"Companies are not sold but bought" – Venture Capital Lifecycle with Gimv

"Companies are not sold but bought" – Venture Capital Lifecycle with Gimv

05-Dec-2012 by Startupbootcamp

On Tuesday, May 29 Aik Deveneijns – the VC of Gimv – gave a presentation at our Amsterdam office on the topic of “Venture Capital Lifecycle”. Aik discussed the Venture Capital Investment Cycle, starting at “investment”, through “creating value”, all the way to “exit”.

Gimv is a private equity and venture capital provider and a major European and international market player. The company makes venture capital investments in promising high-tech companies, focuses on buyouts and growth financing, and cooperates with experienced parties to establish funds and joint ventures.

Investment

First, various criteria for investment were brought up: the Bonzai approach and the Sequoia approach.

The Bonzai approach is characterized by the “think small” attitude, involvement in the local language, market and team, business plan is based on EUR 5-10 mio after 5 years, and it is hard to scale but easy to compete with. The latter, and according to Aik a more preferable appraoch, is characterized by the “think big” attitude, the team is international, members of the team know their business and are obsessed with metrics, business plan is based on EUR >20 mio after 5 years, is easily scalable and has an “unfair” competitive advantage.

The reasons for picking the Sequoia apprach over the Bonzai approach are multiple:

  • Because the world is flat: Technology companies play on an international scale with global competition
  • A certain critical mass is required to support R&D and sustain competitive advantage
  • In some markets, the winner takes it all (think Facebook)
  • Proportionately more value is attributed to larger companies (higher valuation versus revenue)
  • VC overall portfolio return is determined by its “stars”, not by the “dogs” in its portfolio
  • Aik also briefly talked the teams through different steps in the investment process (starting at pitch, through introductory call, follow up questions, meetings, letter of interest, full due diligence, all the way to presenting legal documents, receiving the Investment Committee’s approval and finally – closing of the deal).

    Creation of value

    The next step in the Venture Capital Investment Cycle (creation of value) can be achieved by offering financial support, leveraging network, stimulating partenting, legal support or MT & supervisory board. Aik stressed that creating value is much more than simply providing capital!

    Exit

    Last, the exit timing considerations and exit peparation were discussed and Aik ended the session by providing the teams with extra materials relating to a successful business plan and other resources.