Is the Nordic investment culture “founder-friendly”?

BLOG: Is there a “founder-friendly” investment culture in the Nordic countries— and what does that mean? What dilemmas do Nordic founders face when they want to raise capital?

Many founders believe that Denmark and the Nordic countries are not “founder friendly”

TechBBQ, inQvation & Synch all have their fingers on the pulse of innovation and entrepreneurship in Denmark and the Nordics. They operate at all levels of the ecosystem, from legal services to investment to promotion, and as such communicate constantly with Nordic startups. Through this communication, they have found that many of these startups believe that Denmark and the Nordics generally are not particularly “founder-friendly.” In fact, many say that such a concept does not exist when talking about investments.

So where do we start?

Denmark and the rest of the Nordic region are extremely attractive ecosystems in many respects. Last December, Bootstrapping presented Denmark’s placement in Atomico’s “State of European Tech” report for 2018 (article in Danish). In the report, Denmark is ranked 10th in Europe for the amount of money invested in professional development in the city, and the other Nordic countries also placed relatively highly.

This indicates that objectively, there is plenty of capital and investment opportunities in the Nordics; despite this, the entrepreneurs themselves think that it is not especially “founder-friendly.”

In order to get a deeper insight into this problem, TechBBQ, inQvation & Synch have talked to: Claus Zibrandtsen, CEO at inQvation, Tine Thygesen, co-founder and chairman of The Creators Community, Jesper Theil Thomsen, co-founder and CEO of SOUNDBOKS, Juuso Koskinen, VC at byFounders, and Frederikke Antonie Schmidt, founder of roccamore.

Building a “founder-friendly” investment culture

Claus Zibrandtsen, CEO at inQvation thinks that in order for an investment partnership to work: “both the founder and the investor have to see it as a long-term collaboration where they work together to develop the company and make them a success. That’s the perfect match.”

Tine Thygesen, co-founder and chairman of The Creators Community claims that there needs to be “an understanding of the company’s journey,” because without that the investors will not understand how they got to where they are.

This understanding of the journey that a startup takes is critical to a founder-friendly culture according to Jesper Theil Thomsen, co-founder and CEO of SOUNDBOKS. He thinks that “It is quite telling that it is never former founders or early employees who ask for unfriendly terms.”

In other words, people who understand startups at an intimate level —sometimes having been founders themselves— know how to be friendlier to founders. But founders and investors are not the only people who have a hand in creating investment terms that are “founder-friendly.”

There is a need to create legal frameworks that motivate entrepreneurs

When discussing “founder-friendly” investment, we mostly hear from the people on the two sides of a contract: the founder and the funder.

However, it is just as important to look at the people behind the contracts. Having legal advisers that understand the unique nature of venture capital investments is vital to the creation and execution of founder-friendly contracts with terms that are beneficial for all involved. It is important to create a legal framework that motivates entrepreneurs, and thus [is focused] on being founder-friendly. The carrot is more effective than the stick — especially within tech start-ups.

Different definitions of “founder-friendly”

“Founder-friendly” is a broad term that doesn’t seem to have a widely agreed-upon definition within the world of tech and entrepreneurship.  Particularly when discussing the imbalance of power that is inherent to venture capital and entrepreneurial investments, it is hard to think of what exactly “founder-friendly” could mean.

A simple, effective baseline we could start with comes from Frederikke Antonie Schmidt, founder of roccamore, who thinks that “founder friendly investments are about looking out for the founder in the contract”. However, Claus from inQvation noted that “there are different definitions of ‘founder-friendly’ — especially when we talk about investments.

But I believe that, after all, we want to promote Danish entrepreneurs in the best possible way.” So while there isn’t a total consensus on what “founder-friendly” is, all of the people we talked to noted in one way or another that the key to being “founder-friendly” is to just be friendly to the founders.

Therein lies the real debate: what is the best way to be friendly to founders? What are the best ways to make an investment and entrepreneurial culture in the Nordics that is friendly to its founders, while still providing returns for the investors who help the companies to market?

