Why I’m investing in Danish startups

After announcing investments in Peakon and Planday, 2 startups launched out of Copenhagen, I thought it was time to reflect on what attracted me to that vibrant, emerging startup hub.

Copenhagen School of Design and Technology

On May 25th, 2015, after a weekend spent celebrating a hardly obtained promotion into Luxemburgish Second Division with my teammates from my beloved football club, Avenir Beggen FC, I boarded a 6AM plane at Findel airport and 2 hours later, I landed in Copenhagen for the first time in my entire life. With a very painful ear infection.

It was Whit Monday, it was raining and the city was looking grey, sad and empty. My wife and kids were on holidays in Cascais with my parents and I was feeling tired, depressed and homesick.

Beautiful view of rainy Copenhagen

Some 300 days later, I have met with more than 50 Copenhagen-based startups (including some really special ones such as Tattoodo and Tonsser) and there are many more I want to meet in the coming weeks. My venture capital firm, Idinvest Partners, has injected over $10 million in Danish startups during Q1 2016 alone, which undoubtedly establishes us as one of the most active early-stage investors in the Oresund region (the area composed notably of Copenhagen and Malmo, two cities which are linked by the beautiful Oresund bridge, probably one of the most impressive things ever built by men).

Personally, I’m honored to serve on the board of two very promising Copenhagen-born SaaS startups, Peakon and Planday, with great founders and some of the most famous representatives of the Scandinavian startup ecosystem: Tommy Ahlers, founder of ZYB (sold to Vodafone) and former CEO of Podio (sold to Citrix); Klaus Nyengaard, former CEO of Just Eat and Chairman of Treatwell; Nikolaj Nyholm, Partner at Sunstone and angel investor in Mojang (Minecraft); and Johan Brenner, Partner at Creandum and whose career is simply too long and successful to be summarized here.

I find myself travelling to Copenhagen every 3 weeks, I read Danish newspapers (in English) and I’m taking my family to Denmark for a weekend in May. Around last Christmas, my wife and I even watched Season 3 of Broen, a great Danish/Swedish TV series taking place between Copenhagen and Malmo. Original version with subtitles of course.

I guess a fair question is: what happened?

Well, first, I obviously got extremely lucky. I met the right people at exactly the right time. When I look back at it, it’s almost a joke.

It all started in Amsterdam actually. I had just joined Idinvest Partners from Mangrove Capital Partners and I wanted to focus on some of the new emerging startup hubs in Europe.

In Amsterdam, I met with Kasper Brandi Petersen, the Danish founder of The Cloakroom (a startup that he actually sold a few months later). Kasper recommended me to consider Copenhagen and he quickly introduced me to Jasenko Hadzic who was then running #CPHFTW, the association promoting startups from Copenhagen (Jasenko left #CPHFTW a few weeks after that to launch his own startup and was replaced by Christoffer Malling). But before that, he organized a great event for Idinvest, during which my partner Matthieu Baret and I met 9 startups that he had selected for us.

Jasenko notably encouraged us to invite Phil Chambers, founder of “Thrive AI” (that would later become Peakon) to that event and we met Phil and his cofounder Kasper Hulthin (it was Kasper’s first day being full time with the company) although Thrive AI had just been created. As a former tech investment banker, I had been doing a lot of hiring, training, staffing and mentoring of junior bankers for many years and I had worked with several Talent Management software companies such as Jobpartners, Taleo, Talentia Software, etc. so I was immediately attracted to Peakon’s vision and ambition of building a People Analytics platform. I introduced them to Curse and Scality, two of Idinvest’s portfolio companies which happened to be then looking for a way to replace their annual surveys to measure employee engagement and which gave me some very positive feedback on Peakon’s product (when compared to competitors Officevibe, TinyPulse and Culture Amp) and finished to convince me to keep an eye on Kasper and Phil.

Dan Rogers, Phil Chambers and Kasper Hulthin giving birth to Peakon

Funnily, at that event, there was only one company invited by Jasenko which could not come to meet us (and which ignored me for a long time afterwards…). It was Planday, a collaborative employee scheduling and workforce management solution.

Luckily, a few months after that, Christian Steffensen from Churchdesk (a startup backed by my ex colleagues from Mangrove Capital Partners) recommended Klaus Nyengaard (a famous angel investor in Copenhagen and a shareholder in Planday) to get in touch with me as Klaus wanted to meet more French startups. I quickly introduced him to an exciting seed opportunity in Paris in which we ended up co-investing. Now I had my angle to convince Christian Brøndum, CEO of Planday to meet with me right when his company was starting a road show for its Series B round…

Peakon and Planday are two great companies in industries that I love and that I somehow understand, started by top entrepreneurs who were founders and key executives at startups and leading tech companies such as Podio, Gumtree, Qype, Citrix, Iris Software, Songkick, IBM, etc. and who are surrounded by some of the most experienced investors I’ve met (guys from Creandum, Sunstone, Zendesk, Atlassian, Bookatable, etc.).

