Jeroen Bertrams (46) is the author of the book ‘Start-up. Van idee tot exit’ (Start-up. From idea to exit). Bertrams worked for a consultancy firm after graduating from the Faculty of Economics (Erasmus University Rotterdam, The Netherlands). In 2006, he launched a marketplace of mortgages onto the Internet, one of the first of its kind. He then sold the company seven years later. Since then he has been an angel investor. We asked him about the secrets of the trade.
What are the factors for success in a start-up?
“The market has to be big enough and the idea behind it has to be scalable. Those are two important things that I judge a start-up on. It is still too often the case that a market is tapped into that seems big, but it isn’t. For example, if a market is worth a billion euros, you’ll never be able to become big. At best, you’ll capture a few percent from that kind of market. Those kind of start-ups will find it really tough to attract private investment.”
Does a start-up need to have a unique idea?
“Start-ups often say that there is no competition and that their idea is unique. But I can tell you that there are almost no unique ideas left anymore. The idea you have now, thirty others in the world also have. That, in itself, is not so bad. What matters is that you are better at executing it. For start-ups, it is all about execution, execution and execution.”
If, as a start-up, you allow an investor to take 30 or 40 percent of your shares in the first round, then you will barely be fundable in the next round of investment.” Jeroen Bertrams
“In my book, I spoke to twenty successful Internet entrepreneurs and they, too, say that it’s not just about the idea, but more importantly it’s about the execution. You have to work in an almost military fashion day in day out in order to move your business forward step by step. If you do not do that, you will be overtaken.”
What else does a start-up need to pay attention to?
“Most start-ups are started by a couple of people or a small group. It is important that the founders make solid agreements with each other. The CEOs I’ve talked to almost all say that when problems arise, it’s due to the fact that founders never made their individual goals clear up front. Some want to make an exit when there are a million sales. Others want to continue until there is an IPO. Some work seven days a week without hardly taking a break, while others think that a 9 to 5 work week is enough. This creates friction.”
What is a healthy level of participation for an investor in a start-up?
“As interesting as an investor can be, it is important as a start-up not to get rid of too many shares. As a rule of thumb, you surrender about twenty percent in the first round of investment. If you don’t do that, and you allow an investor to take 30 or 40 percent of your shares in the first round, then you will barely be fundable in the next round of investment.”
“This doesn’t leave enough shares over for the founders. The risk is that they will lose their motivation and pull out. This is why you should not want too many shares as a financier.”
As an investor, when should you definitely not get involved with a start-up?
“If I analyze a start-up and I notice that the company is buying the technology from third parties, I will drop out. The core competence must lie with at least one of the founders. In general, I check a number of KPIs i.e. key performance indicators in a start-up. I always look at the return on revenue, recurring turnover. This offers a good estimate of the prospects for the future.”
“What I also consider an important indicator is the growth in the number of new customers. But at the same time, I also have an eye for the percentage of customers who pull out again. Many start-ups grow very fast and have a reasonable turnover, but are unable to retain their customers.”
What is the role of staff in the success of a start-up?
“The founders of a company have a certain culture. You have to look at the quality of the staff you hire, of cours. But also at their behavior and whether he or she fits into the prevailing culture. A manager can be very strong on paper, but if they don’t fit in with the culture, that can have a huge negative impact. This can lead to the creation of a dual culture in a company. Start-ups have to be very wary of that.”
Is your book just meant for digital start-ups?
“The pattern is the same for all start-ups, whether it be a marketplace on the Internet or an application from the field of robotics, for example. It is true that the investments that industrial start-ups need are much higher. But the fundamentals are the same.”
Which start-ups are you currently funding?
“Among other things, I’m involved in Notion, which has an online workspace for companies to house their notes, tasks and databases. I’m in Weave as well. That’s an application that handles customer administration and communication for doctors and dentists. Both applications are very scalable and can be used around the world.”
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