked together for a long time, advising HNWIs with investment decisions. While I was involved in the dealmaking part, Dmitry focused more on the operational side of the businesses that we invested in and on developing robust corporate governance. Throughout these years, Dmitry and I have created a great synergy between us, so we decided to partner and create a fund.

Take us through the process of building the first version of your product.

At Alfin Ventures, we developed an investment thesis based on research and analysis, which led us to choose our preferred investment geography and industry focus. Right now, we are actively investing in software companies in Israel and the United Kingdom.

The main driver behind our decision was that venture capital is well-established in both regions, and there are thriving innovation ecosystems in both countries. In the UK, there is a booming fintech hub, while Israel has risen to prominence as a deep tech leader. Also, our team has a solid network in both places, and we know the market well to be able to advise our founders accordingly.

Of course, no investment venture is complete without having a comprehensive risk management strategy in place. To correspond to the trust that our LPs have placed in us, we have created a manual of management policies that regulate our investment decisions. These include the maximum amount of money we are willing to invest when writing our first check, the preferred stage of the startups that we invest in, and how much we are willing to deploy per industry and per company, as well as our maximum shareholding position in portfolio companies. As fund managers, capital allocation is our most important decision.

After this, we know that we need to do everything we can to bolster the success of our portfolio companies. To accomplish this, we have identified our main strengths, which are our extensive network in the venture capital world and established relationships with Israeli and British accelerators and early-stage funds, as well as our knowledge and expertise in fast-growing industries such as AI, Fintech, Web3, and Enterprise SaaS.

Thanks to the formulated focus and strengths of our team, we were able to attract capital, make our first investments in target geographies, and establish ourselves as a reliable partner for early-stage startups. Also important is to ensure that we are aligned with all of our stakeholders. To succeed in an industry as competitive as venture capital, we need to make sure we have long-term relationships with investors, other GPs, and founders, and that those are based on trust and transparency.

When it comes to marketing strategies, we need to consider that we have two separate target audiences and optimize our marketing strategies accordingly. These include both online and offline channels, as each target audience requires a different approach.

For LPs (limited partners), networking is paramount. Primarily, we leverage our existing networks. However, we also need to consistently be expanding our rolodex and to do this, we participate in various events and relationship-building activities through partnerships with financial institutions and by joining private social clubs that we know are frequented by prospective LPs.

Another goal is to maintain visibility and establish ourselves as reliable partners for startups. To achieve this, we aim to participate actively in founder-centric events and maintain close connections with international accelerators and incubators. Besides this, investing in a professional website and robust media relations is essential, which is why we focus on connecting with the media, reaching out to journalists with timely reactions to news, and providing insightful commentaries.

We also believe in the power of personal branding of the fund’s partners. We frequently prepare expert publications on diverse media platforms, sharing insights about technology and investments. As for social media, while it isn’t our priority, it serves as a crucial channel for disseminating company news and updates.

Community building is another invaluable tool. We consistently engage in various Telegram and Slack group chats, providing advice and staying connected with founders and other stakeholders.

Utilizing a combination of these tools, aligned with a meticulously crafted marketing strategy, we have been successful at effectively promoting our venture fund. This approach enhances the fund’s appeal to potential investors and fosters meaningful collaborations with startups.

Success in an industry as competitive as venture capital depends on building long-term relationships with investors, other GPs, and founders.

Describe the process of launching the business.

The process of creating a venture capital fund is fairly regulated, especially because we have been engaged in investing for a long time so we have a lot of experience in this business. Therefore, the main question when we were at the incipient stage of the process concerned choosing the right legal structure for our fund, so we worked with leading legal and tax advisors to create a structure that would be optimal for our LPs.

Also, since we take governance protocols very seriously, we needed to establish the right reporting and communication mechanisms to ensure that we were always in line with our stakeholders and addressed any issues promptly and transparently.

After this, we went into fundraising mode, identifying who our ideal limited partners (LPs) would be, and developing an attractive value proposition to be able to raise the money we needed. Some key questions that we addressed were:

What are our core strengths?
Why are we the right fund managers to create sustainable, long-term value?
What are our key advantages and capabilities in the countries and sectors that we will allocate our capital to?

Having this clarity was very important because the investment world is very broad, and it can be very easy to get caught in the hype surrounding a particular sector. So the process of launching our business also involved saying “no” to a lot and maintaining a laser-focused strategy to build up those things that we knew we would succeed at from the get-go.

In terms of pitching LPs and explaining why they should choose Alfin Ventures, I would not use the phrase "Alfin Ventures and not the other." Instead, I would say "Alfin Ventures AND others."

There are many outstanding funds in the market. What sets us apart is our unique combination of geographical diversification and industry focus. We’ve specifically selected the UK and Israel as our core regions, which are well-developed in terms of the VC ecosystem and where we have excellent outreach.

Within these regions, we focus on the most developed sectors, where we have expertise – fintech in the UK and innovative software in Israel. As a result, we offer our LPs exclusive access to high-performing sectors while simultaneously mitigating risks through geographical and industry diversification.

Since launch, what has worked to attract and retain customers?

We have already invested in eight early-stage startups coming from diverse industries: Yaizi, Wectory, Abingdon, Funverse Games, Quack, Vabble, Torus and Newhedge. With all of them, we are actively working with and helping them to succeed, and this will be the case until we exit our investment. We have great connections within the VC ecosystems and partners like accelerators and VC funds. The best deals usually come from our partners and founders of our portfolio companies.

