Hekla Arnardottir, Helga Valfells, and Jenny Ruth Hrafnsdottir, Founding Partners, Crowberry Capital
Investing in the Future
How three women from Iceland launched Crowberry Capital, a Nordic venture capital fund seeking to support the next generation of creative entrepreneurs.
To be boldly creative, you often have to strike out on your own adventure. So that’s exactly what Hekla Arnardottir, Helga Valfells, and Jenny Ruth Hrafnsdottir did.
While working together at an investment capital fund, the three women noticed a pressing need for more early-stage funding in their region. The trio wondered if they could not only meet that need, but also create something exciting and visionary by launching a private fund of their own.
In 2017, they took the leap, and set out to launch Crowberry Capital, a Nordic venture capital fund with its sights set on supporting creative technological advancements in spaces ranging from gaming to health.
No matter the field, their goal was to help young and promising Nordic companies (in Iceland and Sweden) grow into global brands. And just two years later, they already have 10 startups under their wing.
There were, of course, many steps in between the launch and the fund’s present day success. For one, before a fund can start scouting new talent to back, it needs a whole lot of cash to invest in the first place.
As you might imagine, launching a venture capital fund isn’t cheap. But you might be surprised to learn that venture capitalists don’t necessarily need to have their own personal wealth to get started (although it certainly helps). VC firms offer financial and other forms of support to early stage companies with high potential for growth, often deploying assets from other sources—wealthy individuals, banks, other investment funds, etc.
Although Arnardottir, Valfells, and Hrafnsdottir knew many of the institutional investors in Iceland and had impeccable reputations, they still found themselves cold calling smaller investors. They even spread word through the media that they were launching the fund.
“We went out early in the process to the local media and said we were going raise this fund,” Hrafnsdottir says. “So we sort of got it out in the open. Of course, that increases the risk that if you fail, you fail publicly, but we took that risk.”
Although they acknowledged the risk, for them, failure was never an option.
“That’s why it’s great to be three,” Valfells says. “There was always at least one optimist.”
That process of raising capital also gave the team a fresh perspective on life as an entrepreneur.
“It made us more empathetic toward entrepreneurs, because you realize you just have to cold call rich people you’ve never met and say, ‘Would you like to invest in my fund?’” Valfells recounts with a laugh.
Being on the “selling side,” as she puts it, helped them to recognize more clearly what it takes to pitch effectively and reemphasized the importance of passionate energy, lessons they carried forward into choosing where to invest once the fund was up and running.
But despite the daily strain of cold calling for investments, Valfells says that living in Iceland took away much of the stress others might experience in their position.
“There’s a great safety net,” Valfells says. “Everybody has access to childcare and school and healthcare, so I think you’re willing to take a risk with your professional life because you know there’s a safety net that catches you.”
She says that this safety net makes walking away from stability much easier and, because of that, creativity is free to flourish. And by extension, people are more liberated to do what they love.
“I think we’ve all made sacrifices in the sense that we’ve turned down higher paying jobs and jobs with more security, but it hasn’t been a sacrifice because this is what we love doing,” Valfells says.
After six months of phone calls and meetings, they had raised $40 million, and Crowberry Capital was ready to take flight.
Comfort in the Chaos
When the time came for the trio to begin investing in up-and-coming companies, they weren’t just focused on the products coming across their desks. Instead, they took the time to learn as much, if not more, about the minds behind the products.
“Everybody wishes to invest in bold, creative, and hardworking entrepreneurs,” Valfells says, “but I think that one part of the process with us is we get to know the entrepreneurs really well and really see the ones that can kind of do things to move the needle.”
By taking everything into account, from the passion behind the pitch to the willingness of the entrepreneurs to leave jobs behind and throw themselves entirely into their projects, the three founders of Crowberry Capital single out investments with staying power.
“It’s about finding the comfort in the chaos,” Hrafnsdottir says. “I think the ones that really go with the flow and are determined with their mission manage to prosper at this early stage.”
They also consider how the entrepreneurs plan to enter the market, draw attention to their product, and brand themselves. Essentially, they have an eye on the creative spirit that exists within a team.
“It’s becoming more important than anything, because in this age of artificial intelligence it’s really important that we as people build up our and social intelligence,” Hrafnsdottir says. “These are the things AI is never going to bring to the table.”
Arnardottir also says that they pay particular attention to what kind of team the entrepreneurs surround themselves with, citing gaming companies as being particularly talented at building stellar teams. Do they communicate well? Do they represent a diversity of skillsets? These are the questions the trio talks over before choosing to invest.
Valfells even noted that she’s seen particular success when it comes to going global when a team is international from day one.
“Having a diverse, international background helps build an international company,” she says.
But, while they try to find teams and companies that can thrive and grow internationally, they aren’t just on the hunt for the next unicorn.
“I think there’s a risk in the world today that unicorns overshadow a lot of good businesses that can give investors great returns,” Valfells says.
