In this month’s ‘VC Under The Spotlight’, we spoke with Jeppe Zink, a General Partner at Northzone. Celebrating its 20th anniversary this year, Northzone is one of the most established VC firms in Europe, and has invested in the likes of Spotify, Trustpilot, Avito, Wallapop and MarketInvoice.
Jeppe talked to us about Northzone’s investment ethos, industries he is excited about and shared his top advice for entrepreneurs embarking on their fundraising journey….
Tell us about yourself. Where are you from and what journey led you to become a General Partner at Northzone?
I’m a Dane, but spent a large part of my childhood in Germany and studied in the U.K.
I got into Venture Capital back in the 1990s before the European VC boom. At the time, I was part of Deutsche Bank’s tech team where we set up a venture capital arm to invest in pre-IPO companies.
I then joined Amadeus – an independent VC partnership based in the UK. It was during my time there that I first met one of the Northzone partners while he was still an entrepreneur, and we eventually ended up co-investing on a number of deals. I officially joined Northzone 4 years ago as General Partner, and set up the firm’s London office.
What’s Northzone’s Founding story. How did it get started?
The story of Northzone is pretty much synonymous with the growth of the European Venture Capital scene as far as independent funds go.
The fund was set up 1996 by four partners. They went to Silicon Valley to see how things were done, and returned to Norway to establish Northzone. Since those early days, Northzone has raised seven funds and invested through economic upturns and downturns, expanding from a Norwegian focus to a Nordic one, and now taking a cross-Europe approach. Great companies are being built across the continent, but we definitely see a concentration in the Nordics, Berlin, London.
Over the years, Northzone’s core values have remained the same. We started with less than €10 million and our last fund was €250 million, but we are always 100% focused on putting our entrepreneurs first. Typically as VC funds become larger, the focus shifts to bigger deals and more hierarchy. For Northzone, it has always been about being true to our values and what we call our ‘bare metal strategy’ – being close to the ground and accessible to entrepreneurs.
[Click to Tweet: Jeppe Zink Of @northzoneVC Talks #Fundraising Tips & Nordic Startup Success]
Share a little about your most recent fund stats. What is your fund’s typical investment?
Northzone has more than €600 million under management. Our most recent fund, NZVII, raised in 2013, was €250 million Euros. It’s a pretty unique thing in European venture to have raised that number of funds.
We have learned not to talk too much about average cheque sizes because we don’t want to put too many limits on the type of deals we do. We are in a unique position that we can write cheques from anywhere between €700k to €25 million euros. What that means for our entrepreneurs is that we can invest early and continue to back them as they grow.
So instead, what’s typical for us is that we like to start early and scale up fast together with the entrepreneur. That being said, if it’s a business that we have to spend a couple of years putting the foundations together for before scaling, then it’s too early for us.
Although there aren’t minimum metrics we need to see, the company does need to be able to hit primetime within 18 months i.e. they need to be ready to scale significantly in that time.
Founders often underestimate the amount of time you have to spend on getting things right before you scale dramatically. If you look at some current success stories like BlaBlaCar or Spotify, they spent years getting the product and business model right before they were ready to scale up.
Do you have personal focuses within your fund?
I currently do a lot of FinTech. I wasn’t too keen on the first wave of companies that were more like e-commerce-led businesses, but now I am seeing lots of interesting companies where the founders truly understand that at its core it’s a banking related business where trust and liability are key drivers.
If you look at my portfolio at the moment, it’s pretty obvious that I’m interested in marketplaces, Fintech, and mobile first solutions.
What attracts you to investing in a new startup?
It comes down to the fact that I’m human and there are certain things that excite me as an individual. For founders, it’s about understanding what the particular VC they’re approaching is interested in.
The bottom line, however, is of course that there is nothing more exciting than being part of an amazing growth story where a small team takes on the world by thinking outside the box.
What would you say are the current ‘hot-trends’ in the startup scene?
Value propositions that are looking at delivering better service around key-value drivers either in your personal or professional life. Sectors such as FinTech, IoT and HealthTech are all working on making things that are valuable to consumers better and more efficient, which truly will make a difference.
[Click to Tweet:Northzone’s Jeppe Zink: Startups that are looking at delivering better service around key-value drivers are hot]
Are there any under-the-radar sectors are you most excited about?
The VC community is definitely trend-sensitive like anyone else. So for me, it’s about the ones that are maybe not the flavour of the month. Take gaming, for example. If you step back you realise it’s not just about games. It’s about new ways of mainstream media distribution, consumption, and engagement on the mobile since a mobile extension of TV in its current format simply doesn’t cut it for most people. I think that whole space is ready for disruption and we are beginning to see some very interesting grassroots stuff.
What advice would you give to a founder fundraising for the first time? What common pitfalls should startups be aware of?
I see a common mistake, and that is treating fundraising as some sort of silver bullet. It’s a skill to learn and refine like anything else. So approach it like Roadshow. I’d advise founders to clear their diary for a couple of weeks and plan which funds to meet in that compressed time. That gives them a sense of momentum.
I typically see startups fundraising in waves, where they hit the funds they’re most interested in first. Instead, they should work their way to their target funds, gather feedback and refine their pitch along the way.
Do you have atypical questions you ask founders pitching to you?
While not atypical, I really like to understand the personal story behind the startup. I find it much more interesting if the founders share the story that led them to the idea.
The greatest founders and success cases weren’t necessarily the product of a rational brain, it’s about the passion behind the startup.
The Nordics have produced big European Unicorns with the likes of Spotify, Skype, and SoundCloud. What do you think were the drivers behind these amazing successes?
There are actually some rather dull structural reasons behind it. The Nordics is where the world’s first mobile phones were produced with Nokia and Ericsson. They were among the first countries in the world to get broadband, and back in the 1990s in Sweden, personal computers were actually subsidised by the government. This all resulted in the world’s most advanced internet and e-commerce users that were more open to advanced concepts and new user behaviours.
But what is driving the ecosystem currently is the availability of a highly experienced ecosystem of senior execs and angels who have experienced first hand some of the big successes from the region. Success breeds success.
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