Women in VC: FundingBox.vc's Cymerman on new fund plans and the power of networking

The firm could raise more than EUR 50m for its second fund, Cymerman said. The fundraising process is about to start, with the fund expected to be operationally active in Q1 2024, giving FundingBox.vc a continued presence in the market. The name of the fund is not settled yet, although it could be called "Fund II," she said. The vehicle will continue to focus on deep-tech companies, with potential targets located both in Poland and abroad, she added.

LPs in the firm’s debut fund, FundingBox Deep Tech Fund, include Polish public investor PFR Ventures. FundingBox.vc also has private investors via a commitment-based fund, through which this group of investors has agreed to invest throughout the whole period of the fund's lifecycle.

For the new fund, FundingBox.vc would be receptive to onboarding international institutional investors in addition to Polish ones, Cymerman said. No early-stage discussions are happening yet, she said.

Before starting the fundraising process, FundingBox.vc intends to continue to build an investment track record with its PLN 23.5m (c. EUR 5m) debut fund, which has an eight-year investment period and can be extended up to 10 years. The firm plans to invest the remainder of the capital by the end of this year. "We have been active for a very short time, two years, and a few new investments will happen by the end of 2023," she said.

The VC could make about five new investments by the end of 2023, Cymerman said, and the firm currently has a term sheet on its table for a new deal. The firm is in negotiations with new potential targets on a rolling basis, she added.

Deep tech deployment
At present, the maximum amount that FundingBox.vc can invest per company is PLN 4m (c. EUR 852,000), she said. It usually deploys between PLN 500,000 and 2m (EUR 107,149-428,594) because it wants to achieve a balance in its investment portfolio, particularly because the fund invests at a very early, pre-seed stage, Cymerman said.

"These companies are usually at a pre-sale stage, so we need to predict the future,” she said. “Will the company generate revenues? Will the market want to pay for this solution? Will it also be able to pay the amount the company expects? That's difficult, especially because we don't have historical indicators, and also because we don't have benchmarks in the region and cannot use peers from another continent."

For these reasons, FundingBox.vc invests tickets designed to allow the target company to achieve its next milestone, whether this involves validating the technology or its business assumptions, she said.

The firm invests in projects with a unique technology advantage. "It can be a business model that is difficult to replicate thanks to the founders' skills, background, or network,” Cymerman said. “These are also projects that solve specific problems but also generate an entry barrier for others.”

FundingBox.vc sees opportunities in hardware, especially if it is possible to combine different business models and sell the hardware solutions in a similar model to Software-as-a-Service (SaaS). There are barriers to entry in hardware, Cymerman said, given the skills required to build it. It also has a different logistics setup from internet portals and different forms of aftersales service, she added.

One of its hardware companies that uses a similar model to SaaS is Carscanner by Inmotion Labs, a device that performs a quick scan of a vehicle that can be used by businesses including car services, car rentals, fleet management companies to determine the car's condition. Non-invasive glucose measuring device producer GlucoActive could also sell its solutions in a subscription model, Cymerman said.

FundingBox.vc is far less interested in marketplaces, which need a very large investment in marketing and brand recognition, she said. It also will not invest in defense, drugs, or coal-mining-related projects, she said.

The fund's investments are often made as co-investment with other funds and usually provide a one-year runway for the startup.

In spite of the pandemic and the war in Ukraine, FundingBox.vc sees a constant flow of new projects. For example, it recently completed investments in a talent matching platform provider gyfted.me, as well as in solvbot.com, a provider of a platform that automates economic legal processes. Cymerman declined to disclose the ticket sizes deployed in these deals but said that they were within the firm's typical investment sizes.

At present, FundingBox.vc does not expect any exits within its portfolio companies by the end of 2023, Cymerman said. Some opportunistic M&A activity could happen, but none of the portfolio companies is mature enough to consider an exit.

Building diversity
FundingBox.vc has a diverse managing team, half of it consisting of women. The founding partners are Cymerman and Tomasz Mazuryk, and its partners are Tomasz Jozefacki and Anna Dymowska.

Although the FundingBox.vc team is diverse, it is still challenging to implement diversity in other aspects, Cymerman said. For instance, FundingBox.vc has not yet been able to onboard a female LP and would like to change that, she said.

"It's an important topic because the LPs shape the politics of the fund and set standards,” Cymerman said. “They create the ecosystem, and I believe there should be diversity on every level: there should be diversity among the LPs, there should be a diverse GP team, the startup's team should cover different competencies as well, and finally – the products and services should address the needs of both women and men."

In some areas, reaching this diversity can be difficult, Cymerman said. For instance, as FundingBox.vc invests at a very early stage, it sometimes interacts with solo founders, making it difficult to judge diversity potential.

This is why a lack of diversity is not a dealbreaker for FundingBox.vc, she said. Nevertheless, it is the area the fund is actively working on. When collaborating with a startup whose team is not diverse, FundingBox.vc tries to understand the reasons behind it.

Because FundingBox.vc invests at such an early stage and cannot base the decisions on historical data, it often discusses vision, strategy, approach and values when talking with founders. "Sometimes we ask a question about a particular risk and observe if the team is receptive to feedback and makes an effort to address our concerns,” Cymerman said, citing an example in which the VC asked the team of one startup to present ROI on every proposed functionality. “We wondered if the clients would leave if the company doesn't implement a particular functionality,” she said. “What if they implement it – will it boost sales significantly? Thanks to this exercise, the team decided to eliminate one functionality and prioritize others. This is the team that we want to work with. The one that we wouldn't like to work with would say: “It's good as it is now".”

When dealing with the founders, there is often a mismatch between their valuation expectations and the fund's assessment of the company's worth. That is when FundingBox.vc often decides to invest in the form of a convertible note: "It allows us to wait and see what the valuation would be in the future and whether the company will be able to meet the next milestones,” she said.

However, she added that if the valuation is beyond what the firm thinks is reasonable – for instance, a project at a PowerPoint presentation stage with a EUR 10m valuation – then it "lets the founders look for capital elsewhere," she said.

Network-building
Cymerman has an academic background and was focused on science projects in the area of bioinformatics and molecular neurobiology before joining FundingBox.vc. The move was a significant transition for Cymerman; she had never worked for any investment fund before and had no experience in fundraising, although she did have experience in fundraising for startup scientific projects.

One of her main challenges was to build a relevant network of industry contacts. She cautioned, however, that she does not know whether the challenges were caused by gender discrimination or simply because she moved from a completely different sector and had to build her network from scratch. "Having a network is necessary to secure access to LPs for the fundraising efforts, but also – at a later stage – fundraising for the portfolio startups," she said.

FundingBox.vc is a boutique VC firm, meaning that Cymerman has a broad role that includes fundraising, scouting for targets, assessing projects, making investment agreements and, eventually, working with portfolio companies. Thanks to the broad scope of the responsibilities, Cymerman has been able to familiarise herself with all the processes within FundingBox.vc.

"I can see that the majority of talks I participate in, whether with startups, other funds, or advisory firms, are led by men,” Cymerman said. “If there is a woman, it's an exception. Still, I focus on opportunities rather than obstacles.”

To build a relevant network of contacts, Cymerman joined various groups, associations, and events geared towards the investment community and women in finance, such as European Women in VC and the Polish Private Equity and Venture Capital Association (PSIK).

"Something that I'm still looking for, and have yet to find, is an opportunity that would allow me to shadow an experienced leader in the VC/PE sector for a few days to share the best practices regarding exits from the investments," Cymerman said.

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