She explains that, while unicorns are great, they also keep their eyes peeled for racehorses: companies that won’t make a massive splash but will never fail as they faithfully speed forward into the future.
And the future is where all three women have fixed their sights.
Planning for a Digital Future
In an increasingly digital world, Crowberry Capital has chosen to focus on businesses that are focused on building a better future within that reality.
“We invest in technology that we believe is changing the world for the better,” Valfells says, “and that makes you feel really happy and good about your job.”
For example, Travelade provides online travel guides curated from the recommendations of locals, and Aldin is an immersive VR company. They’ve also welcomed Monerium, an e-currency supported by blockchain technology, and Kind, a virtual communication tool for the healthcare industry, into the fold.
They are also very mindful to choose companies they will want to work with for years, because Crowberry doesn’t just offer seed money to startups. They also plan to support businesses through B and even C round funding, with up to $6 million set aside for each company as it grows over the 10-year lifespan of the fund.
So, Arnardottir explains, if one of the three founders is more passionate about a company than the others, she takes point on guiding that business while the others serve more of a support role.
But no matter how passionate they are about a business, they are very careful to let the entrepreneurs make the big decisions.
“I think it’s very important that we are hands on and not hands in,” Valfells says. “For us, it’s very important that we’re backing teams that are really good at execution and are in the operations, and we’re more like sounding boards and mentors.”
So, as the trio behind Crowberry Capital presses forward into the future, searching for the final five investments they plan to make, they are excited to lead another generation of Nordic entrepreneurs onto the international stage as creative innovators who will change the world.
Interview by Nathan Chan, feature article reprinted from Foundr Magazine, by Erica Comitalo
ATTENTION: The Crowberry Capital founders are also featured in Issue 81 of Foundr magazine, The Creativity Issue, a special FREE edition focused on entrepreneurial creativity in all its forms. We teamed up with global creative platform 99designs to produce this bonus-sized issue that celebrates the creative vision and potential of all founders.
Throughout this issue, you’ll find spectacular artwork created by the designers working on the 99designs platform as well as inspiring features on the most innovative minds in the startup world—from Clark Valberg of InVision to Jack Dorsey of Square. We hope this edition gets your creative juices flowing!
This issue is open to anyone to read, whether or not you have a Foundr magazine subscription. Just go here to view this special edition. Note that you can also download the magazine as a PDF for future viewing. Enjoy!
- The pressing need Arnardottir, Valfells, and Hrafnsdottir noticed that inspired the idea for their Nordic venture capital fund, Crowberry Capital
- Why the trio relied on cold calling and local media to launch their venture capital fund
- How raising $40 million in capital made the founding partners more empathetic towards entrepreneurs
- How living in Iceland relieved some of the pressure of taking a professional risk
- Why Arnardottir, Valfells, and Hrafnsdottir keep their eyes peeled for “racehorses” in addition to unicorns
- The reason the founding partners take so much time to get to know the entrepreneurs they invest in
- The difference between hands on versus hands in
- Why Crowberry Capital chooses to focus on businesses that are building a better digital future
Full Transcript of Podcast with The Founders of Crowberry Capital
Nathan: The first question I ask everyone that comes on is, how did you guys get your job?
Helga: Yes, we were actually working together at another evergreen fund, so that was a fund that was sort of a public/private initiative and we were shareholders or owners in a fund, but I was the CEO and Jenny and Hekla worked with me at the fund and I think we sort of wanted to change things and do things better. And I think that can be … and wanted to have a completely private initiative. So in 2017 the three of us left our very profitable job at the evergreen fund and decided to raise our own fund. I think it was really, really good. It also made us more empathetic towards entrepreneurs, because you realise you have to go out there and you just have to ring that cold call with people you’ve never met and say, “Would you like to invest in my fund?” And talk also to pension funds and things like that.
So we rang like crazy for about six months and manage to raise Crowberry Capital, it’s a 40 million fund that we raised in six months. And I think we were kind of very passionate about raising this fund, because we saw there was a real need for a local seed and early-stage fund built in Iceland and in the Nordics.
Helga: So this is Helga, by the way. I don’t know if, Jenny and Hekla, you want to add anything to that?
Hekla: No, I think you called it pretty well.
Hekla: This is … yeah, this is where we came from.
Helga: And that’s why we never feel sorry for entrepreneurs if they have to quit their job and go out there and take a risk when they’re raising money for their start-up. If they’re serious about a start-up, we kind of want them to have that, not be in another job and all comfortable and thinking, maybe I will do this if somebody gives me money. It is about, yeah, just going out there and taking the risk and believing what you’re going to get.
Jenny: And this is often what you sense as an investor. If their thought is really about doing this. You just feel it right away.
Hekla: I think also you learn so much from this process, because you’re on the selling side. I think just going through that process of trying to sell your vision and sell your beliefs is really … yeah, you learn a lot from that process.
Helga: And we see this in the teams that we back. The ones that are really good at fundraising are really good salesmen, and usually end-up being really good at selling a product as well. Yeah.
