Thursday, December 21, 2017
Interview with Richard Sussman, NordicEye
For today's interview, we spoke with Richard Sussman, who is leading up investments for a new venture capital firm in town, NordicEye (www.nordiceye.com), which just saw a big exit in one of its very first investments, Los Angeles-based Weblife. NordicEye invested $3M for a 30 percent stake in Weblife a year ago, and just sold the firm to Proofpoint for $66M. We talked with Richard about NordicEye's $30M fund, its interests in Los Angeles, and why a Nordic venture capital firm has its eyes on Southern California's technology startups.
Give us an overview of your fund and what you invest in?
Richard Sussman: To date, we have raised 20 million Euros, which is around $30M US give or take. We're in the process of raising funds with institutional investors as well. We expect in 2018, we will have as much as 150 million Euros, or around $180M US. What's wonderful about this new fund, is we literally started in April of 2017. The fund has been about two years of development with Peter Warnoe, who is a serial entrepreneur who is very famous in the Nordics. He is the CEO of Magic Partners. Lars Tvede has written fifteen books on entrepreneurship, is a serial entrepreneur himself, and has been uber-succcessful. He's based in Switzerland and Copenhagen, and he's also a celebrity in the startup world and business world in Europe. They are the two senior partners.
I was brought in as a partner to build this new model. There's a lot of money out there, but if you have a good company, finding money shouldn't be the hardest thing. Having been an entrepreneur for my entire career, what I found, and what my partners found in Europe, is what they lack is smart money which actually gets involved, and rolls up their sleeves. You need smart money which helps you poen up markets, so you can achieve exponential growth in real time. Literally, when we put our money into Weblife eleven months ago, is we provided oversight and support and guidance. It's not just sitting on the board, which is very typical. Instead, what we really did, which was instrumental to achieve this type of exit, quickly, is within one month of investment we had opened up a third party sales organization for them in Europe. There was no risk to the company, and they did not have to pay any infrasructure or legal costs, and they did not have to do any hiring or vetting of people. Instead, we have a turnkey company we work with for our portfolio companies, which we have brought in and have known for about 20 years. That allowed them, from literally day one, to be up and running in Europe, expanding their revenue potential by double. That was just gravy on top of the performance Weblife already had in the states, with such clients as Amgen, Citi, Sony, and other big names as well.
We saw hyper growth in their revenues, adoption of the product, in users and growth, and that actaully caught the eye of several publicly traded companies. It became a bidding war, and honestly, we didn't want them to sell right away. We thought if they could hold on through another year, or another six months, they could have easily doubled their exits based on their comps. However, getting a first exit for a new fund, and getting and incredible return for our investors, and really a life changing story for the CEO, it made sense to accept the offer. Weblife's CEO is a first time CEO, and was in Deloitte for a number of years, this was actually his first time as an entrepreneur.
How did a fund originally from the Nordics become interested in investing in Los Angeles companies?
Richard Sussman: That's a great question. In Europe, over fifty percent of all the unicorns that have come out of Europe since 2005 have come from the Nordics. There is a reason for that, which is there is some amazing talent there. You have Nokia, Ericsson, Skype, and on and one. The issue there is you're not hearing about it until too late. That's similar to the issue with early stage companies here in Southern California, which is the step child to Silicon Valley. You have less, attentive money being funneled into Southern California, with the bigger money funneled into Silicon Valley. I saw an opportunity here which I thought was very interesting. LA, and Southern California, is getting bigger and bigger and bigger in technology. All the numbers are there—the demographics, the technology skill set, the number of universities. There is an opportunity to create something much bigger than if we went to Silicon Valley and opened an office. We had to explain to our European partners, who don't work here, that number one, the cost to fund a company up North is much much higher. Salaries are higher, and you've got to invest in companies at higher valuations. There's also toughter competition, because you're competing with the big boys. As a very young VC, we can't do that. There is a lot of opportunity down south, too, because a lot of talent is moving from the north to the south. It's just more effective for them and their families to relocate down here. Even though LA is expensive, it's nowhere as expensive as Silicon Valley.
Here's a real use case. We invested in a company which is in Denmark, but is an American company. That's very important for any European company. They are incorporated in Delaware, and have an office in California. Because of that, their valuation goes up from what it would be in Europe. The company, Organic Basics, was started by two young college kids. They started up this organic clothing startup, with t-shirts, underwear, and socks, and have killed it. They have literally grew to a couple of million dollars a year selling online online. They managed to get the interest of an investor, the very large family office of Maersk, which is a big shipping family out of Denmark. Because of our connections, they brought the company to us. At the time, the company was based in San Francisco, and they were finding it was too expensive to live in San Francisco, it was too expensive to maintain an office, and it was too expensive to hire programmers in San Francisco. We met with the CEO, and besides the money we put into the company, we did two things. First, is we helped them tap into Europe through Peter and Lars, who know the owners of all the major retail conglomerates, and used that to open up a bricks and mortar play in Europe. Second, here in the states, we gave them a base in Los Angeles, in Silicon Beach, and connect you with leaders in retail and fashion. That turned them overnight into a company with projections for next year of $4M to $6M.
What things are you looking at when you consider a company or entrepreneur?
Richard Sussman: We look for people. It's all about peoplel. We love working with people, getting our hands dirty, getting on the phone with them, and being part of their team. We don't just want to throw our money at them. We want to be a part of the team, so we can elevate the company. We also want people who understand that, and want that. It's very important for the CEO to say, I know my space, but I don't know these five things—and maybe those are the things we could bring to the company. Ideally, we want a company that has good leadership, ideally, where you have two co-founders. We find that two founders, rather than one makes the chance of success much greater. We also want to see some market penetration. We don't want an idea company, we want a company that has actually gone out there and built something. A company which has some revenue and has proven some sales, is more important than an MVP. Most companies don't know how to take it from there to hypergrowth. That's actually where most companies fail. At the early, early stage, they just don't have the right infrastructure built to support growth.
Thanks!