A journey along the Danish road to success

We started this week by explaining how Denmark came to host Internet Week Denmark. Now we look ahead, exploring how the Danish tech giants of the future will be created.

By Sam Richardson @SamRich91

Denmark’s IT industry has come of age, in every sense of the word. Inaugurating the country’s first Internet Pioneer Awards, held in Aarhus on Wednesday evening, were some of the country’s internet greats; Preben Mejer of TDC Internet, Lars Rasmussen of Google Maps, Jesper Buch of JustEat – all had found success at least a decade previously. Yet not only is Internet Week intended to celebrate Denmark’s booming internet economy –it’s hoped it will create the successes of the future. So how are tomorrow’s generation of Danish tech leaders going to make it?

Events like the Pioneer Awards are intended to inspire, but the journey to success in 2014 starts at a personal level. People, not ideas, are the most important building blocks in the country that invented LEGO, entrepreneur Jonathan Løw told me. As part of Internet Week, Løw attempted to form a company, from a group of volunteers, in just 5 hours. Whilst a company was indeed formed (registering takes minutes), with funds, office space and expert advice, it had neither a name nor a product. But this didn’t seem to worry Løw: “in Denmark we’ve been so focused on ideas and protecting ideas. The idea was the most important thing. And this was sort of our attempt to turn this logic around; it’s not about the idea, it’s about the team and the vision. The idea tends to change a million times before you’ve finished.”

IT start-ups are flourishing in Denmark, as are the businesses that support start ups. Løw’s event was part of a larger day called Iværk & Vækst (Entrepreneurs & Growth), just one of many bringing local firms together. These were certainly not the traditional suits and stalls trade fairs one might expect however. Instead, start-ups presented their products to investors in increasingly frantic rounds – 10 minutes, 5 minutes, 1 minute, in dark and crowded rooms where everyone seemed to know each other. One forum, Growing Investors, even featured live negotiations between fictional investors and a fictional start-up. Similarly, the intervals were filled with speakers attempted to predict the next big trend, advising investors and investees, all sat in the same room, how to outwit each other. And it was at one of these events that I met Kare Media.

“This was sort of our attempt to turn this logic around; it’s not about the idea, it’s about the team and the vision

 

Kare Media are a group of IT students from around Aarhus, who hope to make a business selling digital tools to the retail industry. I asked one of the founders, Aleksander Herforth Rendtslev, to tell me a little more. “We make a platform for the design and distribution of digital membership cards [for mobile applications like Apple’s passbook]. Currently our competitors are American companies…only two have gone into Europe, mainly the UK.” Kare Media’s first customer, a music venue in Aarhus, was poised to start using the system in just three days. But how had Rendtslev and his colleagues got to that point? “The good thing about Denmark is there are a lot of things you can get as a start-up company: so we’ve been sponsored a bit by Væksthuset, which is a growth-house, so to speak.”

Væksthuset, a social enterprise for young people, is one of a variety of organisation offering assistance to start-ups at a local level. So is local government; in a room adjacent to where Rendtslev presented was stood a variety of city mayors from Business Region Aarhus – powerful figures intending to talk specifically to new businesses. Aarhus also has two contrasting institutions which nurture start-ups; Godsbanen, a suitably gritty converted rail yard, and IT Katrinebjerg, a collection of gleaming glass boxes by the city’s university, where ambitious newcomers can rub shoulders with a local branch of Google, with Ebay also close by. But, regardless of location, by this point Danish start-ups tend to be already looking beyond Denmark, typically to the UK (as in the case of Kare Media), where the Danes’ impeccable command of English gives them an advantage.

A simulated negotiation between start-up and investor PHOTO: Sam Richardson

A simulated negotiation between start-up and investor PHOTO: Sam Richardson

For many start ups, this is where the story ends, with a successful sale to a larger organisation, often abroad. Among the speakers during Internet Week was Thomas Madsen-Mygdal, previously Chair of Directors for Copenhagen-based Podio, an online-work platform which was sold to US firm Citrix in 2012. As such, Madsen-Mygdal is regarded as something of a tech investment guru, and his words had strong implications for his audience. “What I see happening, and what is the [Silicon] valley model, is that people in the network invest peer-to-peer in each other…they look at each other, and start writing cheques, and start building together…When the Google and Ebay guys in Aarhus start to invest – then things get going.” This, he argued, represented a shift away from “the peculiar Danish model”.

What was the ‘peculiar Danish model’, I asked Madsen-Mygdal, and what was wrong with it? “A crazy percentage of the investing is from institutions”, he replied “the problem is it’s basically one guy who picks whether you can do a new VC [venture capital] fund…and he tends to pick nice suits and haircuts.” The Danish Ministry of Commerce has its own funds like Vækstfunden, which has invested over 12 billion DKK both through venture capital funds and directly in businesses since 1992. Invest in Denmark’s representative at the talk, Søren Tranberg Hansen, sympathised with the Madsen-Mygdal’s dissatisfaction: “since it’s public money it’s often very bureaucratic to get, and often the guys who are picking the cases are often bureaucrats by nature.” “It’s very fair to say that things are changing a lot” Hansen concluded, referring to alternative options like crowd-funding; “maybe the time when these public institutions invest is getting more and more obsolete.”

“People in the network [now] invest peer-to-peer in each other…they look at each other, and start writing cheques, and start building together”

 

If Danish government funds back-away from IT firms, it could have much wider consequences. And to explore them, it’s worth comparing two large companies; the abovementioned JustEat and the IT consultancy Systematic, both with strong connections to Aarhus. Both companies are hugely successful; JustEat was valued at £1.47 billion (13.36 billion DKK) on the London Stock Exchange in April 2014; Systematic’s 2012/13 revenue was 52.7 million DKK. As its flotation suggested, JustEat has now effectively outgrown Denmark; it is headquartered in London, with the UK providing 70% of its revenue, although it still has offices in Aarhus and Copenhagen. Systematic on the other hand, is privately owned by its founders, and remains centred on Aarhus.

JustEat and Systematic are hugely different companies, representing different development models. And it’s quite clear which model is winning the minds up-and-coming Danish tech entrepreneurs. Denmark might still provide an excellent place to start out, many told me, but investment – and the promise of future riches from an acquisition or public offering – means looking further, to London if not Silicon Valley. Certainly the IT industry feels underserved by government funds and traditional investors at home. Danish policymakers should be concerned, for the very reason that Denmark’s entrepreneurs are so successful; the ties that bind one of this small country’s most successful sectors to wider society are being loosened.

Internet Week Denmark was a well-deserved opportunity to celebrate the IT industry, and examine the factors which have made Danish tech talent so in demand, and given Danish IT companies global success. The debate over what this success means for Denmark has only just begun.

 

Jutland Station was an official media partner of Internet Week Denmark, and covered the event in English, through live-tweeting and six articles, previewing and showcasing the week’s most business-relevant aspects.

Today’s piece is our final article of the week.

If you’d like to see what happened at Internet Week Denmark, please see their website for further details.

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Sam Richardson is a journalism student and freelancer, and Society Editor of Jutland Station. He’s worked at the BBC, The Times, Daily Telegraph and Islington Gazette newspapers, and studied History at Oxford University. You can see his portfolio here:  http://flip.it/CNH5t