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Creandum  - VC Of The Month
20 January 2021·10 min read

Magdalena Balcerzak

Manager, Vestbee

VC Of The Month - Creandum

Creandum is a leading European early-stage venture capital firm with a lot of experience and a long history to look back at. Since 2003, Creandum has backed Europe’s most ambitious tech companies from seed to exit across a wide range of industries.

Creandum's advisory teams are based in Stockholm, Berlin, and San Francisco. With extensive operational expertise, they offer comprehensive support to the funds’ portfolio of more than 100 companies, including some of Europe’s most successful tech companies such as Spotify, iZettle, Klarna, Kahoot!, and Small Giant Games.

Fund Strategy Overview 

Creandum has raised five funds in total with more than €600M under management, which are deploying to early-stage companies, mostly at seed and Series A level. Creandum closed the fifth fund in June 2019 at $300M and so far backed more than 100 companies.

Geography: Strong focus on Europe, but if at least one of the founders has a European background, they also back companies outside Europe, primarily the US.
Preferred industries: Industry-agnostic, portfolio companies’ sectors include digital health, fintech, SaaS, gaming, edtech, insurtech, and more.
Investment ticket: From €200K – up to €10M
Company stage: Early-stage companies, Seed/Series A
Product type: All types, primarily enterprise IT, SaaS and tech-driven consumer-facing businesses, in general software preferred over hardware.
Product stage: All stages
Revenues: Depending on the product/service, the fund considers pre-revenue companies, if the company can show early user love.

Q&A with Staffan Helgesson, Founding Partner 

What are the 5 main things you look for in a startup?

  1. Team: One of the most fundamental factors when evaluating startups. The earlier the stage the company is in, the more important we consider the right team. We’re trying to partner with the most ambitious founders, who have a global vision and a long-term plan to grow their companies.
  2. Market: We like to see companies aiming for big, growing markets that can be disrupted or exploited by innovative tech solutions.
  3. Timing: In startups, timing is everything. No matter how strong the founding team is, enter a market too early and you could be stuck waiting for a day that never comes. On the other hand - enter too late and you’re fighting an uphill battle against incumbents on a greater scale.
  4. Moat: When evaluating companies, in particular in competitive environments, we’re examining if they have any unique advantage that will help them in the long run to build and scale their business.
  5. User love: No matter if companies already have a monetization model or not, one of our first principles when evaluating early-stage companies is to consider user love as a proxy for the adaptation of the product by the critical masses (as we have seen at Spotify, Vivino, Kry, Shapr3D, Depop, etc.).


What disqualifies a startup as your potential investment target?

As a VC fund looking at companies industry-agnostically, there are no companies that get disqualified right away, at least from an industry perspective. However, there are various reasons why VCs refrain from investing. As a general rule, a startup is out of the running if it targets a market that’s not big enough, if the founding team is missing a big vision to scale their company globally, or if we aren’t convinced that the team will have the grit to work on the long-term success of the company.

What in your opinion differentiates the best founders from the rest?

At Creandum we have been fortunate to have worked with some of Europe’s most successful founders, such as Sebastian from Klarna, Jacob and Magnus from iZettle, Daniel from Spotify and Heini from Vivino. While it’s impossible for a founder to tick all the boxes, there are a few key traits that we think many of them have in common: 

  • Passion and inherent curiosity around what they are pursuing: The founders we work with love what they do and instead of accepting the status quo of “just good enough”, they have the hunger to keep learning, improving and iterating.
  • Strong people skills: Successful founders know how to trust, evaluate, motivate, attract, influence and inspire those around them, whether that’s investors, employees, clients or partners. It’s key to building a diverse team, strong company culture and uniting narrative very early on.
  • The ability to hustle: The best founders sweat the small stuff, particularly in the early days when they’re operating with a tiny budget and a nonexistent team. The ability to move between strategic high-level thinking and operational problem solving on a day-to-day basis, and then to evolve this focus seamlessly as the business grows is one of the hardest parts of being a startup founder.


What should startups take into account before making a deal with a VC fund?

With increased competition between venture capital funds for the best startups, expertise, empathy and the connection between investor and founder is more important than ever. I can't emphasize enough the importance of doing your due diligence on an investor before you sign a deal because you will have a long-term relationship with them. Do your research to make sure the investor is confident in your ambition, understands your vision and shares your values, on a business but also on a personal level. 

What is your approach to startup valuation and preferable share in the company?

Business valuation is never straightforward – for any startup. It highly depends on the venture's stage of commercial development. The earlier the company’s stage is, the higher the risk for the investor, hence the lower the valuation. On top of that, a range of other factors come into play, such as whether a strong and experienced management team is in place to execute on the business plan, whether a final product or technology prototype has been built yet, any strategic alliances or partnerships agreed by the company or signs of a customer base, and last but not least, if there are clear signs of revenue growth and an obvious pathway to profitability.