This is important both for the growth of our portfolio value and for the relationship we have with our portfolio company’s founders, who often do not retire after exiting their startup, but use the proceeds to create a new venture. This makes it possible for us to be their first investor in their next business, and create another opportunity to earn good returns for our LPs.

One of our key advantages is our speed when making investment decisions. We set ourselves the goal of spending no more than 4 weeks from the moment we first connect with the founder to signing the binding documentation. This helps founders have certainty that we will deliver on our promise and give them a firm decision.

As an early-stage fund, we mostly rely on three key criteria:

Solid founders with relevant expertise and strong execution skills
Whether the startup addresses a real existing problem.
If the startup has a competitive advantage over its competitors.

We then use key financial metrics to validate our hypotheses.

We also build bridges of communication between our founders, creating a community of entrepreneurs who are backed by Alfin Ventures. This allows them to exchange experiences, help each other operationally, and learn from the best practices in the industry.

Many founders are addressing similar day-to-day challenges. We begin by connecting them, allowing them to share their experiences, including fundraising, go-to-market issues, hiring, and more.

Starting in 2024, we are planning to transition to annual offline meetings where we can bring all founders together in one location. We firmly believe that we can foster a community of friends and fellow founders, which would be a valuable complement to achieving sustainable fund returns.

In terms of our LPs, we have helped them mitigate their risks by diversifying our portfolio by industry and geography (Israel, Great Britain). For our investors, we also provide an opportunity to diversify by offering them access to co-investments, a strategy that has recently been gaining popularity among private investors and family offices.

How are you doing today and what does the future look like?

Today, we have already made several investments, and some of the companies that we have invested in are now in the process of raising their next round of funding, so we can say that Alfin Ventures has contributed by helping them build an excellent foundation for their future success.

Among our top investments is Yaizy, an ed-tech venture offering experiential learning courses for K-12 students in the United States. We are the first investor in the company, we have a board seat and are actively helping the company establish its business in the US market. We also supported the company in opening a technological and methodological center in Portugal.

Another portfolio company is Newhedge, which is like a Bloomberg Terminal for cryptocurrencies. We are the second investor in the company, striving to assist the company in expanding its B2B sales pipeline by leveraging our extensive network of hedge funds and financial institutions.

An additional portfolio company I would like to highlight is Funverse Games, which is a promising gaming studio. Since the moment we invested, we have helped this startup with marketing and expanding the founder’s network in the gaming industry.

In terms of our plans, we are aiming to close our fund by the end of the year, after which we will focus on increasing our portfolio. With our current fund, we plan to invest in 20-25 startups in 3 years. When we created the fund, there was a desire to add projects to the radar in the Asia Pacific region and in the United States, where the startup ecosystems are also well developed.

However, at the moment we decided to focus on Israel and the UK, where we have an established network and expertise. We may look at additional markets in more detail when raising our next fund.

Through starting the business, have you learned anything particularly helpful or advantageous?

When you do something for the first time, you always learn something new. In our case, it was our first time creating an investment fund from scratch, and our learning curve was primarily concerned with the experience of structuring funds and attracting LPs. During the structuring process, we compared different jurisdictions (USA, Cayman Islands, Luxembourg, Dubai, Israel), to determine the optimal structure for investments in Israeli and UK companies, and we managed to create the most effective structure for LPs in a few months.

In the process of creating the fund, we actively communicated with other GPs, and in this process, we were able to calibrate and reach an agreement on how to market our fund, what our budget for the back office would be, and strengthened our funnel and pipeline to be able to attract more investors and meet our fundraising targets. To do this, it helped us to refine our value proposition and to have a lot of clarity in what we were bringing to the table.

What platform/tools do you use for your business?

Crunchbase to track valuable data points including investment trends, startups, growth industries, and more
Affinitive for CRM purposes
Carta to track my fund’s equity position in each portfolio company and share real-time data with my LPs without manual data entry
Calendly to track my schedule
Notion to track our day-by-day activity
Bloomberg Terminal for analysis of the macro environment, public companies performance, derivatives, currency pricing, etc
Newhedge Terminal for deep analysis of crypto market

What have been the most influential books, podcasts, or other resources?

Many resources have influenced my path and provided me with valuable knowledge and insights. For example, I read TechCrunch and Sifted daily to stay on top of what is happening in the tech world. I also listen to the A16Z podcast, produced by the iconic Silicon Valley firm Andreessen Horowitz, and to Harry Stebbing’s 20 Minute VC podcast. I can also recommend Guy Katsovich’s Fusion VC podcast, which is available on Substack.

Advice for other entrepreneurs who want to get started or are just starting out?

The key to success, from my experience, is a combination of a solid technological background, knowledge of the latest high-tech trends, and soft skills, especially networking. Success in an industry as competitive as venture capital depends on building long-term relationships with investors, other GPs, and founders.

Moreover, the investment process does not end when a transaction closes – it is necessary to continue to maintain relations with your founders to help them grow, learn from their experience, and keep the door open so that you can create new projects together in the future.

Also, do not be shy about sharing your ideas with other members of the investment community. The venture capital industry will grow faster if, instead of a competitive spirit among investors, the spirit of mutual assistance prevails. Always remember – sharing is caring.

Are you looking to hire for certain positions right now?

We plan to close (which means to stop fundraising and shift our focus to exclusively deploying capital and supporting our portfolio companies) our fund by the end of 2023, after which we plan to expand our team of investment professionals to search and analyze new opportunities.

We also help our portfolio companies to hire talent, for this, we plan to open a special section on our website by the end of the year once we have concluded the relevant framework agreements with our partner recruiting agencies, so stay tuned!

Where can we go to learn more?

If you have any questions or comments, drop a comment below!