Who dares, wins

For once we have found something our politicians, captains of industry and media fully agree on: Belgium needs more entrepreneurs. If we don’t find them, we’re soon to see our economic fertile soil turn into a desert. But despite all measures and initiatives such as Flanders Enterprise (VLAO) or Flanders DC, we’ve seen hardly any successful start-up, let alone one that made it to a scalable level. Why? Never before we had that much venture capital available on our market. Word has it that local investors are loaded. But, there are simply no(t enough) interesting projects to spend their money on. Really? 

The ARKimedes Fund for instance, which invests in promising SMEs through the activation of venture capital, managed to gather over 200 million euros from private investors in no time. But in the following 12 months it invested only 23 million euros in 38 companies. So on average 600,000 euros. That is significantly lower than the current statutory maximum (1.5 million euros), and even lower than the initial maximum of 1 million euros that was imposed by the government. 

And what about the Business Angels, the network of (former) entrepreneurs who want to invest in promising start-ups or fast growing companies? In itself a laudable initiative, as expertise is of inestimable value for each young company. But the project has not really lift off. The Business Angels invest an average of 70,000 euros per project. If you are an entrepreneur and you need to fetch 600,000 euros, not even that big a number, you’ll soon need 10 guarding angels. It’s simply not worth the effort. 

The question must be asked as to whether such an investment is realistic at all. Is it really promoting entrepreneurship? Or is it a waste of time and money? I believe it is actually too much to fail, but also too little to start a company that can make a difference on a national, let alone an international scale. One thing is for sure: foreign investors have a whole other idea of risk assessment than their Belgian colleagues. Several Belgian entrepreneurs have managed to attract millions of dollars from foreign investors, and they had only a simple business plan to show for it. Something they would never have achieved on their native soil. 

The Belgian company Acquia for instance, the consultancy firm of Dries Buytaert, managed to convince US based investors Northridge, Sigma and OATV to invest 7 million dollars. Buytaert didn’t hesitate for a minute. Today, he’s delivering services on Drupal, a very popular open source software product (by the way: invented by Dries himself). And that’s probably what’s keeping Belgian investors from helping companies like Acquia: they don’t have the guts to invest in services or products of which the intellectual property rights aren’t perfectly protected. That’s the very definition of open source software. Such a project is too daring for our venture capitalists.

But why do some entrepreneurs succeed to attract foreign funds, often ten times the size of the limits set by the Flemish government to the local initiatives? 

As far as the investors are concerned, two reasons: economies of scale and simply having the guts. Our local fund managers represent only a fraction of the large international funds. Not the absolute amount per capita is a decisive element, but the extent to which the funds are dispersed. Moreover, they use very conservative criteria for selection and there is little or no room for seed capital (the initial money needed to start a company). Our best bet would be to invest as much as possible in seed capital. Sure, the risks are higher, but by inserting money from the various existing funds, we can spread the risks and we’ll finally have a tool that allows us to keep our entrepreneurs and their companies in Belgium.  

On the entrepreneurs side it's also chrystal clear: dare to think big. A start-up company cannot be proud of growing slowly on the local market. From its very conception, it should have international ambitions. Companies like Acquia or NetLog (yes, this popular social network site is 'made in Belgium') have international ambitions from day one and... they act on them. That's why venture capitalists have faith in these projects: they too think big. Remember: who dares, wins.