E459 | Charles Martin, Kinnevik: Nordic AI Talent, Founder Archetypes, Evergreen Funds and more

0:00Everyone is obsessing over AI models and algorithms, But what if they're all missing the real competitive edge? Charles, investor at Kinevic with 1.5 billion euros to deploy, reveals why the Nordic region is unexpectedly becoming Europe's AI talent hub. Technology is never the constrained resource. Differentiation, really. It's in this assembly of people and how we manage them. While the world obsesses over models and algorithms, Charles reveals what actually drives AI success. The question you ask is fundamentally one about pools of talent, and in particular, why the Nordics has the right pools of talent to build a great application company.

0:38But here's what most investors miss. The Nordic region's hidden engineering power is astonishing. We looked at how many people from the Nordics and Baltics were working in the large LLM companies. It was something like over 50, including, interestingly, some very young people there as well. And it's not just about technical talent. The real competitive edge? Operation firepower from world-class teams. And these guys are coming out of the likes of Klarna, Spotify. They know how to go to zero to one, and one to ten, and then ten to a hundred. Distribution is almost as important, maybe as important, as what you're doing on the technology and product side.

1:13Charles breaks down the three-part formula that's driving Nordic AI success. To build a really great application company, you need a 10x product. So you need a novel wedge, and something that's very differentiated to other products. You then need really great engineering. And then lastly, you need really talented people to help distribute the product. And what this means for the future will transform how we think about building companies. We could have a very big company built with 10, 20 employees. That is not obvious if AI can continue to improve. Join us for a fascinating conversation about the future of AI, talent, and why the Nordic Formula might just determine the next wave of tech winners.

1:50This one's for you if you're thinking about AI, talent moats or where Europe's next unicorns will emerge.

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2:42This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Charlie, welcome to the European VZ Podcast. Thanks very much for having me. As we were just saying now, it's my first ever podcast, so very excited. And to everyone tuning in today, we're talking to Charlie from Shinnevik. And for that reason, the first thing I will ask you, Charlie, and I'm saying Charlie, I'm very colloquial. I hope that's okay. Otherwise, Charles Martin, if we said the whole name. We're going to talk everything about first a bit on Shinnevik, just so everyone knows the story and who you are, where you're focused.

3:20And then after that, we're going to dive into AI in the Nordics and why you as a Brit are spending a lot of time in Copenhagen these days. Cool. Sounds good. But we can start with Tunebik. So Tunebik are a very differentiated investment firm. It's actually the primary reason I moved to Stockholm was because I really wanted to work for them. And I think there are a few really key things to understand. The first one is that we're the only truly multi-stage European fund. So we can invest from anything from first check all the way up into the public markets. So truly full stack in that sense. The second part of this is scale.

3:57So with around 1.5 billion euros in cash to deploy, we have more firepower than pretty much any of the other funds operating in this part of the world. So Accel Europe, Atomaco, Bolderton, et cetera. And then I think the third part, which really sets us apart from the others, is we have a very long-term perspective. So our average holding period for companies is around 12 years. And this is a function of fund structure. And that's because we don't have LPs. It's an evergreen setup. So we reinvest our own capital back into businesses, meaning that we don't need to seek a liquidity event for ourselves in a sort of five to seven year time period.

4:36So when you pass scale with a multi-stage capability and a long-term perspective, you get a real anchor and long-term partner on the cap table. And you can take something like Travelperk as an example of this. So Travelperk recently announced their, I think, near$3 billion valuation the other day. And that's a company that we invested in, I think, 14 times since we invested early on, which is, I think, a great case study on why the value proposition is different. Lastly, this is a recipe that's worked very well. So we've had several billion and multi-billion dollar companies, including Clio, Travelpark, Muse, Spring Health, Salando, Livongo, and then more recently in AI companies like Recursion and Veda, with a few exciting ones in stealth also.

5:22So it seems to be a recipe that is working pretty well. Beautiful. Let me just ask you, where does the money come from? So Genevig has a pretty colorful history. So around 100 years ago, we were actually in pulp and forestry. And then in the 70s, we transitioned into building big telco companies and challenging entrench monopolies. So we built companies like Teletoo, for example, there. And then at the turn of the century, so the start of the millennia, we went, okay, let's do pure play tech investing. And that is all we do now. And that is what the entire sort of balance of our portfolio is, is venture and growth.

6:01Typically private companies, unless they graduated or we've made a public investment. And yourself, Charlie, where do you spend the majority of your time in, if we start with the stages, but also location wise? Yeah, of course. So I work on our ventures team at Chinavik. So anything from, I would say, first check to series B. As I said earlier, I actually moved out to the Nordics because I wanted to work for Cervé. So I also have a very strong focus on anything that's Nordic or Baltic related. And then in terms of where I cast that focus, I'd say software and in particular AI application companies.

