Month: December 2024

2024 is coming to an end, and like last year I did a ‘best of’ and shared on my Substack called Torstensson’s Notes. This is a slightly edited version of that newsletter.

I haven’t been as active writing in 2024 as in 2023 (120 posts vs 357 posts), but it has been enough to create a trail of my thinking about startups, technology and investing for the year. 

One topic that was heavily discussed in early September was Paul Graham’s essay Founder Mode. My post Founder Mode, take 2 (or: Life is always more complex) turned out to be my second most popular post of the year, and my comments were picked up by Wall Street Journal and GeekWire among others. Basically, I think Paul oversimplified founder vs manager (even if founders are critical for a startup to become a large company).

I think the essay resonated as it touched the nerve of how the startup world is “getting back to normal” after a few years when politics was more important than performance (at both large technology firms and successful startups). 

A second example of “getting back to normal” is how technology firms switching back the default from “work from home” to “work from the office”. 

A third example is the AI-driven rebirth of San Francisco as the epicenter of technology and startups.

There was a lot more that happened in 2024, but the startup world continuing to get back to normal has been a major theme in my eyes.

My favorite torstensson.com blog posts in 2024:

Founder Mode, take 2 (or: Life is always more complex): Managing organizations is not easy. But it is not quite as simple as Founders are always great (even if I think it is hard to overstate founders’ value to a startup) and Managers are always bad.

Venture capital is an ‘extreme sport’: Venture capital is an ‘extreme sport’. It’s best when aiming to build a very large company extremely fast. […] This is not ‘normal’ nor something that is a good fit for many companies.

When building or investing in startups: Do it your way: There are several ways to build a startup or invest in startups. For a founder or investor I think it is a big win to find the way that works for oneself, where one can be authentic, find enjoyment in the day-to-day work and adapt the work to one’s strengths.

Time for the Swedish government to improve employee stock option rules: Adjustments to the legislation should include eligibility for larger startups (that employ hundreds of people or more) to use QESO (qualified employee stock options) and making sure fintech companies (including banks), that is a Swedish ecosystem strength, can use them. It should also include shortening the vesting cliff from 3 years to the market standard of 1 year cliff and 4 year vesting.

Profits let us build better products: “Before I get to the actual results from last year, I want to explain how we think about financial results in general. We see them as something that enables us to do more of what we’re passionate about. We have been lucky to be very profitable for years now, which is important because it enables us to take a very long term view on everything, including keeping the quality bar for our games very high and enabling us to try new risky things.” 

Perkins’ Law: “market risk is inversely proportional to technical risk”.

Liquidation preferences: Liquidation preferences on shares are discussed now and again in the Swedish startup ecosystem. I think Leo Polovets at Susa Ventures explains why 1x liquidation preferences makes sense. 

Very good read on founding and leading a startup by Brian Halligan of Hubspot: A bunch of short snippets (“Halliganism’s”) on founding and building a startup including leading, culture, team, strategy, decision making, crisis management, improving your CEO craft, managing yourself, exits, planning and stepping away. This should become a classic like The Hard Things About Hard Things or the original Netflix Culture: Freedom & Responsibility presentation.

The Top 5 Most Read New Posts on torstensson.com:

1. Coatue’s 2024 EMW State of the Market presentation
2. Founder Mode, take 2 (or: Life is always more complex)
3. Nordic SaaS company benchmarks for 2024
4. Napper – building a profitable mobile consumer company with a strong product
5. Founder Mode, take 3 (one size fits all advice doesn’t fit all)

Book Recommendation

If you haven’t already picked up The Nvidia Way: Jensen Huang and the Making of a Tech Giant by Tae Kim, consider this to be a 5 star recommendation.

Carta has released benchmark data for U.S. Series A rounds for 2024.

While median numbers don’t capture the outliers (which is what startups and venture capital is about), it is noteworthy that non-AI SaaS startups had a pre-money of $45 million, AI SaaS had a pre-money of $61.5, healthtech a pre-money of $39.8 million and fintech pre-money of $46 million. All with between $10 and 15 million raised.

