The full story
Investing in the Future
As the investment arm of the Flemish government, Gimv has shaped the development of Flanders since its inception. Now with 75 companies in its portfolio of investments, it has actually come out of the financial crisis stronger than when it went in. How has it managed? And what’s the secret of its success?
For the past three decades, Gimv has been investing venture capital into some of the most innovative companies in Belgium and beyond. With 75 portfolio companies currently under their belt, generating a total turnover of more than €6 billion, they’ve emerged from the financial crisis more robust than ever.
As the investment arm of the Flemish government, Gimv has shaped the development of Flanders since its inception. Under their influence, the region has seen a shift from the traditional industries of coal, steel, and textiles, to a modern, technology-based economy.
Today, the organisation works closely with graduates of Vlerick, continuing to discover new investment opportunities and shape the direction of the region’s development. We met with Gimv CEO Koen Dejonckheere to find out how.
The birth of Gimv
Gimv emerged at a crucial time for Flanders, at a time when old industries were slowing down and new opportunities needed to be generated. As Dejonckheere says, “Gimv started 33 years ago, when Flanders region realised it needed to invest. In those days, we had the national sectors in Belgium. We had coal, steel, textiles, shipyards, and so on. Of all those splendid companies, maybe just five have survived. At the time, there was a growing interest in working together with universities and with new ventures to create new industries, because people understood that coal mines and steel and shipyards did not have assets for the future.”
“A couple of years later, the organisation was split into parts. The new part of it, which was a tiny little part, was set apart to protect it from the big, traditional industries - industries we know now are of the past. The new part became so successful that out of it came Gimv. It was partly privatised in 1997.”
With the establishment of the organisation, they seized the opportunity to invest in new areas. Dejonckheere says, “Gimv invested in Silicon Valley to learn about technology venture capital, and in Boston to learn about life sciences venture capital. We did the same in Flanders. We invested in Plant Genetic Systems, and Telenet. We created MobiStar. We were able to attract international, often Anglo-Saxon, investors. This meant we had a multiplier effect on our investments, but we could only do that if we were sufficiently international ourselves. So we invested in the best that Boston had to offer, and then invited our co-investors to see what we had in Flanders.”
“This meant for every euro we had, we could invest three or four or five as a syndicate. In fact, Gimv has hardly ever invested alone. Our biggest asset is intangible: it’s our network. The network is like a factory of ideas and experience which we can use.”
Turning crisis into opportunity
Unlike many companies, for whom the 2008 financial crisis spelled disaster, Gimv used the opportunity to undertake a programme of growth, attracting new talent and reinvesting in the company. Dejonckheere explains how this happened: “In 2008, there was the big crisis. Colleagues of ours had brought a lot of leverage on their balance sheet. They are still struggling with that, if they are still here at all. Others are changing their plans.”
“Our industry is based on liquidity and funding. We were in a quite difficult model, because we were listed on the stock market and we were starting to create some funds, but we were not dependent on the classic fund-to-fund management pools of money in London. This meant that we were outside of the usual benchmarks that said you should be pure play and make small teams. In fact many funds managed by small teams now have succession problems. With pure play, you are often looking at one-trick ponies. They are easy to benchmark. Gimv is a little bit more complex. We have all the contacts and networks and we work with them. We change all the time.”
Dejonckheere talks of the crisis as an on-going opportunity for self-evaluation: “The big financial disaster is still going on. A lot of people were waiting for the crisis to go away, but it won’t happen just like that. You could wait years. Of course, people need to do the urgent thing every day, but they shouldn’t forget to do the important things too. They need to take two steps backward and look at what the situation really is, then ask themselves, ‘Are we operating on fertile ground?’ Every business should do this from time to time. ‘Is this worthwhile?’ ”
“The second question to ask is, ‘What are the big trends?’ If you are working all the time and cycling against the wind, that won’t be very positive for the speed you can make. It’s a lot of effort, for very little results.”
It is by concentrating on their direction that Gimv were able to expand and improve during this period. Dejonckheere says, “We had the money because of our funding model. A couple of years ago, we started our growth exercise - not tapping the stock market, but making business combinations through funds we’d invested in on biotech and infrastructure. We could already double our means during the crisis, which was quite special. This growth in critical mass gave us the opportunity to grow our teams and attract new talent.”