Enter TalkBBQ

Based on these observations, inQvation, Synch, and TechBBQ have joined forces to answer these questions by starting a new initiative under the name “TalkBBQ” — an exclusive event on Thursday, June 27, 2019 at Matrikel1 in Copenhagen that will shine a light on this important debate.

We hope to build consensus on how to promote a more outwardly attractive investment culture in the Nordics, and create an ecosystem where we can attract and keep talented technologists and entrepreneurs.

Let’s talk about it!

One of TalkBBQ’s goals is to get the debate going before the event itself. Therefore, everyone from the Nordic startup ecosystem is invited to contribute with dilemmas, perspectives, experiences, and anything else they think is relevant to the Nordic investment culture. These will TalkBBQ’s experienced panel then try to answer. The panel will be moderated by serial entrepreneur and investor Nikolaj Nyholm. After the debate, there will be a festive summer BBQ with delicious food, cold beer from Mikkeller, great music, and ample opportunities to network and talk about what we’ve learned.

Key takeaways and quotes from the event debates will also be published in the coming weeks for those who cannot attend in person. MOOT will also cover the event and it will be possible to get insights by following their instagram stories, where they will highlight the most important points during the event.

The three companies coming together to put on TalkBBQ represent these three sides of founder-friendliness: inQvation represents the investors, TechBBQ represents the startups, and Synch represents the legal advisers. Together, they hope that TalkBBQ will illuminate all perspectives of this, and build consensus on best practices for creating a “founder-friendly” investment culture in the Nordics. TechBBQ, inQvation and Synch encourage as many people as possible to take part in the debate and help set an agenda for defining a “founder friendly” culture in Denmark and the Nordics as a whole. You can follow the event and participate in the debate by signing up on eventbrite for one of our 150 exclusive tickets  (click here).

inQvation, Synch, and TechBBQ all believe that Denmark and the Nordics must work together to form the best ecosystem for talents and entrepreneurs. In this endeavor, it is important to consult relevant people about how we can create an entrepreneurial environment with the best possible conditions for growth. As such, they have joined forces to hold TalkBBQ.

We talked to some representatives from inQvation, TechBBQ, and Synch about their companies’ relevance and motivations for contributing to the creation of TalkBBQ:

Avnit Singh, CEO of TechBBQ [translated from Danish]:

“Denmark and the rest of the Nordic region are extremely attractive ecosystems in many respects. TechBBQ is an event that exists to highlight the Danish and Nordic values ​​and strengths that make our ecosystems unique and competitive. With TalkBBQ, we will kick-start a focus on how to create an even better framework for a ‘founder-friendly’ startup culture, which will resume at TechBBQ in Øksnehallen this September. We must become better at highlighting the characteristics that make the Nordic and European ecosystems attractive. And we need to find out how we can improve these and thereby create the basis for a more ‘founder-friendly’ startup culture.”

Claus Zibrandtsen, CEO of inQvation [translated from Danish]:

“I am sure there are different definitions of ‘founder-friendly’ — especially when we talk about investments. But I believe that, after all, we want to promote Danish entrepreneurs in the best possible way. We know that this will benefit Danish society in both the short- and the long-term. Entrepreneurs will establish and develop companies with Danish headquarters, create jobs and later give back through mentoring, working on boards, or investments. So we only want the best for our entrepreneurs. Therefore, I also believe that it is important to focus on this area so that together we can help to create the best conditions for entrepreneurs and their growth opportunities. InQvation exists to help create success for entrepreneurs. We therefore also take a more active role when we invest where we not only come with capital, but also ‘manpower,’ as we believe that it creates a better basis for growth for our entrepreneurs.”

Michael Brandt, lawyer at Synch [translated from Danish]:

“As legal advisers for both large and small tech investments, we see both sides of the coin. And our advice is almost without exception to create a legal framework that motivates entrepreneurs, and thus we focus on being founder-friendly. There is certainly a need to protect investors, but this is best done in the context of motivation. The carrot is more effective than the stick — especially within tech start-ups. We have seen it as a perfect match that, together with inQvation and TechBBQ, we can focus on the message of creating and emphasizing ‘founder-friendly’ funding for start-ups.”