Every startup begins with an idea of revolutionising or creating something completely new. However, that idea alone doesn’t always attract investors or supporters, and what they essentially need is a proof-of-concept to succeed and to mitigate the risks for the investors. A large number of startups bootstrap their way to the point of building their proof-of-concept and then either raise funding or sell their product.
However, if you are a Dutch startup with an idea and looking for funding to turn that idea into a proof-of-concept, then you are in luck. Rijksdienst voor Ondernemend Nederland (Netherlands Enterprise Agency or RVO) has a programme that aims to elevate bright ideas from the planning phase into the startup phase.
Proof-of-concept funding: what you need to know?
There is no dearth of startup stories where an interesting idea failed to take off because the core team failed to raise funds necessary to turn that idea into a commercially viable product. The Ministry of Economic Affairs and Climate Policy doesn’t want ambitious Dutch entrepreneurs to fail because they didn’t have the funds necessary to turn their idea into a proof-of-concept.
Aptly called proof-of-concept funding or Vroegefasefinanciering in Dutch, the funding is a loan offered by the RVO, a government agency and part of the Dutch Ministry of Economic Affairs and Climate Policy. The aim of this funding scheme is to help startups and SMEs with a loan necessary to examine whether their idea is potentially feasible in the market to become a growth company.
For the calendar year of 2022, the RVO has set aside a budget of €6M for proof-of-concept funding for SMEs and innovative startups. It is available to small and medium sized enterprises and innovative startups that are less than five years old. The applicants are required to have a detailed business plan and proof-of-concept plan.
In addition, the applicants are required to have a team to actually execute the early phase plan. Last requirement is that the startup has received a letter of intent from an investor interested in financing the continuation of the early phase plan.
Marion van der Heden, an advisor at RVO for proof-of-concept funding, says about 30 companies receive loans every year. She says this is “one-third of all applications” and these companies get an average loan of €290,000.
She also adds that the scheme essentially challenges companies to turn their idea into a successful proof-of-concept. Van der Heden says, “The beauty of this scheme is that companies from all sectors can apply. From a vacuum device for your kitchen, and a modern mobility scooter to a treatment for Alzheimer’s.”
TrueKinetix: From idea to proof-of-concept
TrueKinetix, a Dutch startup based in Hillegom, Zuid-Holland developing the first robotised bike for indoor cycling training, is the best example of turning an idea into a product using RVO’s proof-of-concept funding (Please click on CC in video to view English subtitles. For the Dutch version only, click here). The story of TrueKinetix is one of determination and focus that the Netherlands Enterprise Agency is looking for in startups that receive this funding.
The startup began with the personal dream of its founder, Bas van Rens, to build an innovative smart bike with an experience unlike any other in the market. His dream comes from a personal experience in 2016 where he missed his qualification for the Ironman Hawaii by eight minutes.
“He couldn’t help the feeling that he had trained the wrong way. After an evaluation, his feeling was confirmed: he had trained the wrong muscles,” says Van Rens.
In 2017, Van Rens quit his job as global CEO of sports tech company Mylaps to start TrueKinetix and built the first prototype of the TrueBike in collaboration with partners like TU Delft and TU Eindhoven. However, he wouldn’t have been able to take that step without receiving the proof-of-concept funding.
“If I hadn’t gotten the proof-of-concept funding, I wouldn’t have been able to take that step,” he says.
When Van Rens started, he needed to find a way to finance his idea. “So I started researching and I quickly found the proof-of-concept funding,” he elaborates.
Van Rens adds, “The benefit of the proof-of-concept funding scheme is that the critical view helps entrepreneurs perfect their business case. Additionally, it is completely funded and the business becomes interesting for more investors.”
In the case of TrueKinetix, Van Rens says that the proof-of-concept funding really made it possible for the startup to start. “I was able to order my first building model at a workshop and hire my first employee because of this funding,” he says.
In addition to receiving proof-of-concept funding, TrueKinetix also qualified for the Innovation credit, which helped them build their first real bike, expand the product portfolio, and even expand to international markets.
The Dutch Olympic Committee became the first customer of TrueKinetix and its president Maurits Hendriks joined the board of advisors. The startup now consists of 30 employees and launched a new product line called the TrueTrainer. It has also expanded sales into Germany and Belgium and is now preparing to expand to the US and the UK as well.
With awards like the Bike Motion Award and the Dutch Sports Innovation Award under its belt, TrueKinetix has also been selected by the Dutch government to join the Dutch mission at the Consumer Electronics Show in Las Vegas. As CES Innovation Award winner, the sports tech startup will be the torch bearer for Dutch innovation at Las Vegas next month.
Mirror to the entrepreneurs
Entrepreneurs are arguably the most ambitious people and also ones that could make a misstep without realising it. Apart from offering this loan, Van der Heden (advisor RVO) says that the proof-of-concept funding acts as a “mirror to the entrepreneurs.”
She says the programme ensures that all the critical questions are asked during the intake interview and also offers useful advice. TrueKinetix, a Dutch startup developing the first robotised bike for indoor cycling training, is one of the beneficiaries that, in 2017 turned around its business using the advice.
Among startups and SMEs approaching RVO for proof-of-concept funding, Van der Heden says they mostly help them develop their market and sales strategy. She says entrepreneurs applying for these loans are often those with a technology background and who know what they want to develop and how they want to do it.
However, she feels they often fail to develop a sales strategy and revenue model. By holding a mirror to these entrepreneurs, RVO is also able to illustrate the need for startups to be frugal and try to do the maximum with less money.
“There are often 2 plans: technical and commercial. Bring focus to both plans,” she advises startups and SMEs.
Enabling success for startups and SMEs
It is not easy for a startup to get the funding necessary to build their first product or conceptualise their idea. With its proof-of-concept funding, RVO is not only making that possible but also setting up the Dutch startups and SMEs for success in a competitive landscape.
Since the companies are at the beginning of the development process, Van der Heden feels this scheme deals with driven entrepreneurs who firmly believe in their product. “This ambitious entrepreneurship is what you need and is also desirable for this scheme,” she says.
For more information, please visit the official website of RVO about the Proof-of-concept funding (Vroegefasefinanciering).
