5 trends on VC activity in 2014

CB Insights recently published its free 2014 US VC year in review. I suggest that everybody subscribes and gets the report, as it contains some very interesting insights. Furthermore, at the same time various organizations are publishing some interesting reports. One that caught my attention is EY’s Adapting and evolving, Global venture capital insights and trends 2014.

Below you can see 5 trends on VC activity that were of particular interest.

  • 2014 saw the highest funding since the internet bubble in 2001. $47.3 billion were invested across 3.617 deals. This is up 62% compared to 2013 where $29.2 billion were invested across 3.354 deals.


  • 2014 saw the highest number of seed VC deals since 2009, totaling 976. In terms of dollars invested, these reached $1.33 billion. The average seed round size reached the highest levels in the past four years, at $1.9 million.
  •  Overall VC funding to the mobile sector was up 109% vs. 2013, reaching $7.8 billion. This number was mainly driven by the mega deals of Uber, Snapchat, Instacart and square.
  • Most VCs prefer to make investments at the second/later stage, when companies are partially de-risked.
  • Investments in US present a 50% – 90% higher median round size compared to Europe. The median amount raised prior to IPO by US businesses in 2013 was $100.9 M, while the same number for European companies was $26.4 M. The median time to IPO by US businesses has been 5 years, while the time to IPO for European businesses reached 6.3 years. Therefore we see that US companies receive higher investments, at higher valuations but exit earlier than their European counterparts.


Eindhoven continues to be the dream location for high tech companies.. HighTechXL 2014 was just amazing..

I might have left from HighTechXL, but I am still closely following the developments, since I truly believe in the team, the program and the ecosystem.

As I wrote last year in a post that got featured in VentureBeat, there are many reasons that Eindhoven is THE place for a High Tech company. You can find the original post named ‘8+1 reasons Eindhoven is a dream location for a High Tech company’ here. But if I wrote this post again I would put much more emphasis on HighTechXL and the success of the companies that have participated there.

This year already 4 companies received funding; the most impressive is that 2 of them received investments on stage during demo day. In front of more than 1.000 people, these 2 companies signed an agreement with a Chinese investor on stage during the demo day. More on the investments, as well as on demo day here. Unfortunately I was not able to be there, since I was travelling at the same time as the demo day. Still, I can’t but feel extremely proud that I was part of this fantastic team!  

Thoughts on the way back from NY

Follow me on twitter:
I wrote a post when I was going to NY and I am writing another one as I am flying back. After spending 4 days in NY these are my main thoughts .
  • Next time I go to NY I should also spend the weekend there
  • Next time I go to NY I should make sure the weather is better.


And now focusing on the most important staff
  • Although it is not San Fransisco, New York has a booming Tech Scene. Some of the world’s best investors are located there (like USV) and some of the world’s best accelerators and incubators (like TechStars).
  • Especially on the HRTech side, New York has a lot of startups and Talent Tech Labs, an incubator / accelerator focusing entirely on this segment.
  • How will the future of work look like? Are the online freelancer marketplaces going to prevail in any type of business? Do you see in 5 or 10 years also the high profile white collar jobs contracted via these marketplaces? How far is the day where one would hire investment bankers from a marketplace like Elance-oDesk, twago etc?
  • Is Uber’s model going to work in every industry? With our mobile phones we all are a node in the network. But which are the industries that this model can really disrupt and where does it make no sense?
  • Everybody is talking about the trends of today in the industry. But what are the trends of the next 10 years?
  • Too many people talk about the employeefication for software. This practically means that if you have an enterprise software, you can offer it to employees for free, try to establish an engaged user base and then charge the company to use it. Can this model work?
At some point in the future I might try to tackle some of these aspects one by one. Depending on time and appetite. Please keep sending me emails on topics you would like to see in this blog.

Is Europe anti-inovation?

I am currently on a plane, travelling to New York for a short trip to meet interesting and innovative startups. In order to prepare for this 8 hour flight from Amsterdam to New York I downloaded some videos with interesting discussions that took place in 2014 to watch. One of the videos I watched is the discussion that Fred Wilson (from avc.com) and Loic Le Meur had during LeWeb 2014 in Paris. It is a very interesting  45 minute video that I highly recommend to every entrepreneur, (aspire) VC or tech enthusiast that you can find here.

In this discussion Fred Wilson is talking about his view on the biggest trends of our age. He discusses in detail the sharing economy, the latest valuations, the healthcare sector and wearables. Being one of the top VCs worldwide, he also openly discusses about his biggest mistakes, like passing on Uber and Airbnb (passing on Airbnb is a very nice story that you can read on his blog).

What captured my attention, was his phrase “one of the issues in Europe is that leaders in Europe, governmental leaders are anti-innovation”. That is an interesting approach. As I come from Greece, I still can’t forget the support that the ex development minister gave to taxi unions instead of Uber. Of course I am sure that Greece is not the example Fred Wilson had on his mind. He was particularly referring to Angela Merkel’s opinions on net neutrality.

During the same talk he mentioned twice that he would love to have the opportunity to have a brief discussion with her, as she is the most powerful political leader in Europe on net neutrality and also technology and the future. As far as I know, this meeting never took place. And personally I believe that it is a shame that there are not many discussions like this in Europe. I would love to know that (top) European politicians are indeed exchanging ideas with some of the top venture investors in the world. Not only the ‘local VC association’, but with really successful people that operate in the core of innovation.

Fred Wilson also mentioned that he spends 15 – 20% of his time talking with government officials and regulators. He believes it is important to discuss on technology and where it is going, in order to get them thinking out of the box.

