COVID-19 brought a lot of uncertainty in the markets. Generally, investors are not too fond of uncertain results. At the European-focussed funds of Smartfin Capital and Fortino, experience and a bit of luck get them through the pandemic quite nicely. Both VCs are present on the VC-track of The Big Score, to scout the next big thing in B2B startups.
VC-nominated startups pitching for investors
At The Big Score, high growth startups have the opportunity to score funding or sales. The event, organised by Scale-Ups.eu, brings B2B startups in close contact with large corporations looking for innovation and ‘deep pocket’ VCs ready to invest.
The 2019 edition of The Big Score resulted in some big numbers. 400 international VCs and corporate ‘buyers’ were present for over 1400 one-on-one meetings with 75 European startups. The second and third day of the event is all about meeting the VCs. During the two days VC-track, nominated startups and scaleups are pitching their solutions to international tech investors and corporate sourcing profiles.
Two of the VCs that are scouring the event for startups ready to make an impact are Belgian Fortino and Smartfin, both with an international portfolio that is ready for expansion. But with the ‘new normal’ caused by the pandemic, a lot of uncertainty surrounds the future. How willing are investors still to stick their necks out and write a cheque?
‘Sometimes you need a bit of luck’
“We mostly focus on B2B software startups. In that area, there has never been a lot of uncertainty,” says Jurgen Ingels. He is founding partner of SmartFin, a private equity fund with a strong focus on emerging B2B platform companies in fintech, telecom and infrastructure. Their portfolio consists of companies from the Benelux and the Nordics, including Roamler, Divitel and EyeSee.
As a sign that B2B software startups are generally fairing well, Ingels only has to look at his portfolio. “Generally the cashflow is good. And these are creative entrepreneurs, they can adjust very quickly.” In some cases, they even got lucky and business boomed. Ingels: “One of our companies offers a platform for takeaway food. With restaurants closed, they are doing really well. Sometimes you need a bit of luck in this business, as you can’t predict everything all the time.”
“The philosophy of our fund is to save companies time. We can do that through technology, by investing in startups that help other businesses safe time. During COVID, that has been an increasingly important factor,” explains Ingels. “Formula One driver Ayrton Senna once said that he prefers to drive in bad weather. That’s when he can overtake more easily. There is always something you can’t foresee, but despite COVID, we also go full steam ahead.”
‘Willingness to invest’
Some investors get lucky in these times, but they can’t fair blindly on luck alone though. What is apparent for Renaat Berckmoes, is that VCs are pooling their resources, especially in the Benelux. “Tickets of 4 million and higher are now rarer than before the pandemic. I think this is because they don’t want to take as much risk as they did previously. There is a willingness to invest, just for smaller amounts.”
Berckmoes is a partner at Fortino. Venture activities take place from two separate funds, solely focussed on B2B software companies. The Belgium VC has startups from Northwestern Europe in its portfolio. Among them are Bloomon, FoodDesk and Teamleader.
“Companies in our portfolio have come through largely unscathed,” says Berckmoes. All of them report growth, some faster than others. Many of them are right in the middle of the move to the cloud that enterprises are making. The move to working from home and remote access has pushed this whole movement forward. We do see that offering a plug and play solution is very important. A drawn-out implementation process has a negative impact.”
‘Watch the cash burn’
One of the reasons Berckmoes’ companies haven’t been suffering from the fallout of the pandemic, has been some solid advice: “we already considered 2020 to be a year of recession”, says Berckmoes. “So we urged our portfolio companies to watch their cash burn.”
As soon as COVID-19 started to shut down Europe, they doubled down on this wisdom. “We told them to reduce costs and spend as little as possible. At many of these companies, a lot of money is being put in R&D. This is something you can control yourself. Cut everything you don’t need, bite the bullet.”
Berckmoes also told them to contact existing investors for interim funding. Some of them were able to think outside the box to salvage their revenue, like FoodDesk which shifted its business from Dubai to the Nordics overnight.
‘Every company has a dip’
At SmartFin, Ingels was also able to share his experience with the founders of companies in his portfolio. “We urged them not to give up. There is no company, not even Apple or Google, that hasn’t had a dip. Dare to cut costs, even if it is only for a couple of months.” Another important aspect of a business in rough weather is the people working in it. “Surround yourself with good people. A good team with a bad product can have success. It doesn’t work the other way around.”
What to look for at The Big Score?
Both SmartFin and Fortino are part of the VC-track of The Big Score, where VC nominated startups have the opportunity to pitch their business for an audience of investors. Berckmoes has a couple of points he’ll be paying attention to when deciding to continue doing business with a startup he meets at the virtual event.
“The most important thing for me is; how good are the founders. They need to grow with the company. To scale up a business from 7 to 250 employees in two years is hard. You need to be an entrepreneur to start a business, but a manager to allow it to grow.”
Berckmoes will also be looking at how disruptive the product can be, while international ambitions are also important to gain his attention. Benelux is an interesting starting point. But with a small market and tricky language, Berckmoes wants startups to look beyond that: “I want them to think internationally from their day one, so a company can quickly outgrow Benelux.
For Ingels, passion is the main driver of success. “I want entrepreneurs that wake up their spouses at 3.00 in the morning to explain an idea. Someone who reads everything there is to read about the market and business he’s in and who can tirelessly talk about it. An entrepreneur that doesn’t even know his main competitors, lacks that passion.”
Want to discover new tech? join The Big Score in December
VCs and corporate buyers looking to connect with some of Europe’s most innovative startups should look no further. The Big Score takes place on 1st, 2nd and 3rd of December. On December 1st, 25 corporates live-stream pressing challenges towards startups. On December 2nd and 3rd, 50 VC selected scale-ups live-stream their pitch towards growth stage VCs and corporate sourcing profiles.