In 1993 Henrik Johansson was working for the management consulting firm Andersen Consulting, in Stockholm, when he got an opportunity to go to Dallas for a 6 month project. Today, 18 years later, he is happily stuck in the U.S., working on his third start-up, having raised over $50 million in funding to date for his companies.
“I never really decided to permanently move to the U.S.” Henrik explains. “When the opportunity to transfer to the US presented itself I asked myself: “What’s the worst thing that can happen?”. I figured I could always move back if things didn’t work out. After that time, I’ve found that to be an effective approach to a lot of things in business and life. Rather than contemplating decisions forever, do something fast and see if it works.”
Henrik was climbing the career ladder within Andersen Consulting (now Accenture) when he moved to San Franciscoin the late nineties. Never having thought much about starting a company, he suddenly found himself in the epicenter of the dot com boom, surrounded by young entrepreneurs raising and making millions of dollars.
After some convincing by a friend with a great idea, he decided to take the plunge and co-found an internet company called Creditland.com. “It had all the trademarks of a typical dot com at that time” Henrik recalls. “Young and inexperienced founders, an ambitious disruptive business model, a board of directors with experienced and supposedly conservative industry veterans, and millions of dollars in venture funding from top tier investors.” Henrik continues: “At that time it was easy to raise a lot of money, and investors and advisors alike wanted you to spend it as quickly as possible to capitalize on your first mover advantage.”
When the market suddenly turned in 2000, the company’s final fund raising round failed to materialize and the company’s grand plans fell apart. In the end, Henrik was assigned by the board to save what could be saved. He had to fire over 100 people, and ended up selling some of the assets of the company, but unfortunately without generating a great ROI for its investors.
“Hindsight is 20-20, and in retrospect, the mistakes we made seem obvious.” Henrik says. “We spent too much money too fast without sufficient focus on profitability. Everyone in the internet space had a ‘land grab’ mentality back then. It was all about getting the most market share, no matter the expense.”
Wiser from his first venture, Henrik took a different approach in his current startup and it seems to be working. Boundless Network, the company Henrik co-founded in 2005, reached $43 million in sales in 2011, is profitable, and continues to grow fast. “I have done a lot of things differently this time. We’ve built a great foundation for a company that can scale and become a truly great sustainable enterprise. When many startups in the technology space are “built to flip it”, we’re focused on the fundamentals of building a long-term defensible and highly profitable business.”
Henrik continues: “One of the great things about the investor community in theUSis that it recognizes that most entrepreneurs fail on their first attempt (and often the second and third one too), and people don’t hold it against you. Starting a company is always very risky, and on average it is more likely to fail than to succeed. If only the people that succeeded on their first attempt tried again, we wouldn’t have the vibrant entrepreneurial climate we have over here.”
In his first company, the team was happy to take money from anyone willing to write a check, but now he takes a different approach: “At Boundless, we have taken great care in partnering with the right investors. Your investors should bring more to the table than just money. The right ones bring expertise, relationships, and become true partners in your success. You also have to recognize that when you accept a check from someone, you are entering into a long-term serious relationship. You have to make sure that your vision, goals, and approach are aligned. If you don’t, the relationship is going to get strenuous down the line.”
“Venture funding is like rocket fuel. If you are trying to go to the moon, and you want to get there fast, you definitely need it. But before you fill up the tank you’d better be sure that’s where you want to go. With rocket fuel in the tank, going slow is no longer an option. You have now committed yourself to a moon landing, and there are people expecting you to make that happen.”
Henrik concludes: “In the end, it’s like everything else in life. If you have clarity on where you want to go, the path to get there will become obvious. If you start with the end in mind, your required fund raising strategy should become clear.”
|Henrik’s tips for fund raising in the US:|
|Disclaimer: My experience is with technology-enabled ventures, raising money from angel investors and venture capital firms. This advice may not apply to other types of companies and funding sources.|
|First: Understand that fund raising is part of your entrepreneurial journey. Your ability to raise funds is directly related to your ability to create proof points for your business. Progress is required for you to continue to raise funds. It’s a classic “chicken and the egg” problem. What comes first? Progress or investment? The answer is that you have to move both forward gradually in parallel.|
|Business Model: Build your financial projections “bottoms up”, i.e. base growth on scaling key business metrics that you have already proven, or that you are going to prove with the next round of funding. Do not present a business model based on “we only need X% of the market” or “we’re going to grow X% per month” without being able to substantiate those claims with real data points.|
|Be Prepared: I’ve seen too many Swedes come to the US and be unclear on their plans for US ownership and market introduction, and then expect the investor or partner to make the first move. ProfessionalUSinvestors get pitched new business ideas 10 times a day. If you have not figured out what you are looking for (i.e. $X million) for what % ownership in the company, and how that ownership is structured (subsidiaries, who owns intellectual property, etc.), don’t bother going to a VC meeting. You have to be clear on what you want and not be afraid to ask for it.|
|Be Bold: It is in our nature as Swedes to be more modest than the average American, but you have to recognize that you are now competing with every otherUScompany pitching that investor. You have maybe 15 minutes to succinctly articulate your value proposition, the market opportunity, the exit opportunity, and why you are uniquely qualified to pull all of this off. If you don’t have them interested after 15 minutes, you will likely never get the opportunity to explain all the beautiful and brilliant details about your invention/business. Fund raising is the ultimate sales job. How are you going to be able to conquer theUSmarket if you can’t even sell them?|
Henrik Johansson is the President for SACC Central Texas and can be contacted through 512.879.4402 or email@example.com