Starting up in Baltic Deep Tech & My Personal Views as a VC on How to Back Future Juggernauts

What it takes - in my view - to get a Juggernaut off the ground:

Let's get one thing straight about early-stage startups: there's a battle rhythm to follow — a disciplined, methodical approach to growth that, if not respected, can lead to catastrophic failure. This isn't a playground; it's a proving ground where strategy and execution are tested to their limits.

The goal of the early stage founder is to produce a systematic, disciplined order what fosters and allows for the emergence of something truly innovative — a structure within which creativity can flourish.

Let’s break down the growth phases of a startup the way I've always seen it using the Value framework I created for clients when doing innovation consulting:

1. Pre-Seed (Value Creation):

This is your mission briefing, where you define the objectives. Here, at Baltic Sandbox VC, we focus on deep tech and genuine innovation. It’s not enough to have a good idea; you need a vision that challenges the status quo, that provides a solution with intrinsic value that is revolutionary enough to redefine a category or creates an entirely new one. Founders who approach this with the mindset of developing a fundamental scientific or advanced engineering edge in research and development, rigorously questioning and testing their ideas like a scientist in pursuit of truth - those are the founders we want to back at this stage. Unlike VCs that - even though they say they invest in pre-seed and seed - if they weren't lying through their teeth and wasting Deep Tech Founders' time they'd tell you they really just want to see any commercial traction to even consider an investment. They have zero ability to see beyond the hype when some 'pedigree' founder with some 'brand name logos' on their CV and some initial commercial traction or compelling jazz-handsy narrative with all the right buzzwords comes to them because they lack the competencies to evaluate defensibility, IP value, or understand what real value creation is.

Key Goal: overcome technical risk

2. Seed (Value Delivery):

This is where the rubber meets the road on execution. This stage is about transforming your strategic vision into a tangible product. It requires the operational efficiency of a platoon hitting their targets while themselves coming under fire. Your delivery must be reliable, effective, and above all: quality. This means crafting a user experience so seamless that it can become integral to the customer's daily life, thereby validating your idea in the market under real world conditions, proving it is more than just something people want but that they want it because it addresses a real problem or need you serve. This isn't the place for financial projections and metrics, as many VCs will ask you for at this stage if they don't understand the game. You should have a budget, sure, and a clear plan for utilisation of funds that aligns with your intended activities led by a smart business strategy. You should have an understanding of which customers you want to serve, why those, and how you'll validate/invalidate it. Likewise you should have clarity on how by serving the value proposition you offer you should be able to not only generate value for the customer but at scale your unit economics - at least reasonably in theory - should look. No more than this! Investors may ask you for more, they'll say it's to 'see how you think' as a Founder. It's complete nonsense. If you're an engineer-founder your value add doesn't come from financial modelling, and that skill doesn't convert customers, drive sales, or help you validate or invalidate an embodiment of your product.. which is what leads to something better than financial models: financial results!

Key Goal: overcome product execution and operating cadence risk

3. Series A (Value Positioning):

In business terms, this is where as you've validated those ICPs (ideal customer profiles), you've demonstrated some post-launch growth in different vertical(s) and/or. cohort(s), when you start your branding and market positioning exercises—establishing your product in the right place within the consumer's consciousness. Your startup needs to develop a narrative that resonates, that speaks to the deeper needs and desires of your ideal customer profile, and firmly establishes your place in the market ecosystem. You can only do this well when you've heard and listened deeply to what your customers are expressing as the value they unlock through what you've delivered, and use those narratives and elements of story to curate and craft one for your brand. Idiots who expect you to be pitching this at Pre-Seed are exactly that: idiots. You should be doing the pitch well like this at the Series A level. Before that it's not the Engineer-Founder's job to pitch and jazz-hands, it's the investor's god-damn job to understand where the value is and how it can manifest and work with founders from the real ash-level through to enabling them to rise like phoenixes as they mature. At Baltic Sandbox our goal is to help teams between Pre-Seed through Seed to get to and through their successful Series A.

That said, we don't stop there... because like my Kung-Fu Sensei taught me when I was a younger lad on how to break the wooden plank with a punch: "your target should be further, deeper beyond the surface you see right now."

