First published in AMS business magazine. Author: Paul Anstiss
Amsterdam has become an international hub and attractive environment for those wanting to invest in the next big idea or provide traction for companies who are ready to develop further. The availability of investment capital has been stimulated by the Dutch Venture Initiative (DVI), an organisation that supports around 20 Dutch VC funds and enables managers with a particular focus on the Netherlands to tap into its €200-million reserve to provide further investments in innovative or high-tech early- and development-stage enterprises, in partnership with the European Investment Fund (EIF). Another such initiative is the European Angels Fund (EAF), which launched in September 2015. The aim of this €45 million fund is to enable business angels to increase their investment capacity, matching the angels’ stakes, for a co-investment of between €250,000 and €5 million.
Angels in residence
The stagnant world economy has made investors reluctant to provide Series A-round funding, preferring to go for investment growth instead, which has made it difficult for start-up tech companies to obtain seed capital (usually €1-€3 million). However, things are starting to change, with initiatives such as INKEF Capital (Investing in the Knowledge Economy of the Future), a 15-year investment programme that has €200 million to allocate to Dutch and Canadian start-ups. Set up in 2010 by Dutch and Canadian pension-fund giants ABP and OMERS in a bid to reach out to this neglected seed area, Amsterdam-based INKEF Capital has now been joined by other investors such as Dutch bank ING.
INKEF Capital’s ‘Angels in Residence’ programme recognises the value of co-investing, and encourages other investors to join its fund on a deal-by-deal basis. It focuses on two broad technology sectors: healthcare and ICT/new media/FinTech.
According to Managing Director Robert Jan Galema, ‘the quality of Dutch ventures is very good’, and the VC firm sees itself as more of a collaborator than an investor, preferring to contribute early and be a long-term partner.
Serious international players
One of the funds associated with the DVI is Amsterdam-based Endeit Capital, who launched its second fund of €125 million at the end of 2015. The VC form focuses on high-growth Internet companies with proven business models in digital media and marketing, EdTech, mobile, e-commerce and enterprise services. It typically invests €3-8 million in European companies that are ready to scale up, improve their market share and become serious international players.
Managing Partner and co-founder Hubert Deitmers knows the hard road to success all too well – entrepreneurship is in his blood. In 1994, Deitmers helped set up a small Dutch television production company called Endemol, which went on to became one of the world’s biggest media companies. Following the sale of Endemol in 2000, Deitmers and one of Endemol’s founders, Joop van den Ende, launched Endeit Capital in 2006.
‘We started the firm because we knew from experience that it was possible to build an international company from the Netherlands, and because we wanted to use that experience to help other entrepreneurs to expand,’ Deitmers says. ‘We are not just an investment company that provides money, we also want to be considered a serious partner.’
Endeit Capital invests in tech companies that only have a few partners (including the founder and two or three shareholders, max), and even though it takes a stake of around 30%, Deitmers says the firm is not financially driven. ‘That’s the main difference between us and other investors,’ he continues. ‘We don’t think in terms of exits; our main focus is on helping entrepreneurs build their marketshare so that they are ready in time to either go public or to sell to a larger company.’
Based in Amsterdam, Prime Ventures is another VC firm, one that manages €500 million in investments. Even though 50% of its investments are in the Dutch capital, the company takes a pan-European approach and wants to help new tech entrepreneurs develop a global presence through its international business networks. Acting as the lead investor with a financial interest of €5-€20 million in each project, Prime Ventures also provides significant follow-on funding through its partners and investors. ‘Amsterdam really is an attractive city,’ says founder and Managing Partner Sake Bosch. ‘It is full of extraordinary entrepreneurs, and most of the successful start-ups are just a group of very ambitious people who have come here from all around the world. The reason they start here is that Amsterdam is a great place to live, and it also has a strong, developing ecosystem, of which we are a part. There is a community of angel investors, there are smaller seed funds, and much more too.’
Bosch cites one particular investment that, despite the lure of Silicon Valley, recently decided to move its headquarters back to Amsterdam. Takeaway.com, which started life in the Netherlands in 2000 as the online food-order site Thuisbezorgd.nl, became a phenomenal success, and in 2012, Prime Ventures invested €13 million to develop the concept further. It was followed two years later by another €73 million in a Series B-round led by Macquarie Capital and Prime Ventures two years later, and the company now operates worldwide, averaging 800,000 orders a month for its 20,000 member restaurants.
Refusing to conform
HenQ, another Amsterdam-based VC firm, prides itself in being ‘nonconformist’ in both life and business. It boasts that it is the only Dutch VC firm that dares to invest in early-stage companies looking for seed investments from €100,000 upwards, and that it has the ability to continue to invest up to €10 million in its winners. Executive Partner Floris van Alkemade says that henQ has a philosophy of cooperation and co-investment. ‘We believe that a founding team should get as many brains on board as possible, as both advisors and investors,’ he explains. ‘Whenever we look at a company, we always ask what comes next. Will it be expansion to the UK? Or maybe Germany, the US or Asia? At that point, we look at who the next logical investor to join us could be. We believe that splitting is multiplying.’
HenQ recently launched a third fund of €50 million, aimed at young, ambitious and innovative companies of Dutch origin or with a Dutch link that are active in the fields of Internet, e-commerce, (mobile) media, analytics, Software as a Service (SaaS) and software development. Van Alkemade says that he and his co-investors look for companies that not only respond to global trends, but initiate them too. ‘The question that we ask is: do they attract talent?’ he explains. ‘Are they such visionaries that the brightest engineers, designers and sales people really want to work with them? Because often, when you want to grow a company, it’s all about access to good talent.’
Van Alkemade says henQ’s sweet spot is business-to-business software. It looks for the moment when a company can show traction and a steady stream of regular customers, and it’s particularly keen on service companies whose product is hosted somewhere in the Cloud, avoiding the need for expensive data centres.
Lay of the VC Land
Founded in 2007, Peak Capital has three funds with a combined worth of €18 million, and it hopes to launch a fourth fund for Europe in the near future. According to entrepreneur and co-founder Johan van Mil, there is plenty of venture capital in the Netherlands, but start-up entrepreneurs often know very little about the investment ecosystem or the procedures to obtain funding. In a bid to help make the process more transparent and help entrepreneurs find the right match, Peak Capital recently published a map of the Netherlands tech VC landscape, which is updated each quarter and gives an overview of which seed-, growth- and later-stage VCs are active in the market. ‘As a VC, we are very open as to what we are looking for,’ explains van Mil. ‘If you don’t fit with us, then we will help you look for the right place and discuss which steps you need to take before you come to us.’
Peak Capital itself is interested in marketplaces, software, data, FinTech and HR tech companies that have found their product-market fit and are ready for growth capital to reach the next stage in their development. ‘We’re a very entrepreneurial VC, and we like to give hands-on support,’ says van Mil. ‘Just as when we became the first investor in Catawiki, Europe’s fastest-growing company, we don’t just look at the numbers; we help select the staff and partners, provide access to our network and think along with the entrepreneur as to how the growth of the company can be accelerated.’
According to van Mil, there has been a big shift in thinking over the past 10 years that encourages entrepreneurship. Big companies no longer promise a job for life and, as a result, don’t have the same allure as they used to, which means that more people than ever before are striking out on their own. As Endeit Capital’s Hubert Deitmers says, ‘So much has happened in the online world already, but we’re really only at the beginning. It’s very exciting to be in a segment where we can play a part.’