I know there are some meetings taking place. A few years ago, when I was still working at Rockstart accelerator I remember that we had invited Steve Blank for a discussion. And he had mentioned that he had some meetings with Dutch government officials. Of course The Netherlands is not a representative example of the rest of Europe, as it is considered to be one of the most innovative economies.

But I wish this would happen more. I wish government officials and regulators would take the time to discuss with the successful people of the industry on the trends and problems. Because the current recipe to solve problems is to throw more money at them and I am not convinced that blindly throwing money in innovation related companies will transform a country or a region to a big innovation hub.

SaaS changed software forever

SaaS stands out for Software as a Service. Gartner defines software as a service (SaaS) as software that is owned, delivered and managed remotely by one or more providers. The provider delivers software based on one set of common code and data definitions that is consumed in a one-to-many model by all contracted customers at anytime on a pay-for-use basis or as a subscription based on use metrics.

SaaS has become the default method of software delivery model in various sectors. In October 2014, a very interesting report came out from AGC Partners, which you can find here. It was dealing with SaaS companies and the difference with their counterparts in traditional software delivery.


The main finding of the report is that SaaS companies are in general 2x-3x more profitable than perpetual license providers. Data of publicly traded companies is supporting the fact that SaaS had indeed changed the software landscape forever.

The 3 main reasons behind SaaS businesses being valued at higher multiples are presented below. If you have more ideas on possible explanations, please feel free to share.

  • Higher lock-in periods. Most SaaS businesses have multi-year contracts, with monthly revenue recognition.
  • Higher predictability. Investors tend to value the visibility that SaaS companies are providing to them and are willing to pay premium multiples.
  • Enormous future cash flow potential. In contrast with traditional license providers, SaaS businesses have the vast majority of their cash flows in the future. Customers tend to pay higher amounts, since they are spread in a longer timeframe.

Corporate Venture Capital


For a long time, after joining the Randstad Innovation Fund team, I wanted to write something on Corporate Venture Capital. Corporate VC (CVC) is a Venture Capital fund that is investing corporate funds in external start-up companies, in exchange for an equity stake. Corporate VC is distinct from independent VC in that it strives to advance both strategic and financial objectives.

There are numerous articles online, regarding CVC funds. Many people have studied their performance throughout time, their activity, recent trends, the recent boom, as well as their lifetime duration.

Still, I think that one of the best articles on Corporate Venture Capital comes from the Harvard Business Review from Professor Josh Lerner. In an article that was published in October 2013 Josh Lerner talks about CVCs, the case for these funds and their advantages. He is also discussing both the financial as well as the strategic aspect of CVCs but also digs deeper touching the issue of venture professionals’ compensation.  He is also making the case that firms should create an experimental, failure tolerant mind-set and argues that although corporate executives might interpret as a success if no portfolio companies have failed, this might in essence be a signal that the team is playing too safe, investing in companies with an eye to avoiding failure. It is an excellent article that everybody can read here. I am also reposting it, in this post.


When the genomics revolution was transforming the pharmaceutical industry, Eli Lilly realized that its survival might hinge on its ability to catch up with this disruption. So in 2001 the company launched a corporate venture-capital fund in order to engage with cutting-edge biotech firms when they were just start-ups. By 2013, Lilly Ventures had been involved in more than 30 such collaborations, many of which gave its parent company valuable insights into the science of developing drugs by analyzing biological data.

A corporate VC fund like Lilly Ventures can move faster, more flexibly, and more cheaply than traditional R&D to help a firm respond to changes in technologies and business models. In some cases, such a fund can even help stimulate demand for a company’s own products. At the same time, of course, its investments may earn attractive returns—an added benefit for a tool that helps capture ideas that may ultimately shape an organization’s destiny.

For decades, large companies have been wary of corporate venturing. Some have seen their venture initiatives fail outright, and many more have given up too quickly: The median life span of corporate venturing programs has traditionally hovered around one year. Even firms with successful funds have sometimes struggled to make use of the knowledge gained from start-up investments. To be sure, running successful corporate VC programs isn’t easy: Companies’ processes and rules can make them slow-footed and unfocused. But as disappointment with R&D results grows, there are indications that corporate venturing may be gaining ground—and respect.

Start-ups Backed by Corporations Excel

Start-ups that went public after being funded by at least one corporate venture-capital investor outperformed those funded exclusively by independent VCs. These figures, drawn from 1980–2004 data, are averages for the three years following the IPO.



Companies hoping to acquire knowledge and agility from corporate venturing can benefit from following six steps, including aligning goals, providing the right incentives, and creating systems to transfer knowledge. I’ll go through these steps one by one, showing how firms can establish venture funds that are as savvy and nimble as the best private VCs. But first, let’s consider the potential benefits of corporate venturing.

The Case for Venturing

In the past, corporate interest in creating venture funds tended to wax and wane in sync with the general VC climate. Waves of corporate venture activity—in the late 1960s, the mid-1980s, and the late 1990s—corresponded with booms in VC investments and venture-backed IPOs. But now we’re seeing a corporate-venturing surge even during lackluster days for traditional venture capital.

In the first half of 2011, when independent funds were struggling to raise capital in the wake of the global financial crisis, more than 11% of the VC dollars invested came from corporate venture funds, a level not seen since the dot-com bubble. This new activity may indicate that as research functions face severe pressure to rein in costs and produce results, companies are looking for alternative means to learn and innovate. Companies as diverse as Google, BMW, and General Mills are complementing traditional R&D by joining with other investors to put money into promising start-ups. The logic is indeed compelling.

A faster response.

