Exploring the faster path: crowdfunding versus state support for unlocking startups' potential

  • 2024-06-22
  • Vilnis Prieditis, Founder & Chairman of the Board of Relationship App “Matchful”

To secure support or attract investment funds, startups must reach a certain level of growth. Various platforms or applications must reach a certain number of users before they can qualify for support. Therefore, merely having a good idea often isn't enough. A strong team is also necessary to articulate the idea and generate public interest. Crowdfunding, involving many small investors - individuals, can serve as a stepping stone for Latvian startups to reach the next stage of development.

When analysing startups based on app ideas, it's worth emphasizing that investment funds get involved when the product is ready, launched, and has reached a certain number of users. Each fund may have different requirements – it could be 10,000 users or even 30,000, which is normal because funds receive many ideas daily. 

Thus, the question arises: how can startup founders reach the required level? It's important to remember that strength often lies in coming together for a common goal, so the solution may also lie in attracting many small investors as co-owners. We are a Latvian company with over 100 co-owners - people can buy shares, and these funds are invested in the company. 

We have found that people in Latvia are willing to believe in good ideas and collectively create great things. Our country has creative and talented individuals capable of generating ideas with very high potential and added value, and also people who can see that potential. Currently, there is a great deal of interest in various apps, including the relationship app "Matchful," but we are still open to new co-owners, offering shares starting from ten.

Challenge – attracting funding from venture capital funds

Analysing the Latvian startup ecosystem overall, it's important to highlight that securing funding can be a very challenging process. A study (https://civitta.com/articles/the-baltic-startup-scene-today-s-realities-tomorrow-s-possibilities) conducted a few years ago on startups in Latvia confirmed that one of the biggest challenges is attracting funding from venture capital funds. The greater the number of ideas and projects, the fiercer the competition, and objectively, investors cannot focus on all of them. An alternative solution, especially in the developmental stage, is crowdfunding, but there are nuances here as well. 

I urge startups to carefully analyse the conditions of various crowdfunding platforms. In our case, after such research, we concluded that instead of choosing an existing platform, we should develop our own, which we did and have already tested in practice by attracting co-owners.

Impact of global competition

While initially it might seem that having a good idea is the main thing and funding will follow, it's important to consider that in today's increasingly international startup environment, investors have many choices of where to invest. 

Latvian startups compete in the global market, where situations can vary widely. For example, if inexperienced idea creators present their idea, there is a risk that investors might steal it. Similarly, there could be situations where investor requirements make very successful ideas unfeasible. 

The more experience one has, the easier it is to find ways to mitigate risks and attract investors. Currently, through share sales, we have attracted nearly 250,000 euros, and we plan to attract another 100,000 euros in this way. The amounts are significant enough for the app to start operating, and with each investment attracted, we also enhance our knowledge in this field.

The crucial role of teams: beyond ideas in startup success

Referring to the importance of the idea mentioned earlier, it's crucial to emphasize that while the idea is indeed important, the team is equally vital. Ideally, the team should comprise both creative and tech-savvy individuals as well as people with business acumen and strong sales skills. In our team, for example, we have representatives from the financial technology sector, programmers, and marketing and sales specialists. 

It's unlikely that one person could possess such diverse experience and knowledge, so teamwork and collaboration skills are crucial. And there also needs to be someone with experience in project and team management – that's my role.

Impact of the macro-economic environment

Various factors influence startups, as well as business in general. Analysing societal trends and discussing purposefully the direction of new business ventures, we concluded that many people are dissatisfied with conventional dating apps, which led to the idea of creating an app where artificial intelligence algorithms help people find each other. 

Moreover, it's not just about dating; we focus more on finding business partners, new colleagues, mentors, investors, or reliable companions for traveling or sports. If you're looking for a colleague, the app will suggest people seeking new career challenges; if it's a business partner you need, the app will find the most suitable one. 

Moreover, personality traits and other aspects relevant for long-term collaboration are taken into account. We proudly call ourselves a Latvian startup, but we also actively look towards foreign markets – both in terms of user acquisition and investments. 

One of our primary target markets, besides Latvia, is the United Kingdom. I believe anyone who has successfully developed a startup will agree that the first steps are the hardest, just like the initial target markets. With each subsequent step, it gets a little easier because both the user base and experience and knowledge grow.