The Danish Startup Ecosystem Guide - Magasin - Side 64
SEED & VENTURE CAPITAL
Sponsored: This article is published in collaboration with Nordic Secondary Fund
A new type of investment fund
creates new opportunities for
founders and early investors
Nordic Secondary Fund is the only fund in the Nordic region, and among the largest
in Europe, to invest in “second-hand” shares between investment rounds - so-called
secondaries. This provides liquidity for early investors, founders and employees alike
- and has proven to be a lucrative business for the fund.
W
hen a fast-growing startup
announces a new investment round, it’s usually
earmarked for growth. The
founders give up a percentage of their
ownership and the money goes into the
company where it is spent on new employees, more marketing and international expansion.
When Nordic Secondary Fund (N2F)
invests, it’s different. The new fund buys
shares from founders, employees or early
investors who want to sell out before the
whole company is sold. So it is the previous owner who gets money in his pocket
when N2F invests, not the company.
“If there’s a CTO who quits, a CEO who
wants some money off the table, or an
early investor who wants out of their investment, we can come in. We only buy
‘used’ equity,” explains Peter Sandberg,
Peter Sandberg
Co-Founding
Partner of N2F
I do it because it‘s great fun and super
inspiring. The fund is doing well with some
great returns, but there‘s also a cool purpose
that has an impact: there are some founders
who can sweeten their lives. There are some
early risk-takers who can derisk and invest
somewhere else. It does something for the
ecosystem that wasn‘t there before.«
64
who is Co-Founding Partner of N2F along
with Frank Lyhne Hansen.
The fund seems to have found a gap in
the market that both the fund’s investors
and the rest of the ecosystem have been
missing: since 2018, N2F has raised two
funds totalling €140M from 375 private
investors, invested in 30 companies and
already sold four of them back at a profit.
Gives the founder room for manoeuvre
Startup growth is supposed to be explosive,
but still, the journey from idea to selling
a successful company can easily take 10
years. On successful growth journeys, the
ownership stakes held by co-founders and
early investors become worth millions on
paper. Paper money that’s hard to pay the
rent or buy a new car with.
If they want to turn some of that value
into cold hard cash before the 10 years
are up, N2F comes into play. The fund
typically invests around €3-5M for a
small stake in mature scaleups that have
raised a Series A round of at least €5M.
Wee-established scaleups that still have
growth potential. The portfolio includes
GoMore, Goodiebox, Varjo, Kilo Health,
Acimo and Klarna - of which the last two
have been sold again at a profit for N2F.
“You want hard-working founders, but
they don’t get any less hard-working by
having room to manoeuvre. Instead of
selling their company now for 200 million, they can sell a small stake to us, so
they get some money here and now - but
at the same time have ownership when
the company is built on and sold later as
a unicorn. They still get a lot of money
from the sale, but on the way to the exit
they also have a little more luxury with
their husband or wife and children,” says
Peter Sandberg.
Angels with bigger muscles
N2F buys into companies between traditional investment rounds - and typically
at a discount of around 25 per cent to the
latest valuation.
“We don’t do the pricing ourselves. We
look at what the price was last time and
then get paid a premium for taking on the
risk, in the form of a discount that also
reflects the price of illiquidity that unlisted shares have,” explains Peter Sandberg.
While early-stage business angels
look for startups that can return their
money 20-30 times, N2F seeks to invest
in companies that return 3-5 times on a
sale. Peter Sandberg knows the role of an
angel investor very well, as he was one
of the most active angels in Denmark
before founding N2F. And that might
be why the fund has more than 100
business angels from DanBan behind it,
who see advantages in joining the large
syndicate and getting some different
investment opportunities than they
normally have.
“We buy into companies that are done
with business angels. They’re talking to
venture funds or close to private equity.
They’ve typically raised DKK 50-100m or
much more. So it’s probably more about
The Guide
