Staffan Helgesson founded Creandum in 2003. In 2008, the fund led Spotify's first venture round. Over its 20-year history, one in every six Creandum investments has become a unicorn, including Klarna, Depop, neo4j, Pleo, Trade Republic and Bolt. To date, with operations based in hubs across Stockholm, San Francisco, Berlin, and London, the fund boasts approximately $2 billion in AUM and has invested in close to 150 companies.
Staffan attended the CEE VC Summit organized by Vestbee and participated in a fireside chat with Ewa Chronowska, Vestbee’s CEO and General Partner at Next Road Ventures. During the discussion, he shared Creandum's story and insights on building a successful VC fund, which we now share below.
Staffan, what's your story, and what inspired you to start a VC fund?
The reason I started goes way back to when I was a McKinsey consultant. I wore a tie, a black suit, and a white shirt. I was sent to the Bay Area, or actually Silicon Valley, in 1999, and my first dinner was at the Stanford cafeteria. I listened to Guy Kawasaki, who used to be the chief evangelist of Apple, working directly for Steve Jobs. The first thing he said was, “Guys, just so you all know, here in the Valley, only the bus drivers have ties.” So, during the coffee break, we all went out and ripped off our ties.
That visit made me realize that I was working for the losers of tomorrow. When I was there, I also felt very strongly that if they could do it in the US, why can't we do it in Europe? That was really the start of my venture career.
What was your strategy from day one? Have you always envisioned Creandum becoming a pan-European fund?
My strategy from day one was actually not great because I started two venture funds. The first one was sector-focused on mobile internet back in 1999. We were the first investor globally to focus on mobile internet; it actually came in the summer of June 2007 when the iPhone began to roll out. So the timing was completely off. But then a couple of LPs tapped me on my shoulder three years later and said, “Hey, you know what? We like you. If you start again with a generalist fund, we will back you.” That was actually the start of Creandum.
Did I think about building a pan-European or even a pan-Atlantic fund at the time? No. There were probably 50 or 60 VCs in the Nordics, and we were just so busy trying to get close to the best deals in Sweden. Our vision has grown over time.
Building a successful VC with a presence across key ecosystems is not something we can do overnight and at no cost. What were the biggest challenges and obstacles you faced at this stage of your fund development? And how did you overcome them?
Fundraising was the biggest issue. I had two LPs who invested €15 million each for a first fund of €30 million. Then I fundraised for a year and didn't raise a single dollar more. I went around for a year and had 70 or 80 meetings, but didn't raise a single dollar. But what I learned at the time was that you should fundraise when you're not fundraising. So since then, we've added about 30 LPs. We have a fantastic roster of LP’s; we have many of the top US endowments, and the rest are European pension funds. But almost every single one of them, we had gotten to know before the fundraising, or sometimes even two before they eventually joined.
And they love that. LPs love when you go to them and say, “You know what? We are fundraising, but we don't expect you guys to get into this fund. We just want to get to know you for the next one.” But that was the challenge.
Creandum established its first hub outside the Nordics in Silicon Valley. Why did you prioritize this destination, and how did this move contribute to Creandum’s success and differentiation?
After 4 or 5 years, we started to realize that the Nordics, with about 25 million people, is the oldest and, to some extent, still a very sophisticated ecosystem. But it's only 5% of the population in Europe. So if you have one Spotify or one Daniel Ek in Sweden with 10 million people, you're going to have 8 of those people in Germany, with its 80 million people.
We needed to find a way to expand across Europe, and we knew that eventually, we had to be in Berlin, Paris, and especially London. We could have sent someone to London early on, but if we had done that, we would have been seen as another cousin from the countryside. “We have one person here, we're also in London. You should take us seriously, please.” I just don't think that would have worked.
Instead, we started by going to the US. We did that for 3 or 4 years, built the bridge, built the brand, built the intelligence layer. Then we went to Berlin, and only thereafter did we start to invest elsewhere. But we didn't open the London hub until we were truly an international firm. We were sort of executing a pincer movement, as you would call it in military terms. We would “attack” London from the sides, rather than sending this junior person to set it up. And we always sent very senior people when we opened hubs.
What were the main lessons you learned in the US?
In Europe, we are more conservative. In our industry, people talk about something called risk-adjusted returns. Even in the risk-adjusted or so-called safe 3, 4, 5x times investments, there's is always a lot of risk, even in these investments. So, one of the things that we have brought with us from the US is that venture is all about outliers.
Every year in Europe, venture capital is really only about 3, 4, or 5 companies. You just have to be in them because they potentially offer returns of 50, 100, or 200x. If you look at their market share on absolute returns, they take a very big portion of it. You should be in them, and therefore, you need to put this risk-adjusted stuff to the side and build a portfolio of what the Americans would call swing for the fences type of opportunities. We call them the bigger big’s.