6:39So that's my sweet spot. And now let's move into the bulk of today's conversation, not to make a reference back to bulk trading as in the good old days for Shinovik. I'm saying Shinovik, and that's a bit because I'm coming here from the Nordics, and that's at least how my peers primarily have pronounced it. So if anyone listening in are feeling that, wait, what company are you guys talking about? It's because we're from different backgrounds, so we have different pronunciations here. I want to ask you then about this whole context for AI in the Nordics. Why exactly is it that you think that the new Nordics is a place where AI will be especially well positioned to be a big outlier?

7:28It's such a great question. And just quickly on the name thing, it's something that I get wrong. It's something my London colleagues get wrong. There is definitely a right way to say it, and I'm not going to change it. We'll add that to our Swedish colleagues. But the question you ask is fundamentally one about pools of talent and in particular, why the Nordics has the right pools of talent to build great application companies. So I think there are three layers to this, and I'll map out each of those for you. The first is around technical talent. And firstly, you have very high quality in the Nordics.

8:09And when we spent some time looking at this area and building this thesis around Nordic AI, we looked at how many people from the Nordics and Baltics were working in the large LLM companies. And it was something like over 50, including, interestingly, some very young people there as well. And then there's the skills and the capabilities in the region around technicals. And in particular, you have a high concentration of AI-specific capabilities, so PhDs, researchers, et cetera. And then more generally, software engineering, which is very important in particular, as we now have had this sort of first wave of innovation at the LLM layer.

8:48And it's now about connecting that and embedding that into applications. And this is a term referred to as the AI engineer. Do you consider the foundational layer done? Like we're not going to see any new entrants in this space, especially not from Europe? When you look at the constraints, so the things that make it hard just to spin up a foundational model, right? In particular, that more research-heavy talent and then capital. And Europe has both of those things in abundance and the Nordics does as well. I don't think it's the end of it. And I'm sure that we'll see other companies coming into the space.

9:27Yeah, so you do keep an eye out for new players in the foundational layer as well. Yeah, 100%. Interesting. It's a funny discussion that I'm sure a lot will weigh in on as they listen to this. Okay, so now you went into the AI engineer. Let me know, how do you think about AI engineers? How are they different from the usual engineers, so to say? It's pretty much typical software engineering, but with an understanding of how LLMs work, and then how you can embed that into workflows. These people are really important. And actually, when we speak to our portfolio companies, they've had a lot more leverage in AI by going and hiring these sort of hungry engineers that understand AI than going and hiring a bunch of research scientists and PhDs.

10:14And then let's dive into, because I want to ask you the big question, why the new Nordics? And if we really pull it apart, you say we have technical talent, we have operational talent, we have the inventive mindset. If we start with the technical talent, Can you unpick that for me? Yeah, of course. So as I was alluding to on the AI-specific bucket of talent and then the general software engineering, those are the two things that I think matter here. And actually, if you look at that from a supply perspective, so how many of these people there are divided by the number of startups, the supply is much higher than in the UK, the US, and France.

10:54So you have a very high concentration of talent. The second part of this thesis on talent is around operational talent. So this is the people working in go-to-market roles and the finance function and everything that makes the operations of your business good. And these guys are coming out of the likes of Klarna, Spotify, Clio. They know how to go to zero to one and one to 10 and then 10 to 100. And this is hugely important, right? Distribution is almost as important, maybe as important as what you're doing on the technology and product side. and you really need those players in order to make your business effective.

11:28And then the sort of final part of this is more of a cultural phenomenon. And it's very hard to define, but I think it's as important, which is that the region is just very creative and innovative. And I don't think that's just been something that happens empirically in the world. And you can look at R &D as a percentage of GDP. you can look at the global innovation index where you have companies like Sweden, Denmark, and Finland consistently in the top three. And what that means is that you just have this pool of talent, which are going to be doing very creative and innovative things. And it's the combination of technical talent, operational talent, and then this creative mindset.

12:09And you can sort of pull those together and think about why that matters at the application layer as a starting point to build a really great application company, you need a 10x product. So you need a novel wedge and something that's very differentiated to other products. And that's where that creativity comes in. You then need really great engineering, but to realize that initial product vision, and then also deliver on a roadmap, right? R &D never stops. This is something that happens continuously. And so you need to be able to attract and hire great engineers. And then lastly, you need really talented people to help distribute the product and optimize the business as well.

12:48And it's those three buckets that I think set the foundations for building great AI application companies in the Nordics. I know part of why you are excited about the Nordics is also the strong university base that we have here, the research base. I'd love to ask you how you think about startups that come out of universities and to what extent you like to see slash want to see the operational talent as part of the founding mix as well? Or are you fully comfortable backing teams that are purely technical? So just one thing on that is that I'm not necessarily just interested in teams coming out of university.

