“Capital has almost no borders”
— an interview with Tuomas Kosonen from Inventure
As a Partner at the Finnish Inventure VC fund, Tuomas Kosonen is leaving his mark on more than just the local stage. Having chosen law instead of a skiing career, he went from being a litigation attorney, in-house legal counsel for Nokia, CFO for Angry Birds maker Rovio, to finding his dream job in venture capital.
Tuomas sees the values of diverse teams and varied perspectives that are united by clear vision, strategy, and discipline. He sees becoming a household name with a well-defined specialization as a deciding factor when competing with major international players.
In our interview, Tuomas divulged the lessons he learned throughout his career, his opinion on VC professionalization, and the secrets of withstanding the ups and downs of investing in startups.
Paweł Michalski (PM): After more than 15 years in venture capital, where do you see the industry going? What are the dominant trends?
Tuomas Kosonen (TK): I would say the industry is maturing in all aspects. There’s more money in VC than ever before, the valuations are getting higher, and the companies are getting bigger.
PM: Is this trend sustainable?
TK: As long as there are revenues, profits, exits, or in other words as long as the capital is circulating, it will be sustainable. However, this growth trend needs an entire working ecosystem. Specifically, it requires investors to focus on various stages of enterprise development and exit routes. Besides, if I didn’t believe venture capital to be sustainable, I would be doing something else entirely.
PM: Does that mean VC funds, such as Inventure, will get bigger with time?
TK: We’ve been growing our fund sizes, from 40 to 70 and now to 120 million euros. Our portfolio size has also grown. At the same time, increasing the fund size depends on your activities. If you’re good at what you’re doing, then growing might not make sense.
If the companies you invest in demand more capital, it might be your only choice. Finally, I don’t think that growing is the only way to succeed in this market.
PM: Do you believe that venture capital is becoming a global game?
TK: Of course. Capital has almost no borders. Some entrepreneurs prefer to get money from international investors, especially if they enter new markets. Besides, it makes sense to raise capital from global investors in later stages.
It doesn’t mean that there’s a right or wrong way to do this. For a VC, if you have a global mandate, you need a different strategy and focus than someone who’s focused on a local market.
PM: The market’s competitive nature has become more apparent recently. Even locally, you may end up competing with global players. How can VCs stand out among their competitors?
TK: You have to be known as a household name in your respective sector. It is much more than just marketing. There are a lot of different ways to deliver value to your portfolio companies. For instance, we have a small operations team that is not making deals, but instead, they are helping the founders with operations and finding the best talent.
PM: You had some entrepreneurial experience yourself. How would you compare these two career paths?
TK: As a VC, you don’t have as much influence on execution as you would as an entrepreneur, which might be annoying at times. However, being a VC enables you to see the big picture.
You meet many fantastic entrepreneurs and learn about so many great ideas. You work with people much wiser than yourself, see numerous successes and failures. I think the older you get, the more work it requires, though experience gives you some advantage.
PM: Before entering VC, you took advantage of your legal and financial expertise. How did you eventually become a venture capitalist?
TK: It’s a funny story, though I’m not sure if it looks as good on paper. I was working as an attorney at that time. There were these three guys that came to me for advice on their first funding round. They were building a gaming studio.
This company was Rovio mobile. I helped them with their angel round and later on, they convinced me to join them as their CFO. It was a hell of a ride — I was fundraising like crazy, went through several ups and downs. It was all before the Angry Birds days. You have to understand this was a very different company.
Then, one day, my current partners at Inventure asked me if I would help them raise a fund. I knew this was what I had dreamed of, so I joined them, we raised our first fund, and now I’m stuck here (laugh).
PM: What are the other lessons that prepared you for becoming a venture capitalist?
TK: I learned to never say no to things. In venture capital, you never know which company is the winning one. You never really know who’s behind it either. Even if this particular idea won’t work, another one by the same team might.
As an example, I recently had a chat with a colleague from abroad. He gave me a hint to take a look at a company in Finland I’ve never seen before. It was already a highly profitable business and it didn’t need our money — on the contrary, they could potentially invest in our next fund. I was selling them our money, but they ended up selling their money to me. You never know what happens when you say yes to an opportunity.
PM: Is there something you wish you knew before becoming a VC?
TK: I don’t have a technical background, except for some basic understanding. I’ve learned many things by doing, but I would benefit from having more than just the basics under my belt.
PM: Do you believe that VCs will need to have a technical background in the near future?
TK: No, not at all. I believe in building a VC firm the same way you construct a VC portfolio. We have people from both technical and non-technical backgrounds, people who have a strong interest in deep tech, and people who don’t feel passionate about it at all. The diversity of ages, gender, and backgrounds helps us a lot.
PM: Do you think there is a secret ingredient for achieving success as a VC?
TK: I believe that you have to have a vision, a strategy, and discipline. You have to be lucky, too. Our industry is getting bigger, our competitors are acting faster, and the winners take all the money.
Limited partners are becoming more professional and know who they are looking for as their investment targets. If you don’t have a vision and a plan to execute it, if you don’t follow it through, it’s going to be difficult for you.
PM: Let’s look at my previous question from a different angle: is there something that the best VCs have in common, something that helps them achieve success?
TK: I think the best VCs know people. They learn to know people well, understand how people work together as teams, and figure out what kind of teams they want to back. They are also really good at spotting talent. There are many great individuals, but the key is to pick the winners from the crowd.
Though it may sound cliché, venture capital is a people’s business. You need to maintain a good reputation. You need to be honest and transparent. You need to be yourself. You have to treat people as human beings, no matter how they perform.
PM: What is the most challenging part of your job?
TK: Dealing with opportunities. We have to say no to most of the companies that approach us. The key is to understand why we are saying no. This is yet another example of having the discipline to understand your decision-making process and to follow your strategy and vision.
PM: Are there any decisions that you are particularly proud of? Any favorite achievements?
TK: If we are talking about investment decisions, there’s one that’s easy to name. It’s probably our most significant success so far: we were the first investor in Wolt. At the time, they were just six people and the idea. We believed that the team could achieve something, even if they would have to pivot.
Another example is our portfolio company Blueprint Genetics. It was a gene sequencing enterprise in which we invested in the very early days. We sold it a year ago. It was a global success story in its small bubble. We helped them grow from a small team to a corporate in an interesting but challenging industry. The learning curve was incredible.
I’m also proud of what we have achieved as Inventure. We started from scratch and are now an established player in our region, with three funds and a solid team.
PM: Venture capital is a long-term game. Is this what keeps you going in the industry?
TK: Yes, especially seeing other people grow and succeed. This career is a long-term play, but the job itself is pretty rewarding. The big successes don’t happen overnight. It can be a rollercoaster ride for everybody involved, so the small things are what keeps me going.