Nathan: Interesting. So I’m curious, you raised money for the fund, 40 million in six months. Did you guys have an existing network? Or you were mainly cold calling people? What did that look like?
Helga: I think we kind of knew the institutional investors in Iceland and we thankfully had a good reputation here, so we’d got institutes, but we also were cold calling sort of family offices. And as I said, it’s a bit of, people … and we were quite selective about … in terms of the sort of high net wealth individual that we let into our fund. But we were definitely cold calling them, especially at the end when we kind of closed the fund. We were like, “Who has money and would be interested in investing in venture capital?” So it was definitely lots of cold calls. It’s a good experience.
Hekla: And I think also, because we went out early in the process to the media here, local media and said, “We’re going to raise this fund.” So we sort of got it out in the open. Of course that increases the risk that if you fail, you fail publicly. But we took that risk.
Helga: And also I think not raising the fund was just never in our mindset, even though there were times when it looked like we weren’t going to raise it, but it just wasn’t in our mindset. And it’s also, that’s why it’s great to be three of us, because it was always in the group of three, there was always at least one optimist who was … when somebody said, “Okay, we’re not going to make this,” they sort of, “No, no, we are.” We were all optimistic and pessimistic at different times. And I think that’s also great for entrepreneurs. I think it’s very difficult to be a sole founder, because you don’t have somebody else to share stress with. So people can have doubts at different times. That helps.
Nathan: I see. So I’m curious as well, you said you all worked together at another fund, but you guys decided to start your own because of, you felt what you were looking for was definitely needed. So on your website it says you invest in bold, creative and hard-working entrepreneurs. Can you tell me why that’s distinctly different compared to other typical funds?
Helga: Yeah. I think everybody wishes to invest in all the creative and hard-working entrepreneurs, but I think one of the parts of the process with us is we have a long, we get to know the entrepreneurs really well and we really see the ones that can kind of do things and move the needle. I think one of the things, especially working in Iceland, is there is a lot of creativity here in the culture in Iceland and I think there’s a lot of creativity around the tech scene. And I think that if you want to build something new or do something different, I think creativity matters. Are you creative in how you approach markets? Are you creative at new product development? So I think that matters a lot. And the bold is, are you going to quit your job without any security blanket and just go out there and raise money for your start-up? Or go start developing your product? That’s part of the boldness. And also are you bold enough to think about building a global business?
Hekla: And a very obvious point how we are different from other VC funds, we are three female partnerships, which is not usual in our state. In Europe you have 10 to 12% of VCs who are females and the rest are males, so I think also for entrepreneurs, it’s good to have a broader pool of VCs and perspectives and backgrounds and just a more diverse VC scene. I think we definitely bring that to the scene.
Helga: Yeah. And we didn’t set out to, we were just three colleagues that worked well together and had sort of complimentary skillsets and shared values. But we didn’t set out to have, we’re going to be the all-female fund, but we’ve kind of noticed that after we started people really appreciate that, especially female founders. They trust us and I think it’s helped a lot. I was reading somewhere in the world there are only 300 partners who are women, so the three of us are one percent of all partners in VC funds, globally in VC funds.
Nathan: Wow. There you go. That’s crazy.
Hekla: Yeah, it’s crazy.
Jenny: But also for Iceland I think our approach is a little bit different from other funds. We are spending a lot of time in becoming international and being with other funds in Europe and the US, so helping the companies to get them also on board with them.
Helga: Our goal, because I think start-up has become such an international game and we’re not just in Silicon Valley anymore, I think a lot of start-ups are being built around the world outside of Silicon Valley. And now that we have, people have all sorts of tools and technology, distributed teams and things like that, I think for us it’s very important that we can international capital into Nordic companies. So I think at the moment we have 10 investments and out of those, nine of those have, we are co-investing with international investors. And to us that’s important, because if you’re building an international business, you want an international investment pool, or investors as well. And we really, really believe that investors should collaborate, because it’s … venture capital is all about the creation of capital, you’re building something new, so you don’t have to compete. There’s enough opportunity for everyone. That’s one of the nice things about VC.
Nathan: Yeah. And I’m really curious as well around the creative piece. What is it distinctly between an entrepreneur that’s creative and one that’s not? What are you guys looking for there?
Hekla: Well we look at many things. Of course it’s the product and how they’re developing it and how they have … how they’re bringing fresh perspectives into just the tech world and from a technological perspective, but also how they’re approaching the market and what ways they’re using to sort of access the market, launch their products, get attention, because it’s really hard when you have a small start-up to just get attention from the world. So you have to be creative in that as well.
Jenny: And also a little bit just how, what kind of team …. For example, the gaming companies here in Iceland, they are a very good example of creative teams. So they not only have programmers, they also have very good artist people and, yeah, just very creative people who just sense it right away when you see the teams.