13:27I would say I'm as excited about all the founders who didn't go to university as those that did. And I think in particular in the Nordics and Baltics today, there's this cohort of very young, early 20s founders that didn't go to university at all. So this is people like Sebastian from Talentium, Charles from Strawberry, formerly Dendrite. And they have this spirit of rebellion and they still have technical competency as well and doing very interesting thing on the application side. So I think the universities are really good at helping to build those technical skills, but it's no prerequisite for success.

14:07In other words, are you going so far? Because they asked you a question about the university ecosystems and to what extent you believe in building on top of those. And you kind of pivot the question to, well, I actually like the ones that haven't gone to university. Would you go so far as to say that that is actually a bit your thesis personally, that you are more interested in these profiles because you think they're rebels with the costs that are more aligned with the venture mindset than someone spinning out of university? Look, that's definitely something we're seeing, right? There's so many of those types of profiles.

14:43Then again, there are also so many profiles that did go to university. So it's just one thing I've observed. I mean, Anton Osika, lovable founder, went to KTH, didn't drop off. So I think it's hard to ever get lost in this is the one profile we're looking to. like people are rich and and nuanced and it's very hard in this industry of outliers to like narrow in on any one profile so i wouldn't say that it's just people that have dropped out although that is definitely an interesting thing we're seeing at the moment could you tell me a bit about how you view the different founder profiles that we have in the nordics or new nordics let's just uh restate that new nordics you're saying that because it's not only denmark Sweden, Norway and Finland, but also a bit more Baltics as well.

15:35I think that's how most of the people covering that part of the world are categorizing at this day is New Nordics and that's because there's a lot of exciting things happening in the Baltics. Now, people basically want to add that to their coverage within that region. There are definitely a core set of profiles that we're finding particularly exciting. And I say all of this with the side note that people are very nuanced, particularly founders. So this is more directional than it is absolute. I think the first profile that we find really interesting is this founder with like a platform mindset, a very expansive product vision.

16:16And then pairing that with a very strong focus on data foundations. I think the standout examples here are Tuomo Riki from Xero and then Jonathan Sanders from Light. And what they're doing, which is super interesting, is integrating data infrastructure into the application very well. So being able to do things like setting up the rag, cleaning the data. And what that means is that you can have a much higher quality output in terms of AI. The second one that we really like as well is this opinionated, tasteful product curator. And you see examples of this, like Anton from Lovable, which is a very UX focused product with very good design.

16:58And then another I really like is Merit. She's the founder of Stryze, which is an AML automation platform. And you would think that AML, so anti-money laundering, would be kind of a tied category. But she's managed to both animate that category with this awesome podcast, and then also build a really sleek, amazing product as well. So that's cool. And then the last one, which we touched already, is the rebels without a cause, which is just this cohort of kind of crazy, rebellious founders in their 20s, jumping out of university, dropping out and just going off and building companies. So I think Max from Leia was the pioneer here, who went pretty much straight out of university into founding Leia.

17:39Now Legoran, obviously raising some very impressive founding grounds. You also get people like Charles from Dendrite, Sebastian from Tavantium, Arvid from Cura. this sort of young cohort of exciting young entrepreneurs that are in the New Nordics. Let's talk a bit about where they come from. Where does these categories kind of stem from? What do you see socially in the New Nordics that lead us to create rebels with a cause? So I am no sociologist, but I find myself asking myself this a lot. And I have a few theories and they might be quite bad, but I'll share them anyway. it's too late to not go into the territory of just talking about things we don't know too much about so please continue um so one example would be these founders in their 20s like what they're doing is a very rebellious act right particularly in a economy which has such a high proportion of services jobs because essentially what they're doing is rejecting that these are all smart people they can go work in consulting or law or finance.

18:47They're choosing to take a much riskier approach. So I think that that's interesting. And I kind of reflect on it in the same way that I reflect about my experience in the UK, which is that you have these high services economies and quite like compliant, fairly like small C conservative cultures. I think what is different in the Nordics to the UK actually is that there's maybe a higher proportion of people in the Nordics that just reject that. And they go, right, I'm going to do the thing that's the opposite of that. And they don't go and build startups, which is probably the most high beta thing that you can do.

19:23So I think it's in many ways a rejection, right, of the meme. It's pretty funny because so I'm born and raised in Denmark, right? So I have a bit of something to pitch in here. So what I see in Denmark is that we have this beautiful confluence of having a very liberal upbringing, not liberal as a right wing, but liberal as you can do whatever you want. You can be whatever you want. You can think whatever you want. You can wear whatever you want. There's a lot of liberty in how we raise our children. And then we have, of course, a school system that's also teaching us to think critically right from the beginning.