By providing both an inside look at new technological fields and a path to possible ownership or use of new ideas, corporate venturing can allow a firm to respond quickly to market transformations. Lilly Ventures was just one of several corporate venture initiatives in the 1990s and 2000s that helped pharmaceutical companies catch up with the rapid advances in bioscience that were threatening to render their chemistry-based expertise irrelevant. In a study of 71 venture initiatives by biopharmaceutical firms from 1985 to 2005, Hyunsung Daniel Kang and Vikram K. Nanda of Georgia Tech found that companies that made financially successful investments also experienced greater success in drug development.

It’s likely that developing capabilities such as this on their own would have taken Lilly and other pharma companies far longer and been far more expensive. Given the time and resources needed to update research facilities and recruit scientists with the right expertise, the growth of knowledge in internal laboratories can be painfully slow.

A better view of threats.

A venture fund can serve as an intelligence-gathering initiative, helping a company protect itself from emerging competitive threats. During the 1980s, for example, when integrated-circuit makers were searching for alternatives to silicon (the basis of the dominant chip technology), the silicon-chip specialist Analog Devices created a venture program to invest in competing technologies. Its goal was to gather strategic information at relatively low cost.

Analog’s portfolio didn’t do very well. Just one of its 13 companies went public, and only after so many financing rounds that Analog’s stake was heavily diluted. But the reason for the lackluster performance was significant: Making chips out of anything other than silicon turned out to be stubbornly difficult and expensive. Once this reality hit the markets, makers of silicon chips saw their valuations spike; Analog’s increased sevenfold from 1979 to 1985. But the corporate venturing program had provided insurance: If the alternatives had been viable, Analog would have been covered.

Traditional R&D doesn’t do a good job of sniffing out competitive threats. More and more, corporate R&D units tend to focus on a narrow range of projects, thus potentially neglecting disruptive advances that occur outside the company. Plenty of executives in companies with robust R&D functions lie awake wondering whether their firms are about to be blindsided by technologies they’ve never heard of.

Easier disengagement.

Another benefit of venturing, one that’s closely related to accelerating the company’s response to change and threats, is that it gives executives a faster way to disengage from investments that seem to be going nowhere. As is well-known, many companies find it difficult to abandon the not-quite-good-enough innovations that sometimes come out of internal labs. These projects can linger in product development for years, resisting termination (despite much talk about R&D portfolio management). Nokia’s insistence on developing its phones using the Symbian operating system, even as its competitive position went into free fall, is a classic illustration.

The arm’s-length relationship between companies and their venture funds offers advantages in this regard: The best funds tend to be quicker on the trigger than their corporate parents. Even if a corporation is unwilling to terminate an unpromising initiative, the presence of co-investors may force the decision.

A bigger bang.

By combining its own capital with that of other VCs, a corporate venture can magnify the impact of its investments. This is particularly beneficial when technological uncertainty is high.

A dramatic example is the iFund, supported by Apple and launched in 2008 by the venerable VC firm Kleiner Perkins Caufield & Byers on the day when outside developers were first allowed to begin working on apps for the iPhone. The $100 million fund—which subsequently doubled in size—invested in companies developing games and tools. In this way, Apple rapidly built a critical mass of applications for its new phone while spending very little. (The contrast with Apple’s rival Nokia, which eschewed such an approach when promoting its Symbian system, is striking.) Given the success of the iFund, it is not surprising that similar efforts have been launched by, among others, Research in Motion (to encourage the development of third-party applications for the BlackBerry) and Facebook (which teamed with Kleiner, Amazon, Zynga, and other tech luminaries to establish the sFund, devoted to promoting companies that work with social media sites).

Increased demand.

The iFund also serves as an example of a different kind of leveraging: By encouraging the development of technologies that rely on the parent corporation’s platform, venture investments can help increase demand for the corporation’s own products. Intel Capital took this approach in late 1998, when it established a fund that would help speed the entry of Intel’s next-generation semiconductor chip into the market. Fund managers invested in many software and hardware makers (often Intel competitors) whose products capitalized on the new chip’s power. Those investments accelerated the chip’s adoption by several months, according to Intel.

A Rising Tide

Large companies have been wary of creating corporate VC funds; the median life span of these funds has been about one year. But as disappointment with R&D grows, there are indications that corporate venturing is gaining ground—even in a lackluster environment for traditional venture capital.



Intel Capital also played a role in seeding companies developing wireless internet products around the 802.11 network standards, which had been championed by Intel: In the five months before the 2003 introduction of the wireless-enabled Centrino chip set, the fund revealed its intention to invest $150 million in Cometa Networks and other companies that were promoting the adoption of Wi-Fi networks. The rapid uptake in Intel’s wireless products in subsequent years reflects the company’s success in using corporate venturing to create an ecosystem of wireless players.

Higher returns.

Finally, there’s the purely financial aspect of venturing. For independent VCs, making money for the limited partners is the primary if not the sole object. For corporate venture funds, gaining strategic benefits is usually the main goal; profits from venturing typically aren’t significant enough to matter to the parent company’s bottom line. Still, profits are always nice to have.

Companies bring a lot of value to the start-ups they fund, in the form of reputation, skills, and, of course, resources—from research scientists to sophisticated laboratories to armies of salespeople. They also change the way outside investors view the young firms’ prospects. Private and public equity investors often anticipate that a corporation-backed start-up will ultimately be bought by the company that invested in it—and at an attractive valuation, reflecting the strategic benefits the start-up can offer its new owner.

Thus it’s perhaps not surprising, as Thomas J. Chemmanur, of Boston College, and Elena Loutskina, of the University of Virginia’s Darden School of Business, have shown, that start-ups backed by corporations are more likely than typical VC-backed firms to attract the attention of high-quality market players—from investment banks to equity analysts to institutional investors—when they go public. During their first three years as public companies, the researchers found, firms backed by corporate venture funds show better stock price performance, on average, than those backed by traditional venture groups.