Key Goal: overcome market acceptance risk (CAC/LTV ratios) & validate potential for Product Market Fit (PMF)

4. Series B (Value Perception):

Perception shapes reality. In this phase, you must take command of your brand's narrative and expand its influence. This is akin to winning hearts and minds—it's about leveraging the power of customer success stories, and the psychological impact of social proof to scale your growth. It's a psychological operation on the market, enhancing your product's perceived value and deepening your market penetration. This is where you need to demonstrate the ability to work with larger growth and scaling budgets into your vertical(s) of focus, and demonstrate the potential for expanding your TAM through additional innovation, opening new verticals as much as new markets. This is where you bring in an executive team to work alongside the Founders, it is also where your CFO comes on and you can start financial modelling to pitch your next round of investors. Anyone who asks you to do this at Seed or Pre-Seed is asking you to tell them fairytales, send them a copy of the childrens' book I show to my 8-month old (to be fair, even she's bored with that, but seems many VC's in this region so far haven't grown out of it!)

Key Goal: overcome scaling risk and prove sustainability of high-growth metrics

5. Series C (Value Capture): Now you’re securing the territory you’ve captured. With the innovation you've brought to the field and the efficiency of your operations, you must now ensure the economics of your business are sound and sustainable. This means focusing on scaling outwards, broadening your operational reach, and capturing more market share with a disciplined approach to business development. This is also where you should be in the business of "producing gravity", pulling in talent, acquisition targets, customers, and capital through sheer gravitas of the world everyone can finally now see is emerging, and you go from being obscure to an example... and while it's been a long journey to get here, everyone starts treating you like an 'overnight success', and in your beating heart you know that the time you were that excited about this was back at Pre-Seed, when the blind (VCs) shouted at you for trying to help them cross the street (to generate actual positive TVPI vs optimise for AUM that Management Fees are based on since TVPI won't be seen for a decade anyway so that's not their immediate problem, right?). This is the stage, too, where you work on being more a figurehead but otherwise fully work on removing the reliance of the business on the Founders for execution through boosting the incentives and capabilities for that executive team. You're still involved, the journey is far from over, and you remain in the trenches with the team, however they should not lose direction if you're taken out. That's when you've created a team and organisation that is more than you, but a phenomenon in it's own right.

Key Goal: demonstrate ability for TAM expansion (more verticals, markets, and positive value capture - aka profit potential - from a unit economics perspective).

Applying this knowledge is akin to executing a strategic battle plan. It requires clarity, discipline, precision, and an unyielding commitment to your objectives. You need to set clear goals, maintain a hierarchy of tasks, and execute with relentless consistency.

This is the essence of building a startup that doesn’t just survive but thrives. It’s about more than chasing trends or vanity metrics—it's about constructing a business that can stand the test of time and chaos, that brings order to the market, and that delivers value so undeniable that it becomes a cornerstone of the landscape in which it operates.

Here's the kicker, in EU, few if any VCs really understand this. It's improving, but still a long, long way to go.

Watch out for the Biases that EU & Baltic VCs Chronically Suffer From:

At the earliest stages these companies look so meek, humble, fledgling, that VCs feel validated in explaining what founders 'should' be doing when they're talking to people with 10x their intelligence, capability, and commitment. I can't blame them, because we've all seen founders that are clearly deluded into thinking their product that essentially is just an API to ChatGPT and no fundamental tech edge justifies a 10M EUR valuation... but with that said: these same people have shown to be extremely prone to treating all founders the same due to overgeneralisation bias (this is the cognitive bias where people will take one or two situations that are similar and generalise them to an entire category - as they'll say I'm doing with VCs despite the fact I'm stating that there clearly are exceptions, and if you're one such exception then please reach out to us, we're more than happy to share deal flow at Baltic Sandbox VC and are looking for fellow kindred spirits who actually deploy at the pre-seed to Series A stage in particular based on the definitions above... but I digress...).

One VC that claims to invest in Deep Tech that I know of apparently completely wrote off a sector / segment of the market after one bad investment in that space, showing little to no willingness to even post-mortem the failure case for future learning - I can understand deciding that space is too complex, but it's a disservice to not post-mortem an investment that clearly had some decision-making that led to that in the first place. How can one improve otherwise?

Another irksome bias VCs love to use against founders here is Base Rate fallacy (which is when you consider the base rate of something - e.g. 90% of startups failing) and apply it to every case you see and consider that the likelihood of failure. To me, this is an admission of their own stupidity when they express this expectation, because even rudimentary intelligence applied to selection should mean that one would expect case-specific information and variables being considered prior to investing to have positive skew against base rate outcomes.

