Source: AutomatiseringGids 11 September 2014.
By: Jelle Wijkstra “In the USA, they already know for a longer time that software companies have an attractive business model. Especially now that the transition to SaaS ensures a steady cash flow, “says Pieter van Bodegraven of Main Capital. Dutch companies have some difficulties concerning their funding. Though this is not a disadvantage at all stages of business development.
Main Capital specializes in raising financial capital for investment opportunities in software companies who want to make a next step in their development. “In the Netherlands, we are the only specialist investing in software companies. Most investment funds are very generic”, says co-founder Charley Zwemstra. In this capacity Main Capital has regular contact with American investment funds seeking investment opportunities in European software companies. “In the USA, software as an investment is much more popular. It is so popular that investment funds have dificulties investing their money in the USA” says Charly Zwemstra. “Perhaps thanks to the good example of many successful companies – from IBM to Google. But probably the people in the USA recognize that the developments in many other sectors are softwaredriven and that funds which are specialized in software companies achieve higher returns on average than others. ” Those higher yields depend also on the attractive growth rates in the software industry, emphasizes Van Bodegraven. Worldwide, sales in software this year will grow more than 6 percent, predict market analysts like Forrester and Gartner. For the Netherlands the Netherlands-ICT industry association forecast a growth of 5.2 percent. Slightly lower than the worlds average, but far higher than the 2.1 percent expected revenue growth of the entire ICT sector, which has been growing much faster than the Dutch economy as a whole. Access to finance in the Netherlands is the biggest bottleneck for companies, concluded from the Global Competitiveness Report 2014 by the World Economic Forum; there are 2.5 times more Dutch than American companies who often suffer with the access to finance. It is also very difficult for European startups to get next rounds of investments after a first round of seed capital. This was concluded from another studies of the World Economic Forum to the European innovation environment. Where in the USA, the number of initial capital injections and further capital injections keep each other in balance for the past seven years, in Europe only half of the young companies managed to find funding for a second round. Zwemstra recognizes that scenario in the Netherlands. Between Technopartner Scheme for starters, and participation by private equity – where Main Capital specializes in – there is not a real option for the software companies. That hole should be filled by venture capital. This is, at the moment in Europe, insufficiently available since the sharp tick investment companies received with venture capital in the financial crisis. Whether that’s bad? “We question whether it is good if young entrepreneurs gets millions of capital injections. At Main Capital, we believe that it is a good thing if young entrepreneurs are forced to take care of their funds by themselves. That proves your capability of entrepreneurship.” The Dutch stock market is something that Zwemstra worries more about in the context of corporate finance. Or actually, the lack of small and medium businesses. The Netherlands has no equivalent of the Nasdaq, such as England and France. “Then, by definition, you are designated to private forms of financing. An open stock market would make many companies more effective but with a turnover of less than 100 million, you have no access to this kind of business financing. It would, I think, fulfill a huge demand from both companies and investors, as politics and Euronext would set up an exchange where growing companies with a turnover of around 25 million euros can get a listing.” Meanwhile, Main Capital is successful in identifying and establishing investment opportunities. It has now collected three funds from both private and institutional investors with a combined investment of 55 million euros. Next year a fourth fund should start with between 75 and 100 million; this fund should, next to the Benelux, also be focused on Germany.
50 Main in full swing
Main Capital organizes this year for the third time the Main 50; the ranking of the most successful non-listed Dutch software companies. With this events, Main Capital wants to underline how important software companies are for the Netherlands. The results of the study will be published at the end of October. The enthusiasm among software companies to participate grows every year, says Charly Zwemstra. Software Companies who also like to participate, can register at http://mainsoftware50.com Click top right to subscribe your Enterprise.