We did it for the third time! VC round of 20 million at a valuation of 120!

At the end of 2020, we entered the VC path. After these just over three years, I know it was a very good decision. Understanding and improving key metrics is creating a better product. The rigor of VC doesn't allow for excuses. The first round with Portfolion helped us become metric-driven and revise the business model. The next with Atmos and Mueller Medien forced scale-up thinking and discovery of the ICP (Ideal Customer Profile). The third with InVentures will allow us to scale the business with much better efficiency in verified markets. With outside capital, we were able to understand more quickly where the most important value was for our customers and how to scale the business so that every dollar spent brought in more than a dollar of recurring revenue.

Let's start with the end in mind

In 2023, we doubled revenue in Brazil. We also improved sales efficiency and NDR (Net Dollar Retention) in Poland. In December 2023, we raised VC financing for the third time. Investors paid 20 million for newly issued shares at a valuation of PLN 120 million ($5 million and $30 million, respectively). The newly raised funds will allow us to accelerate our operations overseas. and further investments in the product, will increase automation with artificial intelligence support.

A few months ago, we introduced title and introduction content generation for newsletters. The functionality combines our experience with Sematic AI and Chat GPT4 via API. A few weeks after the introduction, more than half of newsletter creators have used the functionality. Previously, we released search engine support (AVA - online shopping in natural language). We are currently working on the next iteration of Generative AI, but this will deserve a separate text.

Back in 2022, to generate $1 ARR we needed an investment of almost two dollars. Today we generate $1 ARR by spending less than 80 cents. The more than doubling of efficiency is due to our strict focus on the segment that gains the most benefit from using edrone. That segment is SME eCommerce entrepreneurs. Besides, we operate in those markets where the product has the best PMF (Product-Market-Fit) and good educational materials.

What's the round?

To quote GetLatka's blog:

“edrone, a Polish developer and marketer of Marketing Automation and CRM systems designed for e-commerce announced another round of funding. VC funds including INventures, Mueller Medien, Atmos, and PortfoLion decided to back edrone with a total of PLN 20 million ($5M). INventures led the funding round. The acquisition of new capital was possible due to edrone’s continuous growth, as the company reached almost $7M ARR and is currently valued at PLN 120 million ($30M).

The investment amounted to PLN 20 million, including the new capital of more than PLN 10 million from INventures and the conversion of debt capital into shares by the other funds. New funds will be used mostly to expand the Brazil branch and hire new employees, at least doubling the company’s headcount in Brazil.”

The investment comes in response to the company's strong growth, reaching nearly $7 million in ARR and a valuation of $30M in 2023. After the latest round, founders Michal Blak and Rahim Blak retain a 60% stake.

"The product, the business metrics, and the idea of international development, won our praise. What sets edrone apart and gives it the potential to grow is effective management. At edrone, the delegation of responsibility to key people in the company works perfectly. They recruit exceptional talent and use the competencies needed," says Katarzyna Dabrowska, CEO of INventures

Lessons Learned.

Few companies are able to raise a first round of VC funding. From this group, only 30% of startups get another round of funding. Later, from this group, again only 30% get another one, and so on. We have succeeded three times!?

Why?

Because we have a good track record in improving Churn, and the NDR (Net Dollar Retention) of the last 12 months has exceeded 100%, although historically it was only 70%.

We are effectively winning customers. The same team is acquiring more than 1.5x more revenue than it generated a year earlier.

The MA (Marketing Automation) market for SMEs is not as crowded as it might seem - there is room to build much more scale. With the right scale and improved lead gen, we were able to disprove the thesis of a crowded market in the segment we focus on. Yes this is good news for us and with the new funds we will be able to increase our salesforce and investment in the new MRR.

These were all our theses. We managed to defend them and this is the clue of startup development. There is no one well-trodden path. In our case, outbound works better and the strategy of land and expand and conquering the market country by country wins over go-global. Theses need to be verified but more than anything you can't emulate someone else's success, you need to test models and find the one that works best only for your business.

What motivates me?

When we started this business together with Rahim and the first few people in 2016, we could only believe that our idea would succeed. It was going to be a "social CRM," a completely different value proposition from the way our business was evolving. We only had a handful of opinions and our eCommerce experience. However, if you want to build a fast-growing organization you will be making decisions with uncertainty. Startups, moreover, are doomed to permanent uncertainty.

You start with the belief your idea will succeed. But if you want to build a fast-growing organization you will be making decisions in uncertainty. Startups already have it that way! However, if you find the expected value proposition and succeed in generating more than a dollar of ARR for every 100 cents spent then you have a chance to repeat the success - to gain further investment in an even better product and team.

Operating under uncertainty and having to make decisions with limited data. - This to me is something standard, acceptable and even desirable. My role and challenge is to make the team also find value for themselves in this uncertainty. For the team to take joy in constantly looking for new solutions and challenging proven methods. To believe that even when things aren't bad, things can always be done better. That's why it's always worth trying differently. Challenge the status quo whenever you think better results can be achieved. The only status quo may be a constant hunger and curiosity for new methods and value propositions.

I would like to have our team see this not just as a challenge but as a value itself. That value is self-development - the ability to find non-obvious solutions in the face of the unknown. There is even a word for this - entrepreneurship. The best recipe for creativity is the need to solve a problem. And although I started by saying that we have already found our method of effective growth and understood what our customers want most, we will find more than one better solution.

This is the kind of company I would like to create: A company hungry for tomorrow. To quote Bezos, a company of day one! I believe this gives people satisfaction like nothing else. That feeling that we are inventing something new and it is better than what we invented or achieved yesterday.

Investors

The new investor is INventures, a Poznan-based VC fund whose philosophy is based on long-term support of a company at various stages of development. It specializes in strategic consulting, helping companies improve their core business areas. edrone is the fund's ninth investment.?

The presence of existing investors PortfoLion, Mueller Medien and Atmos in the new round is a clear confirmation of their commitment and satisfaction with the company's achievements and consistent implementation of the strategy set in 2020.

The Board of Directors, which includes Michal Blak, Co-Founder and CEO, and Maciej Serafin COO, will be supported by the Supervisory Board, represented by: Katarzyna D?browska - President of INventures, Tibor Gy?rbiró - Partner at PortfoLion, Michael Amtmann - Head of Mueller Medien New Business, Sami Moughrabie - Founder and Managing Partner at ATMOS Ventures, Steen W. Sorensen - Owner of VarsoGroup. Thirteen business angels under the umbrella of Robert Ditrych also invested in edrone, including Maciej Zawadzinski, founder of PiwikPRO and WEG Partners.

Thank you for reading and finding inspiration.

Let’s make non-obvious choices fuel towards our success!