Team of “PVcase”: CEO Deividas Trainavičius, CSO Douglas Geist, CPO Adomas Pažarauskas.
Year of contract: Q4 2018.
Received investment: “Contrarian Ventures” – 250k EUR. “Practica Capital” – 250k EUR.
The investment helped to increase sales to 2m EUR and to attract around 150 clients internationally.
The solution developed by “PVcase” makes designing of solar power plants several times faster and cheaper. The technology not only improves the engineering in the field of solar energy but also contributes to the achievement of goals of the green energy, set out in the strategy “LE 2030” by “Ignitis Group”. Smart energy fund powered by Ignitis Group managed by “Contrarian Ventures”, has invested 250k EUR into “PVcase”. Rokas Pečiulaitis, the managing partner of “Contrarian Ventures”, believes that “PVcase” will become an example of success in the energy B2B SaaS space Europe and maybe even in the whole world.
How did your partnership begin?
Rokas, Contrarian Ventures: We are not a traditional generalist venture capital investors as we specialise in the field of energy and electrified mobility. When we first time met Deividas personally, it was not in a pitch context. Deividas had a successful company, he lived in Germany back then, and only later I found out that he had been considering a possibility to develop a new product. He was solving a problem inside of his previous company, and he was not the only one who was facing this problem. This spurred him to develop software engineering tool for solar power plants.
When Deividas was considering founding “PVcase”, he was not sure if Venture Capital was required for his initial growth. We were discussing with him extensively until he finally decided that cooperation would be beneficial for his company. It was not a quick “yes” or “no” because quite often companies approach us and say: “We are seeking X amount of money and we are going to use the money for Y”. They introduce their business idea, we perform deep due diligence of the idea, technology, product, and team, and evaluate if the company fits our investment strategy and then if by that time we are still interested to partner with the company we take it under consideration in the investment committee where the decision to invest is made. Overall process to make a decision takes from 2 to 6 months. Deividas did not come to fundraise at the time, after the initial discussions we found the product and the target market interesting: there was no obvious competition and we thought that Deividas was capable of growing this company into a large and scalable business, and he had a clear ambition and vision for it. We wanted to contribute to his success and we decided to partner.
Deividas, PVcase: At that time I was thinking about coming back to Lithuania to help start-ups operating in the energy sector. Between our first meeting and the investment there was a prolonged period during which we communicated extensively with Rokas. At first I did not see why an investment from the fund would be necessary, however, during discussions with the investors I learnt more about the differences between venture-backed and traditional SME companies. In the beginning, the greatest challenge was to prepare a technical roadmap and calculate the costs of developing and launching such a product.
"There is a common saying in the industry that the best companies are those that you do not need to help at all, as the founders know what to do and they just focus on execution. Such companies perceive venture capital not as a solution to every problem they face, but, instead, as a leverage to build the company quicker."
Rokas, Contrarian Venutres
Looking back at what we achieved over the last two years, I think, while we could have achieved it without the investment from venture capital, but it could have taken two or three times longer because we would have been slower and more careful. However, since we were in the quickly developing and changing solar market, we had no luxury to waste time and not take this opportunity. So the decision was made. Then I initially analyzed the market, our clients were curious about what we were developing, because there was nothing similar to it on the market. I gathered some feedback and got a very long feature list for them to buy such a product. It would have taken too long without investment to execute and launch the product in the market.
Rokas, Contrarian Ventures: Deividas had been developing a completely different business before – it was project-based and not a business you can scale fast. Not all businesses are fit for venture capital. Ninety per cent of all businesses, as we know it , do not fit venture capital criteria, because they are very local, do not have scalability, or unique technology and are not appropriate for fast growth, and most often do not have a team capable of growing international business. Deividas had been switching from a project-based business to a scalable, high-growth technology business. He came from a sector in which he had worked for a long time, understood it well and had developed an extensive network, thus David was not building a company from scratch. He had a deep knowledge and understanding of the sector and it's dynamics, he knew many of the partners who he relied on. There is a common saying in the industry that the best companies are those that you do not need to help at all, as the founders know what to do and they just focus on execution. Such companies perceive venture capital not as a solution to every problem they face, but, instead, as a leverage to build the company quicker.
What is the achieved value of your cooperation?
Deividas, PVcase: For me the most important and beneficial thing is that investors have changed my view on how busineses are built. Before that, I had always thought this way: if a company grows organically, capital helps to expand, but products should be developed and the team expanded only when it is necessary. When the company has more sales, only then you hire more people. However, with the venture capital investmentand thanks to the push by investors, I have changed my perspective completely and now our company operates differently internally. We are expanding our team faster than is currently required, but in the long run it generates much more value. Working with investors has changed my thinking and strategic view – planning two or five years ahead. This has been the greatest added value of working together.