It was easy to decide to “tag along” and it was even comfortable to invest in a foreign country under such conditions.

As a VC, when you stumble on very talented teams, you just behave opportunistically. Christian Brøndum, John Coldicutt, Phil Chambers, Kasper Hulthin & co invested in me at least as much as Idinvest and I invested in them — by now you probably believe that most Danish men are called Christian and Kasper. Well, that’s actually kind of true :).

The Planday team in front of Founders House

That being said, let me try now to rationalize “ex post” what attracted me to Copenhagen, as a person and as a venture capitalist.

First, very quickly, there are some obvious, objective reasons for investing in Denmark:

  • Denmark has the highest broadband adoption in the world, 4G coverage is practically universal and substantial investments have been made to the infrastructure.
  • It’s a welfare state, which actually encourages people to take risks and become entrepreneurs as they don’t have to worry about the most basic needs of their loved ones as much as in other countries (health insurance, good schools for free, unemployment benefits, etc.).
  • Denmark has numerous tech success stories (and exits) to showcase (especially in the software space) that inspire local entrepreneurs: Zendesk, Success Factors, Sitecore, Trustpilot, Just Eat, Podio, Endomondo, etc.
  • Denmark is consistently ranked as a top country to do business: transparency, rule of law, stable country, stable currency, etc.
  • Cost of housing in Copenhagen is reasonable (compared to London and Stockholm for instance). You can have a very good life in Copenhagen.
  • Etc.

But I won’t focus on those reasons and will rather discuss them in another post. I prefer simply sharing some of the reasons that specifically attracted me to Copenhagen.

It’s a relatively small ecosystem and a close-knit community

Many founders from Copenhagen know each other and some of them have worked together in the past. They all want their startups to be successful but not to the detriment of others. Entrepreneurs don’t trash other entrepreneurs and have a common interest in promoting the local startup scene and having success stories in Copenhagen that would give visibility to the ecosystem.

Many startups have offices in the city center, at Founders House or at Rainmaking Loft, which makes it easy to visit them and every entrepreneur I meet in Copenhagen will generally recommend 2 or 3 other startups to look at.

Beautiful Rainmaking Loft in Copenhagen

Finally, most startups collaborate with #CPHFTW to promote the city as a startup hub.

So it’s easy for me to understand what is going on in Copenhagen remotely, from Paris, even if I only spend 2–3 days there every 3 to 4 weeks.

I know which startups have traction, which ones are struggling, which ones are hiring good talent, which ones are trying to raise money, which new startups are being started, etc.

In the last 10 months, I have rarely been surprised by a startup’s fundraising announcement. This happens to me all the time with cities such as London and Berlin.

There’s a lot of talent available and eager to work at startups

I often discuss another startup scene (Amsterdam) with Arthur Kosten, the main business angel there and his view is that most of the tech talent is sucked out of the entrepreneurial ecosystem by a few Tech giants which also happen to be cool companies with a great culture (Booking.com, Adyen, Coolblue, Takeaway) and by a few exciting scale-ups (Catawiki, WeTransfer and Elastic).

Copenhagen does not really suffer from such phenomenon.

Level of education is very high, everyone speaks perfect English, the pool of tech talent is extremely deep and more importantly it is available and eager to work at startups.

Denmark has actually one of the world’s highest rates of startup companies created per capita.

Copenhagen is also very attractive to foreign talent. Again, welfare state, reasonable cost of housing, open-mindedness, quality of spoken English, etc. The initial team at Peakon at the time I funded them was a small version of my INSEAD class: Danes, Swedes, Brits, Germans, a French girl on customer support, a Brazilian full stack developper…

I face less competition from other top international VCs

Creandum is covering Denmark quite well (Vivino, Planday, etc.) and has just added a Danish professional to its team (Bjarke Staun-Olsen). Apart from them, only Index, Mangrove, Prime and Balderton have invested in Denmark in the last 3 years (in Vivino, Falcon Social, Autobutler, Churchdesk and Opbeat).

No sign yet of some of the other best European investors such as Accel, Atomico, Highland, Kennet, Partech, Felix, Eight Roads, Northzone, Point Nine, Notion (only Tradeshift 5 years ago), Ventech, etc. And almost no investment from US-based VCs (only Sequoia invested in Malmo-based Mapillary).

Generally speaking, I’m hearing from Danish entrepreneurs that they rarely see international investors in Copenhagen and that they have to travel a lot to fundraise.

