In Sweden there is a big confusion in terminology surrounding different types of Investment companies, the Swedish journalists of the leading papers and even the politicians can’t tell Venture Capital companies apart from private equity firms and other types of corporate finances business’, they are all grouped under the term “Riskkapital” (“Risk Capital”, which is the Swedish expression for Venture Capital).

For the past year there have been a debate in Sweden about “Riskkapital bolag” (Venture Capital companies) and their moral. The first thing I think about how investing in startups could be that amoral? Are they all funding startups that will pollute the world, borderline criminal business, or something else terrible?

The debate is really not about VC firms, but about investments companies such as private equity firms that do take-overs of well established companies and break them up. Most people I know i the UK or US would not think of these types of investment companies when I say VC (which is the closest translation to “Riskkapital”), and most Swedish entrepreneurs or people in the Swedish corporate finance sector wouldn’t either. Take a look at the one the larger private equity firms in Sweden, EQT, mentioned in DN today, the describe themselves correctly in English as a private equity group on their website, and they are an investment fund / company not a Venture Capital firm. Why can’t the Swedish journalists get the terminology right?

So why does this matter? Well when I tell my mom that there is a need for more VC’s in Sweden and a climate more like the one I see in London, she says, isn’t that those companies that buy up Volvo to break it apart? And I have to explain it and say “No, it’s the companies that will fund a future Skype or the like (which all of the Swedish “VC’s” where to risk averse to invest in by the way, so Skype have never had even a part of it’s corporate structure in Sweden, but in Luxembourg, where the investors were willing to take a risk).”

2 replies
  1. MJ
    MJ says:

    Having called on almost 60 Swedish so called VCs for funding, but in the end only managing to raise it from a California VC and a Swedish industrial company I must say your comment is dead on.
    I am extremely happy to see your comment on the Swedish aberration of calling private equity “Risk Capital”. The fact that the corporate people e.g. EQT are allowed to get away with the glamourous lie that they take risks which support the development of business actually leads to less VC funds being available for startups. EQT and its likes do not take risks in a meaningful sense of the word, mainly betting on gift horses and knowing beforehand what their influence peddling in a small market will deliver. Let us grow this debate. I hate it when Svenska RIskkapitalföreningen(a group of companies who want to seem like glamourous VCs but are not) publishes statistics to make them look good but which are meaningless as a measure of how much true VC or risk taking investors are out there. Another example is Industrifonden (a Governement VC) which leads a comfortable risk-free existence, investing only in companies which could have gotten commercial funding anyway and in bizarre things like the Skeppsholm Jazz festival.

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  2. Nicolai Wadstrom
    Nicolai Wadstrom says:

    Good to hear your thoughts and experience on the matter. I am all for getting some traction behind this debate, feel free to contact me (nicolai@wadstrom.net).

    I meet with a few American VC’s in a workshop last week, and really interesting to see how they go about screening prospective investment targets. They are really though, but they take big risks on the things that they believe in.

    The American VC industry today consists of about 1 000 companies and 1 500 funds, a fund of 100 MUSD typically have 1-2 partners that and each partner invests in a couple of companies every year. Typically a VC invests 15 MUSD per startup (5 MUSD initially and 10 MUSD later on). These investments are made in early stages were most Swedish VC’s would not invest even 5 MSEK (less than 1 MUSD). If you compare that with the Swedish “Riskkapita”/VC industry the Swedish industry seems large but with not much capital, but “real” VC’s that invest like the American companies are quite few in Sweden and do not have much money to invest, most that are in fact VC’s invest in later stages at lower risks than the American.

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