EUVC #254: Staffan Helgesson, Founder of Creandum on building a Tier-1 firm & capturing the Climate Tech opportunity

0:00In a world where podcasts outnumber humans, we try at EUVC to be mildly more interesting. Tune in at EU.VC to watch this episode instead of just listening. EU.VC, where the extraordinary is just another Monday. Hi everybody and welcome to the EUVC podcast. I'm David and I'm joined by Andreas. Today we have Stefan Helgesen. Stefan is the founder of Creandum, a European early stage venture firm with no appointed headquarter but offices or hubs as they all in Sweden, London, Berlin and San Francisco. They just turned 20 years and are investing out of their sixth fund, which is a 500 million US dollars fund to back founders and companies across Europe.

0:43In addition to Europe, they invest in European diaspora founders in the US. The firm is a generalist investor, but have organized themselves in six main verticals health, climate, technical SaaS, application SaaS, fintech and consumer, where they spend most of their time. The firm has approximately US$2 billion in their management and has done close to 150 investments over the years. At Criandam, Stefan leads the climate vertical and is also a very active investment suspect. If you're listening in and you love our show, don't forget to drop us a review, follow the pod and subscribe at EU.vc. And now, some words from our beloved sponsor.

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2:21Tear down this wall. It's more than just an alliance. This is a union of values. United and determined we can serve as a model for other regions of the world. The nature of a problem requires a European response. Europe is a story of new beginnings. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. So Stefan, we had a great time together in Bucharest, but most of our audience were unfortunately not there. So let's just start this thing off by telling your story about how you got into venture. So it's a good question.

3:12So, hey, I'm originally from a small farm outside a university town down in southern Sweden. And, you know, when I grew up, I knew nothing about business or anything like that. But I was lucky. So my mother eventually got the whole family to move into the city age 15. One thing led to another. And, you know, as most Europeans, I then started to work at big companies. after my degree. Those big companies, and specifically McKinsey, where I was a consultant, that brought me to the Bay Area, summer of 99. And the first evening, I met a guy, a guy called Guy Kawasaki. He was at the time, a former chief evangelist of Apple.

4:00And he told me a bunch of things. One of them was that in Silicon Valley, only the bus drivers have ties. You know, I ripped off the tide pretty. But he, you know, he also made me realize that I was working for what I strongly felt was the losers of tomorrow, and not the winners of tomorrow. And that the combination of, you know, increasing computing power and the internet was going to change the world. And I remember clearly thinking that, hey, if they can do it over here in the Bay Area, Why can't we do it in Europe? And we also had a pre-chat stuff. I can't remember the word that you used. They had a little big stint in fencing.

4:43I'd love to share that with our audience as well. I think it's super cool to reveal some of the stories of our guests. Yeah, so if my wife listens to this, she's going to give me a hard time because I've always made it in small sports. So I played for Sweden in field hockey. I was, believe it or not, I was even the coach of the national team and the president of the Swedish Hockey Association, again, field hockey. And then I picked up fencing, age 30, while trying it out at a bachelor party. And then eventually, I actually qualified for World Cup four years later. But she is saying that it's only because I'm not that good in sports.

5:22So I have to focus on these niche sports. He was very good in soccer. And, you know, I never did anything in soccer. So that's sort of the sad truth. It's better to be a big fish in a small pond than to be an average size fish in a very good ocean. And that's why you found a creandum in Europe. Can I make that now? The venture is a good one. I mean, the venture pond, you know, wasn't that big at the time. Or actually, it's interesting. It was much bigger than we think today. I mean, in the Nordics, back in 2003, or actually fall of 2002, when I started Crandom, there were a bunch of venture firms around.

6:05But what happened after the internet bubble burst in 2000 was that they all went to what I call 3x investing. And if you do a bunch of investments that all aim to do 3x, what's your fund going to end up at? Well, I think maybe 1.3, 1.4, and that's not returns for venture. So they all eventually died. Can I ask you about that stuff? And because that's we've seen now we've seen that that keep getting data out, especially from Cambridge Associates that's quoted everywhere saying that European venture outperforms U.S. And then you've got this history, I think, where you're completely right in saying that where venture comes from in Europe is certainly a more conservative approach where you take more time and you'd also invest in less moonshot type ideals.

6:56because that is then maybe a good legacy to have, to then have then adopted U.S. principles, but you still have this bit more conservative approach to investing than what you see in the U.S. Do you think that that's the explainer of why our performance is better, that we have a different investing style than U.S.? Or do you think that that's actually something that we need to shed more in Europe and it's just because we have a better price and a very, very good talent pool in Europe that has yet to really come to fruition. And that's what we're reaping right now. Yeah, so there's a lot of questions in there, Andreas.