Helga: And you also see it just around the branding. If we’re really going into art and creativity. And I think, for example, we are in a company called Travelade, which does these, you can build these wonder guides, it’d be great to get some good wonder guides in Australia. They’ve been very creative about how they brand their company and how they use it, because it’s supposed to sort of be travel, peer-to-peer travel guidebooks for free-spirited people who are not going to go through a travel agency, so you want it to look kind of creative and authentic and things like that. So that is also another way that creativity helps and helps you get attention in a way.
Nathan: Yeah I, funnily enough, we’ve worked with a lot of designers and freelancers in the Nordic area. So I don’t know why, but it seems there’s a lot of great designers out there.
Jenny: Yeah. Maybe it’s the ever-changing weather. You can have four types of weather every day.
Helga: And I think also art and design is something that’s revered and is just part of the culture. So I think that’s also why it is important in the tech scene. And I also think that, for example, you kind of look, also Nordic music can be very, very creative and that also goes into a lot of the products, because a lot of products that we’re in, especially the gaming, again, they need to have great sound engineers and have good music and things like that. So I think it’s just a creative culture here.
Hekla: And we think that it’s just becoming more important if anything, because at this age of artificial intelligence, it’s really important that just we as people also build up our creativeness and also social intelligence. Because I think we … these are the things that AI is never going to really bring to the table. And that’s where our roles become more important.
Nathan: Yeah. I’d love to switch gears. So you guys have made 17 seed investments and you have a lot of gaming companies in your portfolio. And you’ve negotiated a total of 15 exits. Is that since the fund was created only two years ago?
Helga: No, no. This is our experience from the previous fund. So there are more than 17 seed investments now. I think we’ve done 27 and we’ve worked through our … I mean Hekla and I have been in venture for 10 years, Jenny sort of joined us later for five years, because she was working for a start-up in Boston for a long time when she came out of a lab. So I think we’ve done a lot of investments, groomed a lot of portfolio companies in our new fund. And actually that kind of reminds us to update our website. We did our website when we started our portfolio fund but we had no portfolio. Now we have experience, so I think we kind of have to change that a little bit.
But it was just, from our previous fund, we got a lot of venture experience that we have been able to apply to our new fund. But in our new fund we have a portfolio of 10 companies, we’re going to go up to 15. And we haven’t, given that we only have a two year track record, sadly we don’t have … understandably we don’t have any exits yet. But in our previous life, we did a lot of exits, especially trade sales to big US corporates and things like that. So we kind of know how that works and know how to do that.
Nathan: Got you, okay. Now we’re on the same page. That makes sense. So out of those 10 companies, what would you say are the three to five really key things? You guys said you spend a lot of time with these founders, you look at the team, you look at certain things. I’m curious, what are … because you guys have been in venture for a long time, you would see patterns, right? Because this is essentially what you guys are doing, you’re looking for some sort of pattern recognition or coming up with some sort of formula to identify certain teams, certain products, certain opportunities.
Jenny: Yeah of course the team has to be a variety of experience, you need different traits in the team and we look at that. It just has to be really good at executing. And you can test that a little bit when you’re in the dialogue with the teams, once you’re thinking about investing in them. Of course we are also thinking about what is happening in the broader world, in the tech trend. Does it fit into a trend that is emerging? And also just are we excited about the product? Are they solving any real problems that we believe are problems?
Hekla: Absolutely, yeah. And the team, we often joke about that we need the hustler and the hipster and the hacker, so these are traits that we sort of look for.
Jenny: Not only a CTO, CEO at the-
Jenny: You need also different types of characters in the teams.
Hekla: And then we also just look at how they sort of sell their vision. How visionary they are and what other investors are sort of bought in to their vision and if they manage to sell to people on a broader scale.
Helga: And I think some of the best teams that we’ve invested in have been international teams from day one, because if you’re building an international company and your founding team is from different markets, I think that can often be great. So I think sometimes that, having a diverse international background helps build an international company.
Nathan: Yeah. And when you guys talk about kind of … you said before how well they can sell. If they can sell you guys on investing in them, generally they can sell the product pretty well. So do you think that comes back to around the passion for the product? Or do these people have to have sales experience? Not everyone’s really good at selling, you know?
Helga: No. We know. We know people that build fantastic products and somehow never get them to market.
Jenny: There’s some people that can only sell shares but they’re not able to sell the product.
Helga: Yeah. Some people are good at fundraising, but don’t sell the product. So you look for both, but I think initially if you really believe in what you have, it’s easier to sell and you almost think that you’re doing people a … you feel sorry for people that don’t have your product, so you kind of-
Jenny: And also just in the early stage, you don’t have, the product is maybe not even on the market yet and you don’t have it full of customers, so you really have to be able to sell it to other employees to join the company, to sell it to the investors to join the company. So it’s that kind of sale that is important in the beginning. And later of course you need to have more sophisticated sales machines that you have to build into your company.
Helga: And I think some of the most successful entrepreneurs that we’ve worked with have been the ones that even started talking to the customers pre-product. So they’re building a relationship and they’re really good at doing that, so when they actually have launched the product, they know their customer and they’re getting feedback from the customers. So I think that’s something that’s really important.
