Stockholm start-up smackdown: investors feel the sting
Three Stockholm entrepreneurs gave four well-heeled investors a taste of their own medicine last week, rewriting the standard start-up narrative and exacting sweet revenge – with surprising results. The Local and business accelerator STING bring you the story.
It's STING Day. But if you've clicked in expecting a 24-hour tribute to the new wave-rock-jazz-reggae-worldbeat superstar and self-proclaimed king of tantric sex, then you may find what follows a little disappointing.
If, on the other hand, you are looking for a blow-by-blow account of a Battle Royale between Sweden's hottest investors and start-ups, then you've struck gold. Because STING Day is the beating heart of Stockholm’s thriving tech start-up scene. It's the annual frenzy where bright ideas collide with deep pockets on a grand scale. Or, as the blurb would have it: everybody you need to meet, all in one day, one place.
This is it. This is what entrepreneurs the world over have been waiting for. The turnaround. The flipabout. Revenge. Payback time. Yes folks, it’s the STING Day reverse pitch, where four experience-encrusted investors don their battledress and take to the stage to present to entrepreneurs.
Anyone who’s ever had the nerve – or the financial need – to read the blurb on an investor’s web site knows that the faux-humble tone is merely a trap. We all know where the power really lies.
But not today. Because today the investors are being called out on their humility. Today, one business angel, one family office, one hard-core venture capitalist, and one corporate venture rep are going to be
publicly flogged pitching to the founders of start-ups.
And The Local – no stranger to the occasional investor pitch itself and consequently perhaps not entirely unbiased in its reporting – will witness the ensuing havoc.
The sacrificial lambs
Nothing happens in Sweden without a consensus, so how did the Swedish investment community pick these four characters to lead the charge? Are they the cream of the crop or the sacrificial lambs?
Erik Byrenius (@byrenius), Founder, OnlinePizza.se. Never mind Mr Domino or Papa John - when it comes to pizza supply, Byrenius is your man. He built OnlinePizza.se, an online pizza company, from the base up and sold it for almost $40m. Serious dough. Battledress: power-jeans, no-shit t-shirt, grey jacket.
The family office representative
The family in question is the Hed family - owners of Rovio, inventors of Angry Birds and about a hundred other games that nobody’s heard of. The office in question is Moor. Oh, and the representative in question is Katja Bergman (@KatjaBe). Battledress: black top, black skirt and very, very dark green boots that are almost black.
The hardcore venture capitalist
Creandum. Cre. An. Dum. The entrepreneur’s Holy Grail. (If Northzone says no.) And Staffan Helgesson (@shelgesson), who earned his stripes at P&G, McKinsey and IKEA and has five (count ‘em) funds under his belt, looks confident. Battledress: power-chinos capped by a shirt and sweater with fetching power-patches on the elbows.
The industrial investor
Apart from The Local, there are three media giants that matter up here in Sweden. Miriam Grut Norrby (@mgrutnorrby) will be making the case for the one called Schibsted, wielding her experience at Facebook like a solid-gold fist in a silk glove. Battledress: beige top, black trousers, black boots.
Given the number of first-rate entrepreneurs in Stockholm-The-Start-Up-Capital-of-EuropeTM, there can have been no shortage of candidates for putting the boot in today. But these are the best of the best of the best. And the bloodthirsty crowd is evidently hoping that these lucky lions will have a bit of bite about them.
The fisherman’s friend
And Johan Attby (@JohanAttby), founder of Fishbrain, the world’s favourite fishing app. Because nothing beats anglers working together.
The scourge of the wifi hotspot market
Niklas Agevik (@niklas_a), founder of Instabridge, doesn’t want you to have to pay for wifi ever again.
The medical marvel
Caroline Walerud (@CWalerud), co-founder of Volumental, wants to bring your body online with the power of 3D scanning.
As it happened
Let the games begin. The Local is front and centre. Time for the play by play.
Strangely enough, the room is still mostly empty. So much for Swedes being on time. I guess when money's involved, there's no rush. A cardboard cutout mash-up of iconic buildings from around the world sits centre-stage.
The crowd settles in to watch the spectacle. It's easy to spot the investors (who reportedly outnumber the start-ups by nearly 2-to-1): their shoes have a bit more shine, their suit coats a bit more style, their beards a bit more groom.
