Why every founder should want an entrepreneur-led VC
I’ve raised over $200m for two companies I started. Twice in climates like the one now: once just after the dot-com crash in 2002 and once in the wake of the 2008 financial crash.
Through this, I learned that there are two kinds of investors you can have as a founder: the ones you go to with your problems to strategize around how to solve them, and those who only get filtered information after the entrepreneurs have polished the story. With Node, we want to be the first kind.
The Node origin story
Having seen the ecosystem as a founder, an angel investor and LP investor, I saw a lack of Nordic early-stage investors that could relate to founders and help build great companies based on own experience.
Being an entrepreneur, I saw an opportunity to both build the investor I would have wanted in my own companies and to build a VC where we can have a unique access to the best founders in the Nordics. To me it was a no-brainer, and we put together a team of founders and operators with technical knowledge, industry expertise, complementary networks — as well as significant experience from leading venture investments.
We then invested a large part of the fund ourselves and were excited to see that 50 successful Nordic founders and operators shared our vision and invested in the fund, along with Saminvest, and several other institutional investors.
Why I think Node makes for a great investor
I had a few investors in Tobii that had entrepreneurial backgrounds, and what set them apart was primarily the transparency. When two entrepreneurs talk, the communication is direct, and we worked as partners. I knew what they needed to see for them to invest and we were side-by-side in the trenches negotiating contracts and acquisitions, sometimes until 3am. On my Tobii journey, they were Hans Otterling at Northzone, who led our Series A, and Nils Bernhard, who was an early angel investor.
The founders and investors are on the same side. They both share the financial and reputational upside, but often end up not working as real partners.
A VC usually takes a minority position but wants to be involved in building the company. In that role, the investor often becomes a CEO coach and is part of making big strategic decisions, and I think you only can do that if you have seen great companies being built up-close before.
Node and our network of successful entrepreneurs can assist via our hands-on experience with everything from recruiting, HR and compensation; introductions to investors; launching and developing products; building IP portfolios (with >200 patents held in the team) to diving into strategic topics.
How we want to work with founders
Most successful founders I know are bold, ambitious, and have a healthy dose of humility. They are often a bit naïve, because had they known how hard it is they would not have done it (Tobii absolutely is one of those examples!). But primarily they are deeply ambitious, wanting to prove it can be done to everyone who said it was impossible.
Reporting, processes, and standards are bureaucratic tools, many times providing value, but a good entrepreneur should always question bureaucracy: does this tool bring us closer to our goal?
At Node, we will try to keep a close dialogue with our founders and avoid micro-management. We will always try to be value-add: what we encumber the founder with, e.g. in terms of reporting, can never be more than the value we put in. Both as a founder and an investor, I think you need to be pragmatic and have a clear goal — and keep separate the goal from the tools you can use to reach the goal. Reporting, processes, and standards are bureaucratic tools, many times providing value, but a good entrepreneur should always question bureaucracy: does this tool bring us closer to our goal?
What we are looking for in teams and ideas
We want to find ambitious teams with complementing backgrounds that are deeply dedicated to conquering the world by building great and lasting companies — not teams just passionate about a product or an innovation — and do so while addressing large and painful problems.
We need to understand the fundamental value being created with the product: it could be saved time, lowered cost, increased revenue, or an entertainment value, and it should be tangible and a direct product of the work by the company. If we don’t understand this, it would be just pure speculation on our part.
If we don’t understand the value being created, it would be just pure speculation.
We can invest very early, but we need a high level of confidence in the team and idea. The team should be set and be working full-time. The product needs to be well-defined: what value will it create, how will some of that value be captured, who will use it and who is the stakeholder you will be selling it to. We want to be able to chat with potential customers and understand their decision process, price sensitivity and alternatives. Before these things are clear, we are not able to partner with a team. On the other side, at some point the company has progressed so far we cannot get a meaningful ownership stake for our investment: ideally, we would like to own, or see a path to owning, at least 10%.
Now is the perfect time for building
Right now, it is a uniquely exciting time to be building and investing in companies. I’ve heard quite a few people talk about valuations going down — but that’s not the reason teams succeed. Teams succeeding means realizing their grand vision and proving the nay-sayers wrong, and what makes this time unique is that the conditions are better.
The access to talent is better and teams can recruit on better terms. Senior hires could join with lower salaries and more stock options creating true ownership. Moreover, working in a frugal company creates a culture where you focus your efforts on the most important levers you can pull. During my years at Tobii we raised both during downturns and upturns. In the upturns we raised more than we needed, and I think it’s costly for the company: it creates a culture of wastefulness and failed non-core projects are costly both mentally and financially.
I’ve seen both the heydays and the gloomy days, and in these gloomier times I’m happy to invest more as the founders seeking money are working harder and know from the beginning that it’s not going to be a walk in the park.
We want founders to have someone on their team that has personal experience of building great companies in both upturns and downturns.
With Node, we are building the kind of investor founders can strategize around problems with and figure out the best solutions together. We want founders to have someone on their team that has personal experience of building great companies in both upturns and downturns. And most of all, we are looking forward to supporting the next generation of Nordic founders to conquer the world.
Founders: if this resonates with you, please drop a line to me or my team — either on LinkedIn or through the form on our website.
