For early-stage founders, raising venture capital is only part of the job. The investor they choose can shape how the company handles its first serious challenges, adjusts its business model and prepares to grow beyond its home market.
LAUNCHub Ventures wants that relationship to start earlier than the usual fundraising process. With Fund III, the Sofia-based firm is keeping the approach it took with Fund II: a focus on Central and Eastern Europe, with openness to opportunities across sectors.
“The strategy is not changing radically, and that is intentional. Our previous fund showed us what works for a fund focused on our region, so we have decided to continue with the same formula,”
— says Petar Tsachev, General Partner at LAUNCHub Ventures.
The firm continues to invest across Bulgaria, Romania, Croatia, Hungary, Greece, Poland and Slovenia, as well as across the wider Western Balkans. It also backs founders from the region whose companies are based elsewhere, including San Francisco and London. The firm wants to build relationships with these founders as early as possible.
“We want to reach the most promising founders from the region before they are ready, when they may only have a few ideas in their heads about what kind of business they want to build."
Why adaptability matters more than the original idea
At the earliest stages, the first idea is rarely the final product. Customer feedback, market conditions and new opportunities often push founders to rethink where they started.
For Tsachev, a founder's ability to respond to these changes is one of the defining factors behind a company's success.
“The biggest factor for success is a founder’s ability to adapt to the environment in which they operate, making changes both to their team and to the business they are building."
He points to founders in LAUNCHub’s portfolio who started with one idea and found a bigger opportunity by staying close to their customers.
“They begin developing one idea, but as they spend time in the market and talk to customers, they sometimes realize there is a much bigger opportunity elsewhere. Rather than becoming too attached to their initial idea, they pivot and experiment until they find something that addresses a sufficiently large opportunity and a strong market need.”
The mistakes founders make in their first fundraise
Tsachev also sees founders repeat the same mistakes when they approach investors for the first time. The first is raising money without a clear sense of what it should help the company achieve.
“Founders think too much about how long the investment will last rather than what milestones they will be able to reach with that capital,” he says.
Another is putting valuation ahead of the choice of partner. A higher valuation can look good in the short term, but the wrong investor can prove far more costly over time.
Founders also tend to underestimate how long fundraising takes. The process can stretch over months, so conversations with investors should start well before the money is urgently needed.
Tsachev also advises founders to do their own due diligence by talking to entrepreneurs who have worked with a given investor, including those whose companies did not do well.
What LAUNCHub looks for in AI startups
LAUNCHub remains sector-agnostic, but AI now comes up across many of the companies it evaluates. Tsachev sees it less as a standalone industry and more as a way of building products and businesses in any sector.
That changes how investors judge AI startups. Plugging an existing model into a product does not, on its own, create a lasting advantage.
“What we look for is access to proprietary data, or at least easy access to data. Deep integration into the customer’s workflow is also very important, because that makes the product harder for competitors to copy."
This is where a founder’s understanding of the customer matters most. Knowing how a business actually runs and where its inefficiencies are helps founders build products that become part of their customers’ daily work.
For Tsachev, a warning sign is a product that offers little more than an extra layer on top of an existing AI model. The investment case has to go beyond the technology itself: startups need to show why customers will keep using the product and why its value is hard to replicate.
More than capital
LAUNCHub sees its experience in the regional ecosystem as one of the main things it brings to portfolio companies. Much of that, Tsachev says, comes from the team having built companies themselves.
“Most of our team members have been either operators or founders. We understand what it means to build a company from this region and the challenges that come with it."
The fund also draws on its network of investors across Western Europe, including London, and the US. This network becomes particularly valuable when portfolio companies prepare for follow-on rounds, giving LAUNCHub insight into what potential investors expect to see.
This network becomes particularly valuable when portfolio companies prepare for follow-on rounds, giving LAUNCHub insight into what potential investors expect to see.
“We know what those investors look for, what a company needs to demonstrate and how its story should be presented. We help founders prepare their narrative, understand the right timing and position themselves for the next stage."
The community around the fund is another part of that support. Founders from earlier LAUNCHub portfolios share their experience with newer companies, and some have gone on to invest in the current fund. Tsachev says he is proud that several founders from LAUNCHub’s earlier portfolios have invested in the current fund, which he sees as a sign of how much they trust the team.
He describes this founder community as one of the firm’s most distinctive features. Entrepreneurs who have faced similar challenges pass practical lessons on to earlier-stage companies, creating a network of experience that goes beyond the formal investor-startup relationship.
Europe or the US? It depends on the market
For startups from CEE and SEE, international expansion is another major strategic decision. Targeting the US early was long seen as a necessary step towards building a global tech company, but Tsachev says that is no longer true for everyone. LAUNCHub is becoming more and more convinced that a company can build a large business by focusing on the European market.
What matters, in his view, is whether Europe’s fragmented market works against a company or in its favour.
“What we look at is whether the fragmentation of the European market is a tax the company has to pay or a wall that protects it from competition.”
If fragmentation creates barriers that protect a company’s position, Europe alone can support a large business. If the main customers, budgets, category and competitors are concentrated in the US, going there early may be the better strategy.
LAUNCHub’s portfolio includes both. Some companies focus on the US because that is where their main customers and budget holders are, while others, such as AMPECO, have built substantial businesses with Europe as their primary market.
Preparing for the next round starts a year ahead
LAUNCHub's portfolio figures offer some context for this approach. According to the firm, 75% of its pre-seed and seed investments have gone on to raise a follow-on round, while around 40% have reached Series A. These results reflect the firm's track record across nearly 100 companies and 18 exits.
For startups planning to raise again, preparation should not begin when the fundraising process officially starts. In Tsachev’s view, most of the work happens in the year before.
“The most important part of the work with founders happens in the 12 months before the next round, not on the day fundraising begins."
During that time, founders need regular and honest feedback on whether their metrics are strong enough, whether the company is ready for the next stage, and whether the market and customer base can support further growth.
Staying involved when growth is slow
Tsachev also highlights two things founders should know about how LAUNCHub works: speed and long-term involvement.
The team tries not to waste founders’ time, both when deciding whether to invest and after the investment is made. But moving fast does not mean expecting every company to grow straight away. Some businesses need years to find their ideal customer profile and a market that responds to their product.
“We support companies when things are not going well, too — not only when everything is moving up and to the right."
He recalls companies that spent two years searching for their market and ideal customer before things finally took shape and growth accelerated.
And for founders thinking about approaching LAUNCHub, his message is simple: you do not need to have everything figured out before getting in touch.
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