“It’s interesting: 60% of people at Gimv have spent less than five years in the company. On the back of the growth, we made new teams and talent, and put them together with the DNA already in the company. We developed a snowball effect. Against the trend of a degrading environment, we managed to grow. On average, we managed to attract more than we lost.”
“We felt that the big question for us was: ‘We are big for a small region, but we are very small in the big world. So where should we be in ten years time?’ Maybe the best time to think through these things is during a recession period, when change is more natural and the workload is a bit lower. Deals, IPOs, listings on the stock market, refinancing: they were all practically non-existent. People were easily convinced that change was not only necessary, but also an opportunity.”
Change and communication
Dejonckheere emphasises the importance of clear communication during a time of change, both within an organisation and towards the outside world. He says, “Of course, when you initiate a clear change process, some internal challenges come up. You need to create a coalition of people that are relevant, and who understand that change is necessary - or at least that change has been decided upon. Communication throughout the process is key. The communication and the stakes should be clear to the full organisation.”
“In the middle of the project, we made some important decisions, so we invited the full firm - all our offices, all at once - to one auditorium. We presented them with the same material as was presented to the board. Everyone was aware of the same information. There’s no room for politics in the process.”
“Some people came to understand that even if they, personally, were open to the change, it would imply that their team would be disappearing, changing or merging. There is no other way. This cannot be discussed. Strategy can be discussed, but then the organisation has to follow.”
“Throughout the process, we communicated in phases, not only internally but also externally. Communication was key. Each time, we had the internal dynamics that led to a decision. We communicated to the outside, but we also explained. We made small booklets and information sessions to the market and the main shareholders. We were saying what we were doing, but also we were doing what we were saying.”
“By demonstrating that very transparently, we were able to make people understand what we did and gain support internally and externally. People need to understand what you do. You have to take responsibility.”
A culture of curiosity
However successful Gimv has been over the past years, it does not rest on its laurels. Education and learning remain at the forefront of the company’s policy. As Dejonckheere says, “At Gimv, Vlerick is an integral part of our culture. This is a culture of being curious. All people - even if they have been at Gimv for 32 years - need to begin every day thinking about what’s about to happen. Being open minded. That’s why we actively and consciously cooperate with some high-standing business schools, of which Vlerick is the main one. We work together and we sponsor the chair of private equity and venture capital. We have some people of Gimv teach Vlerick courses regularly. This is not because we want to teach, but because we want to be part of an ecosystem of change and a culture of ambition.”
“The ecosystem around Vlerick - making the new business leaders of tomorrow, re-educating them, recycling them - is a constant process of creative destruction. It is fortunate that we have very good business schools, which are all ecosystems. They are not only compatible, they are also intertwined. Often, we directly recruit people who have a Vlerick background. We need to do this, because that is where change is, where ambition is, where people go for growth and globalisation.”
“Ten or twenty years ago, it was important that students, engineers, lawyers and psychologists learned something about management. Today, we are much further on. It’s about strategy, development strategy, driving change, and all in a very international context. Gimv has evolved into that reality but we feel that Vlerick has evolved there too. We are partners for the future.”
A word from Vlerick
Sophie Manigart The financial and economic crisis has perturbed the venture capital and private equity industry worldwide, leading to low levels of activity both at the fund raising and the investment side. Private equity is still hampered by a lack of debt to buyout transactions, while European venture capital is hindered by investors’ low risk threshold and by funds that are too small to commit significant amounts to their portfolio companies.
In the midst of this hostile environment, where a lot of players in the industry have (or will) disappear, Gimv has not only done well, but has also had the guts to dramatically change its strategy.
Based upon an external analysis (“in which direction will the markets evolve?”) and an internal analysis (“what are Gimv’s strengths and weaknesses? How can Gimv even better capitalize its strengths?”), a new investment model was developed that is currently being implemented. The whole team is currently working towards changing its course of action and spreading the word in the market. I am in no doubt that the new strategy will put Gimv in a strong position for tackling the new economic realities and continue to contribute to building a new Flemish economic tissue.