Partnership between VC firm and data platform aims to address anomaly in European venture funding.
Amsterdam Venture Partners (AVP) is joining forces with Index, tech publication The Next Web’s (TNW) machine-learning and data platform, to form Startup Banking, a new approach to addressing the dearth of relevant seed and early-stage capital for European start-ups.
“When you look at start-ups, especially in Europe, it is harder to raise capital than the US but, also, the knowledge about how to raise money among founders is scarce,” explained Patrick de Laive, co-founder of TNW in Amsterdam.
‘We expect to enable more and more cross-border investments in Europe’
– PATRICK DE LAIVE
The new partnership offers early-stage European start-ups an investment banking service at favourable terms and rates, and aims to help them raise seed and Series A rounds.
It aims to do so by combining AVP executives’ experience in funding and investment banking with machine-learning and matchmaking algorithms developed by Index.
These algorithms were tested at TNW’s 2017 Amsterdam conference, a rival to the Web Summit in Lisbon, and enabled 3,800 meetings between start-ups and investors, with a 4.5 out of 5 rating from these participants.
Knowledge is power
Speaking with Siliconrepublic.com, De Laive said that European start-ups are hobbled by borders, languages and a lack of knowledge-sharing among entrepreneurs.
“In the US, there are more funding rounds and people are more open about sharing knowledge. Founders are more educated around how the process works.
“A lot of start-ups in Europe either never get to raise seed funding and many never get to series A. The key is to raise money by getting in front of the right investors.”
A key factor of the platform, De Laive explained, is that, in helping start-ups to raise funding, Startup Banking plans to offer fees that will be a fraction of those charged by traditional investment bankers and venture capital (VC) firms.
“We connect the founders with investors and, if there is a connection that is made and that works out, then the founder is charged a fee.
“The reality is that corporate financiers don’t want to work on smaller funds, they are only interested in rounds of €5m-plus. As a result, there is virtually no market for seed funding rounds and early-stage investing when it comes to investment banking in Europe.
De Laive said that the model is unique to Europe and that there are no plans to bring the model to the US. “The US is a totally different market that requires a totally different product.
“The hardest part is the intelligence and figuring out what stage a company is at before it can meet potential investors. There is also the aspect of training and guiding the founders through the process. It’s one thing to run a company, but raising funding is a specialty.”
De Laive said that the plan is to start small, working intensively with a small number of start-ups, before finding its stride. Success within a year or two would see hundreds of European start-ups raising early-stage funding through the model.
“We expect to enable more and more cross-border investments in Europe. It doesn’t matter where you are based in Europe. The most important question is, if are you building a product or company you love, do you have knowledge about the market and who can invest in you?”