An overview on the Danish startup ecosystem: interview with David Ventzel, Partner at Accelerace
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David Ventzel is partner at Accelerace, one of the Top 10 Accelerators in the world. He is in charge of managing investment relations with LP. He is also General Partner at Overkill Ventures, a CEE focused pre-seed and seed fund with backing from Altum, Lattelecom and Accelerace.
David tell us a bit about your experience with startups and venture. How did it all start?
I’ve always wanted to have my own business, maybe as an “anti-parent” thing (my father worked for the government). I remember being 18 and going down to the bank with a business plan I had created. They took the meeting and then, obviously, rejected it and I remember thinking “maybe they rejected it because I have no formal education”. So, I took a degree in business management and corporational law and finished my master’s degree in 2006. I actually got this idea with friends about a company pioneering ticket services.
What was that about?
The idea was to build largest mobile ticketing platform in Denmark. We thought of making events available on a mobile device so you could buy tickets directly from there. At the time it was almost impossible to create a simple website on a mobile phone because it wouldn’t render correctly on 99% of it due to the fragmented OS, the fragmented hardware, the fragmented browser and system; so we actually created a solution for that and we actually managed to raise funding at the time.
But it didn’t go well…
We just thought that the industry would be inspired by our technical innovation and will stop using Ticketmaster, but it never happened. Nobody ever used it. The company closed after unsuccessful attempts of scaling outside its niche.
What happened after that?
I started a second company, Screenticket. It was a mobile coupon campaign tool offering to brands and agencies on SaaS terms. The company became the market leader in Denmark until it was acquired by Guestlogix, the world leading provider of onboard store technology and merchandising solutions for the airline industry based in Toronto, Canada.
That seems a interesting chapter of your life. Is that when you got in touch with Accelerace?
Yes, I participated to their first batch and, after securing funding for my startup, I talked to Peter Torstensen (CEO of Accelerace). I started coaching startups and then, at some point, I got interested in financing. I had investors on my phone contact list and I didn’t regard them as anything but people who were supposed to get me money so I could do my thing while they stayed away. Then I thought: “maybe I shouldn’t consider them just as this irritating thing that comes with the money at some point”. So, there I started my investment relations role with LP at Accelerace.
David, you have a very privileged view over the Danish startup ecosystem, can you tell us what is the status of it today?
It has improved a lot. It is very different from when I was a founder 10 years ago. We have a lot more supporting institutions; however, the biggest change is actually on the Business Angel side. Angel investors today are remarkably different from 10 years ago. Back then, they were not coming out from the startup industry, they never had an exit, they weren’t founders; they either were in real estate or were coming from sales experience in the 90s – we called them the Oracle generation, the IBM generation. These guys mainly understood how to make money by selling solutions to big companies. They were not really founders as such; they were salesmen and they were good at what they were doing: they were in a tremendous growth industry and we all learned a lot from them about how to sell; they were tough and direct, but they never struggled so much with product market/fit because they came from selling database solutions.
We suffered a lot, as you always do, in early-stage business environment, by having resourceful players who actually didn’t understand startups.
And then how was the journey?
A general level of trust began within the ecosystem and it was mainly due to governmental intervention. We have now so many pre-Seed and Seed high-quality investors because there is a shared level of trust about the value of the ventures and it is thank to the big governmental intervention that lasted for almost 10 years. We basically had in the beginning 7, now consolidate into 5, state-backed VC funds all doing Seed investments, being directly on the government budget. 50-60 Seed investment per year and the vacuum between Angels and VC was starting to get filled. The bad news is that they are gone now, so the market must maintain itself which means that the short-term future is bleaker for the founders. Eventually, money will flow into this stage and it will find an equilibrium as there are very good deals now.
It has been a beautiful journey, any flaws you still see in the Danish system?
One of the things I see it is the lack of hunger. All Danish founders are internationally oriented and their educational background is solid, but they can be a little bit too mild in some ways. I am referring to the kind of hunger I have seen, for example, in some funders from East Europe: if you are coming from Minsk and have global ambitions, you understand that you will not be able to fulfill any of these ambitions just staying in Minsk: you need international network and you fight for it. This is the sort of appetite that I am referring to. Danish founders are more comfortable staying here for longer which makes them little less aggressive. Aggressiveness you sometimes see in less developed ecosystems and when I see that I call it Step 2 in a maturity journey.
And what is Step 1?
Competence and international mindset.
Speaking of less mature ecosystems, what do you know about the Italian startup ecosystem?
