ScaleUpNation

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1. INTRODUCTION

THE NETHERLANDS: SCALEUPNATIONScale-ups make a significant contribution to employment and economic growth. Countries like the United Kingdom and Israel are already shifting focus from start-ups to scale-ups. Also in the Netherlands, scale-ups represent the true “job motor”, creating 70,000 jobs throughout 2011–2014.

The Netherlands has always been a true “scale-up country”. The number of international enterprises of Dutch origin is relatively large. We can and should be proud of our entrepreneurial mindset, giving life to enterprises like Philips, ING, ABN Amro, Ahold, Shell, DSM, Aegon, Randstad, and Unilever. Also more recently, Dutch companies have grown to to large, international scale, e.g., ASML, TomTom, Adyen, Booking.com, and Endemol.

Although the Netherlands remains one of the most entrepreneurial countries in the world, where 127.000 new companies are founded each year, few Dutch startups go on to become large, innovative enterprises. The share of “scale-ups” is less than 0.4%. To add, the amount of rapidly growing enterprises was also halved between 2008-2014. As a result, the number of firms that grew to large companies has lagged behind, for example, the US, the UK, Israel, and Sweden.

BARRIERS TO SCALINGIt starts with ambition. Dutch entrepreneurs list ambition as the main barrier to scaling. Most entrepreneurs see advantages in staying small.

Most start-ups never realize their scale-up potential because they lack founder teams with considerable leadership experience and industry knowledge. They have neither a scalable product nor a scalable, innovative business model. They spend too little time on the preparation phase before launching, and the timing of their product introduction is not optimal; they enter the market too early. Performance management is lacking, and they fail to attract first-class staff, especially in sales and IT, and are unable to close strategic partner deals.

Lastly, most start-ups think too local. The Dutch market is too small to create large corporations. Unless one strives for international scaling from day one, one will soon encounter the market barriers that prevent scaling.

Because of these factors, they don’t succeed in obtaining follow-up funding. VC capital invested in the Dutch enterprises lags behind compared to, e.g., the United States and Israel – 4 times less capital is invested here as a percentage of GDP (FD Outlook, Sept 2015).

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2. AMBITION & OBJECTIVES

OBJECTIVEScaleUpNation is an enterprise that selects and supports a portfolio of young ventures with convincing scale-up potential. Our aim is to double the number of start-ups in the Netherlands that scale up to a substantial size – i.e., to much more than €50 mln after 10 years.

APPROACHWe offer intensive and individually tailored support over a number of years. This sets ScaleUpNation apart from many start-up accelerators, incubators and other growth support programs.

The coming three years, we will build an initial portfolio of around 20 firms. Each year, 5-10 scale-ups are added to the portfolio, with a focus on young companies with the following characteristics: an impressive team of committed founders, a scalable and distinctive product or service of high value and a large potential market, first revenues, high customer appreciation, and an ambitious plan for growth and internationalization. In most cases, these companies have already attracted the interest of, or received, investments from Venture Capital firms.

SECTOR FOCUSEffective support requires specialization. Therefore, we initially focus on three sectors: Healthtech, Cleantech and Smart City/Mobility solutions. These fast-growing sectors allow for “game changing” innovation, attractive returns, and have positive societal impact.

TEAMScaleUpNation has a core leadership team:

• Menno van Dijk – former senior partner at McKinsey & Company, specializing in growth and innovation; founder of NM Insights, a social media analysis scale-up; co-founder and managing director of THNK

• Ritsaart van Montfrans – founder and former CEO of The New Motion, the leading provider of charge points for electric cars in Europe; former partner of H2, a leading private equity firm in the Netherlands.

We are actively looking to broaden the team.

“BEST OF BREED” PARTNERSWe have brought together a diverse network of partners, bridging public and private sectors and all with proven track records in helping enterprises scale. These include THNK, McKinsey & Company, New Venture, Startup Amsterdam, Deloitte Innovation, Eneco, the Erasmus Center of Entrepreneurship, Spark, Crosspring/Lab, UNStudio, the Max Geldensstichting, Chrysalix, the Dutch Ministry of Economic Affairs, Gemeente Amsterdam, Stichting Doen!, NLEvator, Nuon, Autobinck, Dutch Centers for Entrepreneurship, MICompany, and Salesforce.