It’s all getting very gladiatorial here at STING Day, and as the greatest gladiator of them all put it, “I will have my vengeance, in this life or the next." No need to wait that long, because referee Tyler Crowley (@steepdecline) has bounded onto the stage – and we’re off.
"You guys are the hot young startups of Stockholm...you guys are the poster children, so it is appropriate to have you guys critiquing these investors."
'Erik the Angel' jogs confidently up on stage. The crowd roars. Soon we'll find out if he truly is a saint.
"Hello, my name is Erik. And I suck."
Interesting start and he’s got the audience’s ears. Which he then proceeds to fill with some wise words about how at any company the best investor is always the customer. And that investors are “just workarounds until you have enough customers”. You can tell he’s run a business.
He also sucks at lying, in case you were wondering.
Erik’s getting passionate about his passion. Angels invest their own money. And they can act quickly, he points out. “I myself once made a 24-hour investment. I heard the pitch one day and signed the papers the next,” he says. Match THAT, Creandum.
Another attack on the big beasts of the investment world, as Erik argues – quite convincingly – that a big investor in a seed round can be a millstone later as they can set the terms for future rounds. But an angel is happy to bring in a big investor later.
That’s it from Erik and the panel members look like they would stab each other for the chance of getting the first question in. But it’s Niklas from Instabridge who grabs the mic. “Great pitch Erik, thank you very much.” That may not be the greatest line in comedy history but the delivery was exceptional and it brings the house down.
Niklas is on a roll with his I’ll-ask-the-questions act. “But from the investment point of view, I think it's a bit early. We'd like to see a bit more traction before we take your money, but you know, we'd love to stay in touch.” As any entrepreneur who has ever pitched will know, this is good. Audience loving it.
Now fish man Johan gets in on the act. “It was a little bit generic about angel investors. I want to know why I should choose Erik and not one of the other business angels out there.” Laughter, but actually that was a good point. Why you, Erik?
“If you need product development and user experience, I’m the one.” A powerful finish, delivered just before he’s swept cleanly off the stage by MC Tyler.
You’ll need big investors – but don’t bring them in too early.
Your customers are your most important investors.
Katja from Moor flies onto the STING Day stage, a smile on her face and a twinkle in her eye. She quickly gets down to business, pointing out that Moor is "like an angel" but with the financial muscle to participate in future fundraising rounds.
"Moor was founded out of frustration," says Katja; a frustration stemming in part from past VCs' rejections. Maybe that explains the 'Angry' in Angry Birds. In any case, as Katja tells it, experience is one of Moor's main selling points: "We can give you the advice we would have liked so you don't make as many mistakes and can do things faster." Can't argue with that.
"Hands on advice... a strong network... doors open in Asia and the US..." Katja rattles off a menu of Moor's main courses to follow the starter of cold, hard cash. "We can be lightning fast," she adds, as a slide appears showing the trajectory of a start-up's potential relationship with Moor. "We can bridge that death valley that so many companies face." It's Metaphor Madness here at STING Day right now.
The smile on Katja's face becomes increasingly engaging as her presentation, well, doesn't. She meanders through Moor's structure, explaining, "We have a lawyer person, and a CFO/COO person." Is Katja taking this seriously?
"And then the viral...mighty eagle...who will virally spread your product..." she drifts off."Katja, I'm getting the impression that you don't pitch much," Tyler interjects, prompting a roar of laughter, not least from Katja. "How does it feel to be on the other side?" he inquires. "Hilarious!"
Amid persistent giggles, the panel probes Katja on how Moor adds value ("a big network"..."we will challenge you to think big"), but humour seems to have gotten the upper hand. "We are much more than money. We are your friend," she blurts out. "We will believe in you when no one else believes in you."
By the way, this is clearly a savvy audience. Katja's claim that "we have 800 mighty eagles who think they can walk on water" passes without so much as a raised eyebrow.
Panelist Johan is promised meetings with Rovio as Katja jokingly boasts that Moor "doesn't need to bring anyone else to the table" but is open to working with other investors that complement Moor. Caroline wants to know what kind of investor that would be. "Maybe somebody who is more humble," Katja quips, before guffawing at her own joke. Never mind the metrics - board meetings must be a hoot with Moor in the room.
