We Love Ugly Data! The Deep Analysis Podcast

Silicon Valley Versus The Nordic Tech Startup Scene

May 18, 2020 Robin Daniels & Alan Pelz-Sharpe Season 2 Episode 3
We Love Ugly Data! The Deep Analysis Podcast
Silicon Valley Versus The Nordic Tech Startup Scene
Show Notes Transcript

Part two of my conversation with Robin Daniels (ex WeWork, Box, etc) the founder of byFounders the Nordic investment firm. In this podcast we discuss the differences in investment and startup cultures between Silicon Valley and the Nordics. With diversions into Web Content Management, Salesforce, Oracle and Blockchain!

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Unknown Speaker  0:00  

The Deep Analysis podcast.


I get eally irritated when people say to me, “Oh, Britain, I know London really well!” And then I realize later, “No you don’t, no you don’t, no you don’t! You know a little bit of London.” So I'm very cautious here. But I have spent time in the Nordics and I've spent quite a bit of time in Denmark, a little bit of time in Sweden. I worked on a Norwegian oil and gas project back in the day, I spent a month, well more than a month, but in one big chunk once over a very dark winter in Helsinki, which I know is not technically Nordic. I learned enough to know that much, like, Don't ever call a Finn a Scandinavian person. But the broader region, I’m always amazed at two things. The youth, I'm actually really taken aback when I'm in the Nordic countries, just how much energy and effort isAlan Pelz-Sharpe  0:04  

Welcome back to part two of my conversation with Robin Daniels. This time, we are not talking so much about Silicon Valley, but we certainly do touch on that. But here we talk about the tech startup community in the Nordics and how the business culture thrives there, though in a very different way to Silicon Valley. And without further ado, let's join the conversation once again.


Alan Pelz-Sharpe  0:33  

Prior to this podcast, we were talking a little bit about Denmark and I'm one of those people who gets r going in. So I'm sort of bigging up the Nordics here, but yet they don't have the same level of funding. 


Robin Daniels 1:47 

It's changing honestly, pretty rapidly. In the last many years I've been spending a lot of time and there's definitely more capital coming in, which means there's more talent coming in. You're absolutely right. I mean, I think the... because the society is kind of a pseudo-socialist/capitalist society, you both have the opportunity to go and create something that's magical and impactful. But you also have the safety net that you don't have to put all your eggs in one basket. So if it fails, you're screwed for life, like we've seen over here in the US, many times. Here it's like, it's either/or, versus there's like, we want you to go and take the bootcamp. And you should, you should work hard to do it. But if you fail, and again, a lot of companies fail, the majority of startups fail, then society will be there to pick you up and help you and so on. Because we want you to succeed again and try again. And I think that's something really powerful about that notion of solidarity and togetherness, that is a little... sometimes I felt this missing over here in the US. Like I love the entrepreneurial spirit you have over here, but it's sometimes a little too much dog-eat-dog world I feel, where, you know, too many people are being left behind or not being able to fend for themselves and there's no there's no safety net for them. There's nothing to fall back on. And so they're left with crippling debt or bankruptcy or loss of their home and obviously it’s devastating for so many, versus we're going to help you, we're going to help you get back on your feet, so you can go and try again. Which is a great message to send to people because it gives you the psychological and the physical safety to actually go and try some of these big things. Now, the reason why you're seeing this trend in Denmark and other Nordic countries of so many startups is because I think there's a real hunger for, you know, we know that these markets are small. Denmark is a small market, 5 million people you know, so is Finland and Sweden and Norway and so on. But they're trying to export the values more than just export the product, like we are building these products because we really want to have an impact on the world in a much deeper way. We're not doing it just to sell a product because if we did that we would never start a company in Denmark, the markets are still just too small. So let's build products and companies that are not just exporting something that people need, but also something that can ultimately change, you know, the values and behaviors of people, which I think you're seeing a lot of coming out of that ecosystem. 


Alan Pelz-Sharpe 4:02

I think that's very insightful. I mean, if I roll the clock way back in my career, sort of the thing, which I guess in, in a bizarre way sort of made my career was I wrote, I mean, it was essentially a book, we called it a report, but it was essentially a book, which was the very first book that sort of mapped out and gave advice on an emerging market called Web Content Management. I was the first one and you know, the timing was sheer luck, but you know, it sent me around the world and it was pretty amazing. But the funny thing there was, I had.. I better not say the number but I had a budget for research and travel to research this book and so of course, I came out to Silicon Valley and I met Interwoven around at the time, Broadvision, etc. But it was after we published the books, we suddenly found out there was like, 20 other companies in the Nordics. It never crossed our minds to look! And indeed for web content management, not a topic I cover in great depth anymore, that's the home of it. Now, the big money goes in to build something. It sort of gets its exit, it sort of disappears into OpenText or wherever. Whereas this thriving community in Europe is still alive.


