“We definitely are looking to increase our presence in Ukraine.” Interview with Borys Musielak from SMOK Ventures

SMOK Ventures is one of the 20 most active Polish VC funds in 2023. It has already done 7 investments this year, including 3 Ukrainian startups: Finmap, Workee, and Masthead Data, and is planning to add 5 more startups to its portfolio by the end of 2023.

AIN.Capital talked to Borys Musielak, Founding Partner at SMOK Ventures, about the ongoing activities of the fund, its nearest plans, and the state of the Polish VC market in 2023.

Tell us about the fund’s activity in 2023: how many active investments were made, have there been exits/write-offs of investments?

SMOK has made 7 new investments so far in 2023, all from our second fund, silently launched early this year. We’ve written off 2 out of 24 companies we invested in via fund 1 since 2019.

Are you currently negotiating new projects or focusing on supporting portfolio companies? Tell us about your plans for the end of the year?

We’re actively investing. We’ve signed two term sheets recently, which should get us to 9 as soon as early October. We’re planning to get to 12 portfolio companies in fund 2 by the end of the year, so generally keep our pace of one investment per month this year and for the years to come.

How does the Polish venture capital market look now? What trends would you highlight?

Less public money on the market means that it’s harder for founders to fundraise in 2023. On the other hand, the funds that are still active, like SMOK, Market One Capital, Inovo, Bitspiration Booster, Simpact or OTB, are all quality funds with proven track records, so once you get their funding, you’re in good hands.

For me not much has changed as the best deals in Poland or CEE are still very competitive, and you need to go the extra mile to be included even in pre-seed financing rounds. 

Has anything changed in the fund’s approach to investing over the past six months — average check, focus, geography. How did the war in Ukraine affect the fund’s activities? 

The war in Ukraine frightened some of the French and German funds, which are less eager to invest in the region now. Nevertheless, that only means better deals and better terms for local funds that are not afraid.

In venture you don’t make money by following the crowd. You make money by being contrarian (and right). My bet is Eastern Europe is where the majority of European unicorns will be born during this decade, and I want SMOK to be the first step of their journeys.

Our average check is still around $250,000 and we invest in CEE and diaspora founders, so no major changes here.

Over the past six months, you have invested in three Ukrainian startups: Finmap, Masthead Data, Workee. Why did you choose these startups? What can you say about working with Ukrainian founders?

Ukrainian founders have a sense of urgency and competitiveness that I haven’t seen elsewhere. They think global from day one, they are not afraid, and they can keep their costs intact — basically key qualities for founders in times of recession. I’m betting big on Ukraine, and I believe some of those investments will be fund returners for SMOK with amazing multiples.

At the beginning of 2023, Ukrainian Oleksandr Yatsenko joined SMOK Ventures’ team. Even last year, you talked about your intentions to hire an investment team in Ukraine. Are you planning to do it? 

We are a small fund. Our whole team now includes 7 people: 3 partners (Diana, Paul and myself), one venture partner (Dan, based in San Francisco), one principal (Sasha, based in Kyiv) and two analysts (Tomasz based in Warsaw and Konrad in Krakow). 

So hiring an “investment team” in Ukraine is a bit of a stretch, but we definitely are looking to increase our presence in Ukraine. We’ll be very active during IT Arena in Lviv later this month, and we’re looking to make more investments in the country over the following years. If you’re a Ukrainian founder, either in the country or in the diaspora, it’s best to reach out to Oleksandr as your first contact at SMOK.

What is the focus for the next investment? What interests you?

What we require from every founder we invest in are passion, knowledge, ability to constantly be learning and not giving up when things don’t initially work out.

At SMOK we’ve funded software startups in a number of industries. We love software development tools (like Authologic, Vue Storefront, Masthead), startups operating in the world of gaming (both game studios like Madcore or Exit Plan Games and tools for gamers like inStreamly or Gitgut). We’ve done a fair share of AI over the years (startups like MX Labs, Bitskout, SLS or Gemelo.ai). But we’re also funded founders who are experts in a variety of industries like hospitality (Smart Hotel), proptech (Propertgage) or VR (ExplodedView).