This will change as the ecosystem becomes more and more visible and successful and also because Chris Malling at #CPHFTW is doing a great job at promoting the local scene but right now I face less competition in Copenhagen than at home in Paris or in London and Berlin.

This is actually very pleasant. It gives me time to meet entrepreneurs several times, to get to know them, to follow their progress, to take references, speak to customers, introduce customers, study a market and the competitive environment, etc.

In a nutshell, I can do my job properly and work the way I like.

Danish startups think internationally from day one

This is something I personally like a lot. It comes from my time at Mangrove Capital Partners watching Israeli startups such as Wix and WalkMe.

As Denmark is a small country and has a small domestic market, it’s completely normal for Danish entrepreneurs to think internationally almost from day one.

Danes are the most “international people” I know in Europe. It’s natural for them to travel everywhere to find customers, to hire foreigners or to accept foreign investment. They don’t even think about it.

Peakon’s first 10 customers were almost from 10 different countries (France, Israel, US, Germany, UK, Sweden, Denmark, etc.) and Planday has hundreds of customers in the US, in the UK, in Norway, etc.

I believe that this comes with challenges in terms of organization, prioritization and customer support but overall, I see this ability to move fast in many markets as a key competitive advantage and a very specific DNA when compared to startups from Berlin, Paris or London that enjoy a big local market.

For a foreign investor with its home in Paris, it’s also very important to see international ambitions. We could not be helpful sharing our network with a company intending to build a local leader in a country that is not France.

The Danish founders of Zendesk about to IPO in NYC

There’s a healthy environment for startups in their early days

Denmark is lacking local capital at the Series A+/Series B and Growth stages. But not at the early stage.

Seed Capital, Northcap, Sunstone, etc. and top business angels such as Tommy Ahlers, Klaus Nyengaard, Thor Angelo, Anders Pollas, Morten Primdahl, Tommy Andersen, Nicolaj Nielsen, etc. Copenhagen has all it needs at the seed stage in terms of capital, experience and mentoring in order for its startups to get started.

Successful Danish entrepreneurs are deeply attached to Copenhagen and its startup scene and you very often see the founders of Zendesk, Tradeshift, Trustpilot, Just Eat, Podio, etc. in the city and… in the cap tables.

I find it easy to do business in Denmark

It probably sounds obvious but it’s not. I’ve worked with startups from Israel, India, Spain and Russia while I was at Mangrove and the sense of cultural differences was way higher than when I’m working in Denmark.

Again, people speak perfect English. Founders, VCs, business angels are very sophisticated when it comes to business. I can work with top law firms such as Kromann Reumert and top financial advisors like Deloitte. Term sheets are close to what we see in France, legal documentation is very similar, etc. Things are done properly, in due time, everything is clean and done by the book.

And I like the Danes. Very direct, simple, straightforward people. They call a spade a spade. Negotiations don’t take forever, there is a lot of trust, transparency and listening, the line of communication is very clear, etc.

And Danish entrepreneurs usually have that level of self-confidence (without being arrogant) that I like.

Danes are also very polite, respectful and “borderline cold” people the first time you meet them but once you get to know them a bit better, they are friendly and empathetic. I recognize myself very much in those types of personalities and it’s a comfortable and efficient environment for me to work in.

Since I like to use football comparisons for almost everything in life, Danes remind me of Thierry Henry, one of the most talented and successful French football players ever (and the hero of London-based Arsenal FC) who was sometimes considered arrogant although he would always say he was absolutely not. Henry used to say the following: “If you ask me if I can score from 30 meters by putting the ball in the top corner of the goal, I will say yes. And you will think I’m arrogant. But actually, that’s just the honest answer to your question. I simply know I can do it. But if you ask me if I’m good with the head, I will say no. Not because I’m humble. I’m just not good at it. Period.

Most of the Danes I’ve met so far are like “this”.

Copenhagen is a very pleasant city

This is very personal but I enjoy spending time in Copenhagen.

It’s a European capital and a very nice city but also a small one. Pedestrian streets, great restaurants, very safe, no traffic, no pollution, good hotels for decent prices, great outdoor activities if you want to stay around for the weekend. Nice, polite people who are also welcoming to foreigners.

To this you can also add a very efficient airport, 15 minutes away from city center, the best “low cost” in Europe (Norwegian Airlines) that can take you from Copenhagen to London for €20 in 80 minutes.

It’s just always a pleasure to come to Copenhagen.

Studio, one of the top new restaurants in Copenhagen

In the coming months, I’ll be spending even more time in Copenhagen, working with Peakon and Planday and looking for Idinvest’s third Danish investment. And I will also go up North to see if I can replicate this great personal experience (building a presence in Copenhagen) in another Scandinavian city: Stockholm.

If you consider investing in Copenhagen and you would like my very humble tips and advice, feel free to get in touch. I will be happy to help.