I spend some of my spare time to help out founders by telling them about my mistakes as an entrepreneur. I’ve made some over the past few years, and I’ll probably keep making them. Because building a company is not for the faint of heart.
There’s no recipe for really complicated, dynamic situations. There’s no recipe for building a high-tech company; there’s no recipe for leading a group of people out of trouble; there’s no recipe for making a series of hit songs; there’s no recipe for playing NFL quarterback; there’s no recipe for running for president; and there’s no recipe for motivating teams when your business has turned to crap. That’s the hard thing about hard things — there’s no formula for dealing with them.
And that’s the truth. My friend Oscar asked me to become a mentor for the Amsterdam-based Rockstart accelerator a while back, I always start a session by saying that there’s no way I can tell founders how to make a success of their company. Each founder, each team, each product, and therefore, each company needs a different approach. But as I keep learning from the way I succeed and fail at things, other founders can use my stories to make up their own conclusions. But there are a couple of things that I wish I’d known before I started my first company. Figuring out how to raise funds to build your vision is one of them. Most of my experience is based on running a company based in the Netherlands. Amsterdam to be exact, with the exception of Human — which we founded in California. But apart from venture and angel capital raised in the US, Human’s first tickets got signed by Dutch angels and funds.
It’s particularly tough to build a consumer facing product with no expected revenue projection or ‘feasible’ business model with angel or venture backing in the Netherlands. Big ideas are usually frowned upon, partially due to the culture, and Dutch investors are risk averse in general. It’s tough to find investors who’ve actually built products or written lines of code themselves. This is one of the reasons why we founded Human in the US, but irrelevant for this article. It’s very much possible to raise a successful round in the Netherlands. Companies like Shapeways, eBuddy, Layar, Hyves, Silk and Wercker are some prime examples (though most of their subsequent capital was raised abroad). And just like in the US, a couple of simple rules apply.
In my experience, it’s about managing expectations and building relationships with investors by showing progress over an extended period of time. Given, my co-founder and I had experience building our previous companies, but this time around we were entering unchartered waters as we had no immediate background or experience with building the technology required to make Human a success. Our first meetings with angels were people who either backed our previous companies, or that had some kind of connection with the products we intended on shipping. If you ask me what the defining reason was for these angels to back us, I’d say our ability to build product and dream big. Everybody on our founding team shipped code or pushed pixels. The single most valuable thing you can do in the earliest stage of your company is making sure you have a team in place that’s willing to execute with the highest quality achievable. Your earliest investors will know that your story, product, and market might change in the next few months. You can be ready for that by making sure your team is resilient and able to ship fast.
Don’t expect your investor to get in on the first meeting. Unless you’re further along in the game and have lined up substantially good metrics and signed seed cheques there’s no real point in adding a lot of pressure. First show them that you’re able to a lot do on very little. Impress them with week to week progress. And be able to identify who might be a good addition to your company instead of blindly following the money. I see our angels as part-time team members. They are there when I need them, and are hands off when I don’t.
Make a shortlist of investors you’d like to back your company, and specify why. We made a list of our unicorn investors, hailing from our European and US based networks, and approached them from every way possible. Founders who are also active as angels can play key roles in warm introductions to funds that backed their previous companies. Do your homework before you approach and find a good reason to talk to them. Figure out how they typically invest, and how much. In my opinion, the best investors are agnostic when it comes to setting up a convertible note or priced round — but if you’re pitching for your first ticket with a warm lead it can help to use this case as a starting point for your terms. Getting in that first commit is hard in any round, so lowering the entry point (ticket size) is another consideration you could make.
The Netherlands has a handful of funds that either say they get in at seed stage, or have their own definition of what seed stage means. Be sure you clearly define the size of your round before you start making appointments. There are not many funds that will get in pre-rev, or work with you at a pace that matches your agenda, and they will just waste your time. To make things a little easier, here’s a shortlist of angels and funds that are active in the Amsterdam area, and are known for rapid decision making. They also have made deals in the past 2 years. But don’t expect to get meetings with them based on this article. Show off that you’re the best. Aim for excellence instead of mediocrity. Build some value on your own, and perhaps follow some of the tips mentioned above.
Update: My co-founder started a nice repository to keep track of investment activity in Amsterdam. We’d love your help on keeping this updated so we can keep growing a healthy network of Netherlands-based founders aiming to take on big ideas.
Are you an angel or fund with active seed stage dealflow and missing on this list? Hit me up on Twitter.