Expert Blog – September 8, 2022
Bertrand van Leersum, Investment Manager at Borski Fund, describes how the Value Creation Model enables StartGreen to assess investment propositions and to help impact entrepreneurs grow. 'We are not an investor who watches from the sidelines. We want to actively maintain a relationship with entrepreneurs and regularly check with them what is going on.'
Pitfalls and points of attention
Over the years, StartGreen's various funds have assessed thousands of companies for investment opportunities. We ended up investing in hundreds of impact companies. So together we have an incredible amount of experience and knowledge in that area. We have brought these together in this Value Creation Model (VCM). We also looked at what we consider important elements: which pitfalls and points of attention do we look at in an investment proposition and how can we realize the potential?
From all these facets, we have identified six value-drivers . These are the aspects that you have to pay attention to in order to get to the next phase and which therefore determine the success of a company. We look at the management, the technology of the innovation and the market position of the company.
By closely monitoring the six value drivers, we ensure that the company is prepared for the next step during each growth step. Things always turn out differently than you expect, so the company must be able to move flexibly so as not to end up with its back against the wall. The ultimate goal is an attractive company, ready for takeover. In addition, a ready-to-sell business is in control and has the most flexibility in tactical and strategic decisions – whether it is sold or not.
In the first instance, the VCM ensures that we do not have any blind spots during the assessment of companies. When we consider investing at Borski, we first do a QuickScan: we determine the points for attention for a company on the basis of the six drivers from the VCM. We will zoom in on this during the due diligence. If we decide to do business with a company, we will work with the entrepreneur on those points for attention. We do this with a 100-day plan.
After those 100 days, the filled out VCM becomes a roadmap, which we every now and then review together with the entrepreneur : where are we now? What's going well? What effects do changing market conditions have? What has priority? We then guide the growth process in three steps:
Step 1: get the base in order
In the first period we look at the basics. This includes findings from the due diligence, adjustments to reporting structures, the hiring policy, filling vacancies, and appointing a legal advisor. We ensure that the entrepreneur is not only concerned with what she or he has the most affinity with, but also with all other important aspects for growth.
Not only do you want to avoid surprises, but you also want to know what needs to be done to be able to start fundraising on time. For example, are extensions required in the management team? We can help build expert profiles or introduce a CFO. We can also bring in parties with a specific focus for support.
Step 2: expanding strategic position
In the following period, we help the company to further expand its strategic position. For example, at this stage it is desirable to obtain proof points such as certification of a product, but we also help with strategic partnerships, market introduction abroad, a certain level of turnover or bringing in expertise. When you double down in employees, processes and management lines have to change. In short: we help them adapt the organizational structure to growth.
Step 3: accelerating growth
During the third phase, we help the company grow faster. For example, by bringing international investors on board, attracting debt financing, by integrating and optimizing internal systems, broadening the product portfolio, expanding with sales teams abroad or by improving production and supply.
Reflect and anticipate
We are not an investor watching from the sidelines. We want to actively maintain a relationship with entrepreneurs and regularly check with them what is going on. This is how we help them to grow. We believe it is important that the entrepreneur remains in control. But, together you know more than alone. Tackling challenges and realizing opportunities, that's what it's about. And if we can't help them, someone in our network can. We have a facilitating role. Other investors are completely hands off; that doesn't fit with our strategy. In addition, for us as a shareholder, it is a means of internal reflection and anticipation: is the entrepreneur still on track?
Help determine direction
A value creation model is also relevant if you play the role of lead investor . With this model you ensure that the noses of all investors are in the same direction. Using the VCM roadmap, you can discuss with them and the entrepreneur: “How can you get there?” instead of "What are you going to do?" That does not mean that we tell the entrepreneurs how to do business. We do discuss strategy and direction with them. It is a very compact model that you can use to reflect and discuss. It helps bring focus.
Helping to grow can also be: thinking along about how a company makes its impact clear. A clear vision on diversity & inclusiveness helps to interpret culture, norms and values. Diversity and female entrepreneurship are central to Borski, we see that companies that are consciously engaged in this, have a better choice in the tight labor market. A clear brand positioning from purpose and SDG performance provides external profiling and positioning. Ultimately, it promotes sales and profitability. Our advice can be: create an impact dashboard or communicate your purpose more clearly. Or: show how many people you have helped with your medical innovation with a counter on your website. With the VCM you can guarantee that the entrepreneur also pays the necessary attention to this.
Of course, we are not equally closely involved with every company in which we invest. It depends on which phase we invest in, whether we are the lead investor and to what extent entrepreneurs find active involvement desirable. At the start of an investment process, we therefore ask ourselves together with the entrepreneurs: where can we add value? To do this, we compare our experience, capabilities and network with the needs of the entrepreneurs and company. As a fund, you add value if you can help entrepreneurs accelerate, overcome obstacles and reach the next growth phase.'