Building a Capital-Efficient Niche SaaS Startup from The Netherlands: Hatch CEO Joris Kroese (Part 1)

Often niche ideas are great to build capital-efficient, profitable startups on.

Sramana Mitra: Let’s start at the very beginning of your journey. Where are you from? Where were you born, raised, and in what kind of background?

Joris Kroese: I was born in a small village close to Amsterdam. I was born in 1977. I studied Information Engineering. After my studies, I started my first venture which was an e-commerce venture selling, mainly, consumer electronics in Benelux and Spain. I did that for about 10 years.

Sramana Mitra: How did you get that started? Was it bootstrapped?

Joris Kroese: I started from my living room as a student. I was the go-to person when it comes to computer advice for family and friends.

Sramana Mitra: What year was this?

Joris Kroese: 1999. Slowly but surely, that friends and family network expanded to referrals.

Sramana Mitra: You were selling on your own website?

Joris Kroese: Initially, without a website. At some point, we had some parts stocked. We had some pre-configured models. We would list those on our website.

Sramana Mitra: You were selling computers?

Joris Kroese: Yes, initially. That expanded into other categories like cameras and television.

Sramana Mitra: How did you fund the inventory early on?

Joris Kroese: We just asked people for pre-payments. When we grew, we got credit lines from the suppliers. We just ordered for a month and, after 30 days, we had to pay the supplier.

Sramana Mitra: At that time, Google advertising was new and cheaper.

Joris Kroese: Yes.

Sramana Mitra: What percentage of your business came from PPC?

Joris Kroese: It was a long time ago – 25 years almost. We were working a lot with comparison websites. That drove quite a bit of revenue. We grew from zero to $10 million in revenues – 30% to 40% growth per year. Initially, it was friends and family and then transitioned to 80% coming from paid advertising.

Sramana Mitra: How long did it take to get you to a million?

Joris Kroese: We grew to $10 million. Computers and electronics are low-margin products. Our margin was only 8% to 10%. Actually, it went bankrupt. We grew rapidly. We didn’t take any external credit but we were financing our business with credit lines from various suppliers. With the financial crisis, big insurance companies stopped insuring credit lines. Overnight, we had to finance our inventory. We didn’t really gain a lot of reserves either. In an online world, people expect next-day delivery.

Sramana Mitra: It’s a vicious cycle. When a macro-level crisis hits, a lot of things fall apart for a lot of people in different kinds of businesses. What did you do after that?

Joris Kroese: There was a segment of business customers for which we maintained their infrastructure a bit. We’re talking about servers and email exchange. We have service-level agreements with these clients.

Sramana Mitra: Which you kept?

Joris Kroese: Yes. I talked to them one by one and asked if they wanted to stay if we were to establish a new company and whether they wanted to enter a new agreement. I took five people and started a new company. We moved forward focusing only on the IT services part.

Sramana Mitra: Fast forward a little bit, how long did this IT services model work?

Joris Kroese: We were cash-flow positive from day one. We were involved with services and support. I realized that it wasn’t for me.

This segment is part 1 in the series : Building a Capital-Efficient Niche SaaS Startup from The Netherlands: Hatch CEO Joris Kroese
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