The last bias I'll mention to not make this too long, is the shockingly dumb one that a VC openly acknowledged and even boasted about doing in a room full of founders: focusing only on Founders with 'pedigree'. They openly showed their 'decision making process' where they open their CRM, look at the potential companies in pipeline, look at founders info, click on LinkedIn, quick skim to see if any big name companies they recognise, and if none then they move on to the next. Endeavour VC published a study (link: https://endeavor.org/knowledge-center-events/research-report/unicorn-founder-pathways/ ) of unicorn founders and it showed that only 20% of unicorn companies were founded by those who had any 'big logos' on their CVs. Between this and the fact the same study showed more than half of unicorn founders are immigrants, yet in the local region one VC fund partner said my co-founder Youssef and I weren't 'Baltic enough' to receive financing - it goes to show the state of play here is doing a major disservice to the pension funds and private allocators trusting these folks to invest money intelligently.

How can allocators that allocate to such people expect to generate returns or improve the ecosystem when they hear one thing but in reality this is how their capital is being managed? If I were an LP in such funds, personally, I'd be livid.

Capital and Competence: The Intersection of Founder Insight and VC Strategy

Anyway, as a Founder I often take it with a grain of salt when a VC tells us what we 'should' be doing, of course consider the perspective but understand that it tells me more about their ability to understand our market or their thought processes on risk and investing than about what we necessarily should do. That, and importantly at what stage they 'really' invest in (many 'late Seed to Series A' investors are firmly Series A+ in this ecosystem, for example). Yes, it is irksome. In my conversations with Founders they smile and get back to those VCs later, and won't necessarily say it to those VCs faces, but I can tell you folks: they're talking about you pretty candidly in certain Founder circles. And at a recent ESA event in Estonia it was funny to see how that was said out loud on stages that 'VCs in this ecosystem are mostly dumb' (not my words by the way, though I can't say I disagree) as well since it was mostly deep tech folks in the room. So for the VCs reading this, understand something: as soon as any slightly-smarter capital comes into this market at your investment stage, your deal flow will dry up in a femtosecond. Also: I am personally seeing to it that this is going to happen.

Most VC advice often translates - if they were honest - into: "make me feel comfortable by doing things at pre-seed that look like me" (financial modelling, like they do with their management fee calculation based on AUM all day long and look forward to that sweet fees-related cap-call that they justify by 'doing deals' into stuff they can 'look good' doing when showing LPs to get them to double down on the next fund before the current fund has any actual final results to show, whether or not these investments really are good based on insight the LPs are meant to be paying for - but hey, visionless wealth management approaches on the LP front are what leads to investments into visionless wealth managers, so VCs aren't the only problem)...

From NVIDIA's Jensen Huang who also said at the early stage financial models and business plans are meaningless (sure, I am paraphrasing) to Justin Kan who received funding from Paul Graham before Justin-tv even figured out they could enable others to stream their own content with their technology leading to Twitch and the eventual acquisition to Amazon; what generates results in Venture is not a Financial Model or Business Plan, arguably that's the smallest part that matters, as relevant as the principles behind those are - it's the thesis on the opportunity space being as spot-on to the reality of the market, and the founders / team having an edge - preferably a fundamental hard-to-replicate edge - to serve those market needs. That's it.

I'm really not knocking VCs here... I am, however, making an earnest effort to 'trigger' and lose those who aren't earnest about what they're doing (they probably stopped reading already) before I share our approach. I can see you Founders and builders-who-have-become-Funders nodding along and smiling - maybe even chuckling, at those jabs if you've interacted with some of those types. Great, you're the ones I want to be talking to here.

Now let's get into the meat of it, 5 things to keep in mind...

