ZAS Ventures increases its activity in Ukraine using its investment company and syndicate as core investment sources. The venture group has recently launched a new consulting service with paid deal flow access for subscribers and analytics for investors.
Not long ago, the company closed several deals with $50,000 checks with Mantis Analytics, CloudAvocado, and Fintellect and invested $180,000 in S-Lab during the seed stage.
AIN spoke to Andrew Zinchuk, the co-founder, about the most successful startups “to become unicorns,” minimum checks to join a syndicated network, and exclusive details of a new crowdfunding project for investing in defense tech startups.
“If you want our funds, come to us at least six months in advance.”
Nowadays, you actively participate in syndicated deals through your own ZAS.Syndicate community. Are you satisfied with the results, and how does it technically look in reality?
We are one of the first syndicates in Ukraine, right after ICLUB. Our first deal was with Zeely in early 2023.
Following our example, other ventures created their syndicates: Toloka.vc, SID Venture Partners, or United Angels Network. The last one is developed by Ivan Dmytrasevych and Sasha Reminnyi.
You must understand all syndicates have their missions. We, as a venture and a syndicate, are focusing on startups with Ukrainian founders. Our mission is to support them with investments. The conditions are that most team members are in Ukraine and a foreign legal entity, for example, in Delaware (USA) or Estonia. Unfortunately, it is what the current market dictates, and we can’t change it. And the last condition is a startup’s active traction.
As a syndicate, we invest from pre-seed to Series A. We and our investment company usually sign two $100k checks in parallel against specific KPIs during the pre-seed stages.
Our goal is to make one deal every month. How it goes: We give a pitch deck and a brief project description to our investors. After that, we send interested parties a deal memo, detailed information about a startup, and our “homework” about why we believe it would be worth investing in. One or two weeks later, we will do an introductory call with the startup team. Then, we will involve the interested investors who showed in this deal.
Which startup requirements do we have? If you want our funds, come to us at least six months before fundraising. We are the only one in the market with office hours: you can come during those hours, pitch your startup, and get our feedback. We will follow your activity after you get us interested.
The closer the fundraising, the more we will give you mentorship. During these six months, we want to see three things. The first one is the startup’s delivery or how they achieve KPIs, follow the roadmap, and perceive feedback. The second thing is the startup’s fuck-ups and how their team solves critical issues. And the third one is status updates. We have specific monthly report forms.
We see the importance of running this track together and discovering more about the project team. Because you usually invest in the team during a pre-seed round.
Another critical startup pre-development assessment indicator is our 3-3-3 method: three months of traction in a foreign market (most of the time, it’s America and Europe), at least a $3,000 MRR, and a 30% growth until the end of the month. Although some startups struggle with fulfilling those requirements, for example, a B2B project with complicated sales, low-touch selling projects can do it.
If a startup does 3-3-3, we invest $100,000 in installments through our investment company against set KPIs and make another $100,000 deal within our syndicate. For instance, we invested $50,000 through our foundation within the deal with S-Lab and had to invest the same amount from the syndicate. Nevertheless, we raised $130,000 as a syndicated investment, resulting in $180,000 in total.
We always make pre-seed investments from the investment company first, so it takes the most risks. We split a check in installments according to the KPIs achieved. And in three to four months, we present the project to our syndicate. So, the syndicated deals face much fewer risks thanks to the startup’s live traction. However, the syndicate must consider investing based on an evaluation of the foundation. Then, we invest in seed, later seed to Series A with a check of up to $1,000,000.
So, we closed three syndicated deals last year. The first one was Zeely—$125,000—which raised $1m within the round. The second investment was $500,000 in ComeBack Mobility and a $500,000 allocation against achieving the set KPIs. The third deal was S-Lab, which got $130,000 from the foundation and syndicate. That means we invested almost $800,000 in 2023 only through the syndicate.
Zeely is worth my special attention. They finished the third year of their product existence with a $300,000 MRR and a $4,000,000 ARR. And now, they are closing a pre-series A round with an evaluation of $26 million. We prepared a $500,000 allocation and almost raised the amount.
For our syndicate members, the round was closed in March 2023, and a new round started in December 2023, six months later. The startup evaluation increased from $10m to $26m during this period.
“We will make 12 to 15 deals this year.”
How does your syndicate look from the inside?
We have no paid membership, but all members must invest at least in one deal a year. If they don’t know how to invest, they learn together with us.
