Hunting Unicorns: DeepTech Venture in Europe
In this post I review Collibra, the Data Governance giant and first Belgian unicorn, charting their journey and what venture investors and aspiring founders can learn from it…
What?
- Founded in 2008 by Felix van de Maele (CEO), Stan Christiaens, Pieter De Leenheer and Damien Trog, Collibra is the leader in Data Governance and the first Belgian unicorn, successfully raising a total of $234m over 6 rounds.
- Their platform provides an easy-to-use business application that automates any data-related business process for enterprise users and knowledge workers. In doing so, they make it easy for all ‘data citizens’ to find, understand and trust their data.
Milestones: 2008–2019
- 2008/9 — Pivot: they realized they did not have product market fit but did have the wherewithal to listen to clients’ wants and adjust the solution accordingly.
- 2009 — Sales: a good product without salesmen. They hired an outside sales expert and made him a co-founder. He ultimately grew the business from $0–20m in sales.
- 2012 — $1 million ARR: led to the first major capital round and key outside board hires, providing essential expertise and the right message to the market.
- 2015 — $20m from Index Ventures: (led by Jan Hammer): revenue had grown at 200% for the past couple of years, the round funded a switch to SaaS.
- 2016 — Market development: data became an essential driver of value for business.
- 2019 — Unicorn valuation: and a $100m round.
What made Collibra a great investment on reflection?
Technical Brilliance
They were technically the best team in the market who also built the best product. Teddie Wardi who led Dawn Capital’s participation in the Series B round noted that their technical ability allowed them to build a product superior to the competition that was tailored to the consumer — setting them apart.
Vision
They saw the market before anyone else which gave them time to find the exact product market fit. As a result they built a better product and were able to continually improve it, appealing to clients faster than the competition. Seeing the market so early also meant they were overlooked by investors and consequently undervalued for those who did invest.
Humility
Humility helped them to reflect, see what wasn’t working and reinvent themselves and their product. The result was something tailored exactly to the customer’s wants, rather than something they thought the customer should want.
They also realized their technical skill did not mean they could sell the product, so they hired sales expert Benny Verhaeghe and made him a co-founder; he grew sales from $0 to 20m.
Additionally, in 2012 they added further outside personnel to the board, explicitly signalling to investors that the startup did not revolve around the founders’ wants and that they were open to advice.
Decisive+Incisive
Once they had reflected, they moved to re-deploy decisively and effectively with speed, as opposed to not seeing problems/solutions clearly, becoming torn between different strategies and wasting time through indecision.
Resourceful
Seeing the market almost too early, meant that they had to be strong, gritty and most importantly, resourceful to survive. There was neither a real market for data, nor a startup scene in Belgium.
However, this coupled with the team’s ingenuity resulted in two things:
1) An international approach from the outset — both in hiring and in client acquisition, which gave them a larger vision and an international agility many European startups did not (and do not) have. They closed US customers much faster because of this and, as a result, were able to raise larger US based funding — impossible with a myopic, localized outlook.
2) A product tailored exactly to customer: built for customers, in part by customers, rather than something that they alone thought was cool. This approach produced a successful pivot in 2009 and continual product evolution tailored to market demands. The importance of building a product for the market, something customers really want enough to part with cash for cannot be overstated. Building something with no market need is the no.1 cause of startup failure.
New Market+First Mover Advantage
This meant two key things:
1) They did not have to battle entrenched incumbents for market share.
2) They were able to ride the wave of market growth which added to their own growth, as opposed to relying on their product alone, something highlighted by both Teddie Wardi and Norman Fiore (general partner at Dawn Capital) during the Series B round.
Lessons For Investors
- Don’t overlook the potential: Collibra shows there are European DeepTech unicorns and European founders who can visualize and dominate essential markets. However, exceptional DeepTech investments, especially those that are contrarian or right at the cutting edge, run the risk of being overlooked and dismissed by VCs who can’t envision a future market, “investors did not understand our product and doubted there was a market for it” van de Maele. Investors must take care not to compound this mistake by missing the grit of a founder and their will to win and dominate a market.
- Simplicity at the cutting edge: Collibra were a team offering something that now seems obvious (although very technical). They saw and provided simplicity in something very complex — the data market, before anyone else. Investors stand to make the most out sized returns by deploying capital at the forefront of a new market or technology (think Amazon for eCommerce, AirBnB or Uber for decentralized marketplaces etc.) When done correctly the investor sees not only the returns of a great business but those of a leader in a paradigm shift. Look for a team who have the technical ability not only to realize the vision, but to keep things simple: building a genuine, usable product and executing effectively at every stage.
- Look for teams who realize negatives and turn them positives: Early hardship made Collibra better and ultimately bigger. The lack of success with the original lab honed product became an opportunity to pivot and build a product customers wanted. The realization that they weren’t sales hot shots didn’t perturb them; they hired someone who was, who grew the business faster than they ever could have. The lack of a startup scene in Belgium was something they again turned into a positive: they had to be international from the start in pursuit of customers, funding and hiring. This international mindset is indispensable for European DeepTech, “We moved international very quickly…Belgium is a smaller country, so, you understand, you need to go international really quickly” (van de Maele).
- Relationships: A good relationship with your founder team is hugely important to maximize your returns and reputation with both investors and founders. They will continue to champion the value you add years down the line as van de Maele has done with Battery Ventures and Iconiq; instancing their relationship as the key reason to opt for rounds of over $50m each within a year — something he was hesitant to do at first.
- Timing: Timing is crucial for the best DeepTech investments, “We were actually too early for the market” (van de Maele). Collibra ultimately survived and thrived but being too early is often indistinguishable from being wrong for an investor. The investor must carefully consider whether a market being slightly too early can be balanced by the robustness and ingenuity of the team; especially their ability to pivot and find early customers.
Lessons For Founders
- Money: Essential. 30% of startups fail because they run out of cash. In my interview with Stan Christiaens he emphasized funding as the key to staying afloat and the first piece of advice he would give a new founder. However, he was also keen to point out founders should be careful how they raise; take only what you need and will execute with — be precise with your budget. Do not bring someone on board just for the money, VCs add value, picking the right one is crucial to success.
- The Board: Their chairman recommended a large, experienced board from the beginning. This helped them raise funds through personal connections but more importantly, it helped them make the right decisions consistently, chiefly in internal organisation, strategising, conflict resolution. This was crucial early on when they needed to pivot — the board gave clarity in what/what not to do and allowed them to sell to markets they had never considered, perfecting their product.
- Hiring: most people start with people who they know but the world is bigger than you think. Founders should place a lot of premium in thought given to hiring the right people. Stan was keen to note that founder should trust their gut feel — it is usually right with who will and won’t fit with your team culture, especially regarding who will be in for the long haul.
- Pivot early and be Commercial: Don’t try to make something work that is not working. 42% of startups fail due to lack of market need. This is a common tendency in the initial stages, it wastes time and can ultimately prove fatal. DeepTech founders focus too much on the product in isolation:
“Forget about building the product if you can’t sell the idea…If someone won’t buy your idea, why even build a product for it?” (Stan Christiaens). This is a common problem in DeepTech and one Collibra encountered, spending too much time on the computer, “finding salvation in coding” rather than listening to the market.
In closing, for all those out there struggling in the unforgiving world of entrepreneurship, whether you are lying awake worrying you will never find the next big thing, or whether you doubt your dream can become reality, remember…