As a high-conviction VC, we aspire to be the (co-)leading venture capital firm in the early stages of fundraising, namely pre-seed, seed, and Series A. That translates into a preference for relatively sizable positions in startups, typically with a 15–20% equity ownership. We want to be visible among the shareholders while keeping in mind that due to backing companies at early stages our stake will be diluted within the following investment rounds.

How do you support your portfolio companies?

In general, we treat our founders as our family and encourage support networks and knowledge sharing amongst them and with the entire Creandum team. We see ourselves as strategic thought partners to the companies we work with. We don’t necessarily have all the answers, but we ask the right questions and bring out the best in people. When you start working with Creandum, you have access to a strong, value-driven team that sees itself as a long-term partner of high integrity. We have a very diverse team that is uniquely positioned to back industry-agnostic companies and to challenge decisions. We offer a strong, cross-continental network to the most successful venture capital firms, the most experienced founders, and the best potential business partners.

Sometimes, we do bring in one of our Entrepreneurs-in-Residence, who are experienced founders themselves, to work with founders on specific, operational topics such as product development, team culture, or brand building.

What are the best-performing companies in your portfolio? 

The power of the portfolio is one of our key assets. The Creandum funds’ portfolio includes ten unicorns, seven of whom have not exited yet. Payment provider Klarna, micromobility company Bolt, Virta Health and the Edutech company Kahoot! that is aiming for the main list IPO this quarter, as well as online doctor Kry, music company Epidemic Sound and the Latin American grocery delivery company Cornershop. The list of companies that are soon to cross the $1B mark is long. Among them is Vivino, which has become the world’s biggest wine marketplace and today counts more than 42M users. Another one is the second-hand fashion marketplace Depop that continues to impress us with its unprecedented strong organic growth rates.

From the Fintech portfolio, some of the strongest players include German online broker Trade Republic that expanded rapidly over the past 12 months. After they raised a €62M Series B round in April this year, the company has been onboarding 20–30 new employees each month. Similar impressive growth can be found at Taxfix. 

To name a few more strong growth companies from the CEE region, there is the Turkish mental health company Meditopia that is leading in non-English speaking markets, the 3D Design app Shap3rd from Hungary, which won the Apple Design Awards 2020 and we’ve just backed another exciting company from Budapest that we will announce soon!

What are your notable lessons learned from investments that didn’t work out as expected?

Being a VC is a very emotional game, as you’re part of the exciting journey of the startups you back, but ultimately you’re not sitting in the driver’s seat. 

What is key from the beginning, though, is that everyone on the board of a company agrees on the same goals, values and common objectives. As a VC, it’s critical that you maintain a close and honest relationship with the founder to face any challenges together and limit the risk of unpleasant surprises early-on.

What are the hottest markets you’re currently looking at as a VC and where do you see the biggest hype?

The beauty of our job is that we get to see many companies from many different sectors and industries and we try to keep an open mind about the industries in which we can find the next global champion.

However, one of the hottest topics on the top of our minds is Climate Tech. There is currently a lot happening in the sustainability space as we have very limited time left to take meaningful action and avert the irreversible consequences of climate change. At Creandum, we believe that software will play a crucial role when it comes to tackling the climate crisis. We are actively monitoring both end-consumer and business solutions to enable the measurement and reduction of carbon emissions, and the professionalization of behavioral changes that all contribute to slowing down climate change.

Furthermore, the pandemic served as a catalyzer for embracing the remote work concept. Whether it will be a hybrid or a 100% model post-pandemic, only time will tell. But it is certain that very few companies will be left working fully on-site. We are excited to see new disruptive solutions popping up within that space. 

In your view, what are the key trends that will shape the European VC scene in the coming years?

It’s fantastic to see that from an international perspective, the European tech scene is finally on par with the US. We expect the next decade to further strengthen Europe’s position with a better supply of exciting startups, more money flowing in from global VCs, and more role models emerging from the region. 

Much more attention on European tech will naturally also shine a spotlight on the Central and Eastern European startup scene, and we are excited to see already more promising companies being built from these regions. 

Another positive trend we are seeing all over Europe is more females and people from diverse backgrounds entering the VC scene. While there is still a lot to be done here, we’re trying our best to support them on their journey and ensure they have equal access to opportunities. 

 

Related Posts:

VC Of The Month - TMT Investments (by Magdalena Balcerzak, Manager, Vestbee)

VC Of The Month - bValue (by Magdalena Balcerzak, Manager, Vestbee)

VC Of The Month - Inovo Venture Partners (by Magdalena Balcerzak, Manager, Vestbee)



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