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The other side of the table – Funding from the VCs perspective
“As a European venture capitalist, you not only scout moonshot ideas, but also have to compete with your more aggressive American counterparts, some of whom have been in the business for decades,” according to Corné Jansen, partner at Inkef Capital. “To deal with this, you need to increase your ticket size or get in earlier. Either way: you have to be willing to have a similar risk appetite.”
At Inkef, Jansen invests in early stage technology and healthcare startups. Companies in his portfolio include the success stories of GitLab, Castor and Bloomon and it’s been one hell of a ride so far. “When I sent Sytse, the founder of GitLab a message on LinkedIn, he was initially not interested. We did not get to participate in their Seed nor series A, but eventually participated in their series B and every round thereafter.
With Castor, we found out they were able to bootstrap for a long time and were hesitant to raise venture capital. At first, my colleague Thijs did a tremendous job building a relationship. When the time was there, we were able to pull the trigger quickly and the rest is history. We recently announced a USD 12m funding with TSV (not coincidentally with Villi Iltchev who was also on the Board of GitLab and who led the round in Remote.com, so it’s our third cooperation in that sense)”.
Due to Corné’s experience in finance and venture capital, we are thrilled to share with you his views on the funding process. This time not through the eyes of a founder, but from an investors’ perspective.
Let’s begin with the obvious: “I’m looking for startups with a clear product vision, who will eventually be able to target deep markets. I always ask myself, can this be a category leader and a global player? Then there’s the team of course. I can’t go all in without a fundamental belief in, and a connection with the founders.”
Leading up to the actual investment, Corné’s goal is to secure an overview all the players, so he can look for the next ‘Lionel Messi’. Inkef does this by checking out all series A investments and almost every seed investment. With the massive number of rounds in Europe (Inkef Capital has recently expanded its remit from The Netherlands to Europe), it’s hard to go through all of them yourself. “Similar to scouting young sports talent, most deals are introduced to us through scouts, in our case founders, angels and the seed investors, we currently work with.”
That’s why focus and partnerships have been and will be essential to Corné’s approach. “We’re increasingly focused on companies who develop cutting edge technology (software and deeptech) and are pretty uniquely positioned for digital health opportunities. This limits our scope, creates better and for founders relevant domain expertise. We are convinced that this helps us to become a stronger potential partner for other venture capitalists, for example those in the US who invest solely in similar companies.”
How to stand out
When it comes to raising a round, you need to be aware what VCs look for. “The market, and therefore your potential growth, is limited in The Netherlands. So, for startups to stand out of the crowd, you need to be able to measure yourself against industry leaders across the globe. Knowing that 1) you have to be more capital efficient than your peers, because you’ll probably have lower costs, 2) have a strong product vision and, 3) get shit done and execute like hell.”
“It’s our goal to get to know all startups who aim to build something large and lasting. And if that’s you and you want to meet me or one of our other partners, an introduction through one of the founders we work with for a 8:45am Zoom call is easy to set up. It’s a small world after all.”
At every stage, you’re managing a dynamic network of relationships. Even more so with VCs. The most effective way to start off on the right foot, according to Corné, “is to agree on the level of ambition. Are you building a unicorn? OK, but what if someone offers you €50 million? How will you explain not taking that cash at home?”
“When someone decides to pursue the dream of building a unicorn, the role of the VC becomes that of a partner in crime, often through a board seat. But even then, we have to be able to speak frankly informally. To prevent waste when things go wrong, but also to speed up growth when opportunities arise.”
Before you get there, it’s wise to put your needs on paper. You have to think carefully about why a VC would be a great partner or not, besides the money itself. Corné mentions three important variables you can judge a VC on:
Can they provide us with introductions to potential clients?
“Sometimes it takes us literally 3 minutes to introduce a founder to a potential client, for a 6-7 figure deal. That really moves the needle in terms of valuation, and by the way; growing topline is the cheapest form of financing.” According to Corné, looking through a VCs portfolio and checking out if at least one of them has a great CMO, is a valuable insight. That person can not only tell you how it’s done, but possibly introduce you to her network. “At Inkef we’re even launching programs for founders to speak to and learn from large clients. Which, of course, could result in collaborations and new clients for the startups in our portfolio.”
Can they help us with our operations?
“A trend these days is that VCs are adding more operators to their team. To support founders whenever they need. Most notably their go-to-market strategy into different geographic areas. It’s important for you to look for a VC that has the operators you need.”
Can they help us find talent?
When you grow, one of your prime headaches will be looking for talent. “Not only will a VC challenge you on what type of talent you need, for example, sales or engineering, but they can also introduce you to their network. Which usually contains a long list of (former) founders and operators who are looking for their next big step. Not to mention that being backed by a serious VC most definitely increases your brand recognition amongst the most talented.”
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