In order to join us, you should fill out an online form on our website and wait for my call. I do all the calls with potential new members to understand if our values match.
We also created a Discord channel where syndicate members can chat, discuss ongoing deals, and back our portfolio startups. A highlight of this communication will be our first offline community event to devirtualize and present the next startups in our pipeline.
How many members do you have now, and what is a minimum investment check?
Our community has about 70 people at the moment. $10,000 is the minimum check within the syndicate, but it also could be $5,000 in case of a joint investment with our venture firm. We understand our responsibility to select syndicated deal investors. They must bring relevant expertise and help a startup grow, even if they signed small checks.
When your venture created a venture firm in the past year, you declared a goal to do 30 pre-seed investments in Ukrainian startups. Do you catch this goal?
We follow our plan. Last year, we closed four deals. This year, we will do 12 to 15 more. And the remaining deals will be closed in 2025. Our great goal is 30 new unicorns in Ukraine until 2034.
Which startups would be the fastest to achieve a $1,000,000,000 evaluation?
I think it would be Zeely. They plan a Series A round until the end of 2024 with a sound multiplier after this round. And I know some serious players are watching them.
They meet the T2D3 (triple-triple-double-double-double) requirement: after getting its first $1m ARR, a startup should grow triple in the next two years and double again within three years. Zeely grew up four times after its first $1m ARR.
I may also not name another project yet because it is our next potential deal. If it fulfills signed contracts, it will most likely become a unicorn within the next 3-4 years.
“The investors are very compassionate with the events at the forefront.”
ZAS Consulting is a part of your ecosystem. What does it do?
It’s new. I found its importance when I saw how many foundations look for Ukrainian deal flow but don’t know where to find it. The initial war shock is long behind, and they want to invest. We provide two simple services: paid access to deal flow for subscribers and analytics. We are an experienced venture and know how to do due diligence, reference checks, and background checks of founders.
Including Defense Tech, correct?
Correct. By the way, we launched the first equity crowdfunding platform in Ukraine, BeFunders, exclusively focusing on defense tech projects. Any startup confirmed by Brave1 can be placed on our platform and funded by Ukrainian residents. The checks start from $100. The motto of this project is “Become a Co-Owner of Our Victory.” Last week, we closed the first deal which we will publicly announce in July.
So, we work in stealth mode now. Since it is a B2C story, it requires a decent technical implementation because when Russians see the platform, they will DDoS it.
We solve two issues with the project. The first one is the so-called “donation tiredness.” People become co-owners of the project and can get an upside when the business transforms or gets sold, or an exit will happen.
The second problem is gambling—some soldiers, unfortunately, lose all their combat bonuses or take loans. And we give them a chance to invest in a new military development instead of gambling. They will use the product among the first and make more “Russians good.”
In previous interviews with AIN, you mentioned a curious detail: ZAS Ventures doesn’t invest in startups in the Web3 and hardware domains. Did it change or not? Because many defense tech projects work with hardware.
We don’t work with Web3 if it concerns cryptocurrencies or related services. However, if it concerns a direct blockchain application in a real-economy sector, we are ready to examine such projects more closely.
Our investment company doesn’t like hardware, it’s true. However, our next deal is with a hardware company with a founder you can’t refuse his offer. He has 20 years of experience in the industry and a lot of successful cases. If it were someone else with shorter traction, I would say no.
My last question is about the Ukrainian investment market. In the past year, you said that, unfortunately, only a few investors pay attention to 100% domestic Ukrainian products. Is it better now?
Let’s focus on syndicates and our foundation. In Ukraine, we invest only in local founders as the only pre-seed investor. The others always have a condition of having a diversified foreign presence.
I see the investors are very compassionate about the events at the forefront. For instance, everyone awaited the counter-offensive in the past year. But it didn’t succeed, and enthusiasm decreased.
In any case, there is always a space for optimists. Three weeks ago, I was in the Czech Republic at the Invest in Bravery event that united an insane group of investors—different foundations, angel investors, private equity, etc. They showed great interest in Ukraine, and in September 2024, they will organize a new event in Kyiv at which the best startup will win a prize.
After this event, I returned to my hotel room at ten o’clock at night and wrote to all the founders and managing partners of ventures I know in Czechia. They all responded within three hours, and I met all of them during the next three days of my business trip. So, you can imagine a level of interest in the events happening in Ukraine. They also told me about their support of general and defense tech funds working for Ukraine and trying to exchange deal memos, which inspires people who consider a crisis a time of great opportunities.