20:11As an example, I was completely dumbfounded when I heard from a UK peer my age. He said, Andres, I've never presented in school. Like not once in my 16 years of school have I been tasked with presenting X topic in front of my class. and I was like what my daughter or even myself like just from the like age six we were presenting whatever topic whatever in the beginning it's what you did in the weekend and what you think about x y and set and later of course it's big presentations on the back of a research topic and that's already in you know in the in the fifth grade sixth grade you'll be given a week to research any topic that you want, and then you come back and present that to the class.

21:05Having that freedom to chase your curiosity and at the same time also being put in a bit of what you might call an entrepreneurial situation of figuring out how am I going to present this topic to everyone, all that stuff, I think really created a good foundation for being creative and self-motivating and so on and independent. And then we have a weird thing, which is super contrasting to what you hear in the US, which is in the US, they always talk about how the fact that you are your own, you are the master of your own fate. If you don't succeed, you're falling your ass. And that's a good incentive for everyone.

21:52in Denmark we have the opposite and it's the same in Norway and Sweden right because we're told go and do something great and if you fail don't worry we've got you covered you've got two years of social social service or social money right which means that I think that if you have an entrepreneurial spirit in the Nordics the risk of starting something is very very low and I think that really helps a lot of people get out of the nest. And I always say to my friends that I haven't yet taken the jump. Come on, man. It takes a small session for us to brainstorm your route to a startup that leverages your expertise.

22:39And then you freeload a bit on the public system for a year while you build that in the background. And then you can launch and you can be the master of your own fate forever. I think those are great points. I think education is super important. It's interesting. I obviously wasn't educated in the Nordics. I just lived there. It's really interesting to hear that perspective on it also. And then, yeah, having a state that subsidizes you to innovate is a pretty cool feature as well. Yeah, what I hate, though, is that you have to be a bit okay skirting some of the rules. Or at least, well, you don't have to skirt the rules, but you have to definitely frame things in the right way.

23:21But it can be done, which is, I think, the important thing. And also because if you want to be an entrepreneur, you're also the type that figured that stuff out. Let me go to the other, the product curator, the person with great taste. Do you have any view on where that comes from? We obviously have Jackie Ingels and that kind of thing in Denmark, an architect that's world-renowned and has built incredible things. so there's a design culture i think it's a bit above my pay grade that um i think some of the best things about this job actually being an investor is sometimes you just need to see something happening uh and it's someone else's job to explain why it is happening right you're rewarded for action being first of things i do think people do to your actual question i do think people reference the sort of scandy design aesthetic quite a lot So maybe that is one thing.

24:15But it's a really hard thing to give a concrete answer on. These things are so complicated. I think you're right. How do you think about spotting this outlier talent? So to say the spark in an individual that you can see, you really, this is something that looks very exciting. How do you measure that? How do you think about it? How do you talk about it inside Shinovic? You're asking the hard questions today. Of course, always. Okay, so one thing you can hold on to, right, is have they done something really special before? And it doesn't necessarily need to have been a successful startup. But like, have they shown that they can be creative, that they can build things that people want, and that they can execute?

25:02So that's usually a good pointer. There's also a lot of this, particularly in that first conversation, which is gut-based. and the heuristic I have for that is because I used to be an operator is do I want to go and work for this person and I think that that like sums up so much of the skills that founders need to do right they need to hire they need to sell they need to inspire you so that's always one that I ask myself at the end of the conversation is do I want to throw caution to the wind and go and work for this person it's actually it's a great example because you know given your age and and your background as an operator, that's the thought you have.

25:41Is this someone I would want to work with or slash for? I always, when I talk to angels that want to get into LP investing, I always, because they're always a bit like, how am I going to think about this? You know, I haven't done fund investments before. And I oftentimes summarize it as, well, you've been an executive through your entire year or your entire life almost. I would probably think about this as, is this someone I would want to hire as my executive to run my venture program? Because that all of a sudden flips everything in a way that's usual to hear for people. And I really like that perspective.

26:25And I often would also advise maybe some emerging managers that are thinking about or people thinking about breaking out as emerging managers. Ask yourself that question. If you had a million dollars, would you hire yourself to look after the venture allocation? And I honestly think that that question can sometimes help people realize that they're pursuing their own dream rather than doing what their best position to do right now. So that's a provocative statement, but I do think it's one that helps people a lot. We're going to talk about that with Evan Finkel and Carmen from Cocoa soon in a podcast as well, where we dive into this topic of how honest should we be with our peers in the industry?

27:12How ruthless should we be when we give feedback? And I am on the side that it's absolutely integral that we are super ruthless with each other because you can go so long trying to raise that first fund without getting traction. And honestly, you could have gotten some hard learnings early in your career instead. It can be kind to be cruel sometimes. Time is our most valuable resource, right? The one thing that is truly finite. Right. So if someone's going to dedicate multiple years of their life to something that you think has a very low probability of success, then I think it's your part to either tell them or tell them what they could do differently.