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North, south and sideways – top Nordic VCs share their European strategies Written by Nina Fowler on 17. April 2013



Internet companies from the Nordics – Sweden, Denmark, Norway and Finland – are known for making waves beyond their home region. Think Skype, Spotify, online work platform Podio, Rovio and online payments company Klarna, to name just a few.

At first glance, some of their investors are starting to do the same. Last week, Copenhagen-headquartered Sunstone Capital announced that Max Niederhofer (ex-Accel Partners) would join it to focus on both the Nordics and Germany.

Meanwhile, in January last year, Northzone set up a London office – and one of its biggest recent investments is a classifieds site in Russia.

Last July, Creandum appointed a new advisor to help it cover the Baltics. In December, it made its first investment ever in a team based outside the Nordics – German hotel booking service JustBook.

Are we looking at isolated opportunities or a rising trend? As international investors take more of an interest in Stockholm, Copenhagen and Helsinki, is it pushing that region’s investors to look elsewhere for top deals? We ask around to get a sense of top Nordic VCs’ strategies for greater Europe:

Sunstone Capital – “We want to become pan-European”

Jimmy Fussing NielsenOf those we spoke to, only Sunstone Capital – established in Denmark in 2007 – aspires to become a thoroughly pan-European firm: “We want to become a dominant, US-style early-stage VC for pan-Europe,” Sunstone managing director Jimmy Fussing Nielsen (right) confirms.

He’s got a theory about VC firm growth – you can either expand the stage of deal you do, the sectors you cover or the regions where you source deals – and says they’ve decided to go for the latter.

“We want to remain very early stage – seed and A, not opportunistically investing in B and later rounds,” he explains. “There are a lot of London and US players competing for the really good B deals coming around, with more resources… We think it’s harder for them to play at early-stage. There’s a real A round crunch in Europe right now.”

Sunstone is currently working with a $110m (€83.5m) fund, which it raised in December 2011. It’s the firm’s third fund and the first mandated as pan-European. The focus region for the fund covers the Nordics, the German-speaking countries, Benelux and Eastern Europe.

But Nielsen says they’d invest anywhere in Europe if they found the right deal: “We would invest in a great European company within the scope of what we do, which is mostly software and services,” he says. “No clean tech, no hardware…”

So far, Sunstone Capital’s investments outside the Nordics include Prezi in Hungary and Amen, Gidsy and Paymill in Germany.

Creandum – “There’s no lack of good businesses to back up here”

Creandum, headquartered in Stockholm and an investor in top Swedish startups Spotify, iZettle and Wrapp, is also currently on its third fund – the final close isn’t available yet but it hit a reported first close of €92.5m in May 2012.

Fredrik CasselAfter Germany’s JustBook, are they open to more deals outside their home region? “As our reputation carries us into privileged positions in deals outside the Nordics, we’ll continue to assess them,” Creandum partner Fredrik Cassel (right) says – and of course occasionally invest.
Still, don’t expect a pan-European spending spree: Creandum’s overall strategy right now is in line with the firm’s approach since it raised its second fund in 2007. In other words, early-stage (seed or Series A), mostly software and consumer internet, and a focus on deals in northern Europe and particularly the four Nordic countries.

Cassel is less concerned with upping deal numbers than with maintaining quality. “If we can match the quality we’ve had so far, we’ll be really happy,” he says. “There’s no lack of good teams or good businesses to back up here.”

Creandum’s own figures back that statement up: according to data provided to us this week, the Nordic region accounted for nearly 44 per cent of Europe’s billion-dollar exits from 2005 to 2012 – impressive, given the region’s relatively small population.

And, as PandoDaily also points out, of the billion-dollar private companies listed in Business Insider’s Digital 100, “13 percent are from the Nordics, while Europe without the northern region represents only eight percent”.

Northzone’s Greger Kronborg and Marta Sjögren

Northzone – “The Nordics is our stronghold”

Marta Sjögren (left) and Gregers Kronborg (right) from Northzone – an investor in Spotify, Lastminute and Avito among others, and with offices in Oslo, Stockholm, Copenhagen and London – take a similar attitude:

“The Nordics is our stronghold. Going forward, I would expect at least 75 per cent of our investment to come out of the region,” Kronborg, a partner for Copenhagen/London, says. “We have an advantage – other teams that are not close or don’t have our standing have a hard time competing with that.”

Northzone raised its current €130m fund, its sixth since starting up, in May 2010 – Kronborg says there are still funds available from that fund to invest. The firm is preparing to announce its most recent Series A investment.

Like Creandum, Northzone is open to following Nordic angels or entrepreneurs to deals in other regions. Avito is a good example: the company itself may operate in Russia but co-founders Filip Engelbert and Jonas Nordlander hail from Sweden.
Sjögren, an investment manager in Stockholm, says the firm also keeps an eye on what she calls “innovation spikes” in Europe outside the Nordics. “London is certainly one of those; Cambridge in the UK is another. Berlin is – very-hyped, has been so for three-to-five years, increasing crazily. A couple of other centres…”
“Our franchise continues to expand to markets we feel we can cover well,” Kronborg adds.

Go out or stay home? The advantages and disadvantages for VCs – and entrepreneurs

For VCs and entrepreneurs with the luxury to choose, there’s a decent case to be made for doing deals “at home”. Even in today’s hyper-connected world, it’s hard to beat working together in the same city. Still, international reach comes in very handy for opening new markets, closing new deals and finding buyers when you’re ready to exit – whether that reach comes via a packed international contacts book, a diaspora of Nordic entrepreneurs, satellite offices or frequent flights.
Sunstone, despite its pan-European ambitions, isn’t currently planning to open offices beyond its existing bases in Copenhagen and Menlo Park (US).
“Most focus cities can be reached by max 1.5 hours flight,” Jimmy Fussing Nielsen explains. “There is always a trade-off of multiple offices on deal-sourcing versus effective communication among the partners. At the end of day, sourcing of deals is not a function of where you are but who you know.”

“For really good deals, there will always be competition”

The investors we spoke to disagreed that non-Nordic investors are coming in and creating more competition for deals in the region – or at least that it’s a bad thing.
“For really good deals, there will always be competition,” Nielsen points out – perhaps with a bit more global attention paid to Stockholm right now than other Nordic hubs. A greater risk for European VCs, he says, is that promising companies will relocate entirely to the US.
“For seed rounds or even A investments, there’s very limited activity from US funds”, Creandum’s Fredrik Cassel adds – though “when it comes to coming in with a B round, I think that’s becoming increasingly common”.
For Northzone’s Marta Sjögren, the more interest in the region, the better: “Given that we’re such a small part of Europe and the world, the question so far has been: Is there critical mass in the Nordics? I think we’re finally coming to that point of having critical mass in all aspects of value creation (talent, ecosystem, and capital), so much so that we have extra resources to cope with the amount of interesting things we’re seeing.”

Image credits:
Stockholm: flickr user hector melo


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