Looking for the next big thing in Europe

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Venture capitalist Kees Koolen (left), the son of a farmer, is on the look-out for startup companies whose founders work as hard as farmers do. Johan Brenner, who grew up in an entrepreneurial family, wishes that Europeans would stop being afraid to fail.

Dutchman Kees Koolen and Swede Johan Brenner are always looking for startups that they can finance and advise because the help available for these types of companies in Europe is very limited. Koolen became internationally known as the CEO and developer of Booking.com. Today he is a founding partner of EQT Ventures, which invests in startup companies. Brenner, a partner at the venture capital firm Creandum, has been involved in the establishment of several companies.

In their financing decisions, both men rely on their own experiences as entrepreneurs, but their family backgrounds also have a strong influence in company selections. They meet with representatives of numerous companies every day.

“I grew up on a dairy farm in southern Holland. The only model for working that I knew was to wake up in the morning, start working and finish when it was time to go to bed,” says Koolen.

“All my colleagues at Booking.com had the same mentality: one was a bricklayer’s son and another one came from a family of teachers. We had no holidays or fancy cars. We just worked.”

According to venture capitalist Kees Koolen, many EU countries still don´t like startups from other member states. That’s why he would create a ‘European passport’ for startups.

The right things at the right time

Koolen sifts through entrepreneurs in need of financing to find people and teams with a passion for hard work. Many technology success stories, like Oracle, Microsoft, Google, Amazon, Apple, Uber and Booking.com, have been founded by entrepreneurs who have worked tirelessly to grow their companies.

“Entrepreneurs shouldn’t think about money and dream about riches. You have to do the right things at the right time. Create a product that customers want and that they will choose ahead of the alternatives. Money is the result of the right decisions.”

For Brenner, it’s important that entrepreneurs have some experience alongside the start-up enthusiasm. He worked for ABB and Kinnevik for several years before he founded his own company called eTrade. He later became involved as an angel investor in a number of companies, including Jobline, which grew into Europe’s largest online recruitment site.

“Working in large companies taught me how they function. This is also important for the smaller ones, as at some point they are likely to work with the big ones. Since my father and grandfather were entrepreneurs, it was clear to me that I would carve my own way and probably become an entrepreneur myself,” Brenner says.

He has been involved with the founding, managing and financing of several startups; half of them have succeeded and half have not.

“We shouldn’t be afraid to fail. Unfortunately, failed entrepreneurs in Europe still carry some kind of stigma. In the USA, a failure doesn’t label the entrepreneur in their later ventures,” Brenner notes.

“The Nordic countries get ten per cent of European venture capital, but they’ve managed to create about half of Europe´s top technology companies,” says Creandum partner Johan Brenner.

Silicon Valley has a huge head start

Europe has a lot of catching up to do if it ever wants to get close to the kind of ecosystem found in Silicon Valley. It’s an ecosystem where new ideas, bright entrepreneurs, great financing opportunities and experienced advisors converge. Brenner points out that Silicon Valley gets about 60 per cent of the world´s venture capital and the rest is split fairly equally between the rest of the USA and Europe. In proportion to their population, the Nordic countries get a good share of the European funding.

“The difference is at its greatest during the growth stage when the Americans have access to ten times more funding than the Europeans, but the Europeans are catching up bit by bit,” says Brenner.

According to Koolen, Europe’s problem is that as much as we want to be Europeans, we aren´t. He would like to create a ‘European passport’ for startups so that the European countries would stop arguing about which country the startup should be based in and what sort of special requirements it has to comply with in different parts of the continent.

“Many countries still don’t like startups from neighbouring countries,” says Koolen.

Helsinki is a leading city

Both Brenner and Koolen list Helsinki, Stockholm, Amsterdam, London, Berlin and Munich as the leading technology startup hubs of Europe, followed closely by Paris, Madrid, Barcelona, Zurich and Tallinn. While the geographical spread of these cities prevents the formation of a European Silicon Valley, it does have one advantage: diversity.

“These cities have a good climate for startups. The Europeans are inherently international, as their home markets are often very small,” says Koolen.

“The Nordic countries, which get about ten per cent of European venture capital, have managed to create about half of Europe’s top technology companies. The unicorns include Supercell, Skype and Spotify,” says Brenner.

There are hundreds of ex-entrepreneurs like Koolen and Brenner sharing advice in the USA, but that is still a rarity in Europe.

Short window of opportunity

Both men require their portfolio companies to have entrepreneurship and a passion to work hard, but that alone is not enough. The product and the idea behind it has to be good and when the time is right the company has to be able to move fast. The competition is fierce and the pace is hectic when the markets open.

“The window of opportunity is only open for a short while. This could be the right time to invest in self-driving cars, but soon it might be too late. Companies that are based on smart software, artificial intelligence or machine learning are interesting, but they do not need to be technology companies as such,” Koolen explains.

Brenner is particularly enthusiastic about companies where every new customer adds value to the product. One of Creandum’s portfolio companies, Spotify, is a prime example of this, but the same logic applies to Facebook and Google and many other success stories.

“When Spotify users can create their own playlists and share them, every new customer can add value to the following users,” Brenner notes.

All products have to be born from customer needs. The product has to be such that the customer will choose it ahead of the competitors’ products. Although it is essential to have speed to reach the market, the timing has to be right.

“Often technology projects last for years, and then suddenly speed up very quickly. We are patient investors and we typically stay with a company for 7 to 8 years, but in the end we are after the biggest possible return. Still, about half of our companies do not succeed,” Brenner explains.

“Speed can also be harmful, especially if the company starts to accelerate before its product and team are ready for it,” Koolen points out.

Keys to international success

Kees Koolen:

  1. Make sure that your product is really good. Focus intently on customer needs.
  2. Make sure you have the best possible team: look beyond your friendship network to choose the right people. Make use of your networks.
  3. When your product and team are good, think big and move fast.

Johan Brenner:

  1. Build a multinational and multilingual team from the beginning, as it helps in understanding the international market.
  2. Don’t undermine yourself: aim for the big markets right from the start. It’s just as difficult to go to Norway as it is to go to Germany, a much bigger market.
  3. You can build international growth rather far from your home country, but eventually some key staff will have to move to other market areas.

Kees Koolen

  • Partner at EQT Ventures, which was founded a year ago and has a portfolio of ten companies, including Finnish Verto Analytics and Wolt. Tesi has invested in EQT Ventures.
  • Grew up on a dairy farm in southern Holland.
  • Bachelor’s degree in mechanical engineering (1988). Master of Business Administration (not completed) 1988-1992.
  • Founded his own management consultancy company in 1988, started technology investments in 1997 and has been involved in the financing of 50 different companies, including Booking.com and Uber.
  • From 1997 to 2014 was an investor, CEO and Chairman of the Board at Booking.com, which became the world´s largest online hotel booking system.

Johan Brenner

  • Partner at Creandum, which has invested in over 50 startup and growth companies, including 8 from Finland. The latest investment is KNL Networks, a startup from Oulu. Tesi has invested in Creandum.
  • Grew up in a Swedish entrepreneurial family.
  • Moved abroad immediately after compulsory school; has lived and studied in the USA and several other countries in Europe.
  • Spent the first ten years of his career at ABB and Kinnevik.
  • Was an entrepreneur and angel investor in several companies, including eTrade, Jobline, Tradera and the restaurant booking company Livebooking/Bookatable.
  • Prior to Creandum, spent four years as a general partner at Benchmark/Balderton Capital.

The article was first published in Growth 2/2016.