7:36I'll try to... I always try and talk enough so you can pick something. No, but hey, I'm super bullish on Europe. And you may have seen that we put out a report this summer together with Dealroom. And I think the core essence of that report basically says that finally, after many years, Europe is on roll. And I think if you look at the most important aspect, which is volume of people, hence talent, Europe is close to a 2x advantage versus the US. It's close to 2x in population. But then on top of that, we have lots of immigration. And immigration is fantastic for entrepreneurship and startups. Just look at Silicon Valley, where I think more than half of all successful startups have had one or two first or second generation immigrants as co-founders.

8:29And the same thing will happen in Europe. Now, why hasn't Europe gotten there yet? Well, I think there's a number of reasons. It's not only investing style, et cetera. And I think the most important reason is that the ecosystem in the US started, call it 50 years ago. Whereas here, I think to be very frank, maybe it started 20 years ago, and maybe the last 10 or 12 years, it really has momentum. So as with many things in life, there is this important time component. And I actually think that time, not only, but time will actually, so to say, solve some of these issues. It will not fully and immediately solve the cultural difference and to the point of investing.

9:20I mean, I think one of the reasons why we are still standing, so to say, after 20 years is that we were very influenced by the U.S. early on. We spent a lot of time there. We can come back to that later. But I think it really inspired us to think big and go for those, you know, swing for the fences type of opportunities and entrepreneurs. Some of my friends sometimes ask, you know, what it is like to be an investor in venture. And sometimes I feel it's like having your head inside a beehive, you know, 16 hours a day. And success is contingent on your ability to pick which be to focus on. Exactly.

10:01It's just constant noise all the time. And out of that complete noise and somewhere, you know, 8 ,000, 10 ,000 opportunities a year, you need to focus and you need to eventually find those 10, 15 opportunities that you want to do. And that is the real challenge, I think, in what we do, to focus out of this mass of opportunities. this. And we're going to talk much more about how you've built the firm. And obviously, that's going to be one of the topics, decision making. And first decision is where do we focus? And then there's a bunch of down the line decisions. Stefan, I want to take us to your pivotal moment in your career, because I think it's incredibly interesting.

10:46So I'll just tee you up like this and say, Stefan, give us your pivotal moment. Yeah, I mean, hey, there are probably many and most you don't remember. But I think for me, a pivotal moment was back in 2004, where I suddenly got a phone call. I actually got phone calls at that time. It wasn't just text and WhatsApps and emails. I got a phone call from an American woman who was the CEO of something called the Kalfan Fellows Program. And the Kalfan Fellows Program was a, I think, pretty exclusive training program for young emerging leaders in the American venture capital industry. And they had heard of me and had decided to make class 10.

11:33So class 10 was sort of the 10th annual program to an international program. And in that international program, they wanted emerging venture leaders from all around the world to complement the, say, 20 leaders that they have found in the American ecosystem. I have to say that, you know, it changed my life. You know, I got friends for life, but I think it also reinforced that American DNA that we tried to have from the get-go in our firm of aim for the stars, end up, you know, maybe on the moon, swing for the fences, find these massive opportunities, super bold entrepreneurs. I got into that program.

12:19I spent two years and I still have, you know, as I said, lifelong friends that I meet on a regular basis. And the funny thing was they had actually found me through a training course that I took in Atlanta, something called the Venture Capital Institute. And during that event, I had met a couple of fellows from class nine who said, hey, there's this Swedish dude. You should talk to him. He's probably something. Well, they had a nose for talent, I guess. Let's get us into the take a stand section. Take a start.

13:03Now, Stefan, I would love to hear you take a stance on something I've heard quite often come out of the mouth of EIF employees. And that is deep tech is the next big thing in Europe. I don't think it's only the EIF that have said this. I actually think that a lot of people talk about this and a bunch of emerging managers, a bunch of established managers have a deep tech practice, etc. And hey, I'm a massive believer in innovation. I love not the professors and all that, right? And even in Sweden, where I come from, you know, a lot of the companies we have, have based them on innovations going way back.

13:47But I also think we should look at this with a bit of sober minds. And we once looked at a large number of really successful and valuable companies. I think it was like 100. And then we tried to identify how many of them were based on true innovation, deep technology, and not the professor or something like that. And I think with a bit of imagination, we concluded that it was one out of those 100 companies. And, you know, that may sound crazy. Well, I actually don't think it is because at the end of the day, I think, you know, most great companies and really valuable companies, they are based more on great founders with bold ideas and huge plans.

