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Founders Club launches MVP fund
We talk to startups and investors, you get the value.
Rocket DAO MVP Fund was created to finance startups born in the Founders Club startup studio and promising ideas from outside. The fund invests in projects that are in process of creating MVP — this is a rather rare phenomenon, as a rule, funds and business angels invest in companies that have already tested their product on an audience and took metrics. Here is the opposite story. Gabil Tagiev, co-founder of the Rocket DAO startup ecosystem, told how the fund was created, what is its peculiarity in addition to focusing on early projects, in which startups the fund will invest. Who knows, maybe this is your chance to finally launch a startup?
— How did you decide to create a fund?
— We came to this in a natural way. For the last two years, Rocket DAO has been gathering teams, founders and helping them find money in InvestСlub.vc, its own community of early stage investors/business angels. The members of the club serially “invested” in the startups, which were selected and “pumped” by us, because they trusted our opinion and experience. And during this time we have learned not only to put projects on the conveyor belt, but have also reinforced our expertise economically: some projects have grown by an estimated 3-5 times over the specified period, which is confirmed by completed transactions.
We decided to form our own fund for several reasons. Firstly, the InvestClub.vc angels are very busy people, and adjusting to their work schedule did not always have a positive effect on the development of startups. Secondly, the level of trust in us has significantly increased on the part of all players in the venture capital ecosystem. And thirdly, in the venture capital market there is a need to accelerate the growth of startups in order to enter the market as soon as possible, which led us to the idea of the need to accelerate the process of obtaining funds for startups. As a result, the Rocket DAO MVP fund appeared in the structure of the Founders Club startup studio.
The investors who came to the fund not only gave money for management, but also gave the mentors (founders of successful startups from the Rocket DAO ecosystem) the right to choose projects. I managed to convince investors that start-up studios are definitely the mainstream of the next three years and the availability of funds in management is a very important and necessary condition both for attracting founders and for quickly funding testing the hypotheses they put forward.
We are at the forefront of the market, we research it and understand the prospects of many projects, therefore investors have delegated the decision to invest to us. After all, it takes time to understand, to get to know the founders, to prepare a project for communication with investors, and the Founders Club and the fund take over these processes. And after the project gives the first metrics, investors will actively join the process — with their competencies, expertise and connections.
— Founders Club for the uninitiated is...
— Founders Club is a startup studio based on the concept of “founders for founders”. We are developing our studio based on the principles of a decentralized autonomous society — DAO, and on this basis we form an original approach to creating innovative businesses. The largest venture capital funds believe in DAO structures because they are very transparent and inclusive. We are committed to a long process, but we definitely want to do it: we will slowly move from centralization to complete decentralization.
Our startup studio has several components: a finder (a person, which is interested in the topic of startups and development, he is a future founder), a founder and a mentor. The first are developing, the second are doing their own projects, the third are helping the first two and are voting to allocate money for new projects. Thus, we get a classic structure with stakeholders, while at the same time we understand what each stakeholder does and why. In addition, the structure contributes to the fact that its participants are better aware of themselves and can decide for themselves — to stay in this structure or to do their own projects solo.
— What is the best way to do a project: on your own or in the studio?
— When you are developing within a startup studio, the likelihood that the project will survive in the market is much higher. If there are people nearby who can allocate money, give advice, provide mentoring assistance and carry out constant tracking of the project, introduce you to the right people, and provide psychological support — this is very important. Starting a startup is a war, and for three or four years — the founder is under great pressure at this time. In the studio, a person gets much more than when he is working on a project alone.
As a startup studio, we are trying to create balanced teams and startups. This is due to the fact that many inharmonious projects come to us, where, for example, there may be a great team, but a bad product, or vice versa. Each team may have many so-called "red flags" — problems, project, product and management features that hinder the development of a startup. By reducing their number, the team will be able to fundraise more successfully. We create projects from scratch, taking into account all the nuances, and build the foundation of the future company.
— How do you see an MVP fund, how it differs from a traditional venture fund?
— As a rule, funds give money to projects that already have an MVP. Few people give money to create an MVP, so it is very important for us to convey that our MVP fund is an investment in new beginnings and specifically in the creation of an MVP.
A classic venture fund is a kind of legal structure, where investors invest money. Our fund operates on the principle of trust management, where investors entrust us with their money and we conduct deal by deal transactions. MVP fund is a kind of "moneybox", but without a clear fund structure, which, in principle, is needed only for large funds.
At the moment, the fund is already discussing investments in three projects — more detailed information will appear in the near future, which Startup Jedi will definitely share.
— Where will you get projects for your future portfolio from?
— From the thematic discussion groups of the Founders Club — we have several such groups. For example, there are groups on neural networks, volunteering, blockchain, and 3 more new groups are in the process of formation.
At group meetings, "epics" are defined (Epic is a large amount of work on one topic, which can be broken down into several smaller stories. Epic is almost always completed in several time approaches. — Startup Jedi), which in the near future will bring big changes — socio-cultural, technological... At the first stage, the group plunges into the topic around which it was formed, at the second — it discusses the market, at the third stage ideas are born: what could be done now, where there are no competitors, but there is a market that has not yet attracted attention.
