We need different types of funding for different types of businesses - Zdenek Fred Fous, PurposeTech

Zdenek Fred Fous is a General Partner at PurposeTech, a pre-seed fund that backs founders reshaping Health, Climate, and the Future of Work. He started his entrepreneurial journey in 2005, as he felt a need to work on problems he cared about and build with purpose. 

He has co-founded six companies over the years and says that for him, entrepreneurship is one of the most powerful tools we have to create meaningful change. He started investing in early-stage tech companies in 2022, and has invested, through PurposeTech (their first fund) in 11 companies.

Looking back at the companies he co-founded himself, he says that what helped some of them succeed and others fail was first and foremost the team.

“People are the core of the company, and their willingness to grow and learn is telling of a startup’s success. Then comes the execution of the idea, how well the team is set up, how well the leadership functions, what’s the mindset and what process is in place. Then it’s also about going after the right things, in the right way, with timing and luck playing an important role. Some things are outside of your control.”

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The quality of the team is also one of the most important criteria he looks at, as an investor, when assessing a potential investment. 

“Are those the most exceptional, hungry, talented people in that segment? Is there a proper founder-market fit? How uniquely qualified are they with regards to the opportunity? I am looking for people who care, who have been interested in the problem they want to solve, who don’t pitch to us what we want to hear, but who have a really good story and experience in that field.

Also, what’s the aspiration? We are backing people who go after global, billion dollar plus markets, in certain verticals - health, future of work, climate.”

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He’s looking at impact-related startups the same way he’d look at any other type of startup and emphasizes how important it is not to measure them against separate metrics.

What happens, he says, is that being more indulgent with these startups, cutting founders some slack, is not helpful for anyone. 

“In the past, there was greater tolerance for businesses with an unclear business model, particularly in the impact-related verticals, where labeling an initiative as ‘impactful’ was sometimes used to justify the absence of a viable business model. That approach is not sustainable. 

We continue to see an imbalance between the ambition to create positive change and the discipline required to build a resilient, self-sustaining company. Greater awareness is needed that lasting impact depends on both.

There is a certain pathway for a startup - you raise money, you reach the growth / traction required and then raise your next round. That should be the case for impact companies as well.”

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Impact startups are required to grow exponentially, build scalable technology in order to raise money from VCs. From 1,200 startups scanned, PurposeTech would back 4 or 5, because many opportunities are not venture scale (meaning they cannot grow fast enough). Founders need to understand the requirements of the VC path.

“When it comes to founders fundraising from VCs/investors, what matters is their ability to build products / services and sell to their customers.” he adds.

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Finally, we wanted to know what Zdenek thinks we need in order to see more impact startups:

“Certain impact-related verticals, such as HealthTech, have structural constraints such as regulation, geographical fragmentation etc., which fundamentally shape how companies can scale. At the same time, AI is enabling a new generation of entrepreneurs to build credible products with significantly less capital and reach profitability earlier. These companies often deliver meaningful impact and sustainable economics, yet they do not fit the growth expectations of traditional venture funds. This creates a clear gap in the market: different types of businesses require different types of capital and support.

It’s also important for these founders to build companies that suit their aspirations - that’s how they’ll stay on the journey and persevere.”

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Thank you, Zdenek Fred Fous!

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