Investor R. Rasmussen: Thoughts on the state of Impact investing in the Baltics.

Ukrainian startups continue despite the horrors of war.

Rick Rasmussen – an investor from the USA, and Industry Fellow at the University of California, Berkeley – says that our region went on an amazing path to progression over the last decade and is an integral part of the world economy. Also, he sees continued progress by many of the brave startups in Ukraine.

R. Rasmussen is also a managing director of Concordia Ventures, he assisted over a dozen

accelerators and mentored over 1000 companies. This year he is joining Rockit Impact 2.0

accelerator as a mentor and will help participants in their business journey.

Mr. Rasmussen, how do you see the path Lithuania and our business companies went during the last decade?

Now you are a country of unicorns, you are talking about big investments. If you look over time the progression has been amazing and with that comes a change in focus. Now we see not just individual start-ups and scaleups with commercial tasks, but it also start-ups and scales with a wider purpose in Lithuania and Europe around. We are starting to see a lot more interest in the impact on the globe. This change is also visible if we are talking about the investment environment. I see the desire to change the world overall and make a big difference in terms of impact companies and impact investment.

You are from Silicon Valley, what changes do you see here the impact and the sustainable innovations? Maybe there are lessons that we can learn from you?

I can talk about Silicon Valley in general. The impact investing is for sure becoming huge there in almost all industries. There are many funds that are involved in impact investing and not only those that are focused on EU but also investing all around the world. Silicon Valley, Los Angeles, Seattle, New York, and other areas where tech economy is booming, also have large impact investing communities. If you look at the foundations and where is their money going, so it is the impact sector. New tech funds are starting up and again – all many of which have an impact emphasis.

They are starting to take a look at metrics not just on pure profits but also the sort of impact investing metrics. In the universities at Stanford and Berkeley and others where I also teach, there are classes on developing impact funds, on impact investing. It is a thing, and it has been a thing for a while. So, it's definitely mainstream.

What trends do you see in Silicon Valley and what are the leaders now?

The tech economy is taking over now. If you take a line 20 years back, we can easily name the leaders: it was ‘Chevron’, ‘Exxon’, ‘Texaco’ and all these places. Now it's different and it’s tech everywhere: ‘Apple’ right down the street, it's ‘Amazon’ right up the road, it's ‘Microsoft’ not too far, it's ‘Facebook’. What I see now, there are a lot of large Fortune 500 companies that are now taking on environmental projects that are very large in scope.

As an example, California is shifting largely to renewable energy dramatically. We have some of the largest solar farms in the world, taking a look at wave energy and a lot of other things is just super interesting outside of the natural scope.

The drive towards impact investment is coming from the top down. It starts with the government; they are very proactive in terms of climate change. The next level is companies that actually make those investments. They are driving the ability to be innovative and enabling start-ups and scaleups to enter into that ecosystem and have markets straight away. Historically, if you have a start-up, it will take 5, 7, or even 10 years to be something significant. What is happening with impact investment and companies with innovative technology – they grow really big, really fast.

I see that the typical investment for impact-driven companies is much larger than you'd see for a typical technology start-up. It is often around 10 million dollars for early-round financing. So, it's an interesting phenomenon, a big market with big opportunities.

Usually, it's also the same with the deep tech as well. You need to have more, attract more investments and maybe it is easier in the USA. What is your advice for Lithuania and other countries in the region: is it a good strategy for us to work with impact investments, because they require more money, but our funds are smaller?

I think in general the geographic barriers are breaking down. This is especially accelerated with COVID-19. We do a lot more business online and over zoom than we ever have done before. Almost all funds from Silicon Valley which often we're focused on investing in companies that were local or if they were investing outside of the area, they were asking and forcing companies to move to Silicon Valley. But it's just no longer the case. Funds are looking globally. They're investing globally.

I would say that a company from Eastern Europe or Lithuania with strong technology, a strong team, a strong vision, and so on, would be treated equally to a potential investment that was born and raised here, in Silicon Valley. I mentioned strong technology and a strong team intentionally – those are the things that you need to be focused on. Organizations like ‘ROCKIT’ and Rockit Impact 2.0 accelerator are basically helping to develop that capability. And then when you have something that looks like a very strong investment opportunity, you can work to promote them on a global stage.

The ability to network is also super important. So, that's again you as a start-up founder have to search and take part in similar accelerators we are now having in Lithuania. It helps your company to get exposure at a global level.

How young entrepreneurs could reach people like you, who are very important both as advisers and investors?

I'm not anything special there. But you have to keep in mind that networking and finding people it's a part of the job. Again, for this, you will need strong technology, a strong team, strong ambition, a strong ability to execute, and so on. That's independent of geography, you search for funds, who are looking for investment opportunities, your search for accelerators to expose your company.

Think about a general-purpose VC firm, an investment firm, which is usually full of bankers. They know very little about technology, they just take a look at the numbers: what are your revenues, what are your churn rates and profits and then say “OK, let's do investments”. So, it is not an investment opportunity and target for deep tech businesses.

But if you can identify those firms that are very interested in those specific areas usually it's one or two partners that are experts in those fields. Those are your targets, and it is not about marketing at his point. It's a business development perspective, to find out, who would be your key and likely partners. So, the proper thing to do is to focus on those places, where you might have the greatest success and focus on technology.

How do you see the situation in the startup world because of the war in Ukraine? Maybe it is time for Lithuania and neighboring countries to make a pause and not search for investments now?

I'm going to draw the distinction again between a classic standard run of the mill banker driven investment firm. They're all about risk. Eastern Europe and the entire area around right now are probably viewed with higher risk than it was six months ago for them. But the deep tech sector is really different.

If you can demonstrate that you've got a unique technology capability and you have a team that's willing to execute, wherever they're located, that’s the main point. I don't think the doors are shut at all. Maybe they are closed a little bit, but honestly, the investors continue thinking about their job. They have to place money into companies that have their best chance of success. They're still here, they're still very active in looking all the way throughout Eastern Europe.

There was an initial shock, but now it is a bit more normalized. Of course, you need to explain your own political situation and what NATO membership means and all those kinds of things, but you could pass those barriers and you should be OK.

You also work with the companies in Ukraine. What is happening there from your point of view?

I was running one of the largest accelerators in Ukraine ‘NEST Boostcamp’. We just began our fifth start on February 22nd and two days later everything changed. First, I'm happy to say that everybody that I worked with is safe. All women have left the country, and some of them are starting to return, which is wonderful. The men did not leave, they went into the armed forces, and joined volunteers.

But people claim that 75% of all the start-ups in Ukraine that were active pre-war, are still active to this day. I continue to get calls to mentor and help and provide guidance. They are looking to raise money and it is more difficult than in the Baltics. Our accelerator is on hold for now, but there are others that are getting back. And I am more than happy to hear that.