2. Fail Conference
Ghent, November 6th 2012
Failure is not about falling down,
failure is about staying down
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3. Introduction
• Newion Investments Management has 3 Funds under
Management:
• Newion Investments I: Early stage IT software fund ( € 28
mln, 2000, closed)
• Private Plus Fund: generic fund (€ 20 mln, 2005, closed)
• Newion Investments II: Early –Later stage IT software fund (€
50 mln, 2011, open)
• B2B, Enterprise Software
• Benelux
• Stages:
• Early: Market validation by minimal 5 pilots/customers
• Later: Expansion stage has just started
• Investment rounds: min € 500.000 up to € 2.000.000
• Total max € 4.000.000 per company
• Controlled growth philosophy: fully funded rounds
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6. Personal obeservations
• These are personal observations
• In hindsight everything is easy
• No one can predict the future
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7. Failures that hurt most
• Company A (RIP 2002)
• Buy and Build strategy in Supply chain software
• Focused on exit rather on building a company
• IPO forecasted in 2001-2002
• Large syndicate of large VC‟s/PE involved, plus Angels
• Too many people involved…..
• Successful but dominant CEO
• Many acquisitions (paid in shares and cash)
• Too fast
• No Integration of product and organization and region
• Too much money involved: “almost too big to fail”
• If one PE would say no to next funding round: full dilution… so domino effect
• Lessons
• Ambition is great, but you have to build a company rather than go for the exit.
• Doing an acquisition requires strategy, careful planning, investigations and integration.
• It is high risk!
• Do not acquire the next company until the previous company is successfully
integrated
• Make sure all your shareholders are aligned, and keep them aligned.
• A small team is way better and efficient.
• Listen to your gut feel!!! If it doesn‟t feel right, it is wrong
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8. Failures that hurt most
• Company B (RIP 2010)
• Expansion Software for Defense industry (intelligence departments)
• World class technology
• Track record and references
• Unbelievable committed and dedicated (complete!) team
• Unpredictable market
• One year good revenues, the next none.
• Fully driven by budgets and politics
• Lessons
• No matter how good and committed the CEO and team is, it is not
always a guarantee for success
• I did not have experience in this typical market
• In defense industry you need to be very well funded to survive the long
dry desserts. It‟s different compared to other software markets
• Shareholders to “bridge from gap to gap” is not the right way: after a
while everybody is tired
• Understand the situation and try to move away from a market while
you still can
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9. Almost a failure
• Company C (Successful exit in 2006)
• Investment in September „01.
• Goal: Buy and Build since they had 1 huge dominant customer
• Autonomous growth was not high enough compared to the growth of
this dominant customer: buy and integrate other companies to become
less depended on this customer
• Good technology, good management, excellent market
• Long term contracts
• 1 week after investment, large customer in financial
difficulties: ending relationship with all their suppliers
• Instead of investment for growth, re-organize
• Laying off over 50% of all staff in two rounds (early 2002 and
early 2003)
• Lost many key people in second round
• After re-focus: acquisition/merger with competitor
• Rebuilding again in 2004-2006
• Successful exit in 2006
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10. Almost a failure
• Lessons
• Timing is everything
• Never give up in fighting for the company
• In a re-organization always cut deeper than you expect
• Minimum of 20% more
• Staff is intelligent: they understand and acknowledge the first reorganization. But
at a second (or third) they do not support the management and talent looks
elsewhere.
• Keep your eyes open for survival and maybe that is by doing something hat
hurts your ego: talk to a competitor
• VC‟s have to stay close to the management of the startup
• Many times young entrepreneurs
• VC should have hands on experience
• VC‟s must look for a solution for all stakeholders
• Including founders, other shareholders, staff etc..
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11. My personal cliché takeaways
• Understand your business through and through
• Measure everything.
• Find a balance between “if you think you are in control, you are not
going fast enough” and “to finish first you first have to finish”.
• Analyze everything and “sample size n=1 is no proof”! Don‟t fool
yourself
• Be in daily contact with your customers: they tell their needs and wishes.
And they are the believers in your startup. Use that.
• It is the CEO‟s job to test new offerings to existing customers, not a sales
guy‟s
• Look for proof. Real proof…. Don‟t fool yourself
• “sample size n=1”is no proof!
• Build a Minimal Viable Product! And test it with your customers. Do not build
the “Full-Spec-Product-Suite-From-The Attic”: you will be too late.
• There is no such thing as 1+1=3
• There is no magic, it is dedication, hard work and smart thinking.
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12. My personal cliché takeaways
• “Failure is not about falling down, failure is about staying down”
• Why have you ever started to become an entrepreneur?
• Focus on the positive things, not on the negative.
• And if things go wrong, explain and be professional: you‟ll have a second
chance later
• It is not the exit, it is building a company
• Take the best people in your team. Never compromise on this
• Shareholders can ruin your company if they are not aligned, not share
the same knowledge, philosophy, experience, etc.
• Do not expand too soon or too fast
• Scale only if you can prove that your business model is predictable!!
• Always listen to your gut feeling.
• Use your brain, listen to your heart
• Do not be impressed by the seniors and specialists
• If it doesn‟t feel right, it is wrong.
• Buy: Steve Blank’s “The startup owners manual”
• Prepare, Stay focused, Have Fun!
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