Start-ups and venture capital, the journey of a founder often intertwines with the pursuit of the right investment. Founded had the opportunity to sit down with Liu Kars, the Co-founder of Innosend, in the building where he, Virgil Swagemakers and the team work daily to grow Innosend.
The buzz surrounding Innosend's recent capital injection by Royal Rotra, investment fund G-Force Capital and Harold Huizing, the former commercial director of Trust, was picked up by quite a few news websites. However, what exactly did this journey look like for Innosend and exactly how did it all come together?
From frustration to innovation
Imagine the frustration of navigating clunky shipping software while running an e-commerce business.Virgil Swagemakers had an eye-opening moment that led to the start of Innosend. Even though Virgil had set up a few webshops, he always struggled with one thing: there wasn't any good software for simple, hassle-free shipping. The options out there were full of problems and didn't really work for someone running a webshop. So, he decided to change that with Innosend.
When Virgil approached Liu with his pioneering concept, his initial reaction was not immediately enthusiastic to become the co-founder. He had just ended a previous venture and left behind a talented team. But after careful consideration, research and seeing the growing importance of e-commerce in the wake of the pandemic, Liu took the plunge with part of his team and joined Virgil to build Innosend.
Building the right team
Liu recognized that the success of Innosend hinged not only on the idea itself but also on the people driving it forward. Assembling a team with the right blend of skills, drive, and cultural fit was paramount. This process laid the groundwork for a team that was resilient, adaptable, and deeply invested in the company's vision.
Innosend has established itself as a middleman in the e-commerce market, solving critical industry challenges. Central to their approach is the development of an innovative infrastructure that simplifies logistics for webshops, primarily by enabling easy printing of shipping labels. One noteworthy feature is their brand-aligned email system, seamlessly integrating with the webshop's style to create a personalized shopping experience for customers. Additionally, they address a core pain point for webshops: the complexities of shipping logistics. Their smart shipping rules eliminate the need for manual intervention by warehouse staff, automatically selecting the most suitable shipping provider based on package weight and destination. This not only streamlines the process but also ensures that webshops offer the best delivery options at competitive rates.
Bootstrapping or big funding?
Liu explains that he and Virgil faced the decision of attracting funding for Innosend. The duo grappled with a fundamental question about their own entrepreneurial aspirations: "Go big, or go home?" As Liu puts it, "Were we entrepreneurs aspiring to scale or did we want to keep it small?" This crucial question demanded honest self-evaluation and open communication between the co-founders. Their differing perspectives led them to bootstrap Innosend initially.
They bootstrapped Innosend, putting the money made by the business back into it. This careful financial method involved personal compromises, like skipping salaries and paying development costs out of their own pockets. But as Innosend expanded, they faced the typical growth challenges of a thriving business – the necessity for larger funding to support growth and handle changes in cash flow. Understanding the importance of extra help, Liu carefully planned their finances. They made detailed estimates and predictions about their money flow. This was important to figure out how much money they needed and to find investors who fit well with their business goals and growth plans.
"These investors weren't just giving us funds; they were key in making strategic choices, offering knowledge that comes from experience. We realized early on that not every investor is a good fit, regardless of the financial resources they bring."
Finding the perfect fit
Liu used a careful approach when looking for investors. The goal was not just to get funding, but to find partners who could add value beyond money. He looked for areas where Innosend needed help, like marketing skills to boost their brand, sales expertise to gain more customers, and logistics knowledge to make their operations smoother and help with growth. This focused method helped pick out investors who could provide useful advice, connections, and knowledge in the industry.
Leveraging his existing relationships with investors from his previous company, Liu fostered trust and transparency by contacting them first. However, Liu didn't limit himself to past connections. He actively engaged with a diverse group of potential investors he had met through networking and events or through being introduced by people in his network. He carefully assessed each one, looking at:
- Their experience in e-commerce or similar fields.
- Whether their investment approach matched Innosend's long-term goals and growth plans.
- If they could introduce Innosend to important partners and resources.
- How well their values and work style would fit with Innosend's team.
The process of attracting potential investors reached its peak with a series of presentations, including well-known companies like Royal Rotra. These presentations were more than about getting money; they were about starting relationships and preparing for a partnership. As Liu put it, "These investors weren't just giving us funds; they were key in making strategic choices, offering knowledge that comes from experience. We realized early on that not every investor is a good fit, regardless of the financial resources they bring."
The selection process was not without its challenges. Liu recalled moments of tension, "There were painful decisions. We had promised participation to some, but then realized the need to reconsider based on compatibility and shared objectives. It's a delicate balance of business needs and investor relationships. And bringing in new investors often means restructuring, rethinking strategies, and sometimes, difficult decisions like buying out existing stakeholders. It's a multifaceted process, intertwined with running the daily business."
Securing the deal
Liu was determined to finalize the deal before Christmas 2023, despite the pressure and strategic challenges. Committed to signing on December 22nd, he faced the day's complexities head-on. It was eventful and challenging, much like the journey itself. Delayed by traffic, Liu arrived thirty minutes late at the IJburg signing. Despite the significance of the moment, he felt overwhelmed. After the signing, Niek Huizenga from G-Force Capital dropped him off at home. Liu was speechless at dinner, overwhelmed by the scale of their achievement.
Drawing from his recent fundraising experience, Liu Kars offered several key takeaways for fellow founders:
- Find strategic partners, not just investors: "More than securing funds," Liu emphasized, "aligning with investors who share your vision builds partnerships that shape your company's future." He underscores the importance of understanding investor perspectives and tailoring pitches accordingly.
- Tell your story: It's not just about numbers and forecasts. Craft a compelling narrative that resonates with investors. "Tell your story," Liu advises, "in a way that connects with their aspirations and interests.”
- Transparency: Honesty fosters trust. "Be open about risks and challenges," Liu says, "and showcase your plan to address them. Investors appreciate a realistic approach to business hurdles.”
- Maintain focus: The process can be taxing. "Stay level-headed and focused on your goals," he advises. "Rushed decisions often require more time and resources to fix later." He jokingly adds, "The gym opposite our building saw me a lot during those months!”
- Delegate and trust your team: As your company grows, delegation becomes crucial. "I'm a self-professed control freak," Liu admits, "but I recognize the importance of giving team members authority and trust to make decisions." He emphasizes the need to balance personal standards with trust in their capabilities and adapt expectations within a diverse and growing team.
Lessons learned and the road ahead
With fresh investment secured, Innosend sets its sights on a strategic expansion into Europe starting in 2025-2026. Their approach is as thoughtful as it is ambitious. Recognizing the importance of a solid home base, Liu says, "You can aim to expand, but if your Netherlands foundation isn't strong, you're building on shaky ground.”
In reflecting on the journey and the investor selection process, Liu emphasizes the value of choosing partners who align with the company’s ethos and long-term goals. The decision to partner with specific investors was not merely a financial one; it was a strategic choice to collaborate with individuals and entities that could offer more than capital. These investors bring a wealth of experience, industry insights, and strategic networks that are crucial for navigating new markets and cultural landscapes.
Looking back, Liu shares some important advice: "When you're looking for investment and it gets tough, remember to 'enjoy the journey.' It's a great adventure where you learn and find new things. Most importantly, use these experiences to grow yourself. The things you learn and understand are valuable – they're like a priceless 'baggage' you carry along.