Early stage investments in Denmark: interview with Christel Piron, CEO of PreSeed Ventures

christel piron

Christel Piron is the CEO of PreSeed Ventures, formerly Pre-Seed Innovation, an early stage investment company from Denmark and one of the most successful early stage investors in the Nordics. Since 2001 PreSeed Ventures has been investing in more than +350 Danish companies like VIVINO, GoMore, Trustpilot and LunarWay all great candidates for being the next Danish unicorn.

How did you personally get involved in Venture and startups?

Christel: My first venture capital job was as the CEO of a family office dealing with life science companies where we built and exited around 20 companies in the Nordics. Somehow it had a structure quite similar to the one we have today at PreSeed Ventures: We had an operational team and a dedicated investment team that actually made the deals (with the universities, hospitals and professors which had invented something) and then we helped the portfolio companies with the commercialization of their invention.

So, 3 years ago you entered PreSeed Ventures, today one of the most successful early stage investors in the Nordics, can you tell us a bit how it all happened and the journey so far?

Christel: I joined PreSeed Ventures – (at that time PreSeed Innovation) with the main task of separating the company from Seed Capital and the Seed Capital brand. And we have succeeded quite well with this task and today PreSeed Ventures is a very strong company and brand in Denmark. The financial years 2017 and 2018 have been the best years ever in our 18 years of history: the highest amounts of investments, highest amount of new syndication capital, highest financial return at our books. At the same time, we changed our brand and position from being quite invisible into the most visible and most active early stage investor in Denmark.

But then something happened in the Danish political system that required another change, right?

Christel: Exactly. In 2018 after we had re-branded ourselves, launched PreSeed Academy and had done a close to 80 investments, the government decided to close the Innovation Subsidy scheme which meant that we were not going to receive public money anymore; that, of course, changed our business model radically. We were the Venture arm of the Danish Government – and had new money every year – as a sort of Evergreen Fund. We really wanted to continue the fantastic work we were doing; so, the only thing we could do was to raise a 100% commercial fund.

You are often compared to Micro VCs, maybe because PreSeed tickets are associated with the word micro. What are your thoughts on that?

Christel: We really don’t consider ourselves a Micro VC– even though we size-wise are in that category – if using US sizes. The Danish term for a micro VC came from a discussion at government level when it was suggested to create Micro Funds or Micro VC that would have a 10-15 M€ fund with 5% management fee and a different “carry” structure enabling to have a big part of the carried interest. It just doesn’t work when you have a fully oiled system with classic six stage as a VC – and you need to make a good return to your LP’s

Can you be more specific?

Christel: Consider our deal flow: we see 500-600 cases a year, we go in depth with 100 of them and invest in 2-3% of those. The funnel is narrow there. There is this concept of ten thousand hours (Malcolm Gladwell “Outliers”) which is very applicable also in our field (and which I am very much using now that I am fund raising). Yes you can be a professional business angel, yes you can also be lucky and pick 1 or 2 winners , but if you want to make a consistent return that makes sense for early stage investments, you need to do things in a very structured way. Then there is money and there are the value-adding activities. We see a lot of things and through our experience…we have identified the most common pitfalls If you want to reach that next value inflection point in good time before you run dry – you need speed and you need to do the right things in the right order. If you, as a startup founder, can have advisors and professional investors supporting you, the probability of you succeeding is much higher. This work takes more than one-person 😊.

But isn’t a startup journey more like a chaotic process?

Yes, but if you put a 100 iterative chaotic process on top of each other, you will see a pattern: there are points that you can see where everybody fails or need help. So, as basic as it sounds, we are trying to convert this pattern into knowledge and knowledge into our most strategic asset. We also, when we invest, try to bring the right syndication partners onboard. Especially later stage VCs with complementary knowledge with regards to international expansion.

Moving from international to a very “national” question, what is the status of the Danish startup ecosystem and how it is the cooperation along “the value chain” in the Danish ecosystem. Do operators cooperate or compete?

Christel: In Denmark the ecosystem has matured very much the last years. There is a tendency for Micro VCs, Business Angels and VC’s to work more and more together. Everyone wants to syndicate, bringing different skills and financial capabilities to the table. Always competing of course for the best deals, but in general a very strong level of cooperation. I believe that we have a very strong eco-system in Denmark – which is a very important fundament for creating new successful companies.

