What is essential to grow your business? If your answer is “uppercase” then yes you are correct. But capital is more than hard cash. The importance of human capital is something founders often overlook. This is what Volta Ventures and Tech Rise Ventures from Amsterdam have also noticed. Both, in their own way, aim to bridge the gap between financial and human capital.
Volta Ventures partners with LevelUp
Volta Ventures provides seed and seed capital to internet and software startups in the Benelux. As such, they have provided their fair share of financial capital to startups like fintech Blanco or deep tech companies like Sentiance. By investing, Volta has found that it is not just hard cash. âHuman capital is one of the biggest obstacles to their growth,â says Sander Vonk, Managing Partner of Volta.
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âWe have found that many human capital issues can and should be addressed sooner. For example, recruiting companies often look for profiles that don’t exist. I always like to joke that they are looking for a CFO with Python skills. Because we don’t need a full-time financier yet, so they need to help us code. But more generally, they underestimate the salary, the hiring time, the recruitment costs. Or they overestimate the skills you can find in one person. So these are typically issues that we try to solve with our startups. “
Investments in human capital
That’s why they got together LevelUp Ventures. With this Amsterdam talent acquisition agency on board, Volta can also offer human capital investments. They offer all the companies in their portfolio two workshops per year, during which the founders receive personalized and strategic HR advice from LevelUp shareholders, Aik Deveneijns and Lebinh Luc. âWe try to cover the entire area of ââtalent acquisition and retention,â says Deveneijns. âEach founder has his own needs which must be met. So we try to find out what they need the most. What’s the challenge right now? “
At Volta, they realized the importance of HR in a growing startup. According to Vonk, the best time for a tech startup to think about talent is “immediately and always.” âIt’s not just about recruiting or hiring. It’s a whole range of strategic HR topics. Startups often think of HR as recruiting. But it’s so much more, and it’s too early for a startup to hire a strategic HR aide, so we can deliver it. With LevelUp, we try to solve these problems with industry experts.
Volta’s partnership with LevelUp is one of the first times in the Netherlands that a VC invests human capital in startups. Vonk: âLarge funds, such as ProjectA in Berlin, have operational partners to actively help their portfolio companies, we wanted to offer the same level of support. We don’t see much of that in the Benelux yet.
‘Yeah sure daddy’
The fact that an external company like LevelUp advises its family of portfolio companies not only brings expertise and access to industry experts. There is also another added value, says Vonk. âIn the Netherlands we have a saying: ‘vreemde ogen dwingen ‘ [Translates to: a strangerâs eyes forces action â red] At some point, we become the father of the board. You say something and your kids say “yeah sure daddy”. But when industry experts come in, they listen to them.
Deveneijns of LevelUp also sees benefits for VCs in employing HR experts. âVenture capitalists tend to focus their time, either on holding companies that are on fire or on those that are in transaction. Many companies are just building the fundamentals of their business. So taking Volta’s position, trying to make these companies scalable by having specialists looking at particular areas, I think it takes courage. It is a wise decision to make.
Vonk: âThe companies in our portfolio can grow faster because we can tackle human capital at an earlier stage. They are not hampered by a lack of knowledge or a lack of access to knowledge on the human capital side. And someone is proactively helping them with these things before they know it’s a problem. The first company that Volta and LevelUp tried, to use the HR strategy session, came out extremely happy, says Vonk. It also revealed the number of possible HR bottlenecks in this particular company. Vonk: âThey sent a three page email on the HR topics they wanted to cover. This reveals how badly it is going.
Tech Rise Ventures approach
Elsewhere in Amsterdam, another arts agency is tackling the same problem as Volta and LevelUp. State-of-the-art companies approach in the opposite direction. The talent acquisition company creates large-scale teams ready to invest, supporting them through all stages of their fundraising and ensuring the team is fit to grow after fundraising. Their services range from finding the right investor to negotiating and closing the deal with the investor as well as other key team members.
I think that in the area of ââcapital, we can differentiate two types of capital, âexplains David Mozes, partner at Tech Rise. âWe are talking about human capital and financial capital. And while it seems that these worlds are far apart, we believe they are not. When you are a fast growing startup, suddenly you are forced to sell your vision to your potential investors. It’s a brand new game.
“How we combine human capital and financial capital”
âAll the founders are committed. But they don’t always have the best tactics to sell their story. And that’s where we come in. We help them by guiding and advising them on the type of language, documents and indicators to present to sell your vision to investors. We know from experience how investors will look at the background and experience of the founding team, and ensure that the gaps of missing executive team members are addressed. ”
âWe advise you on how to engage with a community of potential new team members who need to be attracted and how to secure that team as quickly as possible once you have received the funds. Having these members ready to sign once the investment is in the bank ensures that the investor’s money is used for value creation from day one. Here is how we combine human capital and financial capital.
By bringing together the two forms of capital, Mozes aims for startups and scale-ups to grow faster. âIt’s about reducing risk. If I’m a VC and see a gap in the team, then I bet everything will work out once I transfer the money. But will it really be that easy to fill this void? It’s just a risk, and I don’t want it. This morning I had a call with a company active in the game payment industry. And they have a strong CTO and CCO. But what they don’t have is a financial guru on their leadership team.
Stronger in negotiations
âNow, if I’m an investor, I demand that an experienced CFO join us because it’s not just about creating a strong financial structure, it’s also about making sure all the risks related to this payment technology are managed. Experience in handling payments and the risks involved is essential. I think you have the upper hand in negotiating with a potential investor if you need to say, âI think you are right. Give us three months to find this particular person â.
Taking human capital and team composition seriously from the early stages of early fundraising is something we’ll see a lot more about, says Mozes. âI think these more modern hybrid operational types of VC will have a bigger role. ”
This approach will make it easier for startups to grow without encountering preventable HR issues down the line. âThese operational VCs will potentially have even higher management fees on the money they manage on behalf of their investors, which tempers short-term performance. But the returns will still be very good thereafter because they derisk their portfolio by offering all types of on-site support services, of which HR and recruitment are essential pillars. It could even increase the chances of a unicorn coming out of the wallet â.
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