Tech startups in the periphery of Europe: The Nordic tech success story

1. Martin von
Haller
Bird&Bird

2. 'Tech startups in the
periphery of Europe: The
Nordic tech success story'
StartupTurkey 25 February 2016
Martin von Haller Grønbæk
partner

3. StartupTurkey
Page 3
© Bird & Bird LLP 2016
Agenda
●The Nordic success story
●Building a tech startup
ecosystem (Case study
#CPHFTW)
●Lowering transaction costs
in angel investing

4. StartupTurkey
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© Bird & Bird LLP 201
Martin von Haller Groenbaek
● Partner, Bird & Bird CPH
● Co-founder of First Tuesday (1998),
Co-founder of Danish eBusiness
Association (1996), Co-founder Danish
Open Source Vendors Association
(2004), Co-lead Creative Commons
DK
● (Mikro) angel investor
● Chairman of #CPHFTW foundation
● "Open source advocate”

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© Bird & Bird LLP 2016
The Nordics
• Sweden, Denmark, Finland,
Iceland and Norway
• Brothers and sisters in love-hate
relationship - but family
• Fierce internal competition!
• Region not countries!
• Nordic network with hubs or
clusters

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© Bird & Bird LLP 2016

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The Nordic numbers
• Each nordic country’s per capita
nominal GDP is in top16(2014)
• Combined GNP is 1.7 trillion USD
(2014)
• 7-8th largest economy in the world
• 3,425,804 square kilometers (incl.
Greenland) , the 7th-largest country
in the world
• Population of around 26 million
people.

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© Bird & Bird LLP 2016
“Nordic internal market”
• History, Language (+English),
Culture
• Legal infrastructure
• Minimal corruption
• Internal trading
• Exporters

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© Bird & Bird LLP 2013
Business in the Nordics
• Sweden, Denmark and Finland in top10 of
most innovative countries (Iceland and
Norway in top20) -
https://www.globalinnovationindex.org/
• Nordic countries in top12 in Ease of Doing
Business - http://www.doingbusiness.org/
• Nordic countries in top19 of “networked
readiness" - http://www.weforum.org/
• Nordic Countries are "Mostly Free" in
Economic Freedom -
http://www.heritage.org/

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© Bird & Bird LLP 2013
The Nordic societies
• WORLD HAPPINESS REPORT
• HUMAN DEVELOPMENT INDEX
• WHERE TO BE BORN INDEX
• COUNTRY STRENGTH INDEX
• GOOD COUNTRY INDEX
• GLOBAL COMPETITIVENESSS REPORT
• SOCIAL PROGRESS INDEX
• ENVIRONMENTAL PERFORMANCE
INDEX

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The Nordic tech startup success
• A hotbed for worldclass
innovative tech startups
• Broad range of sectors
(eCommerce, web, apps,
games, ERP, eGovernment,
IoT, hardware, health,
fintech, BigData)

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© Bird & Bird LLP 2013
The “Nordic startup”
• “Nordic startups”
• Helsinki, Stockholm and Copenhagen
as hubs
• Born regional and global
• Integration of HR and finance
• Branding leverage and financial
diversification
• Geopolitical stability
• Sustainable growth

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© Bird & Bird LLP 2013
The “Nordic investor scene”
• Plenty of funding!
• Supply vs. demand
• Few local VCs
• - but more international tier1 VCs
invest directly
• More smart angel money
• Less dependency on government
money
• (But no local market for exits)

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© Bird & Bird LLP 2013
Nordic +1B USD exits

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© Bird & Bird LLP 2013
Nordic tech investments
• With only 3% of Europe’s
population, the Nordics have
taken on 11% of Europe’s VC
investment and turned that into
$3.9 Billion yearly in exit value
over the last ten years. (source:
Creandum)

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Nordic +1B USD exits
• Since 2005, 9% percent of global
Billion dollar exits have come
from the Nordics.
• (Rest of Europe accounts for 8%
of the world’s Billion dollar exits
despite having the remaining
97% of Europe’s population.)

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Ratio of GDP to +1B USD Exits

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Compared to Rest of Europe

19. IoT&OpenSource
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© Bird & Bird LLP 2015
Nordic Tech Startup communities
● The power of the hashtag
• #nordicmade
• #sthlmtech
• #Siliconfjord
• #CPHFTW
● Conferences
• SLUSH
• Nordic Startup Conference
• Many more meetups…

20. © Bird & Bird LLP 2015
Side 20

21. © Bird & Bird LLP 2015
Side 21

22. © Bird & Bird LLP 2015
Side 22

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© Bird & Bird LLP 2013
CPHFTW
• A Startup Community
• "Startups for Startups by Startups"
• #CPHFTW
• (https://medium.com/@neilswmurray/copenhag
en-for-the-win-a282b3c3d32c#.lvjufv4r8)
• Leveraging the existing community
• Improving the ecosystem (the tech
startup c-suite)

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© Bird & Bird LLP 2013
CPHFTW Organisation
• "Doocracy" (open source)
• Transparent communication
• Circle meetings
• Townhall Meetings
• CPHFTW IVS
• CPHFTW Foundation
• 80+ founders
• 100+ Euros raised

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© Bird & Bird LLP 2013
CPHFTW Activities
• Townhall meetings
• Circles (BizDev, ProductDesign,
HR)
• Newsletters
• Databases (jobs and events)
• VC Dinners
• AngelNext
• International coop

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CPHFTW future
• Databases (OpenAPI, financial
statistics)
• 8-12 VC Dinners
• Angle networks facilitation
• International visibility
• A +1B USD startup in
Copenhagen!

27. New documents for angel investing
"or "The first thing we do, let's kill all the lawyers", Henry The Sixth,
Part 2 Act 4, scene 2, 71–78

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© Bird & Bird LLP 2013
Transaction costs in Angel investing
• Relatively small investment sums
• More investors
• Legal fees are proportional too high
• Often inexperienced parties on both
sides
• "The paradox of angels and their term
sheets"
• Bad angel terms lowers chance of further
funding

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© Bird & Bird LLP 2013
The potential and the solution
• More angel investing
• More syndication
• Higher amounts (eliminating need for
seed/pre Series A funding)
• Easier due diligence in next round
financing
• Less adversarial negotations
• More fair (market) terms
• International standardized investment
documents!

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© Bird & Bird LLP 2013
The typical Angel investment
• Equity!
• Convertible note but still equity
• Discussion of valuation pre-money
• Maybe also discussion of other
valuations
• Negotiation of entire SHA
• Adversarial atmosphere
• Potential distrust
• Too many (or too few) lawyers

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© Bird & Bird LLP 2013
The SAFE documents
• yCombinator
• (simple agreement for future equity)
• Not a debt instrument
• No interest
• No SHA
• No Valuation
• Only valuation cap
• High resolution financing!

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© Bird & Bird LLP 2013
The SAFE documents cont.
• Shares are issued in future round of
financing
• Number of shares are based on the
valuation cap
• If valuation in the next round is lower
then the lower valuation applies
• Same rights as new investors
• Conversion is automatic, no repayment
option

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© Bird & Bird LLP 2013
The SAFE documents cont.
• Certain protective provision (Change of
control)
• Variations
• Safe: Cap, no Discount
• Safe: Discount, no Cap
• Safe: Cap and Discount
• Safe: MFN, no Cap, no Discount

34. Thank You
Martin von Haller Groenbaek