Speed is another one. I recently talked to some investors who can make a decision within 5 days. You actually don't want to make investments that fast, right? Because you want to get to know people. But sometimes you have to, and I think that speed is something we have in turn. And then the third is competition. For us, despite the downturn, competition is brutal. We have to be able to be ready to pull the trigger in 5, 6, 7 days if we have to.
Let’s move to your impressive portfolio. What's the secret sauce behind Creandum's capability to access the actual top 1% of deals?
Historically, 1 out of 6 investments that we have made has become a unicorn. That's obviously very hard to replicate over the long term, but let's assume we are even close.
What we all need to do as investors is to ensure that we get to see what I call the top 1% of deals. So, it needs to be amazing founders. How the hell do you get there? The brand of your firm, its individuals, and portfolio. It's about the way that you work with the companies because if you do a good job, the entrepreneurs obviously are going to tell the other people that you are the one to work with.
If you do this well, you get into what I call the virtue circle, and the way to get in there is to have one or two really successful companies. For us, that was Spotify. For Index, it was Skype. They were relatively small, and they did such an amazing job. For Accel, it was Facebook. You need that one thing. Make sure the world knows that you're in it. That's how you get into that virtue circle.
How do you define winners, and how do you pick them out of the mass of opportunities out there?
This is obviously the hard thing. I think we all have our models: companies should look like this, they should have a certain growth rate, etc. I'm actually quite concerned with this way of working because it can lead to what I call mechanical investing. If you are a principal, a junior partner, or an associate, if you come to the team and show them a SaaS deal, it's growing 3.2x, who will criticize you? The opposite is if you bring a crazy deal like Spotify back in 2006 where you invested in music.
We also did this with Trade Republic, a German fintech company, about 4.5 years ago. The cap table was completely messed up; the seed investors owned 75% of the company. And I think everyone who looked at that company said, “Easy pass, easy pass.”
But my colleague Johan had an idea, saying, “You know what? The founder is fantastic, product-market fit is great. I'm going to go to the seed investor and convince them that instead of owning 75%, they're going to own 25%.” And he managed to do it. You need to see the normal and the real of this stuff, the crazy stuff. Because those are often the outliers, and it is an outlier business.
And also often mention in interviews the collective wisdom of your company in picking the deals.
We have many frameworks. One of them is called force rank. We ask our investment team, which is 16 people, once or twice a year to force rank the portfolio. That helps our operating partner guide the investment team in which you do the forums. It's basically using the wisdom of the crowd. If you add the collective wisdom, you're often quite close to the right answer.
But that's the easy part. It is really that initial step, and some of the biggest mistakes that we have made, myself included, is trying to be too framework-oriented or maybe too analytical.
Looking at your portfolio, no wonder you attract leading LPs. Besides the number of unicorns, what are the most important factors behind LP stickiness to Creandum?
We decided early on to try to only have institutions, and they are bad in some ways because they are slow. They won't see a lot of track records, but once you have them, and if you have the right ones, they can be there basically forever.
In our case, our strategy has been to really get to know them, starting around 13–14 years ago when we secured our first endowment on the board. And once you have one, you can get more of them into it. So that eventually led to knowing the others, because then they felt secure there was one of them in there. But the trick has always been to get to know them over time.
Drawing from your extensive, 20-year-old experience in VC, what were the biggest mistakes you made?
We should have taken more liquidity in some of the up cycles, that is key learning. I believe our role as investors should involve investing across the cycles. However, when it comes to exiting, obviously, you should sell when the exit window is open. And sometimes, you almost need to think like a value investor at exit times. I mean, if the company is valued at, I'm making up a number, 75x your ARR, it's probably a good time to sell.
Secondly, I think we have been relying too much on tech itself at times. I have found amazing entrepreneurs. Sometimes, they will build a product that you may think is not that sophisticated, but you know what? At the end of the day, building that last layer of zero friction, and fantastic user interface, that is a skill in itself, which is not that easy.
Creandum has adopted what you call the ‘franchise’ model. What led to this decision, and what advice would you give emerging fund managers seeking to build a successful VC?
There are many models that can work, but you need to define your model and your vision. And then it's a super long-term game. We're building what we call a franchise, heavily inspired by how Benchmark has done it in the US. One of the founding GPs there actually told one of us way back that at Benchmark, you're always a partner. You just go from being a general one to a limited one. So we're trying to build a franchise where all the senior partners, or the GPs, are equal. And that works fantastically.