Then a team is formed that works on the idea and then feeds it to the mentors — just like a startup does — then creates a pitch deck and P&L (a document, which reflects what the money that the project is asking for) and pitches again. Based on the results, the mentors decide whether to support the project. If it is, then, depending on the needs, the team can receive up to $100,000 from our fund for MVP development.
— Is there any peculiarity, specialization of the generated ideas?
—There are a lot of topics, but in order not to defocus, we have chosen a specific specialization: we work with ideas, where there is an element of socialization. We believe that such projects have a better chance of success because they are aimed at engagement and high retention (Retention rate is the company's ability to retain its customers for a certain period of time. — Startup Jedi). Socialization is our specialty, as well as my personal experience in Game Dev, team and investor experience. If there is no socialization in the project, then, most likely, this is not our project.
— What are the entry points to the Founders Club: how to become a finder, a mentor?
— Not everyone is ready and can become super founders right away — many need to learn by observing the work of others, and working in a startup in a specific position. We call such people finders.
To become a finder, you first need to go to Telegram in the Founders Club Bot, register and take a short test. If the test is successful, you will be taken to the Founders Club community — there you will understand who you are and who you can become. You can also learn more about the discussion groups there, and what results they have already arrived at. To get into a particular discussion group, you need to write antitheses to the results of the work of this group — why do you disagree with them and / or why it might not work.
If a person cannot write antitheses, then, most likely, his thinking is not flexible, and he will not be able to organically complement the members of these groups. If he wrote and proved his competence to us, then we will gladly invite and accept them into our community — we really need such guys.
To become our mentor, you must at least be a founder — this is the only entry point. It's important for mentoring to have real experience building a startup — with all the ups and downs. We really need practice, because they help develop a startup studio.
— What is the motivation for investors?
— There is definitely money, but the second motivation is the ability to communicate with outstanding founders and help them with their competencies. Often, investors have already built some businesses and at a certain moment in life they realized that they are not interested in making their own startups, but they can and want to help several projects. This is also the thesis about the personal development of investors — when you help someone, then, first of all, you develop yourself. In fact, these are serial entrepreneurs, and we have the opportunity with them to help startups in every sense, and not just with money.
Investors interact with projects: they communicate, help with networking and advice, some kind of communication can take place without our participation, we in no way control this, but we try to create a common space for connection.
— Can you find out something about the first projects of the fund?
— One of the first projects in the field of mental health and awareness. Awareness is a huge mainstream market that is now exclusively filled with meditation apps. In our opinion, this market is underestimated. Read more on awareness here.
Now in Europe and the United States, many people suffer from anxiety, and the pandemic has further exacerbated this problem. Anxiety gives rise to depression, which leads to even more serious mental disorders. The problem needs to be solved before it reaches the depressive stage, and in this niche the startup Streem, born in the Founders Club discussion group, is developing a product. The project is aimed at combating increased anxiety among Gen Z representatives in a special way — and in what way, Startup Jedi will tell in the near future.
It should be noted that this project went through all the stages of the discussion group at the Founders Club: from idea, team formation, pitch deck preparation to pitch deck protection and start-up creation.
— Which idea do you immediately say “yes” to?
— The most important component is the team. Our projects do not yet have a product and numbers, so people and their competencies are important to us.
Further, we need to clearly understand what problem the project solves and, most importantly, how it solves it. The winner in the market is not the one who came up with a cool idea, but the one who coolly and correctly conveyed it to the end consumer. Therefore, we focus on crystallization and clarity. It is important for us that after reading the pitch deck it is clear: these guys want to solve this problem, they have done a deep research on the topic, there is a growing market and a way to solve the problem is presented, which is enough to come to success.
We also rely on speed, on quick interaction with the audience: you made an MVP, showed the audience, measured the metrics, if they are very bad, you closed the project. If the metrics are incomprehensible, then you need to quickly figure out how to grow them to market ones. If the metrics are cool, we will use our partner funds so that the project grows further and collects money in subsequent rounds.
— How will an MVP fund interact with portfolio projects?
— A mentor and a tracker are assigned to each project. At the initial stage, you need to help the project with the collection of the team, search for a contractor, if necessary, indicate the strategic and tactical mistakes of the team. Systematic work is underway, where we interact with the project with a certain frequency with the help of our mentor.
— How much time is the fund allocated for the development of portfolio startups?
— Each story is different. Someone may need three years, but I would be guided by average values — for the market it is 7-10 years.
There is a common problem in the venture capital world: a lot of money and very few good projects — this also applies to the post-Soviet space. Venture funds often compete for several projects, as a result, projects are overfed with money, and this is very bad for the market. That is why "factories" for the production of startups — start-up studios — are so relevant now.
ПЛАШКА I believe that start-up studios will “take off”, because it is better to do projects from scratch — this is the only way to get quality companies worthy of investment.