Hekla: And I think it’s also about getting people to relate with the problem that they’re solving, so that if they manage to get people to sense the problem and understand the impact of their solution, even if they’re not really skilled salespeople, if they get people to sense it, I think that helps a lot.
Nathan: Yeah, I see. And you guys have made 10 investments so far. I’m curious around how many do you plan to make? Because usually, is it one in 20 you anticipate to be a unicorn? What are the numbers?
Helga: Yeah. I mean we … I think it’s difficult to predict unicorns at this stage. Of course we want 10 out of 10 unicorns, ideally, but we kind of actually look at our portfolio, because I think unicorns always … you wouldn’t say, “No thank you” to a unicorn, but I think it’s dangerous just to go for unicorns. So we kind of have our portfolio, we think about unicorn opportunities where maybe you’re taking a bigger risk and it’s an all-or-nothing type company, or the racehorses, companies that you know are some sort of enterprise S-A, SAS or something that you know is going to build a really good … the company’s never going to fail. It may not become a unicorn, but it could be a 300 million dollar company. So I think those companies can also, especially when you go in early with a very reasonable valuation, those companies are also very important. And I think there’s a risk in the world today that unicorns overshadow a lot of good businesses that can give investors great returns.
Nathan: Yeah, I see. So the goal though in each one of the companies that you guys are investing though, their goal should be to reach 100 million dollars in revenue, though, annual revenue, correct?
Helga: At least definitely. There are lots of good companies that we see that just are never going to be big businesses, or don’t have the potential to become a big business. And it’s not that they’re bad businesses, they’re just not venture opportunities. And I think those are the companies that we help and advise them to get a different sort of funding.
Nathan: Yeah, I see. So how many … from your 40 million dollar fund thus far, do you guys plan to raise more money for the fund? And how many more investments do you plan to make over what period? Because I think you have to structure and time when you make these investments, or if 20 incredible opportunities came and you would just go for them? Or …
Hekla: Sure. So we’ve made 10, then we’re going to be making 15 from this fund. The fund has a 10 year life cycle. So we’re two years in now and the investment period is about four years. Yeah, four to five. So we will be raising the next one, we’ve started to think about that, but we have deployed about 25% of the fund so far. We’ve definitely reserved for follow ons and to follow and back the companies that really take off.
Nathan: Ah, so you guys don’t just do seed?
Helga: No we do, no we follow on, we can follow on for A and B rounds. And I think that’s very important, because it’s often, that’s when the companies need, the most successful companies are the ones that will need the most money and will be the best opportunity. So we’re saving a lot of the fund to help them through the next 10 years. So we can put up to six million dollars into one company, even though, on average, our first investment, it can be anything from 200 thousand dollars up to several million.
Nathan: Got you. I see. So what are you guys, how do you guys split your time? Do all three of you guys catch up with each of the 10 companies? Or one speaks to one, two speaks to the other, how do you guys do that usually? Because you guys all have unique individual skill sets too.
Hekla: Yeah. I think we split it. Me and Jenny, we are, for example, involved more with the healthcare companies and Helga more in the fintech companies. Even though we can all take different roles, we are generalistic, all of us, but we usually just maybe if someone is more passionate about one company than the other, then that person will take on the project and finalise the investment and take the board seat. And the others always, then all of us sharing with each other what is happening with the companies and what needs to be taken into action, or new investment, or is there something that has to be worked on?
Jenny: That’s a constant.
Helga: Yeah, we have weekly meetings where we update each other on the status of the companies, but I think we kind of, at the moment we sort of split who’s responsible for which companies. So I think each of us have three companies now, except Hekla has four.
Jenny: Okay, yeah.
Nathan: I see. And how often do you expect these companies to report? Is it on a quarterly basis and do a kind of presentation? Or send updates?
Helga: No. We get at least a monthly update from the companies.
Jenny: I think we like monthly meetings because these are companies with not long a runway, so if they have maybe 12 to 18 months runway, you really have to meet them every month at least. And then the founders, they can reach us anytime. We’re always there for them.
Helga: Yeah. And we kind of just want to be there to support the founders, so I think we have a lot of talks and dialogues with the founders. And especially, one of the things that I think we can really help with is the next round of fundraising and their fundraising strategy going forward, so for example, on Friday, tomorrow we’re having a workshop with our founders that are raising the next A round, so we can help them. They’re all working, they support each other as well. So I think like that. There’s also a lot of support within the portfolio, that people talk to each other and help each other and we kind of also like to be a catalyst for that to happen.
Nathan: Yeah, I see. So you guys are quite hands-on compared to most funds?
Hekla: We’re very hands on.
