One of venture capital’s best-ever windfalls almost never got an offer.
When Jan Hammer first met with Adyen CEO Pieter van der Does in 2011, he had yet to lead his own deal for his new firm, Index Ventures. Adyen, a digital payments company, was already popular, profitable and not raising money. But the two found a way to partner together. And when Adyen went public in June 2018 and then reached a market capitalization of more than $19 billion as of November 2018, Index Ventures’ nearly 17% stake at IPO became worth more than $3 billion.
The incredible return vaults Hammer, who also counts multibillion-dollar U.S. startup Robinhood as a key investment, to No. 1 on the 2018 Midas List Europe. He shares his top lessons from the investment below.
Always Be Closing
When Hammer went to Amsterdam to meet with van der Does, he had a pitch planned out. Adyen’s digital payments were already popular, and Hammer and his partners at Index Ventures smelled a winner. One of the startup’s first customers, Groupon, had selected Adyen as its payments platform for Europe, then quickly rolled it out to 35 markets. Despite enviable scale and a torrid pace of growth, Adyen had raised only a couple million euros from individual investors.
As a newcomer to Index, Hammer had cut his teeth on the firm’s Just Eat investment, but partner Dominique Vidal spoke for the other partners when he pressed Hammer on Ayden, which would be his first deal. “How do you really feel about this?” he asked, according to Hammer. “I would take mortgage money out of my house to put it in this investment,” Hammer says he replied.
Another snag: Adyen wasn’t raising money, Hammer found out. Index almost walked away. Van der Does told Hammer not to go just yet. “If you don’t make an offer, we will never know if we could end up working together,” he told the VC. In other words, the old salesperson adage: “Always be closing.”
Index made an offer of “just a couple lines” of information to keep things simple. Van der Does replied with his own simple terms, such as monthly meetings. The next time Adyen would raise, it would come considerably more expensive for investors. Its next $250 million round from Hammer’s previous employer, General Atlantic, valued the company at more than $1 billion.
Eye expansion
What impressed Index the most about Adyen when they met wasn’t just that the company was profitable and self-sustaining—it was also rapidly expanding beyond customers’ expectations for it to be a local European vendor. Adyen’s founders had global ambitions, and they wanted an investor who shared their point of view. When Index met with the startup, it had already talked to several European funds and turned them down, partly for their regional focus. “The greatest companies aim globally,” says Hammer.
What Adyen wanted from Index was in part the firm’s support breaking into the U.S. market, where other startups such as Stripe have reached considerable traction and scale. Adyen already had a small office in Boston but opened its San Francisco office in 2012. Two years later, chief commercial officer Roelant Prins said the company should have done so even sooner.
In San Francisco, Index had a growing presence, and partners were able to help recruit a general manager. But Adyen wasn’t just looking to expand to the U.S.—it opened a presence in Brazil in 2011 and currently operates 15 offices globally in cities such as Mexico City, Berlin and Singapore. Non-European revenue accounted for 31% of Adyen’s revenue in 2017.
Index and Hammer followed the same thesis with Robinhood, the stock-trading app now valued at $5.6 billion. Looking farther back, the firm had success looking for mobile gaming companies that could reach a global audience such as King and Supercell.
No more ‘European discount’
Index and Hammer have tried to find “diamonds in the rough” with investments like Collibra, a data governance tool that came out of Belgian research lab, and Elastic, which it found in the Netherlands as well, but the investor says the era of a European discount in startup investing is over.
While investors on the 2018 Midas List Europe share a handful of the same deals—Adyen, commerce company iZettle, Spotify and several others—Hammer says that such a concentration represents the trailing indicator of what top startups were coming out of Europe seven or ten years ago, not the pace today. The rate of venture-worthy startups being created in Europe today is far higher, he argues.
“Building a long-lasting company with growth, profit and cash flow, and strategic value, can be done anywhere,” says Hammer. “Europe is still smaller than the U.S., but on a faster trajectory. There was a historical notion that you had to start your company in Silicon Valley. Increasingly, it can be nurtured anywhere.”
