Amsterdam’s henQ launches €90M fifth fund to back Europe’s B2B software founders. Here’s what Jan Andriessen, Partner at henQ, has to say in our interview.
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Amsterdam-based henQ, an early-stage VC fund that invests in European early-stage B2B software businesses, has announced the first close of its fifth fund — henQ 5, raising €67.57M with a target of €90M.
The Dutch VC invests throughout Europe in Seed and Series A rounds of B2B software startups, and was an early investor in, among others, Mendix, Mews, Sendcloud, Zivver, Wemolo and imagino.
It is run by fund managers Mick Mackaay, Coen van Duiven, Rob Rousseau and Jan Andriessen.
henQ 5: Building on prior success
According to the Dutch VC, henQ 5 has already achieved almost the same size as its predecessor fund in its first close.
Talking about the inspiration behind the latest fund to Silicon Canals, Jan Andriessen, Partner at henQ, says, “That is actually quite simple: we love what we do, and the results in henQ 3 and 4, our prior two funds, are increasingly good. So we are building on that energy and ready for the next fund: there are plenty of entrepreneurial LPs who are attracted by the high return potential of a fund like henQ, and we still see plenty of extremely well-executing entrepreneurs working on refreshing value propositions in great markets.”
For henQ 5, the VC will stick to its proven strategy by investing in the next generation of B2B software-enabled businesses at the Seed and Series A stages, focusing on companies in Europe.
No institutional or government funding
In henQ 4, the team decided to raise the fund without institutional or government funding, which had made up about half of the capital in the previous fund.
“Government-backed money is incredibly important to get funds started. It has been instrumental to henQ over the course of our existence, and we are deeply grateful for that,” says Jan. “At the same time, it is our view that for a fifth-generation fund, it is important to be able to build a purely commercial LP-based fund that is looking for the best long-term returns and nothing else.”
Jan and his team also believe a successful fund shouldn’t depend on public money.
“Within that realm of strictly return-seeking backers, we have a strong preference for former entrepreneurs and entrepreneurial family offices: investors with simple decision-making structures, no politics and no risk aversion. They understand what success takes and are most aligned with what is right for the fund,” adds Jan.
Additionally, the Dutch VC has increased its group of entrepreneurial investors, including founders from companies like Optiver, Exact, Mendix, SEOshop, Zivver, and inSided, four of whom are henQ alumni.
Investing in a “boring market”
The Amsterdam-based VC intends to deploy the fund in the next five years.
The VC plans to invest in 8 to 12 B2B software founding teams across Europe, with initial check sizes of €1-10M – ideally in markets that most other founders and investors see as boring or irrelevant.
“Investing in boring markets is not a goal in and of itself for us. We invest in great founders who are executing insanely well, and that is the key thing we focus on when making an investment decision,” explains Jan.
“Having said that, great businesses are often built in the shadows, rather than in the flashiest early-stage markets that are deemed ripe for disruption and have ‘clear’ multi-billion euro/dollar potential. The latter are the types of markets that receive most of the headlines and venture funding. Being in a ‘boring’ market and, consequently, not being in the spotlight too early on is a major asset in our view. It allows startups to grow without vast competition from day one,” continues Jan.
Jan cited Frank Slootman, a renowned Dutch founder, who makes this point in his book “Tape Sucks.”
He cited it as an example of how some of the most successful companies, like Veeva Systems, Zendesk, and Canva, initially avoided the hype that later came with their success.
From Europe to the US challenge
Scaling a European B2B company presents a unique challenge compared to the US.
“European companies have a smaller home market, and B2B customers are still very culturally biased when they buy technology. Even if all regulations were the same across all of Europe and even if we had the same amount of capital as the US, we believe that B2B customers would still have a strong tendency to buy from people who have local social credibility and understand their culture,” says Jan.
Consequently, Jan noted that European businesses must navigate at least one additional difficult multi-year step to expand globally.
This suits when entering the US market directly or when attempting to scale by targeting multiple European countries.
“Guesses about different markets aren’t practical”
According to Jan, the VC firm avoids guessing about unexplored markets or new technologies in Europe because they find it unhelpful.
“Our core belief is that for each particular market opportunity, there are some talented founders out there who spend all their time on the cross-section of utilising one single technological breakthrough for one single use case and one single customer type. For us to come up with a better analysis for a vastly larger combination of use cases and customers feels a little far-fetched,” says Jan.
In henQ 4, investments such as Wemolo (parking software) and Kanpla (contract catering software) emerged not from predictions but from meeting founders with a deep understanding of their markets.
“We love to be surprised like that by the people who actually have the best view on their respective markets, rather than do the half-baked version ourselves,” says Jan.
How has Europe’s VC scene evolved?
Since launching its first fund in 2006, henQ has watched the European venture landscape transform.
“The VC market has become fully international,” says Jan. “There are many fully pan-European funds now and at henQ we believe there is no longer an edge in local presence. Entrepreneurs from all different nationalities – even notoriously chauvinistic ones – want to have the best investors rather than the familiar ones to optimise their chances for success.”
Jan also highlighted a shift in the maturity of founders across all age groups.
That means, with a sea of accessible information on entrepreneurship, many founders have come to realise that investors are not the sole drivers of success.
They have learned from the experiences of successful entrepreneurs, leading to a decline in the influence that venture capitalists have over business operations.
Jan comments, “Great founders today are looking for smart, driven, and open-minded investors. They want to build peer-to-peer relationships, both on and off the board, and they expect self-reflection from their investors.”
Moving forward
“We do not want to scale through fund size or the number of people on our team. We will stay as lean and small as we can,” clarifies Jan.
Consequently, henQ will continue to focus on investing in early-stage B2B companies as long as the team remains healthy and motivated.
Jan also states that the VC firm has built strong relationships with a small group of investors over the years, who support their unique approach to achieving results.
“We want to get better every single year. Our strategy involves backing increasingly successful companies and supporting them throughout their journey, even if that means taking a bit longer for the best opportunities,” Jan says.
Looking ahead, Jan highlighted the plan for both new and existing portfolio companies to expand into the US, the leading B2B software market.
“We are committed to helping them navigate this challenging market to become global players, even if it initially slows overall growth,” he concludes.