My sense is that the median Series A is ä lower in Sweden and the Nordics than the U.S. and the U.S. median numbers are closer to the 75th percentile in the Nordics (especially in Sweden with the weaker Swedish krona).

The dynamics seems to be that it is tough to raise even as a median company, with a good financing round done quickly requiring a startup to be in the top quartile.

The DeepSeek v3 announcement and discussion caught my interest today. It seems to combine a very capable open-source LLM with 10x lower cost.

I’m happy that Alliance VC has co-led the seed investment in Lightbringer, a Swedish-based startup that is building an AI-platform to revolutionize patent protection. I will be joining the board of directors as part of the investment.

• Company announcement
• DI Digital: Fixar patentansökningar med AI – plockar in 50 miljoner
• Tech.eu: Lightbringer to boost SMEs’ IP protection with €4.2M funding boost
• Breakit:
  Legaltech-utmanaren Lightbringer säkrar 50 miljoner – tunga investerare kliver in i utmanaren

With successful IPOs by ServiceTitan in the US and Apotea in Sweden, and public stock valuations going up I think it is fair to say that the IPO window has opened up.

The ‘big one’ from a Swedish perspective is Klarna, which hopefully has a successful IPO in the first half of 2025.

For startups, IPOs shouldn’t really have a short-term direct impact on fundraising, but with the drought of IPOs and M&As in the last few years it likely will.

An open IPO window and a new regime in the US competition authority (FTC) that will allow large technology companies to acquire startups, will increase the number of exits that send checks (figuratively speaking) back to investors in startups and venture capital funds. Much of this will be recycled back into new startup and venture investments, which is good for startups.

Earlier this year Alliance VC invested in Encore, a Stockholm-based company founded by André Eriksson and Marcus Kohlberg, that is developing an open source backend framework for TypeScript and Go as well as automating cloud infrastructure and DevOps in AWS & GCP.

This week has been Encore launch week with a number of improvements announced.

Dagens Industri writes about Anyfin’s latest capital raise of 150 million SEK and conversion of old preference shares (which seems to have been ca 1.15 billion SEK, based on 1.3 billion SEK raised in total of which, I assume, 150 million SEK in the latest round) to common shares.

The headline doesn’t highlight the information in the end of the article, which states that investors (which seems to only be internal ones) get preference shares with a 5x liquidation preference and four warrants per new share. This would mean that there are ca 750 million SEK in preference shares after the fundraise, if my quick math and assumptions are correct, vs ca 1.15 billion in preference shares before.

Preference shares are a tool in the overall toolbox of getting a capital raise done. In that sense they are similar to a number of clauses in a standard shareholders’ agreement and investment agreement that founders and investors negotiate. There are always trade-offs (including valuation and dilution).

Stockholm-based Toca Boca, the maker of kids-oriented mobile games, has reached 1 billion downloads across 46 titles. Maybe even more impressive is the 60 million monthly active users.

At this scale Toca Boca has also become a very profitable company with 1.7 billion SEK in revenue and 623 million SEK in earnings before tax in 2023.

Apotea’s initial public offering on the Stockholm Stock Exchange today was overall successful. Some might consider the IPO pop from the listing price of 58 SEK to trading above 80 SEK (ca +40 %) to be a failure in pricing, but as the entire offering was secondary shares sold by old shareholders there are pro’s and con’s.

Old shareholders could sell a significant part of their holdings and get cash today (which otherwise can take between six months and two years).

The company got a mix of new shareholders, some large, well-known shareholders and 90,000 smaller ones. And everyone of them are happy (at least today).

Given the low volume of IPOs recently, leaving some money on the table and rather being safe than sorry might have been an ok trade-off for Apotea, but it was definitely a win for the companies planning to go public in 2025 as it helped to “open the IPO window”.

Charles Hudson of Precursor has written down three different scenarios for how the early-stage VC ecosystem could develop.

1. Return to the Status Quo
2. Small and Large Firms Diverge: Bifurcated Seed Market
3. Big Fund Hegemony

It’s an interesting read for an early-stage investor like myself, but the different second-level impact from these scenarios on follow-on funding etc is interesting for startups and investors in funds as well.