Meet two remarkable Groningen entrepreneurs and hear them share their stories. An in depth interview by RTV Noord journalist Bart Breij and a Q&A with the audience; no fluff, no hot air, but the whole story. Last Tuesday, the fifth edition of Founder Talks took place in the Groninger Forum.
Being a successful entreprepreneur in med tech requires a hefty supply of patience and perseverance. Diagnoptics CEO Bart van den Berg discusses his experiences, lessons learned and how to prevent your technology from being copied or stolen. And how’s the startup scene in Groningen really doing? Entrepreneur turned investor, ‘chief’ of theFactor.e and founder of the Northern Online Entrepreneurs discusses the quality of local startups.
The long road
Diagnoptics (together with the UMCG) developed a device that will tell doctors if a patient is at risk of developing cardiovascular disease within minutes. All the patient has to do, is put their arm on it and the device, called an AGE reader, will calculate the risk by illuminating the skin with a special kind of light. Even though that sounds simple and revolutionary enough in its own right, and the reader is in use around the globe, the road to success has been a long one. The first reader was launched in 2004, and the company is not yet reaping the full rewards in terms of profits.
“It’s all about patience and perseverance in the medical technology sector”, van den Berg says. “And it’s also important to keep venture capitalists out, because they expect short term profits, which just doesn’t work. We choose to focus on our revenue and trying to make the future generations of our AGE reader better and cheaper.”
Saved by Mormons
But in order to keep on growing, some money was ultimately needed. “Our big rescue came from a US company selling food supplements”, van den Berg continues. “They were interested in a commercial application for their stores, but thought the device was too expensive. But by then, we already happened to have our new prototype in the back, which was a lot cheaper to produce.”
But that meant a commercial application, not a medical one. How does that weigh on his conscience? “It was a difficult decision”, van den Berg admits. “It is a company from Utah, run by Mormons, so values and ethics are important to them. Still, it wasn’t an easy decision to make.”
“The Netherlands are too small”
“What about competition?” someone from the audience asks. “I would actually like to see a lot more of it”, van den Berg says. “Having little to no competition sounds good in theory, but it also means the burden of proof rests solely on you and you spend a lot of time convincing people this technology works.”
“And of course you still have to be careful the technology doesn’t get copied or reproduced. A Japanese company tried reproducing our AGE reader for about three years, but they didn’t succeed. We’re also active in China, and our technology was copied before we even had our first meeting there, so to speak. But fortunately for us, Chinese hospitals prefer Western technology over Chinese knockoffs.”
Operating worldwide was the intention right from the beginning. “The Netherlands is far too small for us in terms of market. But the biggest mistake we made, was initially trying to sell in as many countries as we could. But you’ll spend far too much time just running around and ultimately it doesn’t get you anywhere. That’s why we decided to focus on five countries: Germany, China, Japan, South Korea and the US.”
Van den Berg has high hopes for an exit (being bought by a larger company) in three to five years, when Diagnoptics’ revenue is projected to 4 to 8 million euros. “That’s when we’ll be interesting enough to be considered.” Will Diagnoptics continue in Groningen after that? “Very likely. We’ve got a great university here and highly specialized employees. And the people I talk to abroad all seem to have heard of the Groningen, which is a good sign too.”
Any advice for aspiring entrepreneurs? “Start thinking in terms of the world, not just the Netherlands and start with that as early as you can.”
Wanna buy a house?
Entrepreneur and investor Marco de Jong starts by showing a picture of his home in Borger. It also happens to be for sale and people are welcome to bid afterwards, but that’s not the only reason for showing it. “It was designed by a very passionate architect, well in his eighties. As an entrepreneur, there’s that classic dream of making enough money to retire as early as you can. I had that too, but not doing anything isn’t fun at all.”
After working as a marketing and sales director at Essent Kabelcom (now Ziggo), de Jong came at the helm of successful internet agency theFactor.e. His first feat: losing their biggest account. “We were working for the World Wide Fund for Nature and things weren’t going well, like not delivering on time to name one. I was summoned by the people in charge for an explanation, which I told them was a very simple one: you need to give us three times more budget and deliver your briefings three times faster. Needless to say, we parted ways soon after that”, he adds with a smile.
“Kidding aside, the real problem was that we were in a situation where we sold our services at a loss, just to be able to keep a big client”, de Jong continues. “That’s something you should never do.”
The next Catawiki
De Jong also founded the Northern Online Entrepreneurs, a group of more than 50 Northern Dutch established companies exchanging knowledge, ideas and expertise. It’s not the easiest club to get into though: “In order to be considered, you need a revenue of at least 1 million euros if your a digital agency, or 10 million if you’re an e-commerce business”, de Jong says.
In 2016, de Jong decided to become less involved in theFactoy.e, because he wanted to work with startups. He started an investment fund, called G-Force. So, as an investor, how does de Jong rate the quality of Groningen startups. “Satisfactory”, he says. “I’d give them a B or 7 out of 10. I do think the next Catawiki is already in the making here in Groningen, by the way.”
The most common mistakes
De Jong had meetings with 30 different startups for a possible investment, ultimately choosing just one, called SharkMark, a startup that creates gaming experiences to improve the organizational structure of companies. One out of 30 startups isn’t much, so what are the most common mistakes startups make?
De Jong mentions three: “Sometimes startups are way too focused on the development of their product, and not looking at how that product actually fits in the market. Secondly, they sometimes lack the ability to commercialize. Having a good idea is important, but launching and selling takes money, time and a whole different skill set. And lastly, startups often don’t tend to think in terms of scalability abroad. You have to think bigger than making enough money to buy a nice house and call it a day.”
Where are the opportunities?
De Jong likes to look ahead. Those CD-ROMS you could buy in bookstores back in the day where you could pay for Internet by the minute without the need of a contract with a provider? He came up with that in 1997. So what are the current trends and opportunities to get into on the ground floor? “Cyber security, Internet of Things and 5G”, he says without hesitation. “We have the 5G fieldlab here in Groningen and a lot of big companies are paying really close attention. If you can come up with something good working with the test lab, it could go far.”
What about startups we should keep an eye on? “Mr. Chadd and SharkMark”, de Jong says, again without hesitation.
Tips for startups
“What’s the timeframe between the first email contact all the way to the actual investment?”, someone in the audience asks. “Too long”, de Jong says. “Expect at least 5 months and really take that into account. It should be done a lot faster and it’s my ambition to be able to arrange everything in a month.”
What about homework for startups before contacting investors? “Make sure you’ve thought out who’s doing what in your team. Do extensive market research, come up with a well thought out business case and make sure you have a good investment proposition. Especially that last part is important. Why do you want an investment? What will you use it for? Having an idea and expecting people to finance it is not enough. That won’t work and will cause a lot of problems down the road.”