Robin Daniels 5:28

It’s funny, I actually used to work at Vignette. I don't know if we ever talked about that... for a couple of years. 


Alan Pelz-Sharpe 5:33

Oh, I could tell you some Vignette stories…


Robin Daniels 5:37

But you’re absolutely right, this is one of the reasons I moved. So back then there was certainly a lot of tech happening in the Nordics. But the tech companies that were founded, were really limited to what I would call small thinking. And they said, well, we're going to create a company, we have some great ideas. And we're going to make it big in Denmark or Sweden or Norway, but now the companies are coming out of there in the last five years saying, “No, no, we want to make these technologies accessible and successful everywhere in the world.” And of course, the internet has facilitated that in a way that just wasn't possible. But now it's 20, 25 years ago. So people have bigger ambitions. And so there's a couple of factors I've seen. You've seen people who’ve worked or had success abroad, they have now come back to the Nordics because they say, well, “We value the value system, the life qualities here. But we actually want to create companies that have global impact.” So that's number one. Number two, you're also seeing a lot of influx of capital, maybe still not as much as Silicon Valley, for sure. But you're seeing a much greater influx of capital, because a lot of VCs are realizing there's a lot of great ideas coming out of the Nordics. And then I think, finally, again, this notion of exporting your values, I think it's something that VCs are starting to appreciate because that can have a... not just create a product that has a great exit, but also create, you know, companies that have these kind of super brands that people fall in love with, which I think is really interesting. But another thing that I've been thinking about, Alan, is also a lot of companies now are thinking about “How do we create a category? How do we leave the category? How do we win a category?” seems to be the thing that so many people want to talk about. I've been thinking about it and the conclusion I've come to, and I’d love to just hear your thoughts on it, is that you really need three things if you want to be a true, true, true category leader and win. There's three things you have to do. Number one, obviously, you have to have an amazing product that people love, and that people actually find valuable and useful. So that's number one. Number two, I think you have to have a strong community around your company, you have to have people who verify that they love using it, they would recommend it to their friends and family, they just can't wait to engage with you, like Salesforce has done very well with building a community. And then number three, I would say is the companies who also stand the test of time and really create exponential value are the companies that reinvent the business model. And I think right now we're in a point in time where if you have time to think about your company and how you're going to add value to your customers, reinventing the business model makes a lot of sense. For example, when some of these SAS became a thing, when they moved from on premise to Software as a Service, not only would Salesforce come in and say we have, you know, better features than Oracle or SAP and so on. But we also have changed the business model, which changes the conversation instantly. Because it’s not just about feature versus feature, it's about well, we’re actually a different kind of company to do business with. Our success is tied to your success, and we only win if you win, and you can pay us for as much as you use, when you need it, and so on. You can scale up or down if you need. Our success is tied to your success. This equity of success, I think has become obviously a standard nowadays, but it wasn't there 10, 15 years ago. And it’s the other companies trying to reinvent the business model. But I think it's a really great way to lead and win a category because it changes the conversation from just being about features. It changes as we allow for something much more meaningful. So I don't know what you're seeing, but it's something to lean into, especially during this time of where we're all sequestered at home and we have to reinvent how we go to market. 


Alan Pelz-Sharpe 9:03

Yeah, I don't know if it's in alignment with that, but I've been fascinated by the use of Blockchain, sort of, not crypto-blockchain but blockchain for business. I think I wrote a report... Oh my gosh, seven years ago, when I was a Research Director at 451, I had no idea what Blockchain was. And I took a briefing and I sort of got up to speed and I thought that’s sort of interesting. And when I started Deep Analysis, it certainly was one of the things I really wanted to focus on. And long story short, Blockchain is really interesting, a ton of money, I mean, a ton of money has gone into it over the last three or four years, right? There’s almost nothing to show for it. However, now you'll see little startups coming out who have said “Oh, That's all it does. That's really interesting.” And so they're developing real applications for insurance, for supply chain. For all sorts of things where the simple concept that “I don't need five copies of a document anymore. I just need one because it's underpinned with a blockchain hash.” That is catalytic. And, and so I do see a lot of, I wouldn't say a lot, but I am seeing startups now coming along, and they're not really going to VCs and saying, “I have this amazing technology.” They're actually going there and saying, “I think this area of business has a problem. And I think I've got a fix for it. Yeah, I mean, they’re leading with the fix, rather than the technology.


Robin Daniels  10:50  

Yeah. Yeah, I think you’ve nailed it. That's exactly what I'm seeing too. And I think for the smart companies out there, they’re leading with that because the technology, of course, is subjective based on what you think is better, and so on. You'll always have people who have certain preferences. But if you lead with that, I think it just changes the nature of the conversation in some way. 