And the relation with the “big ticket” VC investors?

Christel: Regarding the relation with Series A and Series B VCs it is both structured and unstructured. We meet up (and drink beers with them 😊) at different events both in Denmark and abroad, but we also have a structured approach. We try to have a list of 20-30 next stage/later stage-VCs that we work very closely with. A meeting once a quarter, a call every month. The best thing we can do for our startups is to introduce them to next level of investors. That is really value adding for them and for us as the first professional investor as well.

A lot of international investors want to cooperate with us because we scan the market and have an in-debt overview of what is going on in the tech scene in Denmark, – and we invest in the best of the best. The international VCs almost always want to syndicate with a local VC as this raises the probability for them in picking the right winners – and having a local partner that knows the legal and regulatory processes.

Christel, I am one of your most loyal attendees at the PreSeed Academy. What is the secret of PreSeed Academy? It is always sold out. People could get courses online but …

Christel: It started as a branding exercise for PreSeed Ventures but has turned into a more Thought leadership and potential pipeline/deal flow exercise. We always have ex founders attending and it is much more fun and educational listening to ex founder advice than listening to me 😊. We have theory and then massive lessons learned practice – and everything is spiced up with nice food, beers, good venues and a lot of great people from the ecosystem.

In 2020 we are moving to the next Level of PreSeed Academy – and it will be interesting to see how far we can take PreSeed Academy – which basically is our own little start-up. We want to take responsibility for developing the ecosystem in Denmark.

What do you know about the Italian startup ecosystem?

Christel: I am half Italian and I know a lot about Italy, but I don’t know much about the Italian eco-system. I have met a few Italian founders especially the ones who graduated at universities like Copenhagen Business School (CBS) or Danish Technical University (DTU). So far, unfortunately, no Italian investments or co-investors thou.

What is your investment thesis?

Christel: we have a few parameters: first of all, Team quality, skills and execution power. We would rather invest in an A Team with a B Product than otherwise and the reason is simple: there is not so much possible due diligence at the stage where we operate, not a lot of customers, not a lot of metrics to evaluate so you can understand how team is so important. But off course we also evaluate the business model, the Market size, the competitive landscape etc. – things that I believe a quite standard in the VC business.

Christel, you often have a board member together with your investment. What is the secret of a good governance at board level?

Christel: we normally take a board seat when we invest, but we never take the chair position. We always try to bring external sector knowledge people into the boards of our portfolio companies – that have been on the journey before. We cooperate and create value add and it is not only 4 meetings a year where we go through the budget. We work closely with our companies and ask all the relevant questions: and because there is a lot of pivot, we help them all the time with especially: People, Funding, Product, Sales. We either have internal people or we have a lot of external partners that can do that as well.

What are some of the major mistakes you see founders doing nowadays?

Christel: Founders should be careful about underestimating the timeline for a proper funding process. It takes time to understand who could be interested in investing in your company and it takes even more time negotiating all the terms.

Also, I see a lot of teams not having the right Go to Market and sales strategy in place. The problem is that without the right product market fit it is difficult to scale the sales. And you see teams asking for a lot of money for marketing which eventually are committed in a specific direction, and that is burned on something wrong – because they didn’t have the right product-market fit in the first place.

The third mistake I see is not respecting your cap-table. Don’t give away large parts of your company to somebody that won’t be active in the company. Professional investors won’t like this – and if you succeed with your company, the later stage VC’s will be “fighting” over the percentages that they want and need in order for their business model to work.

What sort of advice would you give to entrepreneurs who want to pursue a startup journey?

Christel: Talk to other entrepreneurs and try to learn from their mistakes and good experiences. If you can avoid even a small percentage of their pitfalls, then you are one step ahead. Also choose the right investors that can partner up with you on the very steep and difficult journey of a start-up’s life.

What is the future holding for you and PreSeed Ventures?

Christel: Fundraising for our first commercial early stage venture fund is taking a lot of time but we expect to close in Q1-2020. When we successfully close our first fund, we can go back to helping founders building great startups.


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