The Role of Nordic Angel Investor Role Models

By Claes Mikko Nilsen

The demand for more visible Norwegian early-stage investors

I saw an article in Dagens Næringsliv from last fall interviewing Fanny Ødegård (24) describing her challenging times building a startup and how she was now successfully on her way towards further growth with new investments and a great valuation. The growth story could have taken a very different path as she mentioned that during the difficult period, she had received an investment offer from some “angels” expecting half of the company ownership with a smaller investment that she was finally able to raise. Those investors she calls “sharks” rather than angels. Stories like this just breaks my heart. 

I’ve been working almost a decade with business angel networks and hunderts of great investor individuals. That’s why it always makes me sad and frustrated to see a story like this. Nobody wins with an offer where half of the company ends outside the hands of the entrepreneur in its  early days. In startups, this means that the investor becomes the entrepreneur as the founder typically loses the much needed growth passion. Not to mention that the company becomes quite unattractive in the eyes of the potential next round investors.   

In my bubble, business angels are experienced individuals that have some extra time, good networks and spare capital to share with potential growth goals. For the majority of business angels in the Nordics, startup investments are a way of giving back to the ecosystem. According to angel network study, 80% of the Nordic angel investors are “hobby” or “part-time” investors, which means that they most often don’t actively look for startup investment opportunities. This means that these startup investor individuals don’t often make a great fuss (read social media status) about themselves. 

This seems to be the case especially in Norway: Individuals that claim themselves to be private startup investors, aka business angels, seems to be a rarity. This is my subjective view, but based on a great deal of visits to different startup events in Norway and scouting diverse startup investors lists. The country image of Norway is very capital intensive with an entrepreneurial friendly environment and the main industry linked to oil is expected to end at some point. So the assumption is that there is a great interest towards investments in new innovation, also at a private level. The Norwegian startup ecosystem is also growing fast, creating an increased demand for more early-stage investors. For those interested, startup conferences and several platforms highlight plenty of potential investment opportunities. With some personal visibility a good amount of deal flow would be available. 

The Norwegian angel ecosystem has developed very positively in recent years with more angel profiles taking a public role like Trond Riber Knudsen, Anne Worsoe, Birger Magnus, and Johan Brand. The training and investment services offered by AngelChallenge has been passed by several hundreds of new startup investors and there are now groups available around the country. The role models and services for potential new business angels are all in place to inspire new interested investors to join the action. When filtering Norwegian investors on Crunchbase we find 46 names, compared to Sweden (277), Finland (80), and Denmark (108). Though the startup ecosystem is smaller, it still seems to be smaller than the potential. What is affecting the activity and image of Norwegian business angels and why aren’t more individuals in Norway stepping up in public.    

A more visible angel ecosystem is crucial for entrepreneurs to have a better chance to compare potential investors. A visible market makes it more understandable and attractive for the larger audiences and helps linking international interest. We need more experienced individuals to bravely take a more public role and actively share their experiences.  

What seems to be the issue then?

One of the basic reasons is of course the risk awareness. The thumb-rule is that half of all the startup investments go bust. Not so attractive and therefore the common guideline is to build a portfolio of investments as only 1 out of 10 makes the home-run. According to the Finnish study, the median return for angels was 3.75X within five years, with 22% IRR. The Norwegian government has also implemented as the only Nordic country a tax deduction program to inspire more private startup investments. This is a positive signal from the Norwegian government but naturally shouldn’t be the driving reason to attract new investors to the market.  

 So building a portfolio takes time but for many this is a passionate “hobby” and the potential rewards should attract plenty of individuals. Can it simply be that the image of business angels in Norway is less positive? It seems that many of the leading investor profiles don’t call themselves business angels. In Finland angel investors are seen as patriotic individuals that support the development of something new. The attitude is that the risk is high and therefore all help, especially those with hands-on, are gold worth. No matter how helpful the majority of angels are, the angel role attractiveness is not supported by experiences like the one Fanny had, which strengthens the old-fashioned image of investors as egoistic and cynical capitalists only investing for profits. Doesn’t sound like a group people would like to be associated with. Maybe there should be an image study made about angels in Norway to better understand what angle could be developed.    

This leads to one of the main issues I’ve experienced important for business angels: Trust, towards startups and other investors. No matter how well a due diligence on a startup is done, it always comes done to the level of trust the investor has to the startup and in many cases, trust towards the co-investors. As mentioned, the majority of the startup investors are hobby and part-time investors, meaning they will most likely invest when another investor invites them. An ecosystem of visible and trusted investors, this has been the single most important reason why the angel ecosystem in my experience has become a mainstream theme in Finland and Estonia. Some concrete examples is EstBAN publishing all their 100+ angel members or FiBAN highlighting a great deal of their +700 members. I would assume a public list of trusted Norwegian angel investors would attract new investors to join, as has happened in Finland and Estonia. 

So, what might we “see” in the future for Norwegian business angels?

It will be interesting to see how the visibility of startup investors will develop in Norway. Our already visible and trusted Norwegian angel actors will continue to have a lot of responsibility directing the discussion and interest towards new startup investments. Some great examples of these trusted individuals are Sophia Bendz from Sweden with background from Spotify and currently working as the managing partner at Atomico, one of the leading Nordic VCs. She has launched an angel group inviting individuals to make startup investments and offering them funding and guidance, from Norway by Christine Spite. Another example is Danish Tommy Ahlers who was one of the investors at Dragon’s Den TV program. After the program he became a Minister actively speaking on behalf of startups. Interestingly the same Dragon and Minister path was done in Finland by Anne Berner. In Finland also the previous Prime Minister and current President have made business angel investments. 

So those in the position of personal resources and capacity to inspire, I would say there is room available for more visibility as a business angel. As Norway has a strong position with startups in the social impact and cleantech field, maybe Norway will have world famous thought leader angels inspiring towards a more sustainable economy through game changing startup investments.  

About the author: Claes Mikko Nilsen is a Finnish-Norwegian, based in Helsinki where he works for NordicNinja VC as the Investment Director. After almost a decade managing angel network activity he is an Nordic angel network expert and listed as one of the 100 most impactful and influential figures in the Nordic tech scene. A quick-witted character, well-known for his pitch moderator skills. 

This article was first published in Shifter Magazine.

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