Amsterdam, 26 January 2022: The ideal startup ecosystem could be seen as a closed loop. Because the best investors are entrepreneurs themselves (or have been), they know what it takes to successfully grow startups. When entrepreneurs reinvest their capital after an exit, including their experience and insights, a flywheel effect is set in motion.
Entrepreneurs investing
Fortunately, we no longer need to refer to Silicon Valley to explain how such a system works. In the Netherlands, over the past decade, more and more entrepreneurs have started investing, and they are doing so at a younger age. That means they don't wait for the ultimate exit or their retirement to put their money into other ventures. And, since they are entrepreneurs by nature, they don't just want to act as passive investors; they prefer to stay somewhat involved with the startups they believe in. Exactly this is what Reinder Lubbers is tapping into with No Such Ventures, the venture capital firm he founded three years ago to do things a bit differently.
Certainly, there are more venture capitalists who partially focus on entrepreneurs as investors. Peak Capital is known as a genuine entrepreneurs' club, as is Slingshot Ventures, while the much larger Endeit also allows "its" entrepreneurs to co-invest in its funds. The latest notable move was made by the Dutch Founders Fund, which last week filled a second fund with 60 million from well-known names such as Bas Beerens, Patrick Kerssemakers, Laurens Groenendijk, and dozens of fellow entrepreneurs.
Deal-by-deal investment
But as the new kid on the block, Lubbers does things a bit differently. In a relatively short time, he has gathered a network of 100 investors. What has grown somewhat out of necessity has now become an important unique selling point: No Such Ventures works deal by deal. Investors don't commit their funds to a fund that Lubbers would use for investments. Instead, he and his seven colleagues select the deals they are genuinely enthusiastic about and present them to the network. "Do you want to participate? And if so, how much?"
"It initially arose somewhat out of necessity," Lubbers admits. The 37-year-old former Olympic rower worked in private equity and venture capital firms after his sports career, where he saw how he would do things differently. "I felt that they thought a bit too much inside the box. They had precisely defined what kind of deals they did or didn't do, in which geographic areas, the type of companies, and, for example, the size of the stake they took. And then all deals had to go through an investment committee, which took extra time."
Between business angels and venture capital
"I missed flexibility in short. And as an elite athlete, I am focused on achieving the best results, no matter how you achieve them." Lubbers also felt that there was a gap in the market between business angels, who personally invest and also invest a lot of time in guiding startup entrepreneurs, and venture capital firms, where you put money into a fund, creating a greater distance between investor and entrepreneur – and also between investment and exit.
Many people who have the funds see the value in helping entrepreneurs but do not have the time to act as angels. "With us, you are closer to the company, and if we think you can help the entrepreneur, we dare to ask for it. It's not mandatory, but actually, all our investors enjoy doing it. Besides, we always remain in control of the relationship with the entrepreneurs we invest in."
Deals ranging from €2 to 8 million
Investors can start with as little as 100,000 euros at No Such Ventures. For each deal, they receive a nice "booklet" asking if they want to invest in the exciting startup, alongside the investment team itself. "That is also different with us: the entire team participates." There is no fund because Lubbers didn't get around to it in the early days. "Before I knew it, we had signed a term sheet of 2 million with a fantastic company whose management team I knew. I thought, let's do a few of these individual deals before setting up a fund. But the latter never happened."
Admittedly, you can find the deal-by-deal model at Operator Exchange, the club of angels that come together when they find something promising. But No Such Ventures is more structured as a VC and also engages in larger deals, ranging from 2 to 8 million. "The exciting part is that we sign the term sheet before knowing if we'll raise all the money. But it always works out. We also know who we can usually count on."
Book building method
For investment bankers: No Such Ventures roughly follows the book-building method in such rounds. All investors state how much they want to contribute, and if it's oversubscribed, everyone can usually participate proportionally. "During allocation, we always try to reach an attractive and relevant group for the company."
Because Lubbers has promised himself that his own investment company thinks outside the box, No Such Ventures doesn't limit itself to the Netherlands alone. Besides, there is no common thread in the type of companies or markets they operate in, except for software and hardware. "We don't aim for a specific percentage or necessarily a clean cap table. Less fast-growing companies, consulting firms, or solo founders are also very welcome."
European network of investors
The portfolio includes scale-ups like Goboony (a camper-sharing platform), Exasun (maker of roof-shaped solar panels), Rodeo, and the Irish company Vromo, which provides software for delivery companies. "As a relatively young VC with a limited track record, it sometimes takes effort to convince people, but word of mouth works very well. Once investors are enthusiastic about us, they easily invite their friends to join. We also regularly organize meetings with all the investors or with a portfolio company and the investors behind it."
Lubbers wants to refine the model of No Such Ventures further and grow internationally. "Not because bigger is necessarily better, but if you have a European network of investors behind you, you get better deals as well. And lately, we have seen the interest of American investors in Europe. How great would it be if we could add a group of Dutch investors working from America?"
By the way, that very first deal turned out to be a golden one. "It was a wild ride. I let myself be convinced to become COO, and within a year, we doubled to 150 employees. Then we received an unsolicited, fantastic offer from a British publicly traded company. Literally within a year, we had an exit in our hands. I can say I learned a lot that year. I was like Pippi Longstocking: I've never done it before, so I think I can do it."