Making It Work

Despite corporate venturing’s compelling logic, venture funds sometimes run into trouble. Billions of dollars have gone down the drain as corporations have struggled to deploy their venture capital groups effectively. Most of the problems are rooted in incompatibilities between two mind-sets: that of the risk-loving, sometimes ruthless venture capitalist, and that of the process-bound corporate executive. If companies aren’t careful, their venture capitalists can become ensnared in the agendas of myriad corporate stakeholders or demotivated by inadequate or poorly designed financial incentives. And the parent company can miss out on valuable knowledge. These six steps can help companies avoid the pitfalls.

Align goals with corporate objectives.

Alignment of goals across the venture fund, the start-ups, and the parent company enables a corporate venture group to draw on the parent’s expertise. Without that alignment, corporate venturers are less likely to make good investment decisions and attract high-caliber entrepreneurs—and useful knowledge is less likely to flow from the start-ups to the corporate parent.

In a study of financial returns from more than 30,000 investments in entrepreneurial firms, Paul A. Gompers, of Harvard Business School, and I found that corporate venture funds are more successful if the stated focus of the corporate parent and the business of the portfolio firm overlap. In comparison with start-ups that aren’t linked with the company’s goals, well-aligned start-ups are less likely to be terminated and more likely to go public, produce higher numbers of patents within four years of going public, and have better stock price performance.

Streamline approvals.

A venture fund’s goals should be not only aligned with the parent company’s but also few in number. A streamlined approval process can help. In many companies, various internal constituencies must approve these funds’ goals—a situation that can lead to absurd results. When IBM abandoned its Fireworks Partners after two years, the fund’s initial proposed investments were still tied up in internal review with numerous divisional vice presidents. Delays like this not only drive corporate venture professionals crazy but also signal to external investors and start-ups that the fund is ineffective.


Meeting the Challenge of Corporate Entrepreneurship

ENTREPRENEURSHIP FEATURE David A. Garvin and Lynne C. Levesque

Three balancing acts to keep in mind while growing a new business.


A tortuous approval process inevitably burdens the fund with too many goals. To please R&D, the fund might aim to gain knowledge about emerging technologies. To please the business development group, it might look for start-ups that could become acquisition targets. To satisfy the CFO, it might aim for a certain threshold of financial returns. Managers’ energies are spread too thin, and the fund wanders from goal to goal with no clear objective.

This problem contributed to the spectacular failure of Exxon Enterprises’ venture-capital effort. The program began in 1964 with a mandate to exploit technologies in Exxon’s corporate laboratories. It then shifted to making minority investments in industries from advanced materials to air-pollution control to medical devices. It later changed course again, focusing on computing systems for office use. Before the initiative was abandoned, in 1985, the computing-systems investments alone had generated an estimated $2 billion in losses.

A complicated corporate decision process can also lead to ineffective investing patterns. If getting approval is arduous, investments are made only when top executives are fired up and motivated to act quickly—usually because the media are hyping a particular technology or market segment. But these are usually the worst times to invest, with valuations high and probable returns low. A streamlined approval process allows a venture fund to act quickly on promising but unheralded investments, thus enabling a contrarian approach that might lead to the identification of neglected opportunities.

Provide powerful incentives.

Corporate venture professionals often expect the level of compensation and the incentives that independent VCs enjoy. But corporate leaders are typically troubled by the disparity between what venture managers expect to earn and the compensation of executives with comparable seniority in other parts of the company. And they prefer to provide incentives that are tied to the performance of the company, not of particular investments. “We can’t have people in separate rowboats,” General Electric’s Jack Welch once said, in reference to a venture team’s incentives. “We don’t want anybody in our company going to a meeting with a different interest from everybody else.”

Start-ups that are aligned with the parent company’s goals are more likely to go public and have better stock price performance.

But treating venture investors like other managers can lead to a loss of talent and motivation on venture teams, and a lack of focus on long-term corporate goals. Corporations that fail to provide adequate incentives face a steady stream of defections once junior investors master the venture process. After too many board meetings for which the corporate investor parks his Fiesta next to the independent venture capitalist’s Ferrari, the temptation to go elsewhere becomes overwhelming. The corporation, having borne the cost of training the investor, doesn’t reap the benefit of his or her expertise. GE itself paid the price: In 1998 and 1999, GE Equity lost 18 investors, a number of whom went on to leading VC firms.

Eli Lilly’s venture initiative was at first an organic part of the company—its venture capitalists were corporate employees without any profit share. After a slew of defections, Lilly analyzed compensation levels and found that only the most junior staffers at Lilly Ventures were being rewarded at anything like a market level. Still, the company’s senior management and HR professionals resisted changing the pay scheme. It wasn’t until 2009 that Lilly’s management agreed to turn the venture group into a freestanding organization.

After a slew of defections, Lilly discovered that only the most junior staffers at Lilly Ventures were being compensated at anything like a market level.

For recruitment and retention, compensation levels in a corporate venture initiative should match those offered by independent venture groups. At the same time, pay should be linked to corporate goals as well as start-ups’ long-term performance.

In a study of corporate venture funds, Gary Dushnitsky, of London Business School, and Zur Shapira, of New York University, found that those that closely linked pay to demonstrated investment success (often, both financial and strategic returns to the corporate parent) were more likely than others to make successful investments and to invest in earlier-stage companies—evidence that they were nimbler and more aggressive.

