Introduction
Seedstars is an investment holding founded in 2012 in Switzerland and focused on impact investment. Its mission is to impact people’s lives in emerging markets through technology and entrepreneurship. The company was launched about eight years ago by a group of four, including Alisée de Tonnac, born in France and having spent several years abroad in countries such as Singapore, United States and Nigeria.
Currently, the company is made of over 80 team members of over 20 nationalities located all across the world with some teams based in one of the 12 Seedspaces, the Seedstars coworking hubs for entrepreneurs. “We are proud of the diversity and gender balance within our organisation as we believe it is one of the main business drivers for success”, states Alisée de Tonnac.
She adds, “With a global and fully-remote team, autonomy and independence are extremely valued. That’s why we set a flat organisational structure where everyone is the owner of their own projects and is accountable for their actions and decisions. We see that this not only motivates our teams, but also gives room for flexibility and agility, even more so during these uncertain times”.
Thanks to the limitless extent of the organisation, Seedstars is able to recruit the most sought-for talent around the globe and expand to new markets with great ease. In fact, in 2020 Seedstars is present in over 91 countries with local representatives, partners and alumni amounting to a global community of 150.000 members.
The Seedstars activities fall into two main areas:
Seedstars Community is part of the business that supports entrepreneurs in their personal and business growth as well as preparation for fundraising. The flagship project that encompasses these aspects is the Seedstars World Competition, a startup pitch contest that has been running since 2013 and the winner of which is able to win up to USD 500,000 in equity investment. The project started off with a world tour in over 20 emerging markets led by Alisée de Tonnac and Pierre-Alain Maisson, co-founder of Seedstars. Today, the competition covers over 90 countries and gathers more than 7,000 entrepreneurs each year, bringing together a network of 700+ active mentors and 1200+ active investors. Additionally, Seedstars has developed more than 130 training programs to educate entrepreneurs on topics from growth and revenue, fundraising, international expansion to talent and management. To date, Seedstars has trained over 4000 entrepreneurs.
Seedstars International is an emerging market VC fund focused on impactful seed-stage tech companies. The fund has invested in 59 entities in 28 countries covering key sectors such as financial services, health, education and agriculture. The team invests in batches of 10-15 ventures that are supported through an intense three-month program focused on growth and fundraising. 54% of portfolio companies have already gone on to raise follow-on capital from later stage investors including Omidyar, Sequoia and YCombinator. Seedstars is to continue to strengthen this positioning to support more high-growth ventures that drive economic, social and environmental change with collaborations with other regional funds and in the process of putting in place Seedstars Global Fund 2. To date, the investors that have participated in the first investments include HNWI, family offices and business angel communities. But for the larger funds, Seedstars attracts more institutional investors such as Development Financing Institutions, Impact funds and Corporates.
Seedstars’ Cultural Values
Seedstars functions based on eight key values that hold its team and community tight together and are used as the reference point for both strategy and day-to-day operations. But unlike other enterprises, Seedstars is very blunt about their values and truly holds all their people, management included, accountable to those, especially when it comes to their biannual staff assessment, or as they call them “tribe councils”. Moreover, individuals who excelled at specific values are called out on the monthly internal newsletter as a public praise for their achievements in mastering the company values.
These values are:
Get Sh*t Done, which reflects the importance of creating an impact, moving the needle and being able to prioritise.
In Experiments We Trust, which encourages taking data-driven decisions, trying out new things that no one has ever done before and learning new things.
Independently Together, which means being able to take initiative with a greater common goal in mind as well as being able to give tough feedback.
Out of the Comfort Zone, which challenges the status quo and pushes people to take risks and do great things.
Follow the Money, which symbolises profit with purpose and the importance of understanding the financial impact of decisions.
Hack the System, which is about having a growth mindset and finding new ways of doing things better and faster.
Keep it Swiss, which stands for delivering high quality work, paying attention to details and being professional.
No Excuses, which keeps people accountable for their tasks and at the same time encourages them to ask for support when needed.
These are also the values that Seedstars seeks out in all their network, be it the founder of a startup participating in an educational program, the mentor who’s advising entrepreneurs on their business growth, the investor who’s allocating money into the Seedstars International fund or the governmental institution who’s running an international development program in an emerging market together with Seedstars.
Startup Growth
To invest in start-ups with a high potential for growth was seen as key. And to assess a prospective venture’s scalability was seen as particularly key. But to maintain a common focus among a growing population of employees, a consequence of the growth in the businesses, was seen as hard. Another difficulty might be for the various entrepreneurs of the chosen businesses to maintain their energy and full “drive” throughout longer periods of growth. A third problem would now and then be found at the governmental level, including with frequent introduction of restricting regulations, often with a short-term focus, and often also to support particular political agendas. Scaling might become hard.
Impact
The mission of Seedstars is to create a positive impact in people’s lives through entrepreneurship and technology, and they are doing so by investing in ventures that make a difference in the world. “By investing in socially responsible businesses with a high-growth potential, Seedstars is able to accelerate and scale the positive impact created by these businesses not only in their initial local markets, but also by expanding them internationally and introducing them to new potential partners and investors”, mentions Charlie Graham-Brown, Chief Investment Officer at Seedstars.
Seedstars is an expert when it comes to attracting the most promising startups and managing a dealflow. With its wide range of educational programs run throughout the year with its private and public partners, founders are able to grow their businesses faster, expand their international network and visibility, receive actionable feedback on their performance and are much more likely to receive follow-on investment.