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····················································································································HEALTHTECH

Involves applications for home care, remote monitoring, self-diagnosis, fitness support, and community support. There is a great need to limit further increases in the cost of healthcare. At the same time, the population in the western world is ageing, and the need for affordable access to healthcare in developing economies is huge. The application of IT/digital and consumer solutions offers big opportunity.

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Focuses on sustainable solutions for energy. The world is in transition to counteract global warming. New technologies, e.g., in solar and storage, make local, sustainable production economically feasible. We envision highly scalable business models for service providers in the fields of installation, finance and maintenance of decentralized energy generation, as well as in energy saving and efficiency improvement.

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Makes transport and traffic in large cities cleaner and improves traffic flows in large cities. In the future, the majority of the world population will live and work in mega-cities, which – combined with increasing wealth – will lead to an explosion of traffic in these cities. There is huge demand for solutions in the form of sharing cars and rides, navigation software to avoid traffic jams and finding parking space, new forms of public transport, and self-steering and electric vehicles. It also is one of the fastest growing areas for VC support.

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3. RUNWAY PROGRAM

SCALING WORKSHOPSAs part of our selection process we offer a Runway Program. This program totals 6 days of fully interactive workshops, offering key insights on how to successfully scale to a class of 15 founders at a time, to prepare ventures for their subsequent scale-up phase.

The Runway Program allows us to get to know the ventures better and to determine whether they are prepared for the main program. Most importantly, the workshops allow founders to build a peer relationship with other scale-up founders in the program. There are no costs involved in the Runway Program, allowing us to get to know each other without any strings attached.

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1. MARKET DEVELOPMENTInvolve your customers in product design; grasp key external trends and resulting enterprise opportunities; articulate your passion and purpose, and master the art of storytelling to trigger your people to take bold action.

2. BUSINESS MODEL INNOVATIONInvolve your customers in product design; grasp key external trends and resulting enterprise opportunities; articulate your passion and purpose, and master the art of storytelling to trigger your people to take bold action.

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SELECTION FUNNELThe workshops are by invitation only. We base our selection on our assessment of industry fit, development stage, scale-up potential, and the qualities of the founders and executive team. Once ventures are invited, they will be asked to complete the self-assessment tool ScaleUpMirror.

We aim to target 100 ventures over the next 3 years. The first Runway Class started in December 2016, and included the founders of Sensoterra, The Social Medwork, Blck Bear Carbon, Bluerise, Cocopallet, Fixico, Ulu, LG Sonic, Peerby, Happitech, 11a, Forcare, BrainCompass, Fitchannel, Ampyx Power and INCISION. The second Runway Class is set to start in May 2017

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3. ORGANIZATIONAL DESIGNDetermine how to resolve the vulnerabilities in your team; organize your company more effectively to free you up to work on strategy and with external customers; and you set up a management system with the right priorities, metrics, and rhythm – the basic principles of your quarterly accountability.

4. STRATEGYDefine your no. 1 international market priority and how to enter it. You will explore the various scaling strategies most relevant to your business. You will define the most ideal investors for your enterprise. You will look your own fears in the eye and bolster your resilience. You will pitch to your peers leveraging all you learnt during the program.

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4. MAIN PROGRAM

The main program consists of 3 years of intensive support on leadership scale-up strategy, management best practices, internationalization, and growth financing. Think of 5 times the support you would get from a typical VC.

SELECTIONWe estimate a firm’s potential size and impact based on: great business (industry attractiveness, competitive dynamics, product distinctiveness, social relevance, business model scalability, customer delight, VC activity and risk factors), dream team (credentials, experience, trustworthiness, and ambition), deep edge (differentiating skills, IP, industry network connections and partnership), and organizational health (organizational design, culture, audit financial performance).

