We are always making a point about the power that our ecosystem provides to our portfolio. And, in our book, giving back, spreading knowledge and nurturing the tech scene in the Nordics is just as important to curating such a vibrant ecosystem. Yesterday’s event with the Nordic chapter of Startup Grind is an example of these moments that encourage us to keep pushing - #foreverforward.
At last evening's fireside chat, Startup Grind’s Regional Director Naimul Abd hosted a lively conversation with our Managing Partner Evelina Anttila and our Partner and Fund Manager Jessica Rameau. The topics discussed went from Wellstreet’s strategy and positioning to how each of them views the current and future developments within venture funding, AI and ESG. Here are a few highlights from the discussion.
Ecosystem:
One significant trait which helped transform Sweden into such a beacon of innovation in the tech startup space is the safety net that encourages new ventures and allows for a positive attitude towards failure. While there is a consensus on the vibrant nature of the Swedish tech industry, the macroeconomic changes may still impact it in a more significant way in two to three years. Sure, private and venture capital are more cautious at the moment, but typically these players are involved in a later stage (Wellstreet is different in that sense). A reduction in government backing for state-funded institutions is likely to result in less investment for early-stage startups now and will have visible consequences.
VCs:
Many hats: Startup founders know that they need to roll up their sleeves and work in as many roles as possible to maximise growth in a lean way. That’s actually the same approach that fund managers take in order to help them grow and maximise their own return on their investments. Find the investor that will help you get where you want or have access to those resources.
Exit strategy: If you want to raise external funds, do your best to learn the different routes you can take. Perhaps venture capital is not the best alternative for your particular case, and we are very transparent about that when meeting deal flow. As in any transaction, the terms of the agreement should bring a beneficial outcome to each party, which may require compromises. Being very clear with the exit strategy is, therefore, essential if you’re considering external funds.
Wellstreet:
Operations and Exit: Basically, we are company builders. So we come into startups much earlier than other VCs and have a shorter investment horizon, therefore focusing much more on arriving at the targets set for the exit strategy in a structured and rapid way. Of course, for that reason, we are constantly and actively supporting their growth needs.
Challenge the status quo: we don’t expect companies to be ready or have a long track record - by that point, they are too late for us. We come in after we identify the synergies, realizing we can contribute to what that particular startup needs. For example, if your cap table is not diverse, we will challenge you and encourage you to understand unconscious bias, but we will also help you build diversity and become ready for future challenges.
AI - About regulation, bias and training:
AI bias is an issue, sure, but it is only a mirror of our society. A mirror fed by our overall bias and the percentage of us that is developing it. The idea of implementing regulation is exactly in order to guide the parameters that we want to be reflected in these products. But regulation is very slow for such a fast-paced industry, so the solution is to focus on the consequences rather than the tech per se. Taking an example from ESG, GDPR was passed at a moment when it was needed, but it has a much greater impact now with the recent AI boom and the LLM training.
ESG:
All of the above can be viewed from an ESG lens, actually. We usually say that in 2030 ESG will be a higiene factor, so implementing a strategy must be a basic part of the company's development. Identifying the risks and opportunities for the company futureproofs it. Although not exclusively impact-driven, our funds are registered under the SFDR as Article 8, which means that we have a responsibility regularly to report our portfolio’s status in regard to ESG. Linking to the AI topic, that’s how regulation can support and drive change.
Lack of funding for women-led companies, for example, is one of these issues that has been largely noticed and reported but nothing seems to change. No matter how hard we insist on providing women with money and access to the relevant rooms, ultimately nothing will change if the power continues in the same hands. And power here is not determined (only) by money, but rather by ownership. While large fund backers like Funds of Funds and Family Offices continue to inadvertently back fund-managing companies owned by man, nothing will change.
Evelina and Jess touched upon also many other topics, like due diligence process and the gap between startups and larger corporations, so keep an eye out for the recording of the whole session. Start Grind will make it available on Youtube soon.
