VC Perspectives

During my latest Helsinki trip, I had a very interesting conversation with Ville and Antti at Arctic Startup about what, if anything, is missing in the Nordic startup and VC environment especially compared to the US. One of many things that we identified was lack of successful serial entrepreneurs in the Nordic region.

I have often heard that successful serial entrepreneurs are tricky to invest in. Reasons include:

• If they have been successful enough, they are not hungry enough the second time around
• They will just try and repeat what was successful the previous time
• Only young entrepreneurs are naive or crazy enough to be able to change the world
• Luck never strikes twice

While I am sure we can find numerous cases where some or all of these statements are true, according to Josh Lerner, who has made significant research on the topic, in general this is not correct. Rather the opposite. In his research, Josh has found a strong positive correlation between the success of the startup and if the founders have been successful serial entrepreneurs. Another interesting aspect is that top VCs to a much higher extent invest in successful serial entrepreneurs than other VCs.

Also, successful serial entrepreneurs play an important role not only as founders of new startups but as business angels, board members, advisors and role models.

Unfortunately from a Nordic perspective, this is a bit of a chicken and egg problem. Until we have created enough successful startups, we will not have enough successful serial entrepreneurs. I still feel that we are on the right track with more and more entrepreneurs making good exits for every generation but it is also important that our state systems allow for people to be successful in our region so that these people stay on to either make it again themselves or helping others achieve success.

I read a really inspiring article today in Dagens Industri with young entrepreneur Diana Svensk. She’s 20 years old and is running her own company making cool knitted hats (something we definitely need here in the Nordics). Although she admits it’s tough being a young entrepreneur, she seems to have that wonderful combination of energy, drive and will to make things happen. Keep up the spirit and best of luck!

Thorugh the article, I also got to know about a network called YEOS (Young Entrepreneurs of Sweden).

Young Entrepreneurs of Sweden is a nationwide network with the purpose to connect, educate and inspire young entrepreneurs in the age between 18 and 30 years.

The network was founded to be an accelerator helping young achievers learn and grow through social interaction and collaboration, breeding business success and enriching private life. The network’s members, Sweden’s foremost young entrepreneurs, control the agenda of the network through their share in the legal cooperative.

Young Entrepreneurs of Sweden arranges regional activities around the country on a regular basis as well as one bigger event yearly. Common for the activities is the fact that they gather Sweden’s most ambitious young people for networking, experience exchange and inspiration. Activities of the network are mainly financed by partners and project assignments.

This kind of stuff makes me really happy, what a great initiative!

Last week Internetworld.se announced their list of Sweden’s 25 hottest new web entrepreneurs (Swedish only but pretty easy to understand anyway). The published list so far only includes place 2-25 but the winner Fraktjakt.se has been published separately. New in terms of that they haven’t been on the list before (since quite few have been at it for several years) and hot in terms of their likelihood of being successful during 2009.

Success is hard to measure in early stages of a company but going back to last year’s list actually reveals a pretty good hit rate. Quite a few companies have developed positively, at least a handful have raised capital from VCs and business angels (including Spotify, Bambuser, Videoplaza, Tailsweep, Xcerion, Yubico, Momail and probably more) and at least one was acquired (Viewserve). Hopefully, this year’s bunch will be able to defy the tough financial climate and develop their ideas and companies further.

By the way, are there similar initiatives in the other Nordic countries?

Finally made it. Having waited for 5 hours at Arlanda airport I arrived at the hotel at 3am so I was pretty tired when I finally showed up at the Slush 2008 event. But it was definitely worth it.

The set-up was a mix of short presentations and panel debates with some of Finland’s most successful entrepreneurs, Risto Siilasmaa (F-Secure), Monty Widenius (MySQL), Ilkaa Paananen (Sumea), Petteri Koponen (Firsthop & Jaiku), Sampo Karjalainen (Sulake), and Asmo Halinen (Apaja). The panel debates were moderated by Matt Marshall from VentureBeat.

Personally, I think the major contribution of the speakers was the fact that these successful entrepreneurs engaged and showed interest in an event for up and coming entrepreneurs. I believe that it is extremely important with role models and having the chance to talk and listen to people that have built great companies.

There were also some very useful pieces of advice and sharing of experiences from the speakers, for example in terms of how to handle the current financial situation, the importance of focus (something I will come back to in another blog entry), and what it’s like being acquired by a large international company.

Perhaps the most interesting example was one of failure rather than success when Asmo told us the story of Apaja’s launch of a virtual world to complement their successful avatar and gaming focus. By not listening to what their users wanted, they ended up spending 1.5 years building and eventually dismantling a virtual world which too few people were interested in. And for a start-up, that’s a pretty significant misuse of resoruces knowing that there are so many other things that needs to be carried out.

Another interesting story was told by Sampo from Sulake (Habbo Hotel) and how the whole thing emerged as a project build for their own pleasure and then virally spreading to more and more people. But the important lesson was that the founders never lost touch of either their own love for the product or making sure that they truly understand why and how their users actually use the product. I think many companies can learn from the likes of Sulake, being almost obsessed with understanding user behavior.

The day also provided great opportunity for networking with a nice location and ample space to meet people (since everyone needed to pass by the bar to reach the auditorium). So all in all, a great event and hopefully one which will be held again next year (and hopefully I can stay on for the party next time around).