Family office investors can be fast, flexible, and bring added financial muscle
Dare to be fun – and funny. Investing and growing companies should put a smile on your face.
"We're like an angel, but with the financial strength to take you all the way"
Staffan takes to the stage, strides past the lectern and positions himself centrally, facing the audience. And he gets straight to what he sees as Creandum's USP (Unique Selling Point, sometimes pronounced 'oosp'): an office in Menlo Park, California. The heart of Silicon Valley, where a quarter of Creandum's team resides. "There's very little chance that companies can succeed unless they are very strong in the US," he notes.
Staffan has forgotten that he's supposed to be pitching to the entrepreneurs. He hasn't even looked at them! Is this dazzling confidence or a snub he'll regret later?
He rolls casually through a few of Creandum's many successes: iZettle, Lina's MatKasse, Wrapp, Edgeware. "And we were one of the early investors in Spotify." That was an afterthought.
"Our mission is about serving entrepreneurs," Staffan explains, finally gesturing over his shoulder to "these guys". He's using them as a prop! The entrepreneurs have become cubs and there's no doubt who's the lion king. The main selling points, then? The US link, the prospect of joining a family of "very successful companies" (a recurring theme), and professionalism. "We do this for a living."
But Creandum may not be for everyone: "We're hard to convince," he notes. Wait, this isn't a pitch - he's telling us why Creandum doesn't need to pitch. And by the way, they're only interested in companies with potential to reach one billion SEK.
Staffan turns to Tyler, confident of the tightness of his pitch. "Four minutes?" But Tyler brings him down a notch: "It was more like seven, but that's OK."
The panel looks eager to dig into Staffan. First up, Niklas. "It seems like there are very low barriers to entry in this market," he proclaims, again echoing a line thrown at so many start-ups in their own quest for money. The room erupts in laughter. But Staffan is ready. Talk to Creandum companies, he counters. "The only verdict that matters the one given by the companies we've invested in."
Next Johan demands "some metrics, some hard facts", again turning the tables. Has he beaten the star investor at his own game? Staffan refers to the "miss list", a quarterly list of deals and exits done without Creandum, which the firm uses for numbers-driven soul searching over opportunities missed.
Caroline pushes Staffan on his passion. He answers by comparing the length of time it takes entrepreneurs to raise money (six months) to how long it takes to raise money for a venture fund (24 months "of constant travel"). "We feel your fundraising pain," he says, meaning, "Your fundraising pain is nothing compared to ours."
Tyler ushers Staffan off the stage. "You're scoring SO many points on the empathy scale right now."
European tech companies have little chance of success without a strong presence in the US.
Venture funds hate missed opportunities as much as start-ups, and rigorously apply metrics internally to see what went wrong.
"The only verdict that matters is the one from the companies we've invested in."
Finally, Miriam from Schibsted Growth takes the stage. "This is the first time I've ever done this on a public stage," she admits before promising to "share some secrets". We're all ears as she offers up her first morsel of wisdom. "Every corporation was once a start-up." Even a corporate behemoth like Schibsted started out "trying to change the world". A good point, except that nobody at Schibsted today remembers those crazy start-up days in 1839.
"We love investing in people who are smarter and braver than we are." Humility alert!
Coffee anyone? Miriam encourages the audience (and panelists) to come and have coffee in Schibsted's offices, where "Sweden's most successful internet companies engage with each other. If you're in Stockholm and thirsty, they're at Västra Järnvägsgatan 21, just by Central Station. Ask for Miriam.
They say you can't choose your family, but one gets the impression that's what start-up investing is all about. Echoing previous speakers, Miriam stresses that investing with Schibsted is like "joining a family". The benefits? Access to insights "we'd never share with an outsider," she says. Certainly a massive value-add to new companies who have to punch hard to break out of their start-up bubble.
Miriam wraps up by stressing the importance of shifting the power balance through today's reverse pitches. "As much as it might seem that it's all about us choosing to invest in you, it's equally about you choosing to invest in us."
The warm-fuzzies continue as Miriam starts to sound like a couples' counsellor. "It's like entering a long-term relationship. It has to be built on trust and respect and mutual interests to work out." A slide depicting a heart appears behind her. "With Schibsted, it's usually a love story." Awwww.