VENTURE SUPPORTOnce ventures gain an “entry ticket” into the Main Program, we will create a joint Value Creation Contract. Because all support offered is flexible and adapted to ventures’ specific needs, the Value Creation Contract stipulates a big vision and 5 year targets on: product/service performance level, market penetration, customer delight, social impact, geographic footprint, asset base, leadership development.

Support given falls apart into various topics: sharpening business concept, leadership coaching, stepping up growth, funding for growth, and embedding management excellence. Specific support offered will be designed around individual venture needs.

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1. SHARPENING BUSINESS CONCEPT

Big impactSharpen your articulation of the

venture’s aspired relevance in terms of social impact, innovation and

scale.

Delighting customersFurther explore customer needs,

pains, and value-in-use to discover new opportunities.

Scalable platformsOutsmart competition with

innovative business models; make the product more software based;

drive radical value redesign.

Collaborative networksDevelop external network of

suppliers and competitors acting as peers and collaborators towards a

common goal.

2. LEADERSHIP COACHING

Individual leadership developmentDevelop top team on each of

the elements of entrepreneurial leadership.

Peer-to-peer coachingLearn from founders of other

ventures to provide and receive coaching, and harvest the resulting

insights.

Dream team formationReceive coaching on team

composition (e.g., power balance, creative diversity) and team

dynamics (e.g., social contract, feedback).

Talent sourcingCreate a source of preferential

access to critical and truly world class talent (e.g., in IT).

3. STEPPING UP GROWTH

Prioritizing segmentsDefine niche segments to corner

first, and use further stepping stone towards other market segments.

Creating “pull”Develop marketing strategy,

creative positioning, and communication plan.

Mastering salesEmbed sales excellence, and put

sales performance tracking systems in place.

Flourishing internationalDefine best strategy, business, and organizational models for overseas

activities; find local business builders, distribution partners, and

launch customers.

4. FUNDING FOR GROWTH

HustlingDefine creative opportunities to

attract financing without equity or debt. Develop a paid project for a

corporate for mutual benefit.

Investment readinessAssess team credibility,

concreteness of aspirations, scale-up potential and exit story. Define

best financiers.

PitchingAdopt the most effective story

line to pith. Understand how your venture will be valued.

Financier introductions

Introductions to relevant VCs, crowd platforms, and other

financiers.

5. EMBEDDING MANAGEMENT EXCELLENCE

Quarterly board sessionsUpdates on potential and progress.

Scaling practicesApply tested and proven scale-up management for core processes

and practices (e.g., recruiting, budgeting, communication,

learning loops).

Organizational healthOptimize cash conversion for the

business.

Contract managementOptimize risk management, contract management, and readiness for due diligence.

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DELIVERYWe invest in leadership instead of assets and capital. This way, our investments focus fully on the biggest leverage: the leadership capability to successfully scale a business. Although all VCs stress the importance of leadership, they rarely have time to offer such support to their portfolio ventures. The added value of ScaleUpNation is more intensive, specialized support to significantly enhance the likelihood of scale-ups realizing growth potential.

We provide the following activities:

• Extensive assessment leading to formal agreements on scale-up objectives and results, with a fitting reward structure.

• Individual program per scale-up with the following elements:• Executive search to strengthen the management team. • Individual and team coaching focused on strengthening leadership qualities.• Mentoring on innovation strategy, business model innovation, and international

expansion.• Execution support on scale-up management (Rockefeller Habits), including the

creation of best-practice core processes.• Training on specific functional skills, e.g.., marketing, sales, and data analytics. • Privileged access to a large international network of local clients, partners and

investors, and introductions to large corporates on a board level.• Close linkage with Venture Capital firms (VCs) to facilitate growth funding.

We ask scale-ups for a serious time dedication and willingness to act on proposed changes in leadership, strategy and management. This will be contractually agreed upon between the scale-ups and ScaleUpNation through a Value Creation Contract at the outset. Progress and results will be monitored.

