They dilute too early, too fast before Series A in Silicon Valley
Fear of failure hampers pivoting, time and money spent wrongly
AS one of the speakers at last month’s Digital Winners conference in Oslo, Jostein Svendsen, cofounder and chief executive officer (CEO) of WeVideo, an online video editing platform based in Norway and the United States, had some interesting observations about the lessons that can be learnt from the failure of Norwegian startups to scale globally.
A serial entrepreneur with four successes and one failure to his name, Svendsen is regarded as one of the leading tech entrepreneurs in Norway. Among his successes were launching two digital media companies in Norway that got listed in Sweden in the early 1990s.
Comparing the situation with Sweden, which has delivered a global tech exit worth at least US$1 billion (RM3.3 billion) every two years, Norway is still waiting for its maiden billion-dollar exit. That’s a 20-year wait … and counting.
Norway does have some global tech players – for instance Opera, which runs the mobile browser of the same name; and Meltwater, a social analytics company. Both are privately held, however.
Svendsen points to the failure of Norwegian entrepreneurs to learn and listen to others who have been successful outside Norway as a characteristic flaw that stems from Norwegians being too proud, hence his advice for its entrepreneurs to learn to be humble.
At the same time, he recalls his frustration at being pretty much a lone wolf in his attempts to convince others that the digital media companies he launched in the early 1990s could go global – extremely frustrated that so few seemed to be willing to believe that a global company could be built from Norway, he left in 1996 and went to Silicon Valley.
“I found my spiritual home. Everyone was thinking big and thought they could be No 1. It was extremely inspiring,” he says.
Yet he cautions entrepreneurs not to be lulled into thinking that funding is easily available in Silicon Valley; even he made that mistake. When asked to be CEO of WeVideo and take it global, Svendsen took on the challenge but moved the company to Silicon Valley, the only place he felt it could launch its global ambitions from.
And even though WeVideo already had some success in Europe, he found it was not enough to raise funding in Silicon Valley, and actually found it easier to raise funding from Norway first.
“That’s why I advise entrepreneurs now to make sure they have between 12 months and 18 months of funding when moving to Silicon Valley,” he says.
This gives them the runway to win customers, build partnerships and even win awards, which could take between six and 12 months – all of which then help the entrepreneur build the profile of the company and help it raise further funding, a process that could, even with traction, take up to six months, he cautions.
Diluting too much, too early
And even when this key funding milestone happens, which Svendsen (pic) describes as Series A level, he observes that most Norwegian entrepreneurs and their investors have got the process wrong from the beginning.
Norwegian entrepreneurs tend to dilute themselves too much and too early in Norway, and as a result, by the time they are ready for their Series A in Silicon Valley, they only own between 10% and 20% of their company.
“So don’t dilute too much, too early,” he advises while recommending a book, Venture Capitalists at Work: How VCs Identify and Build Billion-Dollar Successes, for both investors and entrepreneurs to read and understand how to structure a company for success.
“So while there are many reasons to go to Silicon Valley, money is actually not one of them,” Svendsen says, highlighting that WeVideo’s rising user base does show that Silicon Valley is an ideal base from which to grow globally.
A key underlying reason for this is the strong philosophy in Silicon Valley of entrepreneurs and companies willing to meet to share experiences and consider partnerships.
“It is part of the Silicon Valley recipe for success,” he says, sharing his frustration at not being able to get meetings with executives from large Norwegian companies, but finding a totally opposite experience in Silicon Valley.
“We were able to meet with executives from the largest Internet companies and form partnerships with them within a short period of time. It was so different from what I experienced in Norway,” he says, naming some companies whose executives were in the audience.
Speed is of essence too, as Svendsen feels that with the pace of innovation quickening, entrepreneurs have between three and five years to go global, “because if you don’t, someone else will.”
But Svendsen emphasises that the path to becoming a global player must start in the entrepreneur’s home market. “You have to prove yourself locally first because it gets exponentially harder when you go outside your home market.”
On his final point, he highlights that a fear of failure haunts Norwegian entrepreneurs and as a result, they “tend to stick their heads in the sand and do not want to consider they may be spending too much time and money on the wrong things and consider pivoting,” adding that pivoting is necessary to survive.
He says that it is not unusual for staff and even partners to start losing faith when too many pivots happen.
“I have seen this in almost every company I have been involved in, and I have been able to convince them every time to not give up, with the exception of one time,” he says.
The difference between a successful entrepreneur and one who is not “is that the successful entrepreneur does not give up,” he adds.
Karamjit Singh was in Oslo to cover the Digital Winners Conference at the invitation of Telenor and DiGi. All editorials are independent.
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