25 million € in funding for 61 startups? That’s just not ENOUGH!

"Governments and big companies: Give. Startups. A. Break!"

When I had a chance to read an upcoming Belgian Web Startups Barometer in avant premiere, I was hit by an encouraging vibe. I was absolutely, positively surprised that the editors had managed to identify 61 Belgian Web Startups, the bulk of which didn’t even exist three years ago.

This ‘Gang of 61′ collectively raised over 5 million €  in FFFF funding – founders, friends, fools and family a.k.a. “Love Money”. That’s an inspiring number. It’s likely skewed by the few lucky bastards that were able to sell their 10 million € idea to an early stage venture fund, but that in itself is no small feat either.

It’s encouraging that 61 teams of go-getters are frantically working to make a difference, in spite of the economic turmoil. Some of them might have started thinking ‘why waste a good crisis?’, as there is no better time to spur entrepreneurship and innovation than an economic downturn. But I like to believe that truly something of an entrepreneurial spirit is brewing in Belgium.

But on a second reading I got slightly concerned. Our ‘Gang of 61′ expects to raise 25 million € – really? That seems off by a couple of millions on the low side. 25 million might be the amount needed for a single company to become successful! Why aren’t these Web Startups more ambitious?

While it’s normal for companies to kick-off undercapitalized (“barren soil nurtures the strongest teams”, a business angel once told me – he is right!), it does hamper their credibility to do business with the big guys. And you’ll HAVE to do business with the big guys to be successful. And it’s only success that will give access to the level of funding – the real funding – that will allow you to become a world-class player.

I realise that the investor landscape in Europe is scattered – a recent report said as much. But I wonder if it’s just the lack of access to funding that makes startups revise their funding needs downward. Startups should be aware that it requires the same effort and worse: distraction - to raise 100 000 € as it does to raise 5 million €. Moreover, receiving early- stage funding is extremely uncertain. You can’t afford to bet the house on it, so it should never be a startup’s primary focus.

So, here is a warm plea to the Web Startups: focus on business success and what is required for an 18 months survival plan; this survival plan should not include the words “we’ll get funding”. Bootstrap! Work extremely hard at substantiating your business model as soon as possible. Of course, you can raise some FFF money, and give out some sweat equity, but beg, steal and borrow before even thinking about raising real money. When the time is right, be bullish and phase your funding over multiple rounds (A, B, C), in order to maintain control as much as possible (don’t be naïve though).

Side note: should you be so lucky, aim at closing your investment round with two VC’s.  This will proof more healthy for the company, and yourself, as it balances some of the powers – dare I say “politics” – that be.

A warm plea to governments and corporations: give startups a break! 

It’s far easier to blog about all this than to execute it, especially for an undercapitalized internet startup. Therefore, I extend my plea to large corporations and governments: Give Startups A Break! Stop demanding companies that you work with to have a certain size! Simply do business; you never know the startup ethos might inspire your company or department. Become a customer, or better yet a strategic partner, that propels startup companies into major success.

European governments should think hard about putting Small Business Investment Company (SBIC) programs in place, that require governments to include startup businesses in their tenders, or give corporations tax breaks for doing business with the startups. My gut tells me that it is going to yield better results than setting up co-investment schemes with banks or funds.

A final word to the editors of the Belgian barometer: I hope that you can turn this Barometer into a Monitor that regularly checks in with the ‘Gang of 61′, through good and bad times. I personally doubt the relevance or value of a repeated survey with different subjects. Dare to take a Guinea pig approach (no disrespect) and try to distill what constitutes success and failure in this ‘Gang of 61′.

Are you a startup? What do you think about this?

Do you have problems getting contracts from big corporations and governments? Are you undercapitalized? Talk to us about the conditions for startups in Europe at <a href=”mailto:editor@whiteboardmag.com”>editor@whiteboardmag.com</a>

Note: If you want to be informed when the report becomes available on www.belgianwebstartups.be, please send and e-mail to frederic@i4fi.com (yes, him of the vanishing corporations!)

Photo: Flickr, Narrow photostream

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About the author

Filip Tack

Co-founder, CEO at Nomadesk, a leading provider of online storage, file sharing and synchronization software. Co-founder and Chairman at Carambla, a real-time marketplace for parking. Bootstrapped Nomadesk and made it into a revenue generating SaaS-business, geared for growth (revenue CAGR of 271%). Raised over USD 10 million in venture capital (seed, series A and B). Nomadesk was selected by the Guidewire Group during Innovate! 2009 as "the most promising European startup". The company is one of the Deloitte Technology Fast 50 2012 and features on the Red Herring 100 Global 2012. Nomadesk is venture-backed by Gimv and BAMS Angel Fund. BS and MS in Bioscience Engineering from Ghent University, and an MBA degree from Vlerick Business School. Follow me on Twitter, or find out more about me on LinkedIn.

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