“Looking for money? Come to us.” Dmytro Vartanian, SID Venture Partners, on latest deals, plans for 2024, and winning pitch

Dmytro Vartanian, General Managing Partner at SID Venture Partners, told in his recent interview for AIN.UA about the launch of syndication deals, plans to invest at least $2-3 million in 2024, his POV on how to do the right pitch for startups, and the hottest domains from the investor’s perspective.

The last time AIN.UA spoke with you was in August 2023. How good were these six months for SID Venture Partners?

We looked for new startups, communicated with them, visited conferences, and discovered many beautiful projects. Some already received funding from us, and some are still in negotiations. A few of our startups already moved to Series A, their next development stage.

If we consider the full-scale Russian invasion a turning point, which investment goals did your venture fund achieve for the last two years?

We did almost every investment after February 24, 2022. It’s 22 deals in total at the moment, two of which require additional investments. For the last 24 months, we invested about $4.5 m.

Did the startups change their priority domains in the venture capital market in the last two years?

Yes, they did. At that time, Web3 and blockchain were very popular.

Everybody tried to find a solution to use these technologies, and some banks and logistics companies successfully implemented them. However, the current startup ecosystem finds the topic slightly obsolete because anyone can see difficulties in fundraising for this kind of project.

The bestseller is AI, widely used by all. We also invest in startups working with AI in a long-term perspective.

Speaking about AI, we can see a situation similar to the IT market during the war, where the supply is far higher than the demand. It’s too many pitches by a limited capital flow. How do you select promising AI startups among non-promising ones that try to take advantage of the current hype?

We have a few general partners who have professionally worked with artificial intelligence for many years and know this domain well. For example, it is Anton Vaisburd and Kirill Kirikov, the co-founders of Datrics. So, our venture fund has more than a clear understanding of this technology.

We examine startups: Web 3.0, blockchain, or AI are simply tools that one can use for different things and business applications. So, by selecting a startup, we decide based on whether we believe in the idea or not.

Some ideas can get confirmation of our belief in the form of small checks to prove their viability. Several startups already got paid traction—the customers—so even if we are unsure if an idea can develop more, we can invest more since it already has cash flow.

Did your average check change during the war? Or does it remain the same $300,000?

Now it is between $230,000 and $250,000. We also have a group of small-check startups in the early stages. They got like $50K. If a thing is “a revolver,” we can give them more investment in the following rounds, with a higher estimation value of course.

Our fellow investment market actors noted that a startup must be present internationally and diversified to attract funding since any investment in a fully Ukraine-based product is quite risky. Does it work for you as well?

It works for 100%. Tech startups that are worth real attention can develop internationally. Thus, they will more likely get supported by other investors. Even if it would be a big success in Ukraine, there will be a moment when more investments are required. And nobody knows whether foreign investors will look at that startup because they keep their eyes on those with US and European perspectives.

So, it’s one of our key parameters. Yes, the team can stay in Ukraine. It’s not an issue at all. But the business must be international.

We represent a venture that invests in startups with Ukrainian founders and global ambitions. Every company we invested in has foreign customers and a foreign presence.

Based on your observations, how do Ukrainian ventures feel at the moment?

Ventures struggle all the time, whether they are Ukrainian or international. They need more funds, clients, specialists, etc. So, the Ukrainian startups don’t seem any different from the American ones.

You mentioned 22 deals during the fund’s investment period. Please tell us about the latest ones.

Our latest announced deals are investments in Respeecher and AiSDR. Both companies have been doing the most innovative things with AI. Respeecher has already earned a worldwide name for its ability to synthesize and reproduce voices using AI, and its services are used by the world’s leading film studios. AiSDR is a new company by brothers Yuriy and Oleg Zaremba, recent Y Combinator graduates. The startup has been creating an AI assistant that significantly speeds up the sales process.

Several deals have yet to be announced. One of them is an exciting MedTech startup of Ukrainian origin, which is also related to artificial intelligence. It analyzes data from medical equipment and already has customers worldwide. We liked them as a team for their professionalism.

