Cremonini described Italian firm Alkemia Capital, which manages a little under EUR 200m divided between PE and VC investments, as “really hands-on,” offering support for founders who are focused on their business. Investors can offer founders a fresh perspective.
That is exactly what Alkemia did when it encountered Content, an online media business. At that time, the company relied on a traditional advertising model based on consumer time spent online, which did not appeal to Alkemia.
“In our case, we always say that 70% of the decision comes down to the team, […] Then we look at the market, around 20%; and then the 10% left of the decision comes down to whether you have a product, some metrics, and what is the price of the round.” — Ignacio Monereo, Partner, Boost Capital Partners
“We liked the skill mix and also the technology that they developed,” Cremonini recalled. “But we told them, ‘Listen, guys, you have a good mix of team and technologies and solutions. Why don’t you pivot the company and use the money that you want to raise to develop a solution to sell to enterprises?’”
Alkemia committed EUR 3m to a Series A at the beginning of 2020, and the company, now known as Contents, is “a bit over EUR 10m” in revenue and will be EBITDA-positive in 2025, Cremonini said.
What Investment Firms Want
From a VC perspective, Monereo said, Boost Capital looks for companies that try to disrupt or penetrate big markets that can sustain a large company.
About EUR 70m of Alkemia’s EUR 200m funds support a generalist VC fund. Alkemia decided to invest in companies already generating at least EUR 1m in revenue at the Series A fundraising stage.
“When you fundraise, you have to start looking for the first investments because once your investors commit the money, they want the money to be quickly deployed at its best, obviously, because they are paying you a management fee,” Cremonini said.
Monereo explained the appeal of language technology platforms (LTPs) to their firms. The VC model is very specific; cost should grow linearly while revenues, at some point, grow exponentially. VCs are looking for this scalability model.
“It depends on the margins and the chance for growth, […] If it’s something that you can scale very easily, why not?” — Simone Cremonini, Managing Partner, Alkemia Capital
While LTPs are, generally, more scalable than language solutions integrators (LSIs), Monereo did not rule out the possibility of VCs investing in LSIs, noting that an LSI could be scalable depending on the technology it uses. Cremonini agreed.
“It depends on the margins and the chance for growth,” he said. “If it’s something that you can scale very easily, why not?”
Good to Grow
DubMe’s team of Google and YouTube veterans initially founded a company that made kids’ shows for YouTube, including Cocomelon and Super Simplesongs. But the roadblocks they encountered when trying to export their content to different markets inspired a whole new startup.
DubMe was originally imagined as a B2B SaaS company, like ElevenLabs, that would sell localization technology to other content creation clients. In the face of stiff existing competition, however, the team again decided to switch gears.
“If you think about all the back-catalog of content that sits in some storages across media broadcasters, that hasn’t been localized because it wasn’t ROI positive,” Monereo said. “What they’re trying to do is to access that content, localize it, dub it, and then export it in a very efficient way.”
While YouTube might cover some aspects of the features DubMe provides, DubMe goes beyond YouTube’s offerings to streamline a complex workflow heavy on manual processes.
“If you think about all the back-catalog of content that sits in some storages across media broadcasters, that hasn’t been localized because it wasn’t ROI positive, […] What they’re trying to do is to access that content, localize it, dub it, and then export it in a very efficient way.” — Ignacio Monereo, Partner, Boost Capital Partners
“Competition is always fierce across every industry,” Monereo pointed out. To weigh possible risks and advantages, he recommends focusing on specifics: What is the startup’s go-to-market strategy? How can it get a head start? How can it sustain long-term defensibility?
Contents has also evolved, and now offers a solution that helps mid-size to large enterprises automate the production of digital content marketing, including text, audio, and video. It integrates with other platforms used by large companies and addresses specific verticals, in order to offer the right combination of platform and solution to each client.
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Cremonini suggested that a combination of technology and problem-solving makes it more difficult for competitors to win over a startup’s customers.
The goal for each company: to reach a threshold of EUR or GBP 1m per year as soon as possible. “Then you enter a new competitive arena,” Cremonini said. “You can attract money from bigger funds, you are more resilient to changes, to losing customers, and so on.”
In addition to organic growth, Alkemia encourages its portfolio companies to think outside the box and to look out for potential M&A opportunities in order to grow revenue at a steady pace.
DubMe has already had some success with one-off projects and has seen a trend of traffic and volume increasing. The company is now licensing “a lot of content,” Monereo said, including a number of Bollywood movies to be exported into many target languages.
