ByFounders, a relatively new early stage venture capital firm targeting the Nordic and Baltic regions of Europe, officially launches its first fund today.
The debut fund was closed at € 100 million and will be used to support tech startups in pre-seed, seed, and in some cases Series A. ByFounders will also track investments to maintain proportionate ownership in your most promising portfolio companies.
However, what perhaps sets the Founders apart from the crowd is their LP structure. Along with institutional investors, such as anchor investor Danish Growth Fund, Founders’ sponsors include more than 50 entrepreneurs.
Nicknamed the “Collective”, the group of individual LPs includes founders behind some of the most recognized companies in the region, including Skype, Zendesk, Kahoot, Unity, Tradeshift, Sitecore and Vivino.
The idea is that the companies in the Founders portfolio can benefit from a unique access to “deep operational and industry knowledge”, from scaling up, recruiting, international expansion to obtaining additional funding, in addition to the global network. del Colectivo and ties with Silicon Valley.
ByFounders’ other institutional investors are Isomer Capital, Draper Esprit, Digital Garage, Danske Bank, as well as several prominent family businesses from the Nordic countries.
Founded by Eric Lagier and Tommy Andersen, the VC firm has offices in Copenhagen and San Francisco and has already supported 11 startups: Corti, Peergrade, Simple Feast, Cobalt, Spiio, SafetyWing, Drugstars, Omnio, Qurasense, Tame and Uizard . He plans to make another 30 investments in the next three years.
Below is a Q&A email with Eric Lagier, managing partner of the Founders, where we discuss the fund’s competencies, how the Founders LP network aims to give it a head start, ties to Silicon Valley, and the thorny issue of Brexit.
TC: byFounders says your sweet spot is the seed and occasionally series A. Can you be more specific regarding the stage and size of check you plan to write?
EL: The size of the Founders’ 100 million euro fund and the operational guidance of our collective of 50 of the most successful entrepreneurs in the region means that we can commit to initial investments, for example. € 200,000 in pre-seed at companies like UIzard, Safetywing and Qurasense, in € 1-2m seed rounds like Corti and Omnio, and they even do larger Series A rounds of up to € 5m. Last thing, we’ve done away with the likes of Cobalt and SimpleFeast as they expand internationally. Our approach means that we still reserve a large amount of capital to protect our property proportionally in later stages.
TC: What are the types of companies, technologies, business models or sectors that you are focusing on?
EL: Obviously, our current portfolio is a mix of technology companies in verticals like healthtech, edtech, fintech, foodtech, IoT, B2C and B2B. They all have in common that they are founded by great Nordic and Baltic teams with global ambitions. Successful scale of a business is incredibly difficult, but it’s crucial to do it almost from day one. We created porFounders to give the next generation of new Nordic entrepreneurs access to collective learnings and the leaders behind today’s unicorns.
TC: What can we expect the Founders to bring to the Nordic countries that doesn’t exist yet, apart from another € 100 million of venture capital?
EL: What sets us apart is the depth and breadth of our industry experience and practical advice provided by more than 50 people who have met and overcome the challenges you will face as a founder.
Each member of the Collective is actively involved with our portfolio companies and all have invested in the fund. Basically, we are inviting the next generation of founders to the “hall of fame” of the Nordic and Baltic founders. The energy and unleashed potential of this are unparalleled.
TC: You say that the scarcity of local funding sources has pushed many Nordic and Baltic startups to move to the US, but why is this a problem?
EL: Historically, many Nordic technology companies like Skype, Unity, Zendesk, Tradeshift have had to relocate in their search for capital, talent and markets. The emergence of Northzone and Creandum, specifically in Sweden, meant that companies like Spotify, Klarna, iZettle were able to stay local and help build a strong tech community that continues to fuel and accelerate local entrepreneurship and the number of startups created here.
The good news is that many of the founders who once left the Nordic and Baltic countries, such as Sten Tamkivi (Skype, Teleport), Jakob Jønck (Endomondo, SimpleFeast), Morten Primdahl (Zendesk), David Helgason (Unit), Michael Drejer (ProPeople) and Mikkel Hippe Bruun (Tradeshift) have already returned from Silicon Valley. They represent a huge potential for untapped knowledge that we are unleashing to help the next generation of founders.