1. Thesis: In various market domains, and competency domains, as well as their sub-domains I have an internal approach to defining, and as new information presents: refining, our thesis - or: theses - on what we see coming in the future. We've made a bunch of investments in that direction, and we'll soon be announcing those with some articulation of our thesis elements, if you can spot those. Our thesis is not particularly unique in that sense, Perkins - of Kleiner Perkins, a US based VC fund whose fund 1 returned 46x TVPI - was also known to say:"Market Risk is inversely proportional to technical risk because if you solve a truly difficult technical problem, you will face minimal competition thanks to the high barrier to entry."Going back to NVIDIA, they were investing in building chipsets to power the AI industry more than a DECADE before ChatGPT hit the market, and years before OpenAI even existed. The reason their stock price is skyrocketing today is because of things done more than 10 years ago. That's the vision it takes to generate alpha, but it's about more than an intelligent thesis & vision...Key takeaway: build and formulate a thesis around at least your own domain competence, and go from there.
2. Competence - the Core Technology and Thesis-informing side: While we actually have engineering and scientific training at our fund, and are engaged in building bleeding-edge innovative businesses, we recognise our competencies have their limitations. We've taken years to build a network of experts from pharmaceuticals and biotech to AI, Robotics, and even ex-NASA astrophysicists, likewise we've partnered with various organisations from top tier Universities in Lithuania to CERN as well, as a way to expand our reach into technical domains and constantly learn to evaluate and understand the direction of research and hence the core value created by teams we consider investing into. It's hard work, and most VCs are too comfortable earning fees on AUM, we prefer to consider ourselves more carry-oriented and we deploy much of our fees into building infrastructure to support portfolio outcomes.Key takeaway: have some humility as you continue learning and expanding domain competencies to inform and improve your theses, and consider how market dynamics could evolve around such spaces instead of just how they are right now.
3. Competence - the Venture side: While we understand it's the Founders' job to explain what they do, we believe it's MORE so - especially at Pre-Seed and Seed - the investor's job to understand and work to develop conviction through logic, insight, and careful foresight. We engage more deeply with founders than most VCs do and get hands-on (as I did when I was angel investing, now I only invest through the fund - for various incentive reasons that our LPs also love) to back these teams. Our job as VCs is to model things out and consider the venture outcomes, not ask an engineer to get back to us with it with excel files when that's not pertinent for them to do so in order to produce such outcomes, they simply need to be coachable and logical enough to consider such information when presented in moments of decision consideration. The informational inputs from them are all that's really needed. I guess we don't shirk away from actually doing some real work.Key takeaway: do your own financial modelling, and understand what your stage sweet spot is when investing, and communicate well to founders - Charlie Munger recently mentioned how most managers they work with not just dislike but hate any VCs they've partnered with in the part, and that it's not a 'true partnership' after all - don't be that stereotype, be better.
4. Acceleration - by actually being helpful: Yeah, we run an acceleration program. Yeah, there's a ton out there. They all say they're different, so don't believe us when we say ours is, ask some of the Founders who've been through a few different accelerators as well as ours to have them tell you what they think about ours vs others :) If you want to talk with some of them happy to connect you, or you can find them anyway in the weeks ahead as we announce investments into teams and you likely will be able to figure out which other programs they were a part of, and how helpful / not those were in getting them ready for the challenges ahead of them.Key takeaway: the number one job of a capital provider with networks in capital markets when partnering with a founder/team focused on building an opportunity is access to network and consideration of capital needs towards manifesting and effectively exploiting the opportunity that team is creating. Get your hands dirty 'where it counts'. If you're not evangelising and enabling, you're a burden on the cap-table.
5. Beyond the initial deal: Deep Tech is not - I repeat: it is not - a space for the 'one and done' type of investors. I am on a mission to keep the spray-and-pray-ers and one-and-done types of VCs (angels, fine, but VCs no) out of Deep Tech deals. They do more harm than good by not understanding the consideration when financing and investing in such assets, and they do both founders/managers as well as their LPs a deep disservice by being so finnicky. At our fund a majority chunk of our Seed capital will only go to our Pre-Seed investee companies. The only question is how much and to which ones. That depends on their progress and the merits that matter at the relevant stages. Beyond additional capital, we continue being available as they request to advise, providing access to the same mentor network even after their program concludes, and really advocating in the investment ecosystem for our teams well beyond and past when the acceleration or demo days happen. We're thinking through all the stages well past Series A, to make sure our teams can hit the exit that we as a fund need to hit to generate TVPI for our LPs and for the founders to achieve the success and impact they want to make in the world by building towards their vision. VC is, after all, a business of EXITS, not simply throwing capital around and hoping for the best. It is stupid in my opinion to not adequately back a performing Deep Tech company against metrics of run-off-the-mill SaaS because of being a one-and-done style investor for the most part who only wants to double down on initial commercial traction metrics that won't translate into long term value because of extremely low defensibility. Google wasn't the first search engine, after all, but it was a company with Deep Tech advantages that AltaVista, AskJeeves, Yahoo, AOL Search, etc did not have. That edge, more than anything else, is what made the biggest difference.Key takeaway: develop exit opportunities and align those with the founding team, do not go in at pre-seed expecting the founders will have this figured out. This is your job to consider if, how, when, on what basis, and to whom you may and would be able to exit. Foster those relationships as you would participating capital provider relationships. If you don't wan to do this leg work, why participate in venture? If you want passive investing, choose to invest in someone else who will put in the leg work properly. Investing is a business, and should be treated like one.