Indeed, many of the programs with the greatest stability—in terms of both management team and mission—have been characterized by high-powered incentives. An example is GlaxoSmithKline’s SR One, which operated under a single head, Peter Sears, from 1985 to 1999. During most of that period, the corporate VCs received 15% of the profits they generated and bonuses, based on less tangible benefits to the corporation, that could represent as much as 5% of the fund’s capital gains. This approach kept venture investors sensitive to both their financial objectives and the parent company’s strategic needs.

Create an experimental, failure-tolerant mind-set.

Risk aversion can be a serious problem for a corporate venture-capital fund. Sometimes that attitude stems from the corporate parent’s culture. When a venturing team boasts that no firms in its portfolio have been shuttered, corporate executives may interpret the announcement as a sign of success. But given the nature of the entrepreneurial process, and the fact that a significant fraction of independent venture investors’ transactions end in failure, the perfect record may be a signal that the team is playing it too safe, investing in companies with an eye to avoiding failure.

Well-structured incentives can help: They can focus corporate venturers on maximizing investment success, whether strategic or financial, and minimize their worries about getting their knuckles rapped for shuttering investments or selling start-ups at a loss.

Stick to your commitments.

While it’s important to terminate moribund projects, it’s also important not to walk away from promising ones. A low level of corporate commitment to good projects can be highly damaging to a fund and its investments. Sometimes merely a change in top personnel can prompt a company to rethink its commitment to venturing in general and to various investments in particular. In some organizations, it’s a ritual for new executives to discard their predecessors’ projects.

But if a parent company is seen as a fickle investor, professionals will be wary of joining its venture unit, entrepreneurs will be reluctant to accept its funds, and independent VCs will be hesitant to join in, setting off a death spiral.

To attract high-caliber outside investors to their venturing efforts, companies should adopt the attitude of independent VCs: As long as a start-up is healthy, commitments are binding. If a limited partner contributes even a small amount of the total capital promised at the time of closing, there is an expectation that the total amount promised will be provided. Even during the depths of the financial crisis, it was rare for investors to walk away from those commitments.

Harvest valuable information.

Knowledge doesn’t automatically flow from start-ups to the large organizations that have invested in them—at least not in a timely manner. The barriers to knowledge transfer are many: The corporate venturing and business development groups may be located far from the firm’s central operations. Everyone is busy with day-to-day tasks. There’s a cultural gap between the young MBAs who dominate most venture teams and the firm’s senior executives. And, of course, the fledgling technologies being developed by portfolio companies may not seem applicable within the corporation. But a failure to give the corporate parent access to the knowledge generated in its investments defeats a large part of the intelligence-gathering logic of corporate venturing.

Companies cannot leave knowledge spillovers to chance. Nor can they simply put an operating manager on the board of each portfolio firm to be the parent company’s eyes and ears, as GE and others have done. A manager running a 2,000-person refrigerator assembly plant is unlikely to have much time to worry about a 10-person start-up that doesn’t seem to be working on problems of immediate relevance to the corporation.

One of the most successful methods I’ve seen for transferring knowledge from start-ups to corporate parents is the creation of linked units dedicated to this task. This was the approach taken by the U.S. Central Intelligence Agency’s venture-capital program, In-Q-Tel. Founded in 1999 to acquire novel technologies, the fund primarily made equity investments in young firms, many of which had developed products for the private sector—for instance, technologies for detecting card counters in casinos. It was difficult for people in these young companies to identify who in the intelligence community might be interested in their technologies, and it was hard for intelligence professionals to imagine how consumer-oriented technologies might be adapted to their needs—to see, for example, how software for identifying MIT students at the Caesars Palace blackjack tables could be used to identify Al Qaeda members. Moreover, communication between the start-ups’ executives and the Agency’s product developers was severely constrained by limits on sharing classified information.

To address this challenge, In-Q-Tel adopted a two-part structure: A Silicon Valley–based venture team closely mirrors a traditional group, in which general partners and associates scout deals, perform due diligence, prepare term sheets, and shepherd portfolio companies. A technology team in Arlington, Virginia, focuses on assessing new technologies, testing the appropriateness of portfolio firms’ offerings for the Agency, and interacting with intelligence officials. Unlike the venture team, which tends to be dominated by former entrepreneurs and new MBAs, the technology team consists largely of seasoned executives with experience in intelligence. The two units share information in a way that allows In-Q-Tel to learn what’s going on in Silicon Valley without divulging sensitive information to portfolio firms.

In-Q-Tel’s situation highlights an essential lesson: If corporate venturing programs are to succeed, corporations need to invest as much in learning from their start-ups as they do in making and overseeing deals.To people with little experience of company-backed investments in start-ups, it may seem contradictory to juxtapose the words “corporate” and “venture”—the one with its connotations of administrative complexity, the other with its aura of big ideas and big paydays. The apparent incongruity is probably one reason why corporate venture funds sometimes don’t get the respect they deserve within the VC community. Robert Ackerman, of Allegis Capital, once wrote disparagingly that when corporate fund managers arrive to make investment deals, “four guys get out of the car with their corporate tee shirts and singing the company song,” while the independent investors around the table see these naive fellows’ employers as “the dinosaurs we’re trying to kill, the market opportunity we’re trying to capture.”

But the data show that well-managed corporate venture funds can hold their own with independent VC firms, and even outperform them. For companies that have found traditional in-house research unequal to the task of generating valuable insights into next-generation technologies or the movements of the market, the creation of a venture fund might well prove to be what executives are always looking for—the breakthrough idea that changes everything.

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VC bias towards founder age

Mark Zuckerberg started facebook at 19. Jan Koum founded Whatsapp at 33. Robert Noyce founded intel at 41. Ray Kroc started McDonalds at 52 and Charles Flint launched IBM at 61.