Helga: We’re very hands on. I don’t know if we’re compared, but I think a lot of funds are quite hands on. And I think it depends also between … we’re not 100% hands on in every company all of the time. I think some people need support at different times and then we’re there. We kind of … and it’s also very important that we’re kind of hands on and not hands in, so we don’t become operational and we don’t … I think sometimes when you have, you’ve seen former entrepreneurs that start investing and then they really want to become an entrepreneur again and they become operational. And for us it’s very important that we’re backing teams that are really good at execution and any operations and we’re more sounding boards and mentors and help them. We have a network that we can introduce them to, or find the right people to help them, but we’re not going to take over operations, ever.
Jenny: Unless something is seriously wrong.
Helga: Yeah, unless something’s wrong. Yeah. You need to add to the team or change the team.
Nathan: Yeah, I see. So when it comes to kind of the 10 companies you’ve invested in so far since 2017, all 10 are still active?
Nathan: Okay. And do you expect them to be non-reliant? They are at least almost profitable? Or almost break even to keep going? Or would you expect them to raise another round to extend runway? What is the expectation there?
Jenny: Yeah. All of these companies we invested very early stage, so they are still, they will take several runs, hopefully.
Helga: Yeah, I mean, I think if they’re growing and they’re successful, I think that’s the sort of, our VC is that they will need more money. They’re not going to become profitable. I think if they … and especially given … the size of the opportunity means that they will really need more money to continue growing.
Hekla: So usually the first milestone is that they’ll raise a decent A round and can sort of …into A round investors. Then we, of course, participate, but we don’t lead the next round then.
Nathan: Got you. And what do you find are the most common problems for these early stage companies hat you guys are often helping and advising and mentoring on? What are some of the most common problems?
Hekla: I think it’s about finding the comfort in the chaos. Because it’s so chaotic, it doesn’t matter if it’s adding to the team or extending the product or entering new markets and you can’t really follow it with KPIs or something like that, the tools that the corporates use. So I think the ones that really go with the flow, are determined with their vision, they manage to prosper at this early stage.
Jenny: Sometimes there’s also just a timing issue, if a company’s maybe doing everything really well, but it’s a little bit too early it can also be a problem and they have to wait just for everything to take off with them.
Helga: Or close the company and start something else.
Jenny: That can be a little painful, when that happens.
Helga: And I think, from our experience, when we’ve had good teams with just, yeah, and good technology that’s just not, the market isn’t really for it, I think that’s been kind of the sad failures that we’ve seen, but then it’s also you have to have a really responsible failure, because when you come in so early we look at every single investment as an experiment that’s either going to have a positive or negative outcome. And if the outcome is negative, then you have to have the courage to close the company and say, “The market isn’t ready, I’m not selling this product, so we’re just going to close the company before we run out of money.” Rather than going hell-for-leather trying to sell something that nobody’s ever going to buy and owing people salaries and things like that.
So we have gone through, in our previous fund we went through a lot of, a very large portfolio and I think it was very much about knowing when to close a company, because obviously bankruptcy is not an option, because if you bankrupt a company, then you’re hurting a lot of people. I mean you may have buyers and employees that don’t get paid, so I think it’s very important to know when to close a company and having the courage to do that in a responsible way. So I think we kind of … and that’s always something that’s important too. I think a failure, for us, or the negative outcomes for us have been when market timing is off. When you look at something like VR which was a big hype a couple of years ago and I think it’s going to come back and it’s about being able, for example, in VR and AR, navigating when you start burning cash and when to be lean, so you can be ready for when the market takes off.
Nathan: Yeah, I see. So let’s talk about trends and we’ll work towards wrapping up. You mentioned that you guys have invested in some fintech and healthtech companies. Are there any other trends that you guys like to invest in, like any blockchain, current … yeah.
Helga: I think this current fund has been very much about digitalization. I mean the world is becoming digitalized. Part of the digitalization process is blockchain, so for example we invested in a company called Monerium, which puts real money on a blockchain, or fiat currency and it’s like a pre-paid credit card on a blockchain. So they use blockchain technology to make it easy for people to transfer money within the blockchain economy, but it’s not a cryptocurrency, it’s a licenced and regulated company that you can have, like a pre-paid credit card, your money is completely redeemable.
So they have an online fund and you put a dollar into that fund and that’s a regulated fund. They issue a dollar token on the blockchain and you can use that in the blockchain economy. And then when you want your dollar back, you sell your token and you get your dollar back. So that’s one of the world’s first regulated redeemable fiat blockchain currencies. So that’s something … it’s called Monerium, that’s something that we’re really excited about. and a lot of things that Libra has been criticised for, I think Monerium has solved. Obviously they’re not part of Facebook, so they don’t get the publicity yet. But now everybody’s going to listen to Foundr and learn about them.
Nathan: Yeah, there you go. Interesting. That’s a good little plug.
Helga: Yeah. I mean Monerium is about digitalizing money and then we have … I mean I think we’ve done a lot of … so enterprise software, that’s about the digital journey for enterprises. I think gaming, we’ve done a couple of gaming companies, that’s about digitalizing free time. Travelade is about digitalizing travel. So I think that the trend towards digitalization is a huge opportunity for everybody around the world.
