Experienced investors make a huge difference

Photo by: Stine Heilmann

Translated from Danish. Originally brought by bootstrapping.dk

Ulla Brockenhuus-Schack, managing partner at Seed Capital, has been a leading figure on the venture scene for decades and stands behind investments in e.g. Vivino, Endomondo, Trustpilot, Lunar and Templafy and several hundred others. She has a background from working at both McKinsey and Egmont.

1. You are raising DKK 1 billion. for the new Seed fund and have Dansk Vækstkapital and Augustinus Fonden among others in the back: Is the fund so big — by Danish standards — because you want to follow startups for a long time? And what are you investing in?

The new fund will target approx. 20 cool technology entrepreneurs who have created companies that can become global winners. We invest from the seed stage and all the way to the exit. DKK 1 billion is needed to follow the very best all the way to success.

We succeeded in making a so-called first close of DKK 500 million when the corona crisis raged in the Spring. Now we are well on our way to raising the next DKK 500 million. The investors we appeal to are the so-called “family offices” and wealthy people who want to get involved in the next generation of Danish growth companies.

2. You have had many of the best startups. What is your own explanation for this, and how do you — with a relatively small team of less than ten people — interact with them?

We have succeeded in identifying and attracting the best entrepreneurs in Denmark. At the same time, we have been able to assist them on their journey including helped securing funding for them to build their startups into successful growth companies. Among other things, we have helped our companies break their growth journey into meaningful milestones that enables the entrepreneurs to focus on the right things and grow at the right pace with the right team in place — tailored to the right funding. We have been doing this for many years, and we’re quite good at doing just that. It’s a lot about experience because venture is difficult, and it takes time to learn. You will make some bad investments in the beginning, but once you have the experience, you will of course make fewer mistakes and get more success cases in the portfolio. Furthermore, it is important to point out that it is not only us who have improved over time — entrepreneurs in Denmark have certainly also become more skilled, and there is a huge potential in future entrepreneurs who’ll need financing — and preferably wise money.

Our team is large enough in relation to how many investments we make. It is important that there are not too many companies per investment manager. There is a rule of thumb that a venture investor can have 5–6 portfolio companies at a time and still do a great job for them. It is also important to point out that we have an excellent network of people who help us get our companies off the ramp, such as Preben Damgaard, Lars Thinggaard and Jesper Johansen. They typically take an active role as chairmen of the board or similar. In addition, we help our companies obtain further financing, which is crucial for their success. There is not enough money available in Denmark at all, so it requires, that we also help them attract international funding. Already today, 60% of our companies in Fund 3 have received Series A financing or more from international investors, and in total, we have raised over DKK 13 billion to our portfolio companies!

3. There was noise about your own role in the early stages of Seed, where some thought you too easily gained access to privileged dealflow. Has it meant anything to you and your actions?

Back in 2004, Seed was established at the request of e.g. Vækstfonden, as the innovation environments lacked capital for the companies’ further development before they could attract classic venture funds. That construction was then criticized four years ago by individuals in the environment. But already six months before then, we had decided to separate Seed Capital and PreSeed Ventures, as both units had become large enough to continue on their own. It is thus an old case, which was closed a long time ago.

4. What is it like to be in VL1 as a symbol of the at least once most established in the Danish business community — and at the same time be rooted in the Danish startup scene? What does the big corporate relationship and experience give you?

VL1 has been through a generational change, which I have been deeply involved in. We have attracted a number of younger and stronger leaders, which includes a number of women. It has been necessary for the VL groups to keep up with the times. VL1 is important for me to be part of, because I meet talented and inspiring people that I can draw on in my work as investor. It is an extremely good network for e.g. recruiting board members and for general exchange of experience. The companies we help are over time becoming large companies, and this means that some of the issues that the heavyweights in the business world are facing, are similar to those that our companies will experience at some point. The second fact is that many business leaders want to get in dialogue with those who know a lot about technology and how to implement technology solutions in companies. Here I feel I can contribute to the discussions.

5. Seed Capital is probably best known for investments in SaaS solutions, but is, for example, less known for setting green transition, impact or diversity or other major agendas, even though you are a kind of market leader. Is it conscious? What do you think the corona crisis will mean for the startup and scaleup scene in 2021?

We definitely believe that it is important to set an agenda for the green transition and not least the diversity issue. Seed Capital has a clear ESG profile, and we actively use the experience we have from venture for various charitable purposes — such as the One Life Foundation and in various panels, including The Entrepreneurship Panel, the Foundation for Entrepreneurship, the Government’s Growth Panel and the like, where we try to create value in the industry and for society as a whole. In addition, we use both our money and experience to help social entrepreneurs. We believe that if you have the ability, you have the duty. However, my main occupation is of course what is relevant to Seed, and we are set in the world to help tech entrepreneurs and create the next generation of growth companies in Denmark for the benefit of our investors.

Unfortunately, we cannot be active everywhere and spread our focus beyond life science, cleantech and general tech, even though these are some incredibly exciting areas and opportunities. As a small fund, it is important that we focus our efforts where we can contribute the most with our experience and capabilities. Success in venture requires focus. However, sustainability is an integral part of our business in relation to how Seed acts and how Seeds’ investments contribute to sustainable development. It is also part of Seeds risk management, how we manage our own operations to minimize negative impact.

At Seed Capital, ESG analysis is an integral part of our investment processes and due diligence work. One of our portfolio companies that is making an impact is Grant Compass. They are an example of how you can both ensure that there is more money to be distributed from foundations for the benefit of society and at the same time make money from the solution. It is ultimately the only sustainable way to do it, namely that it is self-sustaining, which is what we look at in our companies. Our core focus is always on the investment strategy, creating wealth and jobs, teams and diversity as well as actively supporting our community and doing something good. Over the years, we have i.a. created over 2,000 new jobs in Denmark, and we are also working on attracting more female entrepreneurs and hiring more women at C-level and as board members by ensuring equal opportunities for all. However, there is still a lot of work to be done!

Considering the corona crisis and the prospects for a vaccine, I think we will return to a normalized situation in the summer next year. I believe that those entrepreneurs who have survived the crisis have become both stronger and more skilled. New startups will continue to arise even though we are in a crisis, because born entrepreneurs typically see new opportunities in challenged times and they cannot stop being entrepreneurs! This means that we need to create better conditions for Danish entrepreneurs, so they do not move their companies to Sweden or other countries with significantly better conditions. To succeed in creating the next growth rockets in Denmark, we must stand together and work together. We need that in Denmark. There is a massive need for money in the market to help companies properly on their way and so that they do not have to sell out to foreign investors too soon. It becomes especially important when we reach to the other side of the corona crisis. However, we are very positive about the future.