Therefore, the question is, whether there is a right age to start a startup? Fred Wilson argues here that tech is a young person’s game to some extent, although in the same post he makes clear that USV will consider any investment in their sweet spot regardless of the age of the founder.


The above graph shows that you are never too old to start a company. But Fred Wilson argues that he expects that the median age of the founders of USV’s portfolio would be around 30. Therefore it would be interesting to see whether VC is biased towards younger people.

In an HBR article, they try to measure the age of founders at $1Billion VC backed private companies. The full article can be found here and the main results are as follows.


The average age at founding in HBR’s dataset was just over 31 and the median 30, matching Fred Wilson’s estimation of USV. It also becomes clear that founders under the age of 35 represent a significant portion of founders in this dataset.

When using the same techniques to look at the age of the current CEOs, one can see that this group is significantly older (being 42 years old on average). By way of comparison, the average age of an incoming CEO to an S&P500 company is 52.9. The HBR article concludes by noting that “Even when it comes to installing older leaders, VCs seem to prefer the young”.


The dataset of course includes a successful (therefore non-random) group of founders.




Joining the Randstad Innovation Fund

I haven’t written a new post for a while, and this is for  a reason. Since the beginning of October I took the next step in my career and joined the Randstad Innovation Fund (RIF). RIF is the Corporate Venture Capital fund of Randstad. With a capital of up to 50m euro, the fund intends to invest in the most innovative HRTech companies that want to shape the world of work.

The first days in the new role have been very busy and very exciting at the same time. New sector, therefore a lot to learn and a lot to catch up. If you have any suggestions on innovative HRTech companies, feel free to drop me a line.

Reg. a description of the fund, I am actually going to repost an article that TechCrunch wrote on RIF yesterday, after having a phone interview with Natasha Lomas. You can find the original article here.

TC front page


Randstad’s VC Fund Has $60M To Invest In HR Tech Startups Showing Early Traction

A strategic corporate VC fund set up this April by global HR services giant Randstad is looking to invest in startups working on the hard problem of matching people to jobs, and jobs to people, as well as coming up with more effective ways for employers to communicate with and motivate their existing workforce.

With so much digital data online there are more ways than ever for companies to track down potential candidates, which means ample opportunities for startups to think creatively about better ways to match positions and talent. While the rise of mobile devices offers the potential for far more effective employee outreach. All these are areas of interest for the Randstad Innovation Fund.

The size of the fund is around €50 million, and it’s making four to five investments per year, between the seed and Series A/B stage — usually with a co-investor and investing on the same terms as that co-investor. Its investments are typically sized between €1 million and €5 million. Specific areas of interest within its HR/recruitment target include social sourcing, online platforms, mobile solutions, gamification and big data analytics, it tells TechCrunch.

“People are not only on LinkedIn or have a resume but they are everywhere right now, so how can you access those people and get the data of those people who are blogging or on Facebook or on LinkedIn, so social sourcing is a very interesting area for us — how can you get access to and get information on these people,” said Randstad Innovation Fund managing partner Ilonka Jankovich.

Reaching out to candidates via mobile is also a hot area. “We have 500,000 people on the payroll every day as a company and we have to connect with them, with have to engage with them and mobile is very important in that. And that’s developing very quickly,” she added.

So far the fund has made four investments, two apiece in the U.S. and Europe. These four portfolio companies are mobile workforce management tools maker Gigwalk, and employee referral platform Rolepoint in the U.S.; and in Europe: Twago (Germany), a marketplace for freelance work; and recruitment platform provider VONQ/Qandidate.com (the Netherlands).

“We invested in two online platforms because it automates a part of our services — so it’s interesting what kind of services can you add on online platforms,” noted Jankovich.

She said the fund works closely with the startups it invests in, both to contribute to their growth and to learn from their ideas — trialling their technology within its own business before it makes an investment decision.

It’s possible Randstad may acquire some of the startups it invests in but Jankovich said it expects to do so for only a small proportion. “We really invest as a financial investor so we don’t ask for any extra rights in the future, so we don’t have the right of first refusal or anything,” she added.

In terms of where the best HR startups are being built, there are of course lots of interesting candidates in Silicon Valley but Jankovich said Randstad’s global reach gives it the ability to track down what she dubbed the “small diamonds” in local markets.

“We try to map the markets and see what kind of companies are out there and which are providing the best technical solution, best service because it’s always a combination of technology and the offering,” she added.

So what is Randstad looking for in a startup? A great team is inevitably top of the list for this HR giant, along with a firm idea that’s already powering a growing business. So nothingtoo early stage.

“We always look for the best people, that’s very obvious because we are in the people business that’s the first thing we concentrate on and that also makes a venture successful or not. Then we also look at the technology of course. And before we consider investing we also pilot the product or service within our organisation, which is of enormous value,” said Jankovich.

“We have a few investment criteria. It should be growing rapidly. There should be revenue… Because we are such a large organization then if you want to work with us you have to know what you are offering. There has to be some traction, there should be some client cases, where clients give references… It doesn’t have to be perfect, because nothing is perfect, but at least it has great potential.”

‘Revenue’ what? How Startupbootcamp Pitch Days are Different

Latest article published at startupbootcamp blog with a lot of help by Sophia Kirova.

We recently guided you through the scenario of a Pitch Day, its prologue, plot and feel, culmination, epilogue, and why you shouldn’t miss out to become a protagonist in one. And since we like to keep your thrilled, it’s time we revealed the moral of the story.

There is indeed something more about pitch days you need to know. That one special touch that makes Startupbootcamp pitch events so different.

We actually take quite some pride in our approach and we definitively want to share with you how we do it and why we do it.