For this reason, Seedstars runs its own so-called Growth Program, a three-month post-acceleration program designed to help startups build a growth team and implement a growth methodology in order to support scaling up the venture and raise Series A and beyond. It’s opening the 7th Batch of the program. Selected startups are entitled to an investment of USD 50,000, a USD 100,000 worth pack of in-kind services and perks provided by Microsoft, Intel, Hubspot, Amazon and others, as well as a USD 500,000 follow-on investment from Seedstars and its global investor network.
Key to Success
Seedstars’ operating model is rather complex, yet complimentary in its actions and completely in line with its mission to impact people’s lives in emerging markets. For the sake of simplicity, it can be split in six parts: startup selection, cash flow, team and talent, branding, training and experimentation, and decentralised management.
Startup Selection
One of the key aspects of Seedstars’ operational model is finding the most promising tech startups from emerging markets. But most importantly, how to know whether these startups have the potential to grow and to scale? Do the founders of these startups have what it takes to be successful entrepreneurs?
Over the past years, Seedstars has been refining its secret formula to help the selection process: the Investment Readiness Score. It is an algorithm based on the scalability of the startup, team fit and team experience comprising 8 factors and 16 sub-factors that creates an analytical model to review the potential of the venture to succeed.
“The Investment Readiness Score can provide a rather solid judgement on the startup’s potential and can influence the decision to invest in the business, however, our Investments Team makes the final call. There are simply some factors that need to be taken case by case given the diversity of solutions and scenarios existing in each country we operate in”, says Alisée de Tonnac as a reflection of the methodology.
Some of the most common reasons for failure include mis-judgement of the entrepreneur. At times, they might simply not have what it takes, which is incredible resilience and willingness to persist over lengthy periods of time. Other reasons may be related to the inability to achieve the anticipated scaling effect due to the business’ non-viable planning, the introduction of new legislation or regulation that might make scaling more difficult, or simply unrealistic cash-flow estimates.
Cash-Flow
One of the most difficult aspects of managing a startup is coming up with a realistic forecast regarding future cash-flow. It goes without saying that it is generally not optimal to attempt to raise more cash when the business’ current cash-flow is stretched or at low.
Team and Talent
Another key aspect in the success of a business is its people. Hiring and managing talent that will take ownership in their assignments and will have a proper cultural fit is a great challenge for any startup, especially when facing rapid growth and added complexity. For this reason, Seedstars has optimised its recruitment processes to a collaborative decision-making method, in which various team members are consulted at different stages of the hiring process to make the best assessment possible. So far, the internal NPS of the Seedstars team has been always over 90%, which reflects the strong collaboration and unity in achieving the company’s mission.
Branding
Branding is critical for any startup as that’s the statement of their positioning and external image. Besides building a distinctive brand identity through a unique logo and brand name, Seedstars has also heavily invested in their online and offline presence in their key markets by vigorously spreading their brand message and amplifying it through Seedstars Ambassadors, active supporters and enablers of entrepreneurial ecosystems and widely influential figures who also believe the power of entrepreneurship.
Training and Experimentation
Training and experimentation are an integral part of Seedstars’ approach. Staying up to date with the latest trends, building on good practices from other startups, having a data-driven approach and discussing the learnings are all part of the development of both the Seedstars team and its portfolio companies.
In order to achieve an experimentation mindset, people must be given the freedom to try out new ways of doing things better and faster. Only then can the best talents be attracted to the Seedstars network and be kept. This entices a flexible approach and the ability to go out of one’s comfort zone, while keeping the eyes on the prize. This is a perfect symbiosis between the “In Experiments We Trust” and the “Follow the Money” values previously described.
“At the end of the day, it’s the organisational health that carries the day. Good executives are comfortable with some ambiguity and with giving more than one takes” mentions Alisée de Tonnac in comment to how to keep the balance between experimentation and maintaining focus.
Decentralised Management
Seedstars has thoughtfully been developing decentralised management processes with the goal of enabling each team member to take their own decisions and be accountable for them, while never hesitating to ask for support. It is not the traditional hierarchical top-down system where decisions are imposed by the top management, yet a group approach in which every squad, be it marketing, finance or tech, makes the best call as the experts in their field. This type of management policy encourages people to be the leaders of themselves and avoids bottlenecks related to the decision-making processes, thus keeping the business operations fluid.
Manage key dilemmas
Seedstars considers it critical to cope with dilemmas and strives to find a reasonable balance when it comes to its six main challenges.
Idealistic purpose and business profits need to create value with a clear integrity driving this, so that business growth and societal impact are combined.
Business focus to serve one’s customers and to raise capital is seen as critical to take place in parallel, and not sequential “on-offs”.
Learning through experimentation and building on good examples of business practice.
Getting the job done and being appreciated in the community is key to entrepreneurs who want to be robust enough to be ready to be “disliked”, as they promote sound business practices. "For entrepreneurs by entrepreneurs"
Pursue formal analysis and exercise behavioral judgement. But nothing can substitute good face-to-face interactions.
Balance growth and focus. When Seedstars was in its startup phase it had to live with a relatively high level of complexity, to ameliorate a too high-risk of exposure. But after having grown, it was able to simplify its operations by focusing on clusters of relatively similar investments and in specific countries/regions.
Conclusions
Seedstars is a good example of a successful organization when it comes to impact investing. It has demonstrated that systematic investments in the developing world can indeed be profitable. There does not have to be a conflict between a social purpose and making money. Seedstars and Alisée de Tonnac stand for profitable idealism.
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