Nathan: Yeah, I see. Yeah. Enterprise SAS, big ticket customers, yeah, big opportunity, high, high lifetime value. But they’ve got to be good salespeople, right?
Helga: Completely, definitely. And patient salespeople. I mean you have to do a good sort of seed round, just to get those first enterprise customers, because you know the sales cycle takes a long time.
Hekla: And then of course we see that AI is going across all types of accounts. Some things are going really deep and others are sort of just using just the best words. So our job is to really figure out how deep the technology is, if it really helps them with their defence strategy on the market and what tools and types of AI they’re truly using. So that’s part of our due diligence process.
Nathan: And what about founders, number of founders? What number? Do you invest in solo founders? Does it have to be two? Have to be three? I know, for example, Y Combinator has to be three or has to be two, I think. Yeah, they don’t invest in solo founders. Do you guys have any rules like that?
Hekla: No, we don’t really have any rules. Usually they are two to four, I think that’s the most common.
Jenny: We have one sole founder though.
Helga: We don’t have … I mean I think we’re talking to somebody now at the moment that’s a sole founder, but they have already hired a very early team to work with. But normally I think the best teams are two to three founders at least, because then you get the diversity of skills and it’s also really, really difficult to be a sole founder because you just don’t have anybody to share the joy and the sort of maybe …
Helga: Challenges with. So I think … and I’m saying this from the experience of being in this fund, I think all of us appreciate that it’s great to be three of us when we were raising the fund and we’re operating the fund, because it’s the three of us that take the responsibility for the fund. And it’s great to share responsibility.
Nathan: Yeah. I can’t say I share that experience, I’m very lonely.
Hekla: Oh no.
Helga: You can always call us, yeah?
Nathan: Thank you, thank you. Awesome. Well look, we have to work towards wrapping up. I’m curious, so what’s been some of the sacrifices that you guys have had to make to get where you are today? Talk to me about, yeah, sacrifices. What have you guys had to give up? Because you mentioned at the start of this call that it’s been very difficult cold calling wealthy people to ask them to put money into your fund. Yeah.
Helga: It is difficult, but it’s something that you have to kind of force yourself to do. So I think we’ve been, all of us have been very lucky in life. And you see people with real challenges, especially when you’re working with healthtech companies, people that have chronic diseases and things like that, so one feels that one hasn’t really had to sacrifice anything. One of the great things about being in the Nordics is there is a great safety net. You have brilliant childcare, everybody has access to childcare and school and healthcare, so I think you’re willing to take a risk with your professional life because you know that there’s a safety net that catches you.
Because I’ve lived in the states and the UK and you don’t have that same type of safety net, so a lot of people are worried about giving up high paying jobs to start a company or a fund because they don’t want to lose their medical insurance or they have to pay for childcare or something. So I think being in the Nordics and having a safety net for basic human needs means that you’re more willing to take a challenge. So I don’t think there’s any sort of sacrifices that we’ve made. We’re very passionate about what we do and we work hard, but it’s always a joy. We’re in a job that we love, so we’re always happy to do that and we have families that kind of are-
Hekla: Backing us.
Helga: Backing us and we invested our own money in the fund and we’re all in.
Nathan: Yeah, I love it. That’s amazing.
Helga: It’s a pleasure because it’s like we love what we do and we get to meet people all around the world, including somebody in Australia and it’s a great job. And you feel also, because you’re investing in technology and technology is changing the world and we invest in technology that we believe is changing the world for the better and that makes you feel really happy and good about your job. And we get to really meet bold, creative and hard-working people every day from all over the world. And that’s really interesting. You get to see lots of new ideas. So I think all of us have made sacrifices in the sense that we’ve turned down higher paying jobs and jobs with more security, but there hasn’t been a sacrifice because this is what we love doing.
Nathan: Yeah, thank you for sharing. Best pitches that you’ve received thus far that have, yeah … what out of these 10 companies, anything unique around the pitches? I know obviously the team and the product and the market opportunity are some of the biggest things that you’re looking for, but yeah, what should people be thinking about when it comes to pitching?
Jenny: Some people just have the magic. They just say, “Look into my eyes and I’m going to take you on this ride.” And then you get back to your desk, you really start thinking about what is good and bad about things. So it’s good to have that, but not only that.
Helga: But also there’s, you know when there’s an authentic belief in what you’re doing in yourself and you can really tell that in the pitch. I think if people have energy and an authentic belief in what they’re doing, there’s obviously everything that needs to be included in a pitch and I’m sure there are lists all over the world where you can see what start-ups need to include, but it’s this authentic passion and the energy.
Jenny: Yeah. Sometimes when you meet companies that are very low in energy, that’s bad business.
Helga: And also I guess the questioning too, because the deeper you dig and question people, people can answer or even when people don’t know the answer they say, rather than making up an answer they’ll say, “Oh, that’s a good question, I’ll look into that.” So I think that’s a really good tip for founders. Because if they start making up fake answers or something, pretending that they know something that they don’t know, that always puts you off.
