Get in the Ring The Netherlands 2017

Erasmus Centre for Entrepreneurship

Rotterdam Science Tower, Rotterdam
November 16, 2017, from 14:00 to 20:00
Author: Bituen Hidalgo (info@bituenhidalgo.com)

Getting Investor Ready Session

Five Dutch investors shared their thoughts and tips on how start-ups and scale-ups can get investor ready.
This was at the Get In The Ring The Netherlands 2017 event at the Rotterdam Science Tower last November
16th .

It is not everyday that one gets the opportunity to listen to five renowned Dutch investors in one afternoon.
The session Getting Investor Ready was led by Ton van 't Noordende of Keadyn, a venture capital firm with a
focus on the technology sector and invests in promising early-stage start-ups. The four invited speakers were
Silla Scheepens (Informal investment and strategic marketing/management at Business Makers BV), Janneke
Niessen (serial entrepreneur and Chief Innovation Officer and co-founder of Improve Digital), Johan van Mil
(founder of Peak Capital, a venture capital firm investing in Dutch early stage companies with technology
innovations), and Jonne de Leeuw (Principal at HPE Capital, a growth stage technology investor). The speakers,
themselves serial entrepreneurs and successful investors, have vast and comprehensive experience in
investing in start-ups and scale-ups. The advice they gave are worth listening to.

On getting investor ready, they emphasized the importance of first building a relationship with potential
investors. A face-to-face introduction is vital. Interested start-ups could easily meet up with investors in
networking events, referrals and mentorship opportunities. For example a number of venture capital firms and
angel investors hold “office hours” in different venues where the young companies are given the opportunity
for an introduction and in some cases, do a pitch on the spot. Investors invest in people and not merely on the
businesses. The right match should be present, at a personal level and whether the company’s pitch matches
the interest of the investor. This is the main reason why first meeting up with them, before asking for
investment, is very important. A common mistake done by start-ups is just sending an email, via Linkedin for
example, containing the pitchdeck and asking for money. This way of approaching investors hardly works.

When after a face-to-face introduction and a pitchdeck is requested, the pitchdeck should not be more than
15 slides. The pitchdeck should at least contain the business plan, marketing strategy, financial projections,
and for what the money will be used for. In case there is already information on market validation, that would
also be good to include in the pitchdeck. Aside from the basic pitchdeck information, investors have particular
investment criteria and requirements in order to persuade them to consider the opportunities offered by the
start-ups and scale-ups.

Peak Capital requires the availability of at least one year revenues. It also wants to see in the pitchdeck the
company’s history and future plans, an estimate of how big the potential market is and how the company can
crack the market to get sales. Peak Capital invests between €500,000 to €2 million. Upon investment, a 100-
day plan is created. Ideally, the founders should still have at least 60% of the company equity. If this is not the
case, it is seen as a red flag. Based on experience, if the founder ownership is down to 20% to 30% of the
equity, the founders tend to show less interest in growing the business. Peak Capital prefers that founders stay
for at least three to five years in their company.

HPE Growth Capital investments range from €8 million to €30 million for companies based in Western Europe.
Due to the bigger size of the companies under its scope, it requires the existence of a board and prefers a
simple investors base. In cases where the capitalisation table is not straight-forward, HPE Growth Capital
would like to see this fixed as soon as possible. The amount of equity remaining with the founders is not a
significant factor for HPE Growth Capital.

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 Get in the Ring The Netherlands 2017
Erasmus Centre for Entrepreneurship
Rotterdam Science Tower, Rotterdam
November 16, 2017, from 14:00 to 20:00
Author: Bituen Hidalgo (info@bituenhidalgo.com)

Serial entrepreneur and investor Janneke Niessen considers that her company’s equity investment should
allow it to be a decision-maker. If this is not possible, the start-up/scale-up company is required to find a buyer
for this equity share.

On company valuation, these investors agreed that focus should instead be on the value of the deal and
getting the right investors, the right team and the right clients. Valuation depends on many variables and with
a very high valuation, the start-up might incur, at a later time, problems due to strict terms with its investors.
To have a good basis for valuation, one practical tip given was to log every metric possible, in order to have
quantified information because investors look for this. To learn more about how investors decide, founders
are suggested to read “Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist” by Brad Feld and
Jason Mendelson. For companies that aim to scale-up, it was recommended for founders to set up their
business, right from the start, for international growth, since the Dutch market is limited. scaling up, first get
the right market fit and get things right before scaling.

The investors showed a mix on their preferred level of involvement in the companies they invest in. Some
would do so if they think they could add value to the company, while some have a policy of non-involvement,
specially when the founding teams are doing well. A recent development in the field are Initial Coin Offerings,
or ICOs. This is where a pool of profit-seeking investors put in some amount, in the form of cash or
crytocurrency, to buy tokens issued by the company. The tokens represent the share in the future dividends
from the company. The investment will be kept in the company when the minimum amount is raised. In case
the minimum amount is not met, the investment will be returned to the investors. ICOs are like a combination
of crowdfunding and initial public offerings (IPO). While this is a possible alternative to venture capital, what
the young companies get from the ICOs are investors interested only in making profit out of the tokens
bought. The ICO investors will provide only capital and none of the added value typically provided by the
traditional investors, who can advise on strategy and provide access to a network, for example. In case the
founders would like to raise capital from ICOs, it was suggested that they put a cap to the amount of capital to
be raised from the ICOs and then get the rest of the capital from investors who can add value aside from
money.

A common factor why these investors invest is to help young companies put out in the market their great and
innovative ideas. The investors also recognise that there is often a big discrepancy between knowledge,
technological for example, and bringing this to the market. A number of investors aim to create social impact,
among which are Stichting DOEN, Put Your Money Where Your Meaning Is, and Social Impact Venture.

Information sources suggested by the investors for founders to get updated on the investment scene are
selected Twitter accounts, Recode being one of these, and podcasts by the TwentyMinuteVC. On the
worthiness of joining incubators and accelerators, this is highly suggested for founders who want to build a
desirable network and meet the right people. While some would be required to give up 6% to 8% of equity,
this will give the company a quick valuation. There is however an opinion that it is better for the young
companies to postpone valuation until has generated its first sales. As to the terms of giving up equity, using a
convertible debt to equity note is possible if not preferable. This way, the valuation question will be
postponed, which could be to the advantage of the growing company.

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 Get in the Ring The Netherlands 2017
Erasmus Centre for Entrepreneurship
Rotterdam Science Tower, Rotterdam
November 16, 2017, from 14:00 to 20:00
Author: Bituen Hidalgo (info@bituenhidalgo.com)

The highly informative session gave useful and practical tips for start-ups and scale-ups in their efforts to be
investor ready and get the right investor at the right time.

(Get in the Ring The Netherlands is a yearly event now on its fifth year. This year’s edition was organised in
partnership with the Erasmus Centre for Entrepreneurship in Rotterdam. The event connects investors,
innovators and start-ups. In this year’s edition, 250 start-ups and more than 70 corporates joined the match-
ups, workshops and deal-making sessions. The Get In The Ring Foundation holds start-up competitions and
networking events in more than 20 cities around the world.)