Startup Survival Guide
How to Reduce Risk as an Angel Investor & Get Attention as a Startup Founder – Interview with Wouter Kneepkens

We interviewed Wouter Kneepkens investment banker turned startup guy from the Netherlands. He gives away tips for both angels and founders; straightforward and brutally honest answers about how to reduce risk when funding startups, the key to being successful in financial markets, warning signs and how to find potential startups to invest in.

On the other hand, founders can learn how not to get auto-deleted and what is the best path to take in order to grab the angel’s attention.

Go for it, meet Wouter…

Wouter Kneepkens Quote

Interview with Wouter Kneepkens

1. Hi Wouter! Thanks for agreeing to do the interview! You started working in banking, then you became an entrepreneur and started investing startups. Tell us a bit more about your background, how you became an entrepreneur and an investor? What is it you like about startups?

At university, I’d run a successful little company, which I sold to go into investment banking. I’ve always had an interest in entrepreneurship. So after a couple of years in the financial industry (banker, hedge fund, private equity), while doing my MBA, I decided it was time to try my luck as an entrepreneur again. At around the same time, I tried my hand at angel investing for the first time, using (read: wasting most of) my bonuses on a couple of sizeable bets. Since then (2011) I’ve learned a great deal, both about founding startups and angel investing.

2. You have founded a number of companies. Can you tell me something about them? How do you manage them all?

I usually try to keep as much focus as I can (after having learned the hard way). This means that starting something new means closing/selling the previous startup. Anything I do beyond the main startup is part-time stuff, like StartupJuncture, VNT.RE and mentoring. The more interesting startups I (co-)founded are Vooxl (sold) audio tour apps – 2011, Share a Bite (sold) social dining – 2011, (failure) social discovery – 2012 and SNTMNT (profitable) social sentiment for financial markets – 2013/2014.

3. You invest quite a bit on different online platforms, both in the US and the Netherlands. Why do you invest in using these online platforms instead of off-line?

Fits with my investment strategy of having a large number of investments, with a focus on the US. Both make off-line investments suboptimal (time/geography).

4. What in your opinion, are the main differences between the US and NL? Is there something Dutch investors could learn from US investors?

A 20x larger market, people (users) more open towards innovative concepts, SME’s/enterprises willing to work with startups, these three mean chances of sizeable success are a lot better for US startups. A US$15m exit in the US is considered a failure, while it would place you among the top NL exits in the last decade…

Dutch investors are typically very conservative and only look to invest in something they are comfortable with, that makes sense and that they can understand. Well, those are inherently no unicorns and you need a couple of unicorns to make your portfolio pay off. Secondly, while Americans might be a little too easy on valuation, Dutch investors are usually too stingy. Dropping a deal for a EUR100k difference in a very early round makes absolutely no sense. The startup will either be a success (meaning you’ll be amply rewarded whether it was EUR1.5m or 1.6m) or it will be a failure (meaning you’ll lose all the money anyway). The highest cap I’ve signed was US$12m, for a seed funding, which I thought was starting to get pretty ridiculous. Sixteen months later the startup was valued somewhere in the area of  US$250m in its Series B. Not investing because I would have wanted a US$10m or even a US$5m valuation would have cost me a 15-25x paper return (which could very well move on towards 150-250x in the next two years).    

5. What do you look for when investing in a startup? Do you invest only in a particular industry or can any startup with an amazing idea get you on board as an angel investor?

Traction, interesting concept/market, solid other/previous investors/accelerator. All my investments are tech-related, within tech itself I’m industry agnostic.

6. What would be the best way for a startup to approach you as an angel investor in the case they haven’t met you before? What would be the best path to take?

I never look at anything a startup would send me, that’s an auto-delete from my mailbox. I discover startups via one of the platforms or at times via fellow investors. At times a startup that sounds interesting gets press attention after which I try to see whether I can get in via Angellist, or one of the other startups.

7. How actively involved are you with the companies you invest in?

Typically, completely hands-off -> 0 involvement, pure portfolio management.

8. Angel investing is a very risky business and a strategic investment portfolio can make a big difference. Tell us about your portfolio and the key things angel investors should keep in mind when building it.

I see the highest quality startups around the accelerators or among second/third time entrepreneurs.

After making early mistakes investing like an “oldskool” angel (a few large bets, actively involved) I realised investing in startups is simply like any other type of investing. The key to being successful in financial markets is a decent level of diversification. Now I make more and smaller investments, basically spreading a normal angel investment amount across 10 different bets. I’ve now accumulated (indirect) exposure to over 40 startups, implying my portfolio is probably larger than that of most Dutch VC’s and angels (in quantity, not in size).

9. Direct equity or convertible notes? Which one do you prefer and why?

I don’t care. Most of my investments start out as convertibles or currently some SAFE’s and convert upon a follow-on investment. Given I’m completely hand-off, not involved in any of the negotiations, but simply e-sign whatever others have agreed upon I have no preference.

10. What would make you give up from a planned investment? What kind of warning sign would it be?

Co-founders leaving the firm, traction disappearing, investors dropping out of the round, all imply something’s seriously wrong.

11. What is your most successful investment up to now and what did you learn from a failed investment?

The best performing (on paper) investments are seed investments in Coinbase and Instacart. Both firms are already valued in the hundreds of millions of dollars now, implying a 10-20x return on my investment already (at the valuation of the most recent funding round). If they make it a 50-100x return is within reach, basically meaning each of these individually would return 1.5-2.5x my full portfolio (with the other c. 38 than being pure profit on top).

My first three failed investments made me change my style to my current financial markets inspired a way of investing.

12. You are a founder of StartupJuncture; all Dutch startup news – you know them all, so what would you say are the must-go-events in The Netherlands to discover a good investment, a Startup that will make a difference?

I see the highest quality startups around the accelerators or among second/third time entrepreneurs. Keeping up-to-date on what’s going on is one of the reasons for mentoring at the accelerators.

13. Lastly, what advice would you offer to any soon to be angel investors out there?

Go for a diversification approach like I do. Talk to fellow/experienced angels.

14. Anything else you think would be interested to mention about angel investing?

Make sure you get your goals clear… If you just want to hang around with startups and be involved it might be better to stick to mentoring/advising. In case you see angel investing as a way to make a return (as a part of your asset allocation, like I do) then approach it like you’d approach the stock market. Or simply invest your money with a fund/accelerator/angel who will try to make this return for you.

Thanks a lot, Wouter for doing the interview and for your useful and interesting tips both for angels & founders.

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