The reality is that you don’t need to relocate your business today to get financing and be successful. This is a trend that we are seeing and contributing more and more in the Nordic countries.
The Nordic and Baltic countries have incredibly strong ecosystems that have been created in part by the willingness of our governments to work with entrepreneurs and tech companies, as well as by universities and society encompassing technology-focused education. I think the change in dynamics, in part, was due to companies moving, causing nations to lose themselves in wealth creation and a highly skilled workforce.
TC: You claim to have more than 50 founders as LPs. Will this also be the way you will generate the flow of transactions or how could this be a competitive advantage for the startups you are recovering?
EL: more than a third of all our transaction flow is generated by our collective of more than 50 founders. We benefit from obtaining strong and qualified endorsements of new investment opportunities from our network of proven founders. In terms of our portfolio of companies, our Collective represents unparalleled access to knowledge, experience and networks. You can raise capital anywhere these days, but with byFounders you get a qualified operating guide and game-changing introductions, increasing the likelihood of your success as a founder.
TC: What do the founders think about Brexit? Are you long or short in the UK leaving the EU and having some connection with the Nordic ecosystem?
EL: Despite Brexit, London is likely to retain its position as Europe’s venture capital capital for now, but how it will affect access to talent and access to markets is not yet known. We all know that the success of any tech startup depends on the trinity of access to capital, talent, and markets, and byFounders is further strengthening the Nordic ecosystem at a time of uncertainty across the region.
TC: You’re talking about the Founders’ ability to build bridges to Silicon Valley. You can be more specific?
EL: You don’t need to leave the Nordic region anymore to build a world-leading tech company, but at the same time it’s a massive tailwind to have someone on the ground in Silicon Valley who can help you find the right conversations.
After Skype and Tradeshift, I moved to San Francisco, where I have lived for the last eight years building and then moving out of my own startup to HP and serving as a consultant for 500Startups. During this time, I have built a strong network of other technology entrepreneurs and investors who have helped bring scale and growth to early stage companies.
Many Nordic and Baltic founders venture to Silicon Valley to address a global market, but it is the equivalent of walking into this new room in complete darkness and stumbling your way. Most of our more than 50 Founders Collective live or have lived here, and together we help “flip the light switch” and our portfolio companies on a fast track to accessing additional capital, talent and multi-billion dollar markets. Dollars.
TC: What is the biggest change you have seen within the Nordic (and Baltic) ecosystem in the last 5 years, and what needs to happen next to maintain the current momentum?
EL: Standing on the shoulders of the success of Skype, Spotify, Zendesk, Tradeshift, Unity, etc., it has been very encouraging to experience how the Nordic and Baltic ecosystem has acquired an identity of its own as a global technology hub. Never has the region been able to attract so much investor attention. As an example, three of Sequoia Capital’s top performing companies are from here: Unity (Denmark), Klarna (Sweden) and Medalia (Norway).
This also means that even though we are doing well, we have to work together and continue to support each other so that we can continue to hit above our weight globally. We see the Founders playing an important role in facilitating this and helping to keep the momentum going.
TC: What is the biggest threat to the continued success of the Nordic tech ecosystem?
EL: As the Nordic technology ecosystem rapidly scales, we are quickly facing resource constraints given our small local talent pool and high barriers to entry. The key to success in the future is that we attract talent from outside the Nordic countries and retain them.
TC:. Does the tech press pay enough attention to the region, given that it has recently produced one of the most successful tech companies in Europe? If the answer is no, what is the only Nordic story that you feel no one has told correctly yet?
EL: No. We all know too well the stories of the creation of Facebook, Google, Amazon, etc., but few know the story of the Nordic and Baltic unicorns like Skype, Zendesk, Spotify, Supercell, Klarna, iZettle, Unity, Transferwise , Taxify, Rovio, Sitecore, JustEat, Tradeshift, etc. The common denominator is that they were successful “against all odds.”
With byFounders, we’ve come together because we have strong stories to tell and we want to help guide the next generation of Nordic and Baltic founders to build global companies, but not “against all odds” this time.