Good news for deep tech and hard science founders from the Northern Netherlands who are looking for capital and expertise! NV NOM and Investment Fund Groningen (IFG) have joined forces with Cottonwood Technology Fund, an early-stage venture capital fund with offices in the United States and the Netherlands. The fund supports promising startups in realizing their international ambitions with capital, coaching and advice. Cottonwood’s General Partner Alain le Loux and Investment Manager Marie Weijler discuss their plans and ambitions for the Northern Netherlands, along with some helpful tips for startups.
Cottonwood Technology Fund is a venture capital firm active in the Southwest USA and Northwest Europe, with offices in Santa Fe, New Mexico and Enschede, the Netherlands. Named after the fastest growing tree in the USA, the fund specializes in seed and early stage investments. Theirportfolio includes photonics, electronics, advanced materials, nanotechnology, health sciences, advanced manufacturing, robotics and sustainable energy. “That may sound very broad, but as a general rule, we invest in companies with a focus on hardware, with strong patents and no prior art”, Alain explains.
Philosophy of paying it forward
“Cottonwood was founded in 2010 and our philosophy has always been to try to strengthen under-sourced regions,” Alain continues. “So regions with a lot of talent and potential, but less access to capital and expertise. The University of Groningen is twice the size of the University of Twente, so we see the North as an underdog with a lot of growth potential. Twente has a more developed ecosystem, but they’ve been working on that for the past 14 years. Groningen is catching up, though.”
Marie agrees: “The Northern Netherlands has a very attractive ecosystem for life sciences and biotech as well as for water tech. However, the region has yet to gain national recognition for this and I think part of the problem is that people are being too modest about all of the wonderful things happening here. The NOM and IFG asked us to help out with our international network, but we can also offer help to companies in which we are not involved. With our expertise, practical advice, or common pitfalls. We enjoy passing on our knowledge, free of charge, because we want to help the ecosystem grow. And in turn, these entrepreneurs can help others grow. It’s about creating a mentality of paying it forward.”
Portfolio
Cottonwood has invested in over 20 companies since 2010, including Skorpios Technologies, BayoTech, Sarcos Robotics, Infinitum Electric, SoundEnergy, OPNT and Flexiramics. One recent investment in the Northern Netherlands is Sencure from Roden. This company develops chips that help measure physiological parameters in the human body in innovative ways. “These biometric chips can basically measure anything that goes on in the human body, without all the wires,” explains Alain.
One potential application, according to Alain, is heart monitoring. “Patients no longer need to be hooked up to a machine in the ICU, but can be monitored at home. Or let’s say you want to monitor brain activity in children with ADD. If these children are in a hospital setting and can’t really move, the results of those readings are not as representative as when they are able to move around freely in the comfort of their own home.”
Useful tips for startups
So what, in their experience, are common pitfalls for startups in deep tech ? “Probably one of the biggest pitfalls is underestimating the marketing costs”, Alain says. “Startups will spend the vast majority of an investment on the development of their product, but when the time comes to actually bring that product to the market, there’s little money left for marketing. Another issue is the lead time. Many founders tend to be overoptimistic and think they’ll have a finished and profitable product on the market in 3 years. In reality, it takes much longer.”
“Fundraising also usually takes longer than expected”, Marie adds. “Even if you’re fairly certain it will only take 6 months, you should make sure your runway lasts a year. A lot can change or happen in the span of a few months, from delays to a global pandemic. Better to be safe than sorry. And when you’re working on your pitch deck, have it proofread by someone outside your team, with no insight into what it is that you do. This will help you write a concise and understandable pitch deck, because it forces you to explain the relevance and value of your startup in non-technical terms.”
Save the date
Among other things, Cottonwood will join regional startup events, meetings and master classes. “In addition, we’re organizing open office hours for deep tech startups in need of coaching and advice”, Alain says. “And researchers and PhD students who are considering launching a startup, but are still somewhat hesitant, can also contact us. We want to make it as easy as possible for people to talk to us about setting up and funding a startup.”
“Our goal is to give back and meet as many founders as possible. We invest in very early stage startups, so if your startup matches our investment criteria, please don’t hesitate to contact us. We’re also organizing a tech startup conference in Groningen on September 15, so save the date!”