Alan Pelz-Sharpe 11:13

It does. And, you know, just finally on the Nordic thing, because as I say, it's a region that's fascinated me for a long time. And I don't know enough about it. But, you know, I do love it when I'm there. But I will say, you know, in the past, I was probably guilty of meeting with small companies, small tech companies in the Nordics and sort of scratching my head thinking, Well, you know, why aren't they bigger? Why aren't they doing this? Now, I understand they didn't have access to capital in the past that somebody else would have here. But it also dawned on me a long time afterwards that they're driving BMWs. They’re doing okay, I mean, they don't need 100 million dollars.


Robin Daniels 11:55  

That's right. You're absolutely right.


Alan Pelz-Sharpe 11:59  

Life is pretty comfortable! Why did they need to aim higher than this? And I'd like to see more of that here, if I'm being honest. You know, when it's good technology, like it, we've got a community to check off your boxes, right? But you know what? We don't have to put our lives on the line, to gamble and turn this into a billion dollar company. It's not necessary.


Robin Daniels 12:24

Well you see it so often here, it's so funny, I think it’s just embedded in the American psyche. is the moment you have some success, even if you open a restaurant or a florist or a hair salon. The moment you have a little bit of a taste, you franchise or you scale it, you open up new locations. Versus that has never been the same, and certainly in the Nordics, I think it’s even the same in the UK and the rest of Europe and so on. ignoring something. It's only come in in the last, I would say couple of decades, but it was never kind of embedded. It was just like, I'm going to create a company and have employees and we're going to do well. But it's never about just scale, scale, scale, scale, scale. And I think now you're starting to see that more. But it’s not at all cost, like you said, it's not just the... We don't have to, you know, triple, triple, triple our growth every year. You know, it's like, it's okay if we grow slower as long as it's meaningful and impactful. 


Alan Pelz-Sharpe 13:11

So if you make it back to Denmark at some point, you've got experience from, you know, you're gonna be legendary on day one. I mean, you've got experience with Box, with Facebook. with WeWork. I mean, you've seen the ups and downs. 


Robin Daniels 13:26

Yeah, I did. I did. I never worked for Facebook. That was one that eluded me, but it was LinkedIn and…


Alan Pelz-Sharpe 13:33

LinkedIn! Yes, my apologies


Robin Daniels 13:37

It’s all good, it's all good. But, I mean, yeah, I feel very blessed and very fortunate. You know, I've worked at companies that didn't make it and those are on my LinkedIn profile. You can check it out. And some that have obviously done very well, Salesforce, Box, LinkedIn, WeWork is still around, and so on. And I've always tried to choose companies that I think will do well and that are aligned with the values that I see in the world. I don't know, you know, for example, what happens to WeWork, who knows what's going to happen to them in the future, but I think they have changed the future of work forever, meaning people won't accept kind of a crappy office anymore. You know, when you go into a WeWork, and I know a lot of companies that are there, and their customers are very happy. So, it's different than the investor story and the growth story, but the customers love the concept because it's a different kind of office environment you have. You can attract better talent, your employees are happier, all that's proven. So whether it's going to be WeWork or some other company that's going to lead that in the future, who knows. But the future of work has changed forever, I think, because of what they propelled forward, the idea they propelled forward in the world. And so I've always tried to choose companies that are trying to change, you know, the way people work or the way people operate, communicate, engaged and interesting in scalable ways. 


Alan Pelz-Sharpe 14:54

On that note, I'll say something very positive about the broader Nordic, which includes Finland in this case. I was on a project many years ago in Helsinki, and there was a consultant there. And I thought this guy was nuts. And actually, well, I’ll be careful because he might identify himself here. But yeah, he was a little off-the-charts. That said, he had this idea of the digital nomad, that, you know, why are we going to offices anymore, we should be doing... He had this great idea. And I thought it was the stupidest idea I've ever heard. And it just shows what I know as an industry analyst is clearly very little at times. I agree with you, things change. You know, we have a shared office space. And I'm sure that's what we'll do when we can go back as well. And I think it's changed. And I think that's what's exciting is the short term, sometimes horror stories of crazy money being wasted left, right, and center… That can overshadow actually a fundamental shift in society that's been made. That’s going to be around for a long time. Hey, Robin, thank you so very much. This has been great. And I'm sure people will be fascinated in everything you've got to say, and I wish you well on your next venture.


Robin Daniels  16:25  

Thanks, Alan. It was really great to chat with you. Thanks for having me on. And yeah, it was great to talk to you too.


Alan Pelz-Sharpe  16:32  

I hope you enjoyed that conversation with Robin. If the conversation sparked any thoughts or questions, then let us know. Just email us. Come to our website, you'll find our contact details very, very easily. There are many more podcasts coming up soon. So bye for now and tune in next time. Bye!


Transcribed by https://otter.ai