She's won the audience's hearts but did Miriam woo the panel? Not quite. Niklas wants to know more about the Schibsted team, which she describes as small and filled with entrepreneurs from "places like Facebook and Yahoo". More important to remember, adds Miriam, is that corporate VCs are run independently from their parent firms. "You still run and manage your own company."
Caroline wonders whether joining the Schibsted "family" makes it hard for start-ups to work with their competitors. "Absolutely not," replies Miriam. "That's something that we love. Making money off a competitor. That's awesome."
And what about exit opportunities, asks Johan. Are they limited if a start-up is "in bed, er, in love with Schibsted?” Miriam once again responds like a counselor. "It's about talking and raising that question from the beginning. And deciding on what kind of journey you want to do together with us." And they all lived happily ever after.
In addition to cash, corporate VCs offer access to business support functions that can help entrepreneurs get ahead.
Having a corporate VC investor won't prevent a start-up from working with the corporate parent's competitors.
"Ask yourself what kind of relationship you want with your investor"
Sure, it may have looked like fun and games up on the STING Day stage, but don't be fooled by the smiles on everyone's faces. The stakes are high, the reputations of four investors and the types of investment they represent are on the line.
MC Tyler instructs audience members to whip out their smartphones and start voting. "Who would you choose as your investor and co-owner?"
As the crowd taps furiously on their gadgets, Tyler presses the panelists for their favourites. Both Niklas and Johan, give Erik's points for his passion, but end up picking Creandum "because of the US connection".
Caroline has trouble deciding. "Can I pick two?" Tyler says no. Forced to choose, Caroline sides with Moor and its ties to Rovio. "Their gaming background could help us get introductions to a lot of potential customers.
The votes are counted, says Tyler. "And the winner of the reverse pitch 2014 is Erik!" As the crowd goes wild, a distinct "YES!!!" rings out from an elated Erik as he jumps out of his seat. Don't let anyone tell you angels don't care about winning.
The post mortem
Amid clusters of well-wishers and wide-eyed entrepreneurs with business cards at the ready, some of the panelists and investors offer their thoughts on having the tables turned between investors and start-ups. What did everyone learn? Do they have any regrets? Was it useful? Let's find out...
"This is all fun and games for the most part, but there is some element of truth in the responses. And there is something happening here at STING Day...
"Something is brewing. The landscape is changing. If you go back five or ten years, it was the investors who ran the show. Now there's a bit more power in the hands of the start-ups...
"Before there may have been more barriers between entrepreneurs and investors, but now it's like, hey, come over to us, have a coffee..."
"This was the best thing I've done for a long time. It was payback time. I think it's a great concept. I encourage more of this...
"It's no surprise the angel resonates with this audience because most folks in here are entrepreneurs and thus closer to him. He's also likeable and had an exit...
"It would have been great to see one of the UK-based investors onstage to pitch and see how they present their advantages compared to local Swedish investors..."
"It was fun and fair. It's good to be challenged. I think it was very useful. You need to pitch yourself to entrepreneurs to get them to choose you. Obviously, we want to attract the most interesting entrepreneurs just like everybody else...
"This should be done more often, I think. It's fun, and it's also good for the entrepreneurs to know the differences between different types of investors. It's educational...
"My favourite moment? When it was over!"
"What I should have mentioned is that every single investment that we do includes an angel pool. We put aside a few million SEK and invite in five to ten angels that can really help the company. I think very few VCs actually do that...
"I think the entrepreneurs on the panel were actually outstanding. The questions were tricky and they were really funny...
"The toughest question was when Johan asked about metrics, which ones should I use to evaluate you? That was a super good and super tough question...
Erik, the winner
"I was very impressed by the entrepreneurs. They asked very relevant and excellent questions that took things to another level...
"The other investors were a little similar to one another and sort of competing against each other. I was playing my own game...
"Preparing for this really made me sit down and think through what my USPs are as an angel investor. And that helped clarify in my head what the differences are with angels, and what the benefits are..."
And that's a wrap from STING Day 2014. Thanks for tuning in, to The Local's coverage. C'ya next year.
Still hungry more from the reverse investor pitches? Here's the entire session in real time. Knock yourself out.
This article was produced by The Local and sponsored by STING.
This content was paid for by an advertiser and produced by The Local's Creative Studio.