Case study: Adara Ventures

Questions and topics for discussion

1. How did Nico and Alberto deal with the lack of track record?

We had thought it would take just a year. It was true we didn’t have a track
record, but what we could say was that we had been working to find companies to
invest in. We showed potential partners that we had sourced a real pipeline of
potential portfolio companies. When we talked to the target companies we
indicated that our aim was to be one of the largest venture capital funds focused
on technology, and operating in Spain. We acted very much like an
entrepreneurial start-up. We had to convince the LPs—but we had to find creative
ways for them to share our complete conviction.”
2. How did they manage to convince LPs to invest in their fund?
It was during this first fundraising that the “statistical” hurdle became clear: to close one
investor the team had to talk to almost ten prospects, a proportion that persisted in their
future fundraising efforts

3. Where is the fund located and why – reflect on the role of government
One of the team’s first decisions was where to locate the fund. After looking into the
possibility of Spain, they found that it was too complex – its burdensome regulations added
to the operational constraints of funds. As a result, they looked at other possibilities, notably
Belgium and Luxembourg. They finally settled on Luxembourg, where the fiscal and
supervisory framework was already in place, and offered greater flexibility as compared to
equivalent structures in Spain. Overall, its regulatory environment made it easier to
replicate the limited partnership model.

4. What type of LPs they preferred and why?

The lead investors in Adara Ventures (Fund I) included the European Investment Fund
through the European Communities Growth and Employment Initiative: MAP-ETF Start-
Up Facility, pension funds from Telefónica, and several other institutions and family
offices. In total there were 24 Limited Partners (8 institutional, representing 63% of
commitments, and 16 private). Approximately 45% of the commitments came from Spain
and the remainder were evenly split between Europe and the rest of the world. In 2007,
another €5 million was added to the pool in the form of a co-investment agreement with
NEOTEC, to be managed by Adara Venture Partners.

5. What was the first closing of the first fund (amount)?

40 M €
Two and half years later, in June 2005, Adara Ventures SICAR was officially created as
an investment vehicle in Luxembourg. The first closing was on July 18, 2005 for a total
of €40 million, and the final closing took place on March 30, 2006, bringing in total
commitments of €50 million.

6. How hard was to raise the first fund?

They had to call 10 investors to get one.
It was during this first fundraising that the “statistical” hurdle became clear: to close one
investor the team had to talk to almost ten prospects, a proportion that persisted in their
future fundraising efforts

7. What proportion of the total fund came from Spain (or Spanish LPs)?

Approximately 45% of the commitments came from Spain and the remainder
were evenly split between Europe and the rest of the world.
8. What did they do to speed up the investment process of investing?
They already identified the company
The deal flow turned out to be even better than the firm had expected, with a stream of
highquality, attractive investment opportunities. Adara reviewed almost 200 potential
candidates during the fund raising process, and from these selected a pipeline of deals that
were available for investment in the short term. The prospects had already been analysed
and their development monitored for many months, so it was reasonably quick to finalize
the due diligence process and enter into negotiation of the definitive investment agreement.
This allowed the fund to deploy its capital rapidly. As a result, the investment period was
shortened from five to three years.

9. How much they raised in total for their first fund?

€ 55 M
10. In how many companies they invested – reflect on the size of their portfolio
13
We began investing. These were exciting times. We had raised $55 million! We
had a fund in a market where not many other funds were active. We were able to
complete 13 investments during the three-year period until the end of the investment
period.”

11. What happened during the ‘Dark Ages’?

Many people left.
2 – 3 completely trade off
three companies were sold back to the founders, and two larger investments were
liquidated completely, resulting in full write-offs. Second, the financial performance of the
fund in terms of its net asset value (NAV) was deep in the traditional J-curve, prompting
nervous reactions from LPs and even a couple of small defaults among minor investors who
decided to take the losses and cease supporting the fund.
Finally, the GP itself faced a shrinking budget, which led to the realization that the team
could not sustain three full-time partners. Combined with discussions on the appropriate
strategy for the eventual second fund, the situation prompted Roberto Saint Malo’s exit
from the management company after protracted negotiations.

12. Comment on the performance of their portfolio

13. Which portfolio company performed well and why?
AlienVault (they received funds from Trident Capital, Kleiner Perkins and Intel Capital)
14. What was the investment duration of the first fund?
15. What was the problem when they tried to raise a second fund?
Economical cries. They were unlucky.
16. What are ‘dragon’ companies?
Companies raise more money than the total fund.
17. What dilemma they faced?
They got an anchor funder→ LP Spain EIF. The dilemma was stop fundraising or
underwrite. First strategy was to use personal money, money for management and was a
very risky solution.
18. What was their plan to underwrite the commitment?
19. Did the actually manage to raise the second fund?
Remember the two skills of GP are identifying the right company and nurturing.
20. Reflect on their new (revised) approach when tried to raise money
21. How is the GP doing today?
Adara
Adara invests in Deep Tech companies in early-stage in Spain, Portugal, France, United
Kingdom, and Ireland.
Luxembourg, Luxembourg, Luxembourg
Categories Big Data, Information Technology, SaaS, Software, Venture Capital
Headquarters Regions European Union (EU)
Founded Date Sep 30, 2005
Founders Alberto Gomez, Jesus Sainz, Nicolas Goulet
Operating Status Active
Last Funding Type Grant
Number of Employees 1-10
Also Known As Adara Ventures
Investor Type Venture Capital
Investment Stage Early Stage Venture, Seed
Number of Exits 7
Adara is a Venture Capital firm with 165 million euros under management that invests in Deep
Tech companies in early-stage on the west coast of Europe (Spain, Portugal, France, United
Kingdom, and Ireland). The VC, founded by Alberto Gómez and Nicolás Goulet, has favorite
investment areas such as cyber security, big data, AI, AdTech, SaaS, and other solutions
facilitating the digital transformation of the company.
The investment criteria of Adara Ventures are based on three pillars: that they are
technological startups, with B2B models, in seed capital phases and series A. The fund usually
invests in very powerful equipment at the technological level and that have developed a very
innovative innovative product internationally competitive, targeting a global market.
In addition, Adara seeks that companies have a competitive technological advantage that
allows them to compete in international markets, usually in Europe or the US. They are
complex software solutions that have a high risk profile, but also a great commercial
opportunity since they are designed for global markets. They are very focused on verticals such
as cyber security and infrastructure for big data that includes segments such as artificial
intelligence or machine learning, they also opt for AdTech and SaaS.
Adara invests in phases of seed capital and series A. The first investment can be up to 2 million
euros and can track up to 9 million euros per company. In total, Adara Ventures has invested in
26 companies, and out of 10, achieving several project successes such as AlienVault, LoopUp or
ADD. Among its current assets are startups such as Stratio, Seedtag, 4iQ, Playgiga,
CounterCraft, Kompyte, CBNL, Openbravo, and Scalefast.
They have done research, knowledge about market, Nico had record in raising money for start-
ups from your work experience (start-up fundraiser).
What was the investment strategy? Firstly, they wanted to invest in Spain because nobody was
investing in Spain in early stages and in the technology sector (they’ve identified a gap). In
addition, the Spain has cheap engineers (high qualified people but with low salary). The
strategy was to move then to Silicon Valley. (even if the company moves to silicon valley there
advantages from collaboration, however there are benefits only for US and Spain will lose
talent, jobs and prestige).
Who invested?
- Spain EIF (European investment fund)→ public money, the biggest in Spain and invest in GPs
Where is the found located? Luxemburg because of legislation, regulation, etc. → the
government is friendly