Delarki is an investment company that creates and invests in early-stage businesses targeting Generation Y and Z audiences.
We invest in early-stage businesses in the food and beverage and consumer technology industries. Every company we invest in works alongside Mustard Venture Studio, a venture builder we created to provide our portfolio businesses with the experience and expertise they need to support growth and maximise their value for their next funding event.
Delarki’s approach is grounded in the concept of category building, a precursor to brand building. We believe that focusing on the category build provides the best foundation for exponential growth. Companies focusing just on building a brand are typically seeking to differentiate in a market that already exists, and will run the risk of their growth trajectory being detrimentally misaligned with that of the category. The advantage of building brands in new categories is that their growth trajectory is, by definition, more positively correlated to that of the category.
How did you come up with the idea for the company?
The genesis of Delarki lies in my own experience of working with VCs in the US. After university, I worked with a variety of firms, notably Sway Ventures, setting up satellite offices on the East Coast and working with some of their portfolio companies on their route to market. These were primarily software startups selling to food and beverage companies. Many had raised large amounts of funding but weren’t able to clearly define their product, value proposition, or the audience they were targeting. My job was to work with branding agencies to create product pitches that would secure these contracts.
From this experience, I learnt that there was a fundamental disconnect between the investors, the founders, and the third-party suppliers of the companies – particularly marketing agencies. Investors in closed-end funds are primarily driven by an ambition to raise more money. With a portfolio approach, it is assumed that 8 out of 10 businesses will not return any capital. Since it is practically impossible to predict which ones at the beginning of the fund cycle, it automatically places investors at odds with the individual founders, who will be told they will be getting support in equal measure.
For founders, returns on the investors’ timeline rarely feature as high on their list of priorities as their maintaining their identity as someone at the helm of a ‘promising’ startup. Finally, the third-party suppliers were ill-equipped to cater to the needs of smaller companies, and were more interested in selling expensive products, such as campaigns or whitepapers, to justify their overheads.
It was this realisation that led me to set up Delarki. I wanted to create a business that solved this disconnect and aligned the interests of these disparate stakeholders. Delarki offers a very hands-on, active investment service to all of the companies we invest in. We are very operational in style, and slot in expertise from Delarki and Mustard– our in-house branding and marketing division – to service the business needs. It’s one thing to be doing it right – it’s another thing to be seen to be doing it right in order to remain investable, the most important hygiene factor for any founder.
In short, I wanted to create a business where the investors, the entrepreneurs, and the third-party suppliers were on the same page. The answer was to deliver the overqualified part-time third-party services in-house while providing patient capital to the founders who would be given full transparency on their funding milestones from the first check to the last required for their projected exit.
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How has the company evolved during the pandemic?
What the pandemic taught us is that there’s a competitive advantage in being bilingual between operator and investor. Traditional blue-chip investors typically take a more passive approach to their portfolio. These investors rely entirely on closing high-quality deals first. Since closing a deal almost always requires face-to-face meetings, there were much fewer deals being done. The lack of face-to-face meetings also meant portfolio companies received less support from their investors. Therefore, the few firms that could truly offer hands-on operational support, in addition to capital have thrived during Covid.
Beyond the business model itself, we learned that we had our remote working policy about right before the pandemic hit. Our policy was that employees would work three days a week in the office and two days remote. If you wanted to work remotely for longer, we would accommodate that on the basis that you manage your time effectively. We realised that the office wasn’t going away, because most employees enjoy and learn from an office-based environment. The key for us was formalising Tuesday to Thursday as client days, or strategic days, depending on what division you are in. Mondays and Fridays are execution days – dedicated time to get your head down on projects free from distraction.
What can we hope to see from Delarki in the future?
We’re now pivoting firmly away from being active investors with a portfolio to operators with a checkbook; building products for investors, by investors.
In the last few years, Delarki’s approach has been portfolio-led and similar to a traditional VC or PE fund. We are now focusing on providing opportunities – through capital and operational resources – to businesses we believe can become category leaders. We like new sectors that have already gone through their boom to bust early-adopter phase, where lots of capital flows rapidly into a category before evaporating in a cascading tide of crashing stocks.
The cannabis industry is a good example of where we like to play – having gone from its initial wave to its second wave, where we are confident the category or industry leaders will present themselves. These nascent sectors require patient capital that understands the futility in funding attempts at monopolies in markets that don’t yet exist and the operational experience to help grow the pie for all interested stakeholders, not just the investors- this is where we come in.