What is Startup Banking?

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StartupBanking

Startup Banking is a new approach to early stage financing. We believe our analytical approach is a welcome addition to the startup ecosystem, especially for metric-driven founders and investors. Through this blog, we want to share our knowledge and invite you to add yours. Jaap Dekter, the founder of Amsterdam Venture Partners and Startup Banking, explains what Startup Banking is in our first post.

About ten years ago, I took my first steps on the trading floor of ABN AMRO. Sitting behind four screens and two telephones, surrounded by hundreds of loud bankers, I was having the time of my life. I loved the energy and the steep learning curve of life on a trading floor. Being part of the Private Investor Products team, I sold investment products to private banks, asset managers and family offices. To me, it was the most interesting place in the world and the best possible start of my career.

In 2015, I left the bank to start my own company. I wanted to take the rational approach I was used to, and apply this to an asset class I was slowly falling for: early stage startups. However, like most other former bankers who start their own company, I was overconfident and slow in finding out how to make the business work. I started with building a platform to store and sell data on early stage startups, but nobody was interested in paying directly for the data.

My office at that time was a rented desk in a coworking space at Rockstart, a great accelerator in Amsterdam. While I was struggling to sell the data, something unexpected happened. Founders based at Rockstart shared their insights on how to build a successful business model with me, and in return I looked at how they were presenting their story to investors. I advised them on how to make it more appealing to investors. I would also give suggestions on who to turn to and before I knew it, I was back in dealmaking.

I knew some people who invested in startups and my new founder friends told me who they would want as investors in their company. I decided to reach out to all of them and do what I did best: find out exactly what they look for when they invest in a startup and why they decide to pass on an opportunity. I had moved from derivatives to early stage startups, but the principles of discussing investment opportunities remained the same. This is the core of Startup Banking.

On a trading floor, everybody usually fits in one of two profiles. There are traders and quants who determine what the price of any asset should be and there are sales people who explain that number to a client. Back in the days, I was one of the sales people and effectively, I had to translate the (very much) analytical output of our traders into a solution that would benefit our clients & vice versa.

Clients were not interested in my opinion about the future performance of any asset. My clients were professionals, and formulating an opinion was their job, not mine. Clients told me what their opinion was, and we’d create an investment proposal that met that vision. We use the same methodology when we talk to early stage investors interested in startups.

In derivatives, we talk about investments by looking at their ‘greeks’. Where possible, emotions are removed from the discussion. This clinical approach made, and still makes, sense to me. In investing, it is crucial to have greed and fear under control. Focusing on analytics, numbers and rational thinking, is just as important in early stage startups as it is in other areas of investing.

Being surrounded by startups, I discovered how this analytical approach to investing was considered different, yet welcomed by founders and investors alike. The number of decks I was asked to look at grew at a dramatic rate. As an Investment Banker, I loved teaching junior bankers how to pitch and communicate a compelling investment. This was the same, but working with founders instead of bankers made it even more fun. Over time, my vocabulary started to change. Out went the ‘greeks’, and in came an obsession with ‘startup metrics’ such as MRR, churn, CAC, CLTV, GMV & take rates.

It quickly became apparent that there was a business here. Investors appreciated a no-nonsense, analytical approach to explaining why they should take a look at a particular startup. Like before, investors are not that interested in our opinion on a company’s strategy, or my future vision on a particular sector. That’s their job. However, they are interested in hearing about a company’s metrics, and how that compares to other startups.

This focus on metrics and communicating them to the right investors, evolved into what we now call “Startup Banking”. Startup Banking is an analytical approach to early stage startup financing. At the company I founded, Amsterdam Venture Partners, we are proud to be Europe’s first and leading Startup Bankers. We currently work with startups from 20 countries, and we use our metric driven approach to advice on their dealings with existing and future investors.

In our work, we constantly meet great founders, investors, new colleagues and competitors.
Through StartupBanking.co, we share their best practices, insights, and anything of use to founders and investors in Europe interested in a more analytical approach to early stage financing. .

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-Jaap