On February 5 I had the pleasure of attending a very interesting session at Innovation Center Denmark—and let me note that Camilla Rygaard-Hjalsted and her team do a terrific job in putting on many excellent events—where the Danish Minister of Trade and Industry, Pia Olsen Dyhr, and Ann Winblad, Co-founder and a Managing Director of Hummer Winblad Venture Partners, spoke.

Although I have long known about Ann Winblad, as a leading Venture Capitalist in Silicon Valley, I am sorry to say I had not had the opportunity to hear her speak before, nor did I know much about her background or details about her investment activities. So I am very glad I made it to the event, because Ann gave a very impressive and interesting talk, packed with interesting data and insights, including some interesting US-Europe, and Minnesota-Denmark comparisons in regards to venture activity.

I recently met and talked to Ann again, when we both attended a two-day i4j Summit on Innovation for Jobs at SRI last week, and I then told her how much I enjoyed her ICD talk and asked if we could post a copy of her presentation on our Silicon Vikings website so our Nordic friends and colleagues (and, of course, anyone else interested in her comments)—who were not able to join the IDC session—would be able to read her remarks. The same evening, Ann sent me an e-mail with her talk, so here it is—and thanks very much for making it available to us, Ann:


Innovation Center Denmark Remarks

Thank you for the invitation to speak with you this evening. 

Silicon Valley is an incredible place. Everyone around the world tries to capture our secret, or at least determine if we have secrets. The truth is, it is hard to build the critical mass of entrepreneurs, venture capitalists and other company builders and our environment where entrepreneurs support each other so well.  But it is no secret that Silicon Valley has built a unique virtuous circle of company creators.

The Valley is vibrant and we are in a strong innovation cycle, especially in Software.

In 2012 US Venture Capitalists invested $26 billion in 3,698 deals.  Silicon Valley accounted for almost $11B of these investments and 1,149 deals.  If we add in the rest of the state of CA we add 271 more deals and $2.1B:  so California accounted for close to 50% of all venture dollars and deals.    

So what about the rest of the United States or the rest of the world? 

So how is it we are today in a highly globalized world of information and the highly localized world of company creation? While most of our investments are in Silicon Valley, our most recent investment is in Tornoto Canada.  We also have investments in Minnesota, Utah and Washington DC. 

Our firm has strong Scandanavian roots. My grandparents on my father’s side were Swedish immigrants, settling in Vasa Minnesota. My partner Lars Leckie is the son of Danish Mother and Scottish father, immigrants who settled in Toronto Canada.   While both Lars and I spend the majority of our time in Silicon Valley with companies based here, I spend time in Minnesota and Lars in Canada.

It seems Minnesota and Denmark have many simliarities:  Both have about 5.5 million people.  Both have many great Universities.  Minnesota has over 200 post secondary schools.  I sit on the Board of Trustees of the University of St. Thomas, a University in St. Paul, MN with over 10,000 students. Mean disposable household income in MN is higher than the national average (US #1 in the World) at $55,000, which is a bit higher than Denmark which is $31K (8th in the world).  And both have pretty much the same accent when speaking English -- in other words a similar Scandanavian culture.

Our populations are well educated, wealthy by world standards (and well taxed.)  They both should provide great candidates for entreprenuers and company creation.

Venture Capital is a Measureable Engine for Economic Growth.

So how is Minnesota faring in entrepreneurial company creation? In 2012 27 venture deals were done in Minnesota representing $225M in investments. That’s down from $274 million in 2011, but well above the $139 million Minnesota firms raised in 2010 — a year when annual venture investment in Minnesota reached its lowest level since 1995.

Europe in 2012 had $6.1B in investment dollars and 1,078 deals.  Denmark was 2% of the investment dollars or $120M (about half of the amount Minnesota received) (Sweden, Norway and Finland all had 1% each).  If you combine Denmark, Sweden, Norway and Finland you reach $300M; finally surpassing Minnesota.

Although the dollars are much smaller than California venture capital has been important to Minnesota and its effect can be measured. From 1970 thru 2012 venture capitalists have invested $6.5B in 535 companies in MN, with 89% of that money coming from venture capitalists headquartered outside the state (one third from CA). Public companies headquartered in MN that were once venture back account for over 447,000 US jobs and $184B in revenue, MN ranks #9 in jobs and #7 in revenues for venture back companies headquartered in the state.  Historically one US job was created for every $14,533 of venture capital dollars invested in the state of MN.   If history proves true, over 15,000 new jobs will be permanently created from the 2012 investments. In California one job was created for every $74,846 invested, so the Minnesota ‘venture capital effect’ is better.

Historically  92% of the companies funded were  were in life sciences –Minnesota built a concentration in medical devices.  This sounds great but health care investing paled in 2012 to IT, which made up over 60% of US investment dollars and deals.  This is a point I will make later.  It is important to build an ecosystem that will catch waves of innovation, versus a concentration in one specialty. 

What Minnesota and Denmark Can Do Better?

Funding is competitive and you cannot depend on soley on local sources

Back to Minnesota.  Historically 89% of Minnesota’s VC dollars come from out of state, 31% from California.   That is what is important. What has hurt Minnesota in the past is what I call ‘feed your own young programs’.  This has also led to a concentration of investment in life sciences and an inability to ride the next wave.