Our cooperation is changing, maturing, we better understand who can do what and how everyone may contribute towards quicker growth of PVcase as a company. We have never been a company of such size which would need advisors, or a large network of external partners which could help us strategically. This is the topic Rokas and I discuss most frequently.
Rokas, Contrarian Ventures: It is always important for a company to hire people who are more experienced than the founders and who bring new competencies necessary for elevating the business to a new level. All in all, the ultimate goal is to grow faster, and that is only possible with people who had done it before. What is the value of venture capital? For example, other leading venture capital firms like “Sequoia” or “Andreessen Horowitz” have grown to operational power houses that have internal full-time teams dedicated to help portfolio companies. After the investment they may say: “Deividas, here is an HR specialist you may use as your asset.” And those people usually have 15 years of experience in HR. This is one level how risk capital works. Another level, which is how we position ourselves currently, lies on industry specialization. We focus and rely on the network of energy and mobility sectors. We try to know all investors, advisors, consultants, and clients, to increase their accessibility for our portfolio companies. Therefore, we work with companies of our portfolio to save their time and to allow them to directly reach any resource so that they can dedicate all of their effort at the growth of value of their company, instead of, for example, fundraising.
"For me the most important and beneficial thing is that investors have changed my view on how busineses are built."
Deividas, PVcase: Previously, I used to hire people with a completely different mindset. When you have capital and resources, you come up with and develop certain profiles of people or designate desired skills, and only then you may hire the best talent on the market. I think that was our main source of acceleration: however expensive or experienced an employee might be, the possibility to hire him/her would create a lot of added value in the long run.
In what stage are you now?
Rokas, Contrarian Ventures: Different investors focus on different stages of a company, because the team of a company might need different resources later in their journey. Deividas was in a favorable situation as his company was cash flow positive on month 9, which means that the company spent less money than it generated from the sales of their product. This allowed Deividas to grow while avoiding additional dilution to reach product-market fit while maintaining the growth rate successfully.
Some companies in Silicon Valley attract capital every year and each new investor brings their value-added, and that is how founders pick their next investors. With Deividas we usually work in the board context, where the board is responsible for the strategy, KPI's and monitoring the success of the company, as well as other ad hoc tasks. Outside of the board, Deividas and the team can call our team 24/7 and ask for any help, for example, to set up a motivational system of the company, where we bring perspective of best market practices and help him understand how things are currently structured in this market. The goal is to have as many reference points as possible to avoid commonly made mistakes. As a venture capital fund we aim to reduce the amount of roadblocks the company can run into at early stages of growth – be it long-term defensibly of the company business model, or the long term strategy which has been overlooked focusing only on short term milestones – aspects which have a negative impact in the long run. Every detail matters eventually.
Deividas, PVcase: Now we have come to a stage which is less chaotic, we know how to keep growing. We grow fast, but now our processes are prepared for that. We know who and how to hire. People get involved really fast and begin to generate great returns, in relation to both development and sales. Currently, we are developing new products, so we are planning strategically how they will interact, what clients we will have, how to increase the number of those clients and to expand the total addressable market. We regularly discuss with our investors how the company will grow and in which directions.
"It is always important for a company to hire people who are more experienced than the founders and who bring new competencies
necessary for elevating the business to a new level."
Rokas, Contrarian Ventures
Rokas, Contrarian Ventures: In the case of Deividas, we had always known that the product had the potential to generate EUR 5-10 million sales within a couple of years, but each stage has its challenges: one thing is to grow a business to EUR 10 million revenue, but building a EUR 100 million business is a totally different story. One of the three challenges Deividas has already successfully overcome is he achieved EUR 1 million of revenues, or EUR 100k MRR (monthly recurring revenue). Most companies are unable to reach even this first milestone. The success in the first stage is the confirmation that there is a product-market fit. This means that the product is in demand, it is sold successfully, and the feedback from the market is positive. There are numerous other metrics which indicate that Deividas's business is performing well - do the clients stay or leave which is a churn metric, do they buy more as a result of on-boarding, such as up-sell metric. The next step is to achieve EUR 5 million ARR (annual recurring revenue), and then go for EUR 10 million, after which we have a an international validation. You need to put much effort into the expansion, highly experienced people have to be attracted to join the company, new offices have to be opened and managed in new countries, etc. Every stage demands different competences and people in the organization – advisors and board members who already have experience in building such businesses, maybe even in the same sector where Deividas's company operates.