Hekla: One of our portfolio companies, Kara connect, the founder there, she’s a former politician and I think that came across in the pitch really strongly, how convincing she was. We really had to do our due diligence properly, because … and I think people can benefit from different experiences and I think, having been a politician and really believing in your cause, helps when you then start to pitch for a start-up.
Nathan: Yeah, yeah. I see. Yeah. So really confident with your presentation. What about before you even get to the pitch. How do people through a cold message on LinkedIn, or a cold email, what makes you guys say, “Yeah, we’ll take a meeting with you guys.”
Helga: Well I think it’s also really important if you’re doing a cold email or a cold message on LinkedIn that you include something about the company. If people just kind of send us a one liner, can you meet with us-
Hekla: If you don’t know anything about the person, I think the case has to be-
Helga: Be compelling and interesting, yeah. And then-
Hekla: I really meet people just in some tech events or something, just make them a little bit interested in you by just stopping by and talking to them for a while, tell them a little bit about your company and then next time you can send them something.
Helga: But I think, I mean we try to take most meetings when people approach us, but I think we always have to have a one pager or a couple of slides just telling us what the idea is and we have to make sure that it fits into our investment strategy.
Hekla: Sometimes we reach out as well if your company is something we find interesting, or we see that they’re climbing up the lists that are out there, like … or Crunchbase.
Nathan: Yeah, I see. Okay, interesting. Well look, we have to work towards … sorry.
Helga: We also go to a lot of events and conferences to … across the Nordics to find founders and find deals as well, because that’s, often the best deals are often the ones that you go out there and source yourself. So it’s very easy to sit in your office and you get a lot of inbound deal flow, but I think outbound deals are always as important.
Nathan: Yeah, no, I agree. That makes sense. You look at companies like First Round or Andreessen Horowitz, they’re putting out a lot of content these days, just to build the brand equity for the fund. Is that something you guys are looking to do as well? To get more inbound? Or because the Nordic area isn’t as big as a Silicon Valley or US, it’s not as needed? You guys go too, or …
Helga: Yeah, no, I mean it’s definitely needed. And if we had a team the size of Andreessen Horowitz, we would love to. But unfortunately-
Hekla: We always talk about that, but then it just gets so-
Helga: Yeah. I mean I think we kind of go to events and we speak at events as well, that’s kind of been what we’ve been, has been helping our brand. And we’ve been putting little things on LinkedIn and Facebook and things like that, but we haven’t done … I think putting out as much content as Andreessen Horowitz, we follow the Andreessen Horowitz content a lot, they’re a great resource, but we’re not there yet. But hopefully as Crowberry grows, we can add more people and we’ll have more time to do brand building and content.
Nathan: Yeah, for deal flow. So talk to me, I’m curious, is it just you three guys? Or you have many others in your team?
Helga: There are actually six of us in our investment team, so there are three of us that founded the fund and then we have an investment advisory team that work on investment decisions with us. And they’re great, there’s an IP lawyer who was educated at Stanford and has been working in patent law and IP law for 20 years. We have a guy who is a physicist and a software engineer who has been working in the start-up scene here in Iceland and in the Nordics for the last 30 years and he worked with us at our previous fund. He’s now CEO of a start-up here, so he’s part of the investment advisory team.
And then we have Gummi Hafsteinsson who is a serial entrepreneur. He’s founded, he’s been in three start-ups, one was sold to Apple and one was sold to Google. He has a long, he worked for Apple for a long time, he actually worked at Siri when they were a start-up, he was a very early employee there when that was acquired by Apple. And then he worked at, then he founded another company and that was bought by Google and he’s just left Google. And he’s been in our investment advisory team and it’s great because he has great links to Silicon Valley and things like that. So we work with these additional three people, but we don’t have any sort of principals or associates or anything yet. We’re a small fund, so we can’t really afford to hire a big effort team.
Nathan: Yeah, no, that all makes sense. Yeah, I just find it very interesting and I’ve never spoken to somebody that’s started, or a group of people that have started a fund before, so it’s fascinating. So thank you for sharing.
Hekla: Our pleasure.
Helga: Yeah, thank you for calling us and contacting us. We really enjoyed the questions.
Nathan: You’re welcome. Well look, the last question I have for you guys is where’s the best place people can find out more about each of you and your work?
Jenny: LinkedIn is probably-
Helga: Yeah. If you go on our website, CrowberryCapital.com, we have links to LinkedIn and then we also have a Facebook page where we put sort of news. Yeah. And they’re always welcome to email us if they have, if there are any entrepreneurs in the Nordics that need to raise money, just CrowberryCapital.com and please be in contact.
Key Resources From Our Interview With The Founders of Crowberry Capital
- Visit the Crowberry Capital website
- Check out the LinkedIn profiles of Arnardottir, Valfells, and Hrafnsdottir
- Stay tuned to their Facebook page for updates