Building companies is hard; getting funding is one of the hardest parts.  Of seed companies funded, historically less than 50% ever get an A Round.  A typical seed funded company in Silicon Valley may pitch to dozens of Venture Firms (over a six month period) to get their A Round.  This very Darwinian process is key to the quality of companies in Silicon Valley and to the early process of companies building.  For entrepreneurs it is part of:

  • Getting your strategy honed and well communicated, via this critical feedback process
  • Finding not just the money, but the venture partner and firm that ‘fits’ your company; in other words believes that also can add an unfair advantage
  • Determining if you and your team really are ready to ‘run the gauntlet’ that company building strength requires
  •  Building relationships with VC firms who might pass on your A, but follow you for your B (yes, you’ll need to repeat this grueling process several times in your companies history)

This Darwinian effect is key to creating a virtuous entrepreneurial environment.

You need strong early stage investors and ‘True’ Entrepreneurs

Years ago I met and studied the works of Peter Drucker.  Drucker's books, scholarly and popular articles explore how humans are organized across the business, government and the nonprofit sectors of society.  He is one of the best-known and most widely influential thinkers and writers on the subject of management theory and practice.   While there are many definitions of an entrepreneur I like Peter Drucker’s the best.  “An entrepreneur searches for change, responds to it and exploits opportunities.  Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource.”

Turning new knowledge into commercial achievements represents a major challenge for most entrepreneurs and enterprises.  This is a fancy way to say building companies from scratch is hard.

You must find ‘true’ entrepreneurs.  We don’t fund just inventors or just breakthrough science.  We fund extremely committed disruptors; and disruptors who are able to attract excellence.  The ‘true’ entrepreneur will tell you their team is willing to sacrifice big salaries and other luxuries to see the reality of their vision; and that their greatest reward and goal for everyone in their organization is success, not big salaries at the start.  They understand sacrifice and are executing against their vision before and during the capital raising process. They know that innovation, growth, and market satisfaction does more to galvanize employees than anything. 

While there is no single form of funding that holds the key, a strong set of Series A investors are a requirement for a sustainable company creation ecosystem. Despite the significant growth in overall investment flows, few countries have established a balance between early-stage, expansion (venture capital) and later-stage investments such as buyouts (private equity).  Venture capital and private equity are two different business and capabilities:  venture capitalist build houses, private equity remodels houses.

There is a reason I am called a Venture Capitalist not just a Capitalist.  In reality I think of my day to day job as a “Risk Reduction Engineer”.  We typically fund less than 10 people (heavily weighted to engineers) with mostly vision (ie assumptions) and limited market proof.

For investors marching into new markets with these entprerenuers –the disruptors—we need our own courage as well -- we need to be careful of our own biases and assume small failures along the way lead to greater success. Companies make lots of mistakes.  You must lean forward despite these small failures.

Once in these deals we must all learn to stand naked in front of the mirror.

We roll up our sleeves and try to bring any unfair competitive advantage to these new companies:

  • People:  the intellectual capital is more important than the dollars we bring, especially the CEO.
  • Where the company is located:  my highest performing company in 2012 had the founder in Malta. That founder would have loved to have stayed there.  Today the company is based in San Francisco (a decision made early) and their large engineering team is in Argentina (where we found a critical mass of skills). 

In addition to finding the best geographies for each individual company, we need to knit the companies onto the market map…in other words build early the partnerships with companies that will ultimately ask to acquire them, with hopes that we can say no and march to an IPO.

Intellectual honesty is hard when you want companies to succeed. Real entrepreneurs also seek truth in their assumption sets and the investors need to do likewise.    This is like standing naked in front of the mirror.  True entreprenuers look for new ways to achieve your goals.  This takes not only courage, but tremendous intellectual stamina.  Being a fast follower in a market is hard work and frequently a route to permanent failure.   Ask your companies often, are you innovators or are you the ‘lead’ market disruptor?  Also ask this of yourself. While it’s tough, we frequently need to find homes for companies.  We’re not always the good guys.

It’s a virtuous circle: You Must Bring Your Victors Back – and into the Classroom

Entrepreneurs come back, to their countries to their Universities but they only come back if they are asked.  It’s very hard for students to aspire to company creation and entrepreneurship without exposure to it.  This can only be done with successful entrepreneurs in the classroom, internships at startups and other ‘high touch’ interactions.  University faculty, contrary to popular belief, may not welcome outsiders to their classroom -- they may want to stick to their academic programs, but it is important to push this change.  

You Can’t Be in a Hurry - - Stay Calm But Manage with Urgency

Today in the US, the typical company that is acquired is over 5 years old and a company with a public offering is 7.4 years old.

Jeff Bezos the founder of Amazon likes to say that the Missionaries win and the Mercenaries lose.  It takes stamina and a long view (the Missionary) to not only build a company, but to stay in business.  This has to be balanced with a constant sense of urgency; a desire to really affect change – just a bit of the Mercenary. 

Closing with one last quote from Peter Drucker "The only way to get the future you want is to create it."

I wish you all the best and thank you for the opportunity to be a small part of your great futures.


Ann Winblad

Managing Director

Ann Winblad is the co-founder and a Managing Director of Hummer Winblad Venture Partners.  Hummer Winblad Venture Partners (www.humwin.com) is a leading venture capital firm focused on software investing and manages over $1 billion in cumulative capital.  Since Hummer Winblad Venture Partners’ inception in 1989 the firm has launched over 100 new software companies.

Ann has over 30 years of experience in the software industry as a successful software entrepreneur, strategy advisor, technical author and venture capitalist. Her background and experience have been chronicled in many national business and trade publications. 

Ann has a BA in Mathematics and in Business Administration.  She has an MA in Education with a focus in International Economics from the University of St. Thomas, St. Paul, Minnesota.  Ann also has an honorary Doctorate of Law degree from the University of St. Thomas.

Ann served and serves as a Director of numerous start-up and public companies. She is also a member of the Board of Trustees of the University of St. Thomas, Director and former Chairperson of SVForum and serves as an advisor to many entrepreneurial organizations.

Eilif Trondsen