Companies can apply to the Venture Capital fund for financing. The starting capital lies around €200,000, in exchange for shares. The average investment is between 1 and 3 million euros.
How it works
A Venture Capital fund receives hundreds of applications per year. It only selects the most promising proposals. The fund's main aim is to generate a return on investment (ROI) for its participants. To achieve this, they are looking for your company's shares to increase in value over time. And they will sell their shares on to companies or other financiers in 3 to 7 years' time, to realise the ROI. This is their exit strategy. The capital managed by Venture Capital funds is also called private equity.
Applying for funding from a Venture Capital fund
If you are planning to approach a Venture Capital fund, it is essentail that you learn how they assess and invest. Investors like to see that you can understand their position and view the proposal from their perspective too. Later in the process, negotiations and contractual agreements play an important role. It is wise to hire a professional to help you in this phase.
Do you want to know which Venture Capital funds are active in your sector or industry? Check the list on the website of the Netherlands Venture Capital Association (Nederlandse Vereniging van Participatiemaatschappijen, NVP) for an overview of all their members.
Customer Due Diligence (CDD) and foreign investors
If your company attracts a foreign investor, for example in the form of an equity stake, you should contact your bank before the investment is actually made. This will enable the bank to carry out the Customer Due Diligence (CDD) process correctly, as is their obligation under (amongst others) the Prevention of Money Laundering and Terrorism Financing Act (Wwft). Part of this process is gaining insight into money flows (from abroad) and, sometimes, the organisations and persons involved.
If a new foreign investor becomes involved in your company, and the ownership structure of your business might change as a consequence, you will have to inform the bank of these changes beforehand. The bank will then inform you of the information or documentation it needs to carry out their CDD policy. This also enables you to prepare for the actual investment by a foreign party in your business. You can start collecting the necessary information yourself, while requesting part of the information from the intended investor. This may prevent delays and disappointments in the process later on.
Increase your chances of success
Investors prefer to invest in companies that are financially sound. Here are some checks you can do to increase your chances of a successful application for funding:
- Check the viability of your company.
- Is your solvency ratio positive?
- Can you pay the bills? Draw up a liquidity budget to find out.
- Do you and your team have all the expertise you need to run a successful business?
- Is your financing application complete?
Help in finding financing
There are several organisations (in Dutch) that can help you find financing.