Gradyent and YES!Funded: The importance of getting the rights funds at the right time
A good click is key to every startup-advisor relationship out there. In their early days, in particular, startups need specialized support to steer their business in the right direction and they need the right advisor to help them do that. This is exactly the case with Gradyent, a startup developing an artificial intelligence (AI) cloud platform for making district heating networks more efficient, and YES!Funded, a service launched by YES!Delft to support startups getting funds.
From 0 to 2 funding rounds in just over a year
A lot of startups tend to take their time in validating their idea, finding their product-market fit and signing their first customer. Gradyent is not one of those startups. On the contrary, they hit the ground running.
It was early 2019 when four serial entrepreneurs – Hervé Huisman, Robert Vrancken, Freek Smelt and Pieter Broekema – got together to found an innovative company that would tackle the inefficiencies that district energy networks often struggle with. With their combined experience in building successful businesses and scaling analytics technologies in the energy industry, this new venture was just the right fit for them.
“We started out knowing that there is a problem to solve when it comes to making district heating networks more efficient,” says Hervé. “Many of them have old and even outdated control systems, which has them lagging behind in terms of digitization.” The solution they had in mind was an AI platform in the cloud that can help network owners reduce energy losses and improve efficiency.
It was the start of Gradyent.
Winning their first customer soon after they launched the company was proof of the potential of their solution. Yet, as with any young company looking to grow fast, potential and an initial success weren’t going to be enough. They needed extra funds. Knowing this, the team reached out to YES!Funded to help them find the right financing tools and connections, and grow even further from there.
“We started YES!Funded about a year ago because we found out that startups don’t have much knowledge on how to structure their company or make it financially viable,” says Jan Geert van Hall, Investment Director at YES!Delft. “When it comes to raising their first rounds of funding, they often don’t even know where to start.”
With the help of YES!Funded, this is no longer a problem. In only a few months of working alongside Jan Geert, Hervé and the team of Gradyent had their first round of financing in the bag. It came from henQ, a venture capital (VC) firm supporting B2B software startups.
“It was a small first round, but it helped us accelerate our product development, connect new customers and gain traction,” says Hervé. It was a stepping stone towards increasing their valuation and going for a much more prominent second round later on.
Needless to say, the team didn’t sit around waiting for that second round to come. They rolled up their sleeves and spoke to more than 20 potential investors in just a few months. With the help of Jan Geert, his network and financial expertise, they identified the most suitable candidates and eventually signed with three European investors for the sum of 1.9 million euros. Those include Dutch energy innovation fund ENERGIIQ, and VCs Capricorn Venture Partners from Belgium and Helen Ventures from Finland.
Addressing the right opportunities at the right time
Gradyent secured their second round of funding in June 2020 and are already using it to further develop their AI solution and expand their network beyond the Netherlands.
“We are happy to have these three investors onboard, as each of them brings something valuable and different to the table,” says Hervé. “Capricorn is an experienced VC fund with a strong track record, which adds credibility to our company. ENERGIIQ brings us their regional network in South Holland and expertise in the field, with Helen Ventures providing us with an opportunity to enter the Scandinavian market, which is the most advanced district heating market globally.”
It all sounds like Gradyent have found the right partners at just the right time. Yet, that doesn’t mean their journey hasn’t had its ups and downs.
About a year ago, without yet the support of Jan Geert, Hervé and the team took it upon themselves to manage their fundraising. One of their first moves was to approach UNIIQ, the proof-of-concept fund of Innovation Quarter (IQ), focusing on early-stage innovative companies from the West Holland region. Although they were a great match, what the team didn’t realize is that they already had too much traction for what the fund was looking for.
Timing, they learned, is everything.
“From experience we know that the most challenging period for a startup is finding their first investor and getting the deal done,” says Jan Geert. “For each step of your customer traction or product development, you need to have a funding plan. In each step, the opportunities will be different and perhaps even diverse.”
Both Hervé and Jan Geert agree that not approaching UNIIQ on time was a missed opportunity. Yet, the strong team and business proposition of Gradyent made an impression and they were soon in negotiations with ENERGIIQ, another fund of IQ. With Jan Geert’s timely advice, they were soon able to seal the deal.
“It is crucial for startups to use the right instruments of financing,” Jan Geert continues. “The bad news is VCs don’t often look at early-stage companies. The good news, though, is that there is a wide range of other instruments that you can combine to get to the target of your round.”
Jan Geert is the person with the overview of those instruments and the knowledge of when to use which one. In fact, advising Gradyent on the timing for each investment round and approaching the right funds or VCs has been one of Jan Geert’s main contributions to the success of the team so far. He has supported them on a strategic as well as a more practical level by introducing them to investors, steering the due diligence procedures and establishing necessary shareholder agreements.
In essence, he has helped create a structure that Hervé and his team can follow each time they go for a next investment. “Securing our first round of funding was complicated because there was no foundation for us to step on,” says Hervé. “The second one was a whole different story and that is largely because of the support of YES!Funded.”
With a committed team, a strong advisor and the right approach, Gradyent is well on its way to success. Their next big milestone may be just around the corner.
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