We Serious

The Problem with most Pitch Days

“How many people are on your team? ‘What is your most recent milestone?’ ‘How much money do you want to raise?’ ‘How much revenue do you have so far?”

This sort of ear-bashing coming from the audience of ‘experts’ is a pretty common ending to a pitch presentation. I regularly attend quite a few events where entrepreneurs are invited to pitch, and I keep on surprising myself every time the Q&A session starts. I am surprised to once more hear the same 5-10 well-rehearsed questions thrown back to the presenters by the panel of ‘experts’. I ask myself ‘How didn’t anyone care to ask something different?’


The problem with all these ‘smart’ questions is that they don’t add a lot to the entrepreneur’s understanding whether they’re on the right track. It’s a sheer waste of time, since 1. The time planned for Q&A is too limited to get to the real point of a startup’s plan to monetize and grow and 2. the ‘experts’ will stay for a few minutes after the end of the event, usually to network with other panelists and then leave. Why? Because they usually happen to be random people.

What a Pitch Day Should Really be About

Well, banal, but yes, it should be about adding value. Value to startups, to entrepreneurs, to investors, and to entire local ecosystems. The value for us, of course, is that pitch days help us attract the best companies from various regions. We know that you get what you give, and therefore we are committed to the startup scene per se. We want to see you much better off. So we strive to help you in every way we can.

I’m a big fan of the approach we at Startupbootcamp developed, because it can’t compare to any other similar event and because we care. I’m a humble man, don’t get me wrong, but I am also a Venture Capitalist, so I tend to appreciate time well-spent.

Serious mentoring here

To make sure each and every participant ends the day having gained something, this is what we do:

1.       Closed-doors. Always.

We stand for handpicking. We only allow the mentors, participating startups and selected journalists to attend the event. We prefer that entrepreneurs who are not invited to pitch do not join the event in the audience. The reason is very simple. We want to make sure participating companies have 100% of mentor attention and are asked only relevant questions.

2.       A balanced mentor panel

Members of the investment team of Startupbootcamp HighTechXL mix up with people from the local ecosystem. We strive to invite local investors, successful entrepreneurs, executives of technology organizations, and high profile people. People of a variety of backgrounds who can actually advise you decently and provide more varied feedback, focusing on multiple verticals of your business.

3.       The 5/15 minute format

Teams have 5 minutes to pitch their venture. Countdown 3…2…1, time’s up, the bell rings. No questions are allowed after the pitch. After all 10 companies have taken their turn presenting, thementorship sessions start.

Every company spends 15 minutes with each and every mentor. We implement a rotating system principle, resembling speed-dating. After 15 minutes with one mentor, every company shifts table with a different mentor. In the end of the day every company will have spent 15minutes X 6 mentors (on average) = more than 1 hour of discussions with only relevant people. You can’t find that in a typical startup event.

4.       Honest=Honest

It is about creating a safe environment, where you will be neither denied nor judged, but rather get ideas on how to improve.

5        Immediate results

It is not a rare event that some companies are offered a place at the accelerator’s final selection days on the spo

I, Nick, Believe that:

A pitch day can catalyze a lot of creative potential. What’s more, it brings all these people together, physically, so they can meet, exchange knowledge, encourage one another, and eventually create trust=collaboration. That’s why it’s so important to have only the right people on pitch days. It’s that simple.

And the feedback we are getting from entrepreneurs is always extremely positive. It’s just so rewarding.

I’d love to hear your comments or questions at @kalliagk. In the meanwhile, check out how our first Pitch Day in Eindhoven went>

Pitch day – HighTechXL Weekly ( 25/09/2014 ) fromStartupbootcampTV on Vimeo.

Building a High Tech Startup from Scratch: Sapiens

This is an excellent blog post from Sophia Kirova of Startupbootcamp HighTechXL. She had the change to interview Sjaak Deckers, co-founder of Sapiens, which was recently acquired for 200M.

I had the chance to meet Sjaak during the Setting the Deal event that was organized in January 2013 in Eindhoven. Sjaak was participating with the role of the entrepreneur and I was moderating the event.

You can originaly find the blog of Sophia here.



————-Copied from Startupbootcamp HighTechXL website———————————————-

I sat down with Sjaak Deckers, COO and Co-founder of Sapiens Steering Brain Stimulation — the startup which was recently acquired by Medtronic
for 200M dollars — to talk about life and entrepreneurship. After 21 years at Philips, Sjaak left only to spin out a technology intended to alleviate symptoms of patients with Parkinson’s disease. This is his journey and the lessons learned which he wants to share with you.

Prepare your favourite drink, take your time, and let’s dive together into the story.

Sjaak Deckers

‘You only get one chance, so you have to be damn sure that you’ll be successful with your first milestone.’


The Spinout

‘When I moved from Philips Healthcare to Philips Research seven years ago, I was asked to take responsibility for those healthcare research projects for which Philips had no immediate future plans. It would have been a waste of talent to just stop and end the activities. So, out of a portfolio of about 20-30 projects, we were able to keep, spin out or sell around 10 of them. The last and most exciting one was brain stimulation. This one I wanted to continue myself!’


An Unexpected Shift in Technology

‘My co-founders, Michel Decré and Hubert Martens, had discovered that there was not much ongoing innovation in the field of Deep Brain Stimulation (DBS). Medtronic had been a market leader, a monopolist, for 20 years.’

Philips had developed a technology that originated from flexible displays. Michel and Hubert came up with the idea to apply this to DBS leads. This lead technology was something  companies working in the field of DBS did not know yet, simply because it was developed in a completely different branch of industry. That’s the strength of a company like Philips, where such unusual combinations sometimes arise.


Flexible Display

I thought this innovative lead technology was very cool and embraced it for a number of reasons.

