/ Insights / Dutch VCs look to invest early stage for deals with ‘envy-factor’

Dutch VCs look to invest early stage for deals with ‘envy-factor’

Dutch VC firms always seemed a bit “fearful and risk-averse” when it comes to investing in early stage startups. Talking to some of the investors present at the Startup Deal of the Year there seems to be a shift in mentality however.

As the Dutch startup scene gradually moves from the national arena to the world stage, (as successful entrepreneurship is more and more an international thing), so do Dutch VCs. Investing in startups is hot, and to keep up with the world’s best, it seems you can’t be too early.

“There is always a bit of envy between VCs”, says Edwin Hengstmengel of VC firm Van den Ende & Deitmers. “Nowadays, investing in startups is more lucrative than saving money on a bank account, so we are always on the hunt for deals with the envy-factor.”

Those are the kind of deals every VC wants to close. Hengstmengel mentions the deals of quickly scalable startups 3DHubs, by Balderton Capital, and DealerDirect, by German Rocket Internet and Dutch Prime Ventures last week.

These kind of deals give the associated VC firms a name in the scene. “They are respected by both startups and VCs”, says Hengstmengel. “For the latter mainly because they had the guts to step in first.”

Risk-averse

Van den Ende & Deitmers itself provides ‘later stage’ funding to companies in the field of media and internet, including, Eyeworks, Bright and Hyves. “Around 2 to 3 million euros per deal”, says Hengstmengel.

He feels that most Dutch and probably also European VCs have been too risk-averse in the past. “We wait for too long to join in, usually our American colleagues are therefore the ones to make the envious deals.”

And once they’re in and things go right, they secure funding in next rounds too. “There is no use for us to try and get in anymore”, says Hengstmengel who pleads for more early stage investments and more guts.

Because if Dutch VCs want to compete with their international colleagues, they have to. “We have to improve our ecosystem”, says Hengstmengel.

Shift

Johan van Mil of Peak Capital also sees a shift in thinking as regards his firm. “We are looking to invest lower amounts at an earlier stage, looking less at the estimated valuation of a business”, he says.

Peak Capital already opened two funds for companies in Telecom, Media and Technology. “A third fund is about to be set up for investments between 200k and 1 million euro’s”, Van Mil says. “We want do close more and quicker deals.”

Just five months ago Volta Ventures was founded by Flemish and Dutch VCs to invest in early stage IT company’s. “Somewhere between 250k and 1 million”, says co-founder Frank Appeldoorn.

Nextstage goes even lower with deals from 150k, for “those whom are too early for others. We currently have two first startups in term sheet phase”, says Michel Simons. This fund however solely invests in cooperation with other market parties.

Strategy

Floris van Alkemade of HenQ and Herman Kienhuis of Sanoma Ventures seem ‘early stage men’ from the beginning, investing from 100k in what Van Alkemade calls ‘pain markets’ of Internet, e-Commerce, Media, Analytics, Saas and Software Development. “HenQ’s strategy is to join early, to be able to fund next rounds up to 7 million euros”, Van Alkemade says.

Notably, practically all of these funds are financially backed up by the European Investment Fund for Europe’s micro, small and medium sized businesses. Thus, making early funding a little less risky – and the outlook of possible gains more attractive.

“I truly believe we are not living in a startup bubble”, says Hengstmengel. “I expect a new record number of Dutch startup deals for 2015.”

 
Photo by Pieter van Marion (creative commons via Flickr)

Suzanne Blotenburg
Tweets @SuusNL - Journalist & writer in the fields of business and economics. Co-editor-in-chief @StartupJuncture. Likes to write about #Startups #Entrepreneurship #Policy #Innovation #Newconomy

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