The Level Up event – today in the Eindhoven Evoluon – is a mixed bag of experiences, knowledge sharing, and networking. All very interesting, but some of the highlights are standing out. One of them was Protix CEO Kees Aarts’ answer to a question from the audience and the addition offered by investor Warner Philips (Rubio Impact Ventures). Here’s the (almost) unabridged transcription of their interaction. It took place at the end of the keynote Kees aarts had just given.
The question comes from Peter van de Graaf, the CEO of Choice, a former Gerard & Anton Award winner:
“We have a big story just like you have. But when talking to investors, you are constantly forced to talk about exits and shareholder value. You have a bigger story. How successful was this big story and how successful was the shareholder story, in your experience?”
Excel sheets vs. seeing the business
Kees Aarts answers:
“I have been through my fair share of rounds with investors. Some really don’t like me. I can tell you that. There is a part of the investor community that really doesn’t like people like me. Because I fundamentally believe that there are two types of professions. I don’t step into the world of financing. But I also don’t like investors who step into the world of running a business. And the latter does this more often than the first.
So really, find the right investors. Because before you make the deal, it’s about the behavior around your story about valuation. They, of course, want to lower the valuation because they can buy cheaply. And then as soon as they are on board, they expect you to increase the story for a higher valuation. It’s exactly that delta in the way the investor behaves before the deal and the way they behave after the deal is going to give you headaches. Try to really push that discussion into that conversation. Of course, an investor talks more about the risks of your business before they make the deal. And that’s boring, and that’s annoying. Because at the same time, you are the founder, and you need to tell an aspirational story of growth. To hire people to make it happen. So that schizophrenic situation is very tough.
But there are investors who understand this. And those are the ones you want to have on board. And that’s where it boils down to. The pre and post-behavior of the deal itself. For us, what works best is to really show them always what’s happening. If the discussion ends up in an Excel sheet at a distance from where people create the value. In our case, it is extremely visible. Then, the discussion goes south. It ends up in a battle. It’s not good, and that’s why they don’t like me. But when I get them to see the factory and see the people who are doing it in a 24/7 environment, then it also tones down the conversation. Then it gets more about the question of how to help the company create that value. Try to get it in that area and away from the excel.”
Understanding the numbers
Warner Philips (Rubio Impact Ventures) is one of those investors, also for Protix. His comment:
“We definitely get into Excel sheets, we always do because we want to get to understand the numbers behind the business ultimately. But at the end of the day, that’s not what really matters. You need to understand that all the companies that I have invested in myself, including eight years in Silicon Valley, all those companies take a very long time to mature. And this is not just about deep tech companies like yours. But even about business models like Lyft and Nest and everything. What really matters is what we consider now to be the true partnership between an investor and an entrepreneur.
And that requires that you understand enough about the business itself, to know what you’re actually investing into. You need to understand how things will play out differently, and also be comfortable to really trust each other that it will be okay. It’s always going to be a bumpy ride. It’s only one in a million deals that go smooth and fast and become a unicorn or whatever. It really just takes time. So I subscribe entirely to that. It’s really tempting for VCs to invest in the entrepreneurs who will take their deal. And actually, the entrepreneurs that you want to invest in are the guys like Kees Aarts. Who dares to say ‘push back, push back, if that’s your deal, just piss off. I’m not going to take your money‘. But it does take courage and strength and confidence like Kees Aarts has. And I think you should have that as well. You should do substantial due diligence on your investor. You cannot afford to take on the wrong investors because we could kill your company. A lot of the entrepreneurs in the room can learn from the way Protix has operated.”
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