14:37if you only have a technical innovation, or actually if you only have an idea and not the drive, have you ever tried to sell that idea? I actually think you should. Should you go down the street and try to sell the idea? And I can guarantee no one's going to buy it. It is so much about making it happen. In addition, in today's world, I think a lot of innovation is around design. It's about understanding the user. It is about creating a user interface and a product and a service that people just love. Think about Apple and the MacBook and the amount of time that Steve Jobs put into getting the curve right on the side of the MacBook and all of that.

15:23To me, that is innovation today. It doesn't mean that things will change going forward, but I think there's a massive movement right now and opportunities simply by delighting the end user, whether it's enterprise or consumer. I don't think it matters too much.

15:45Stefan, I think there's a lot of topics here to deep dive on, and I'm going to go a bit on a kind of side topic here just because I'd love to hear you expand on it. before we went in the Take a Stance round, we were talking a bit about how venture can feel like sticking your head into a beehive, right? And the ability to focus and pick where to spend your attention. I'd love to ask you to share some concrete examples of that and also more specifically like core learnings that you've had. And obviously all of this within this context of building up Creandum from the ground up because I think that's an incredibly interesting perspective that you can bring to the table.

16:24that many of our listeners would love to hear? Oh, yeah. I mean, hey, it's a massive challenge. And I think one that we struggle with every day. I might go in a slightly tangential direction here. I think if you look at it, if you look at this industry, it is really about a very few select number of companies every year in whatever region that you focus on. In Europe, I would argue that at the end of the day, It's probably only three, four, five, maybe six, seven companies every year that really matter. It is not a certain sector. It's not a certain country. It's a couple of companies. And if with a power law in this industry, you need to be in one or several of those to really have returns.

17:17And then I think the question is in this beehive of, again, 10 ,000 opportunities every year, How the hell do you make sure that you are in those five or six? And I think one important aspect here is to look at your deal flow. You need to see the top 1 % of deals. If you only see the 99, I think if this is sort of some sort of rank of quality, if you only see the 99, I think you should actually stop doing what you're doing. because those five, six, seven opportunities are very likely, at least to some 80, 90 % likelihood in that top 1%. So your focus needs to be on creating a machine and a brand, firm brand, individual brand, process, etc.

18:09that allows you to tap into the top 1%. how does that worldview stuff coexist or go hand in hand with? So when I introduced you in the beginning, I said you're focused more on the climate space, right? And you just said that, you know, there's a couple of companies for maybe five a year that really matter, right? Who knows which sector, who knows what country, right? How do those two worldviews coexist? It's where you have a firm, you have people that are specializing in sectors, but you also have this firm belief that it's only a couple of companies that really matter. And this year, none is in climate tech.

18:46Next year, all of them might be. Who knows, right? We don't know. A successful venture firm or franchise, as I like to call it, we can come back to that. I think you need to combine two ways of working. One is you develop thesis on transformational change that you think will provide opportunities. But by the way, if there are no great entrepreneurs in those areas, it doesn't really matter. And then secondly, you put your ear on the rail and you try to find a way of working so that you are better than others in hearing when the train comes. And that is basically speaking to a lot of entrepreneurs.

19:27And then you combine these two things. and on climate, which you mentioned, that's something that I think is both super important for us as an industry and as humans to get involved in. But secondly, I think it's also a great investment area. And why do I say that? I mean, some that have been in this industry for a long time will say, hey, you know, there was the clean tech wave 15 years ago. Basically, you know, 90 % of all dollars were just wasted and very few transformational companies were built. And I think that's right. But I also think a lot of those dollars at the time, they went into turbines and pipes and engines and a lot of hard stuff.

20:11I think now there is an opportunity in the software side. And I base that on one fundamental change that is affecting what we believe is 20, 25 % of GDP and it's electrification. And in electrification, there's a lot of hardware, but there's also some fantastic software opportunities. And that's an area where we have tried to dive deep and at the same time listen to the best entrepreneurs that have approached us and then find that crossover between thinking yourself and listening to the entrepreneurs. Can you share any investments you guys made within that space already or is it still too soon to close in?

20:51No, but we've probably done close to 10 investments in this space. And there was actually one investment we've done in the electrical vehicle charging space, which was an interesting combination of us defining a thesis. This will sound terrible, but we identified that there will be a need, obviously, for what we call the gas station of the future. We quickly realized there is already a gas station of the future. It's called Tesla Supercharger. We also figure that it's a bit like iOS. You know, it's vertically integrated. It's hardware all the way down to software. But what will eventually the market share of Tesla be?