We run an accelerator program together with Enel in 2017. We managed that program and looked at all the companies that answered the innovation call. What stroke me at the time was that Business Angels were very well dressed and this is very symptomatic, not former startupper/founder. They looked like lawyers and bankers, probably because they were.
Going back now to Denmark, maybe you can share how does Accelerace work and what is the business model?
We have access to public funds (roughly 30% of our funds), sponsorships from corporates and then management fees from our funds. Corporate sponsorships are the biggest currently. What we do, is basically running specific calls for specific corporate. What in the eyes of the corporate they would call “Open innovation” for us is an acceleration program where they just want to meet startups typically vertically focused. Our food program will be with Arla, for example, where the corporate is present in the selection board.
How did you become one of the top 10 accelerator in the world?
We started very early and we have now accelerated more than 600 companies There weren’t many accelerator back then, so it has been a long learning curve. We keep optimizing the experience, taking feedback from the startup thanks to a team of about 25 people now. Also, through time we have tried to institutionalize the approach. Most of the accelerators are mentor driven which means that the value of accelerator is coordinating and providing that network. Our value is workshops and seminar provided by our own staff. So, we can capitalize our knowledge.
And your investment thesis?
We invest early and we invest often in first time founders. First time founders are often undervalued while the truth is that most successful startups are created by first time founders. We did a study some years ago published by a scientific journal: second time founders have a success rate slightly lower than first time founders. The problem is that VC don’t treat them that way. A founder who has been successful in the past can go to a VC and get a very high evaluation. We have just seen that with Morten Strunge’s Danish podcast start-up called Podimo (pre product and pre revenue stage) that raised $6.7 million in his first round. First time founders will never able to do that. VC puts a premium on past performance. We think that’s a mistake and that first-time founders have equal chance of success. We have also serial entrepreneurs in our program, but not a lot. We invest in asymmetrical information and what matters for us is almost solely the team.
What are some of the major mistakes you see founders doing nowadays?
From a time perspective, one thing they have been doing too much sometimes, maybe out of interpreting Lean Startup in a wrong way, is trying to test everything without having any hypothesis and thinking to find all the answers there. There are things that makes sense to test and there are other things that can’t be answered via a test. Let me give you an example: you won’t be able to gauge real customer interest through a test, especially if you work with enterprises. In most cases the customer needs to have the real feel of the product and the value before giving an accurate assessment. The idea of talking to 10 people, asking them a question and if 6 say show interest then we build the thing is wrong. You need more insights! Testing everything also affects speed and you move slowly because of it: there are multiple scenarios you can test. Sometimes you need to make insightful choices based on the believe and the research and move rapidly. Rather than testing without insightful guidance. You can test a color of a button; you cannot test your go to market model, rather analyze it at deep level.
And what advice would you give to a Startupper today?
My main advice is that you need to serve customer whom you have true empathy for. If you provide a service or a product that is supposed to help them. Most of the people you will talk to will reject you, they won’t buy from you. You will be rejected over and over. If you don’t have deep empathy you will start to hate them, to dislike them. It is uncomfortable to be rejected, especially when you feel you make an extraordinary effort to make something they should appreciated. Taking a long time to make the perfect meal to someone who will not appreciate it might build anger inside you, however If you have deep empathy you will think: “ this person has not seen the value yet, let me work on clarifying that”. Most startup founders don’t think like that and I see a lot of Startupper hating their clients and coming back to the office saying “these guys just don’t get it, they are stupid” so you start creating a culture where your customer is considered stupid. And as soon you start doing that you will never succeed.
What’s the future holding for Accelerace?
Accelerace was an institution that grew out of the need of educating startup founder for a journey that very few people could advice for. We, and other accelerators, are facing the challenge of not being needed in our original form anymore. Today you can get that advice anywhere and so many people are trying to complete that journey. So, Accelerace is going from being an accelerator program to be an engagement platform, not only educating, but also providing a platform where they can transact with the people and the resources they need.
And for you?
Personally, I love the early stage game, because the most interesting part is seeing the future. Most people are in awe of Airbnb and Facebook, but if you worked in early stage you would have seen these companies 10 years ago. You will see in my line of work what everybody else will see in 10 years. There is no company that will change the world in 2030 that has not been founded yet. We know so because it takes at least 10 years to grow that company and make it successful.
One last question: would you encourage Italian startups to apply to Accelerace?
Yes, by all means. They have to be conscious that they have to be here in Denmark during the program, but otherwise they are welcome to it. We had Italian startups in our batches and were quite successful.
Thank you for your time and for the insights, David.