I did an extensive interview with Daniel Blomquist from the Venture Capital firm Creandum. Daniel is an associate at Creandum and profiles innovative companies that have the potential to become market leaders in niche markets. He shares great insight on Nordic companies and gives some first hand tips on venture financing.
Many thanks to Daniel at this moment!
What’s the big idea behind Creandum, what’s the philosphy so to speak?
Creandum was founded based on two important strategic principles. Firstly, from a market perspective, we identified a market opportunity due to the lack of professional venture capital investors in Nordic early-stage technology companies. We have seen through extensive analysis of the Nordic venture capital market that significant value has been created in companies that are less than 5-6 years old, which means that one has to invest early to be part of these successes. Secondly, from a resource perspective, we noticed that in many successful US early-stage venture capital firms, the investors often had entrepreneurial and technology backgrounds. This was rarely the case in Europe or the Nordic region. That’s why everyone at Creandum has an entrepreneurial background being involved in building and growing start-ups. Some have also worked as business angels before joining Creandum.
How many people work with Creandum and what’s your job in the company?
We are 7 people at Creandum of which 5 of us are working in the investment team. Four of us are engineers and one is a business guy but as mentioned we all have an entrepreneurial background.
My background is that I after my MSc degree moved to the UK to work with Volvo IT Great Britain. After a while I moved to Dubai to work with IT and logistics for a company called Gulf Agency Company before returning to Stockholm where I joined a small consultancy firm Ascade. For seven years was part of transforming the company into an international market leader of business optimization software for telecom operators. I primarily worked with commercialization of our products and services as vice president of product management, marketing and business development. Then I took a break for a year and got an MBA degree before joining Creandum.
My job at Creandum involves identifying interesting and innovative companies to invest in and then working with the companies to become international leaders in their market niches. I look at all type of innovative companies ranging from very technical stuff to internet services but my focus is especially on software companies. Since there are many software companies in Finland I am responsible for our deal flow in Finland. Once we have invested, we typically work with the companies as board members. Our job is really to help the companies become as valuable as possible which often involves working with strategic direction, market expansion, and recruitment of management and board members. I am currently on the board of a few different companies including Aito Technologies in Finland.
How do you see the geographic breakdown of the Nordic countries – who has the most potential companies?
From a VC-perspective, Sweden is the dominant country in the region. Although only a third of total population and even less on GDP, Sweden accounts for around 50% of investments and exits made in the technology sector which is where we operate. As for our deal flow, we are also biased towards Sweden but the other Nordic countries are growing in importance and now account for more than 35% of our deal flow. In general, I would say that Sweden is pretty well-rounded with opportunities across all sectors. The other countries are more spread out with strengths in some sectors. My feeling is that Finland and Sweden are very active in the internet space. Finland is dominated by software and wireless. Norway is very strong in oil, gas, and energy and in some specialty IT areas such as search and web technology. Denmark is strong in health care / life sciences where we don’t invest but also in software and some other IT sectors.
How do you see the Nordic startup scene at the moment – is it thriving?
There is a lot of activity especially in the internet space where many young entrepreneurs are very active. I think many more people see entrepreneurship as an interesting alternative nowadays and there is also a much stronger community of entrepreneurs through different networks, events and blogs which is very positive. Role models, both individuals and companies, are important and the network effect and knowledge sharing of having entrepreneurs connected is critical. We have still a long way to go when compared to the real hot spots like Silicon Valley but we’re on the right track. What I am missing is the serial entrepreneurs that have experience of building teams and companies and who wants to make it even bigger. A lot of start-ups have quite limited potential which makes it hard for a VC like us to fund them. Another reflection is that many entrepreneurs in the Nordic region focuses a lot on the idea and not so much on how to bring it to the market and what team is required to achieve that.
Any advice for startups who are looking for funding from a VC point of view?
First of all, VC funding can be a great thing but it is not necessarily good for everyone. It is important to understand why you should be looking for VC financing. When there is a good match between the VC and the company, a VC can add a lot of value in addition to the financing but it also means pressure and high expectations.
Another thing is to try and understand what the VC is looking for. This can be very different from one VC to another and even from one investment manager to another. Look at the profile of the VC, what investments have they done, what experience and focus do the investment professionals have. At Creandum we have a lot of experience in sectors such as internet, software, data communications and hardware but no experience in health care or life science. We are into innovative technology and business models that have international potential. And don’t forget that we look at more things than just the idea. There are many great ideas out there but they are only as good as the people that will make them happen. So focus more on building a strong team or strong board/advisors. We look at more than 400 companies per year and maybe invest in 4-5 so the bar is pretty high.
The best chance to get a meeting is to identify someone that knows us that can refer you to us. Second best is to call us or send an email with a brief pitch but here again it helps if we have heard about you before. In most cases when there is a good match with our investment criteria we will make sure to meet you. Another good thing is to get to know us before you’re looking for money. Come and tell us your idea and what you’re planning to do. We will tell you what we will be looking for. Come back when you have achieved what you set out to do. Then you will be in a much better position both because the VC knows you better and sees than you can deliver but also because you will have a better idea of if the VC is someone you would like to have involved in your company. And remember, VCs like great ideas, but we like great ideas with traction even more, especially in the internet space where it is almost impossible to distinguish what will fly before it is launched.
Leave out bankers or agents. If the idea and your team is good enough, you will get meetings with relevant VCs. If you’re a start-up you normally can’t afford anyone who really can make a difference anyway. And from our perspective it is worrying if the entrepreneur needs help to present his or her idea. Familiarize yourself with VC terms with other entrepreneurs and then bring in legal advice at time of negotiating term sheets and contracts instead.