Relying on lucky guesses may have worked so far here, but in a future dominated by deep tech, we're keen to collaborate with founders and funders who value meritocracy and competence in deliver over the glitz of pitching contests.

Our passion lies in supporting STEM-savvy founders, who operate where the margin for error is razor-thin—a realm where an engineer’s faulty bridge can mean loss of life, or a surgeon’s mistake can have immediate grave outcomes. They transfer this rigorous discipline to their businesses, ensuring they perform, endure, and commit as if lives depend on it—because, often, they do.

At Baltic Sandbox VC, we prize the engineering approach. We invest in strategic connections and ways to foster deep tech innovation to achieving market results. Our acceleration efforts seek to expand the type of industrious mindset that breeds precision, pragmatism, and professionalism. We back those who realise that true impact demands more than a great pitch on stage; it necessitates a powerful commitment to excellence and delivering substantive value.

I would consider us a 'value investor' VC in the sense that the value we look for is in IP edge and the intangibles* within the team. Of course being venture it is high risk, however, we believe our selection and approach will lead to higher returns.

*I say intangibles, but they're only so from an accounting perspective, not reality. At this stage of a business, they're the most tangible thing that builds the rest of it.

I'll also be running workshops on deeper functional aspects we utilise in Baltic Sandbox VC, which will be particularly interesting to Family Offices, Angels, and others who seek to participate in Venture. I'll also over time share some of my own theses and decision analysis infrastructure (that is kind of internal 'secret sauce') to selected investors and on a limited basis in this ecosystem provided they align with our mindset. The goal of those workshops is to help expand decision insight, access to + discovery of deal flow, diligence + expert network support, and a whole lot more. I believe whether you're a Family Office or individual Angel, the venture allocation of a portfolio should be approached with - like those in STEM professions - a level of professionalism whereby that one would approach things with understanding that lives are at stake. We have LPs investing in us funds the returns from which are meant for their children or grandchildren who will be in University or beyond by the time we pay out. Or business people and executives putting aside some allocation for their retirement years. It's a responsibility we take seriously and are honoured to be trusted with.

We see founders all the time genuinely making the world my 8-month old will grow up in a better place, and building opportunities that are commercially extremely compelling, but they're scrambling to raise because many investors locally are too blind and - frankly - too useless to effectively back them. Deep Tech founders are growing increasingly weary of capital allocators who haven't backed their previous Deep Tech teams properly or have shown to be mostly useless (these aren't my words, but those I'm relaying from private founder groups - the uselessness refers to when name-dropping those VCs to international investors, the reputation of the local investor being 'dumb money' precedes them, to not really engaging with Founders to help enable the fundraising process). We believe we can - in our small way - help change this state of play by participating in revitalising the innovative potential in the Baltics and EU - taking Deep Tech from a buzzword but a deeper commitment to true innovation...

...but we're by no means perfect, we will make mistakes, and we cannot do this alone. This is a call to fellow funders to join us in candid exploration on how we can all do this better as professionals who want to see this space continuously improve to not simply get to the world-class level it can be, but set the standard.

We're just getting started ;)

If you are an investor and want to join the seminar I'm planning to organise to openly share what our approach to investing is, please fill out this form: https://tally.so/r/wApgyW

If you're a founder looking for funding and to work with us at Baltic Sandbox Ventures, warm intros don't necessarily help you, nor does a pretty deck, but what will help is if you're building something of fundamental value and have a commitment to making it Big - if this sounds like you, you can apply for funding here: https://www.balticsandbox.ventures/

Onward! ??