REWARD STRUCTUREScale-ups provide us a small percentage of venture shares (in the form of warrants). In doing so, we align interests and are not weighing on the cost base.

CO-INVESTMENT FUNDWe will also explore the possibility of creating a “Co-Investment Fund”. By pooling investments from ScaleUpNation initiators, partners, business mentors, VCs, and private investors from our broader network, we will help ventures gain further access to funding. This also creates further incentives to help ventures scale, putting “skin in the game”, and allowing all those involved to share in the success of participating scale-ups.

GOVERNANCE & SUPPORTScaleUpNation is set up as a social venture seeking to make financial returns, which we will reinvest in further scale-ups.

We aim to “start the ball rolling” with a grant, necessary to cover the cost of supporting the initial portfolio of scale-ups. From there on, ScaleUpNation will be self-financing: the returns from the supporting the first 20 scale-ups will be reinvested in the next group of scale-ups. A grant or subsidy is required because of ScaleUpNation’s extensive social value and innovative character. ScaleUpNation is a unique-to-the-world concept that has never been trialed before.

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NAME ENGAGEMENT

INITIATORS Leadership coaching, access to global network of entrepreneurs and innovation leaders

Innovation strategy mentoring, access to global locations and network of leading corporates

Network access to business mentors and leading Dutch Venture Capital firms

CORPORATE PARTNERS Access to a global database of start-ups

Scale-up selection, Greentech and Mobility mentoring and advice, strategic partnerships

PUBLIC PARTNERS Communication & PR, privileged access to public and corporate partners and VCs

R&D partner, access to Scale Up Dashboard and international network of entrepreneurs

SUPPORT PARTNERS Venture performance and impact tracking, advise and training of data analytical skills

Business execution mentoring and training

Expert advise on software/digitalization/internet of things, capacity building training projects

Expert advise on Smart Cities/Mobility, access to corporate partners and potential launch-clients

VC’S & FUNDS Senior expert advise on scaling and funding, scale-up selection

Access to its international network of McKinsey alumni, financial contribution

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SUPPORTERS “As business angel and Dutch citizen it is clear to me that we face a shortage of rapidly growing enterprises. The Netherlands needs more companies that disrupt existing industies and create employment. If ScaleUpNation is indeed launched, I, together with my partners, would love to invest in each of the selected ventures. Fantastic initiative.” – Jochum Jarigsma (Entrepreneur and investor, Next Stage Venture Fund)

“I think this is a fantastic plan that can have a lot of impact. It’s great for a firm to receive all this in one package. I cannot imagine firms wouldn’t want this.” – Timon Rutten (CEO of eFaqt and previously co-founder of International Bike Group incl. Hans Struijk Fietsen)

“Great ideas and relevant proposal for scale-up support.” – Janneke Bik (Investment partner at Dutch Greentech Fund, 41 Mln EUR Capital under Management)

“I recognize the underlying problem: we have a great many start-ups with potential but too few of them develop to a significant and international scale.” – Krijn Reitsma (Reitsma & Wertheim & Partners)

“Great objective.” – Kees Wesdorp (Executive Vice President at Bain Capital, 75 Bn USD Capital under Management)

“This is a really good initiative and it would be great if it becomes successful!” – Roel Janssen (Director Global Ventures at Rocket Internet, market capitalization of 4.6 bn EUR)

“It’s an interesting concept to help firms grow to the next phase while currently most input goes into earlier stages of growth.” – Maril ‘t Hooft (Investment Partner Online bij Qmulus)

“Interesting approach that can deliver the expected results.” – Tatiana Chopova (Managing Director at AlpInvest, Capital under Management 48 bn EUR)

“It’s an excellent proposal. The idea of offering intensive support to scale-ups is attractive, and no other group is better at facilitating this than THNK, McKinsey and New Venture.” – Vanessa Liu (COO at Trigger Media Group)

“My compliments for this proposal.” – Annelies van Zutphen (former Partner at the Boston Consultancy Group)