21:335, 10, 15, top 20%, I think. I mean, look at iPhones. We think everyone has them, but I think their global market share is sort of 10 % to 20%. So there's probably an Android type opportunity here. And at the same time, we were having a bunch of entrepreneurs approaching us saying, hey, we're building software for this. And eventually we found one that we just fell in love with. It's a Danish company called Molta. Fantastic founder. His name is Kasper Rasmussen. And these two ways of working combined and the firm invested, you know, two years or so ago. And it's a rocket ship. I'm curious, Stefan, because I'm looking.

22:15Thank you for sharing, by the way. I'm here looking at some of the notes we exchanged in advance. And you wrote something that really gets me thinking, which is pick the example of the fossil car and apply for principle thinking. I'd love to ask you to expand on that concept because I'm very curious. As you can hear, I'm a big proponent of electrification. And I try to electrify everything I do with, you know, my kids drive electric mopeds. We drive an electric vehicle. We have a heat pump in the basement, et cetera, et cetera. Flights is an issue. You know, hopefully that will come. But a lot of people around the world, also in close connection to me, still argue that, well, you know, it's not really that great and fossil cars are going to be around for a long time.

23:06They're actually better because they got better range and this and that. And, you know, Tesla doesn't have the right quality and so on. You know, I'm a bit inspired by Elon Musk when it comes to his first principles thinking. And I was just thinking, if we started from scratch today and compared the EV with a fossil car, one has a slightly higher capex, right? The EV, a much lower opex. The other one has a lower capex, higher opex. But I think if you do a full cycle analysis, the EV is cheaper to drive. People might disagree, but I think that's sort of the factor. And then you went to the politicians and said, hey, we have two alternatives here.

23:52One is the EV with its pros and cons, and the other one is a fossil car. And you know what? We're going to spread billions of this thing across the globe in all our cities, and every single one of them will emit fumes that can make people sick. They can get cancer and all these sorts of things. Which of our politicians or us would make the decision of inserting all these polluters in our society? It's just an interesting thought experiment to have. I would completely agree. But now I'm going to take us into the shout out segment.

24:41Stefan, thank you for dancing to our beautiful jingles. I appreciate that, Ahmad, because now I'll ask you to give a shout out to co-investor Angel or LP for being awesome. And of course, share with us the story behind that awesomeness. I think I'll start with my colleague, Fred, or actually Frederick, as he is called. When I started Crandom 20 years ago, I knew very little about this industry. And I was fortunate to be introduced to Fred when I looked for the first analyst to join in our firm. He was actually the only person that I interviewed and he came on board. And the first thing we did was to go to the US for a trip to Silicon Valley.

25:19And we have been co-pilots together with a bunch of other partners. There's eight partners at Crandom today, but he's the type of person that can look around, you know, not one or two corners, but six or seven corners. Usually he doesn't say that much in a meeting. But at the end of the meeting, he asked that one question where you all go, damn, you know, why didn't I think about that? And it sort of almost disrupts the whole conversation sometimes. And he has been absolutely fundamental in building this firm. And I'm proud to call him a friend and a partner. I think he's one of Europe's best investors in venture.

25:59Maybe a quick other one is an LP of ours. There's about 35 of them. So, you know, they're all amazing. They backed us since, you know, way back. Actually, only one LP has not re-upped with us in all our funds ever since we started.

26:21I really wanted us to dive into some of your learnings from building Creandum, from being a boutique firm all the way up to now being a franchise. I know you have this framework of saying that there's three stages in firm development. So I'd love you to lay that out for us and then give us your three best core learnings over the last 10 years of building CREAN. Yeah, so hey, first of all, I think there's so many models that can work in this industry and there's no right, there's no wrong, as long as you pick your model and then try to perfect it. Then I'll come back to what we tried to do. So I think there are sort of three different models, super high level.

27:01One is you can be a solo GP, you can be a couple of people that you get together, you invest, you do it well, but it's a relatively limited effort in terms of time and horizon. But it can work extremely, extremely well. Then I think there's the effort of building a firm where you, again, you get together. But, you know, you build more structure, you build more processes. But there is an end of life to what you're doing. Eventually, you will either stop what you're doing or you will sort of, you could almost sell the firm or try to create value in the top co, as it's called. and this firm belongs to a small set of individuals, usually the founders and so on.

27:52And then I think there is what we're trying to do and a bunch of others are trying to do as well, which is to build a franchise. And I spent time with McKinsey back in the 90s and I was quite intrigued by the fact that they've been able to run a partnership for close to 100 years that was still alive and kicking, probably the number one strategy consulting firm around the world. I think in our world, there's Benchmark in the US. Their motto is sort of, you know, five investors and a dog. You know, I think now there are six, but none of those six, I think, were there from the get-go. So they obviously built a franchise where the brand stays and the way of working stays, but the people change.