The Risk

I took a serious risk leaving Philips after 21 years, but you only live once, right? I thought I could spend another ten years in Philips, which I have enjoyed a lot during all these years, or… Sapiens was an opportunity you only get once in a lifetime.
I told most of the employees: “This is a startup, it can fail tomorrow. If it’s successful, you will rejoice its success. However, you need to have enough confidence in yourself, your capabilities and your strengths, since there is a chance that we fail next year. You should not be afraid of losing your jobs and finding new ones.”


These are the kind of people that you hire; the ones who are confident and want to participate in the fun of a startup.’


Money Talks

‘The first investment is always the most important and the most difficult one. If I look back on the first pitch now, the very first pitch we held… It contained 95 slides and it was really terrible. In 2010, Hubert, Michel, and I pitched to LSP (Life Science Partners) in Amsterdam. They watched all 95 slides with a grin, but at the end, they concluded: “Well, it’s very interesting, but perhaps a bit early for us.’


You have to convince people to believe in three things: the team, the market and the technology. I’ve interacted with 30 or 40 investors, and this is what they are continuously looking for.

The team: do they have enough confidence in the three of us behind the table; do they trust us enough to spend their money wisely? The technology: will it impact the industry, does it create a sustainable advantage? By sustainable advantage, I mean that it is protected by IP, or by know-how, so that it cannot be copied very easily. The market: is the targeted market large enough to create enough business value?

Finally, based on these three basic features, the question is: ‘Do the financials match?’ The correlation between how long it would take and how much money it would require, has to be reasonable and attractive for investors. Initially, some very credible investors reacted: ‘We’re very sorry, but the financials do not match. They simply don’t.’

What  turned the tides? We were fortunate enough to raise over 10M euros through subsidies and loans, so-called soft money. We were promised a 5M euros innovation loan from the Dutch Ministry of Economic Affairs, provided we raised sufficient venture capital money. We also won a subsidy project in the Netherlands from Point One, and we were selected for a large grant from The Wellcome Trust in London. Now we could approach new investors and this time they liked us. Even LSP joined the initial syndicate.’

‘This was probably the greatest lesson that we learned from that early period.’

‘Take a fast decision and focus, focus, focus’

‘We managed to accomplish important milestones with the money that we had. 18 months after the Sapiens kick-off, we were able to include the first patient in our clinical study. It did not consist of a full DBS procedure, but only the lead implant; and we only temporarily inserted it into the head of an actual Parkinson patient.
However, it was sufficient to demonstrate that our lead showed a superior performance in comparison with existing ones. Later, we included seven additional patients during a very short period. So, within two years after starting Sapiens, we had finished our first clinical study.

There are a couple of important aspects which I’d like to emphasize. One is: you have to focus on the first steps. Researchers tend to diverge and see opportunities everywhere. In actual business, one needs to draw the line: “Ok, guys, there’s a lot beyond the horizon, but let’s get our first product out and focus, focus, focus on the most important aspects.”

Second is: your business case. I found out that investors are not so interested and a very detailed 10-year out business plan. What they are most interested in, however, is: do you have a credible understanding of your costs during the first years.

You will have to continuously scrutinize whether you are doing as much as possible with the least resources possible and achieve short-term successes, one step at a time. You only get one chance, so you have to be damn sure that you’ll be successful with your first milestone and then you can go on to the next. Make sure you walk small steps that can prove your credibility.


Building credibility and community

‘For a startup like us, it makes no sense to invest in advertising. What we did instead, was gradually build up confidence and a relationship with clinicians. They are the people that will grow your reputation among their colleagues and the entire community.

Hubert and Michel started discussions with neurosurgeons already back in 2006.

Dr Schuurman in the Amsterdam Medical Center (AMC) was our first clinical connection. He and his team gave us feedback and guidance on the prototype, and in return he performed the first study with patients, which was recently published in the Neurology journal.

Also, we visited a number of physicians in the US very early on. Prof Okun, a Neurology professor in Florida, proposed to set up a medical advisory board for us. He invited his colleagues to discuss the future of DBS and provide feedback to us.

They are a very important part of our business chain. We gained credibility – we showed doctors that we’ve listened to them, because we actually implemented their feedback in the development of the prototype. We created a relationship with all these physicians, a good recommendation for all medical startups.

‘MedTech is Where my Heart is’

There is nothing more rewarding than the consciousness that what you are doing improves the lives of people. I have a couple of friends with Parkinson’s disease, so my personal motivation underlies the path of my choice that I’ve been walking.

Here at Sapiens, we have regular meetings at which doctors or patients share their stories with our team. One of the patients was a former colleague of mine. He kept a diary of how he had deteriorated over the past seven years. He came to us a week before he would undergo his DBS operation, and two weeks after the procedure, he came back to show us how well it worked for him. A year later, they unfortunately discovered that it had some side effects, and that’s exactly what we are working on at Sapiens – to reduce the side effects.
A number of engineers who had never seen a Parkinson’s disease person before, got emotionally involved in the patient’s struggle. They were deeply touched by his story, and it was a very motivating event for them.


Three years and three months

‘It’s a success story in several ways: we picked the right people, we chose the right market, and developed the right technology and this was recognized by the DBS market leader.
I am very happy to have been acquired by Medtronic, for two reasons:

1. For patients: they will have access to the best possible solution for their condition.

2. For the team: with the acquisition, Medtronic not only acknowledges the technology but also the strength of our team.

‘I am very proud of what I pulled off together with my co-founders, and that it worked. For the time being, Sapiens certainly is the cherry on my career cake. It also whets my appetite for more. Perhaps in a couple of years, I might take on another opportunity like this.’

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