I know you have launched syndication deals. Tell us about them.

As we thought about creating a venture fund, we realized we wouldn’t go solo but a series. Now, we support startups in the early stages. Later, we want to make a more significant venture to support startups in the late stages with checks starting from $1 million.

Currently, we try to syndicate—precise investments within a separate entity with allocated $200,000-$300,000 to support a specific startup during a fundraising round. Syndicate is based on AngelList, a famous platform for early investments with over $8 billion of total investments attracted at the moment.

We have two such projects and invested in both in the early and following rounds and now, we want to run syndication deals for them. It’s a kind of private deal within our community where we do quality assurance as a responsible investor. Our task is to protect the Ukrainian investor community’s right to participate in quite exclusive deals that would be impossible for them despite their bright “angel” status.

We want our investor, IT, and startup ecosystem to expand so that more actors with smaller checks can also invest. The venture has a $50,000+ entry limit. But within a syndicate, you can start investing with $1,500, including crypto payments.

How do your co-investors like the news from Ukraine about searches in enterprise offices?

They didn’t tell us any concerns regarding this, but the situation isn’t great for the Ukrainian government or people. However, those startups cannot face the problem in their current development stage.

Moreover, most are registered abroad and only have a dev team or other specialists in Ukraine. It’s not about fiscal checks. Historically, startups use a limited number of popular jurisdictions. For example, the State of Delaware (US) has unique legal entity registration terms.

I also want to ask you about GR. What requests do venture funds have to the government?

We, as a venture, have no requests. However, from the other side, as a member of a tech ecosystem and founder of Sigma Software, I support positive government initiatives. We cooperate with the Ministry of Digital Transformation of Ukraine. I participated in discussing and writing the Diia.City bill as a lawyer.

We work with the government in this regard, but I would not associate it with the venture because it is an international story with only indirect connections with Ukraine.

Let’s return to SID Venture Partners. In your last interview, you said you had no exits. Is it still so?

Yes, it is. And it is OK. From the very beginning, at the end of 2021, we knew the fund would invest in the next four or five years. Let’s wait until next year or a bit longer. And then, we will have five years for exits.

An average venture lasts ten years, sometimes even 12, in the case of an IPO.

What are your investment plans for 2024?

We are constantly looking for new startups. And the market knows this. Last year, we got two awards: Best Investor from the Ukrainian Startup Fund and Startup Awards from Lift99. It’s vital because people must know where to go if they need money. Come to us.

Do you have some minimum deal plan?

We plan to invest at least $2-3 million this year. Or even more. Currently, we have $5 million to invest within the next two years.

You said, “Looking for money? Come to us.” How to do the right pitch for a startup so that Dmytro Vartanian himself would get interested?

*Laughing* Normally, we listen for 30 to 60 minutes, including Q&A after a presentation, for a deeper understanding of problems, if any.

For success, you must know your business well before an interview—its core metrics, product roadmap, sales, and market expansion plans. The founder must not get stuck with all the data.

Then, a recommendation from others also would be fine. Sure, we are ready to listen to pitches without references. However, a good reference always increases your chances.

Last but not least, the startup should get our attention. Ideally, it must be already growing and earning money. I know it’s uncommon. Most startups come in the very early stages for funds during the MVP. In that case, we examine the founders precisely because they must show their expertise and come with some experience.

You have to be able to sell your startup to investors the same way you did it to your clients.

Investors increasingly help startups grow by consulting on operational and marketing activities. Do you do that?

There are so many ventures in the world. What makes them look different except for numbers? Because all have the money. The value they provide makes the difference. For example, they can give some of their clients to the startup, provide them with tech support, conduct an audit, etc. The more a venture helps, the more attractive it becomes for startups. All our GPs have an IT background. So, we can assist in this area as well. And the startupers obviously like it. Added value is the main feature and quality of our venture fund.