Data & Disruption: From MySQL to Truecaller w/ Tom Henrikkson, OpenOcean

Tom Henriksson:
But of course, they hurt tremendously because they were probably the ones where we had put in even more blood, sweat and tears and capital. Yes, we learned the portfolio theory. We learned that venture investing is actually quite random. As we know today, even the best VCs, early stage VCs in the world, lose up to half their companies. Yeah. So you just need to have a large enough.

SCS (Intro):
Today on Billion Dollar Moves, I'm chatting with Tom Henriksson, General Partner at OpenOcean VC, a leading pan-European early stage VC with a focus on startups driving the data economy, including B2B platforms and enterprise software. From his role in growing MySQL into a billion dollar exit to scaling Nokia's mobile ad business, remember that?

Tom shares deep insights on navigating the tough game that is venture capital, and how data-driven software companies continue to reshape industries. Beyond learning about the unique challenges of venture investing, the importance of scaling early, we also chat about everything including how fatherhood has shaped him. If you're curious about what it really takes to build category-defining startups in Europe and really craving a good conversation. This is the episode for you. Enjoy.

SCS:

Talking about parenting, why don't we start there? You've got a couple of kids. I was just talking about being on a boat with Taneli Tikka. We were talking about risk, right? And how it's super early that risk is introduced to children. 

Tom Henriksson:

Before they're born. Yeah. 

SCS:

And girls are told to be careful versus boys, you know, go and be rough and boys will be boys. But that actually impacts how an entrepreneur is sometimes built to think about risk. Are you intentional in how you raise your children?

Tom Henriksson:
I can't say that I never thought of it in that way. And I mean, we actually my first two children, the older one who's now 18 is a boy and he's really good at math. But guess what? When he was a young boy, he was the calmest young boy you could ever have. So he would literally be slow and deliberate and so on. 

Whereas my girl, who is now 13, she was the one who would practice running into the wall full speed. So they were like the opposite of each other, but actually also a bit of the opposite of what you would expect to be the typical role. So I can't say I thought about it in that way.

SCS:
Since we started with that, how has fatherhood changed you or influenced you in the work of investing as a venture capitalist?

Tom Henriksson:
It's a tremendous experience that does change, I think, everybody. Back at Nokia, and as you know, in between my first venture capital firm and now OpenOcean since 2011, I was nine years at Nokia. Back at Nokia, there was a philosophy, kind of an informal one, that until you have had children and raised children, you cannot be a great executive because you learn so much from being a parent, you know, about nurturing people, about setting the right boundaries, about supporting, all these things that you actually need for good leadership. 

So I would say just from that philosophy alone and in practice, having children and starting to understand how you do that, how you create a positive atmosphere, but at the same time, maybe a little bit of trust and verify. You don't let them do absolutely everything and you need to go and check on them so that they stay safe. You learn a lot that you can apply to leadership in general.

SCS:
I love it. So talking about parenthood, your parents were actually teachers. They were. I've heard you speak about how you became interested in business. You also did an MBA. 

Tom Henriksson:

Yes.

SCS:
But where does this entrepreneurial business come from?

Tom Henriksson:
It's a good question. My mom was an elementary school teacher and my dad was the headmaster of a school, but we did have quite rich dinner discussions and communication in the family in general. So I think that, you know, about the world, about politics, about what have you. 

So I'm sure that contributed to having an active mind. But my parents did indeed quite early in my development say that this guy is different. He's going to be a business person. You know, he's negotiating, he's haggling for the best price. He comes up with strange ideas and so on. So he will become a business person. But it was, of course, much, much later only when that then really happened.

SCS:
Yeah, what did you do for university?

Tom Henriksson:
I did go to a bachelor's in business. So I studied for a bachelor's and then I did, after a few years in management consulting, as many do, did my MBA.

SCS:
Because back then, the version of success, I mean, we were just at Aalto University, where apparently in 2000, as early as late, I would say, I guess in your timeline, as late as 2008, a professor had actually said, they quoted, entrepreneurship is the worst thing that you can get into in a Finnish university. Was this what influenced you to get into consulting?

Tom Henriksson:
So I did my degrees in the 90s, right? And entrepreneurship was very much frowned upon. And I mean, if you would fail, that's maybe game over, right? And it's terrible if you have a bankruptcy or something of that sort, which would keep a lot of people away from entrepreneurship. 

In addition, there were not many great role models, and especially not in tech. So it was very unlikely that one would become an entrepreneur in the 90s in Finland.

SCS:
But that changed for you when you actually worked on a project called Co-Jot Comms. Is that how I pronounce it?

Tom Henriksson:
Yeah, so indeed I first was after my bachelor's in consulting and then went back to do my MBA and during my MBA actually I had two projects that related. So the first one was for credits, doing a study of the Finnish software market for Finland's only venture capitalist, the National Fund for Research and Innovation. 

They did a study mapping out as many software companies as possible and it was pretty hard back then because you had to read newspapers and see if you could find some names of companies that might look like software companies and the job was to list the 50 most promising ones.

So that gave me a bit of a perspective into software businesses, I guess. And then during the MBA, I worked for a friend of mine's startup consultancy and my main client was Co-Jot Communications. Co-Jot standing for communications just on time. So they built multiband antenna systems, a filter that would filter different radio frequencies into one antenna only.

So that a police car, for instance, doesn't need to have five different antennas because of the five different radios and frequencies they employ. First I worked there on some planning and strategies and this and that. And then actually after my MBA, I went to work for that company full time, which was not at all the plan.

SCS:

And then you become the guy that's in charge of exports.

Tom Henriksson:
Yes, which shows how crazy the CEO was in this case in a good way, because he took a bet on me. I mean, what did I know about exporting radio technology to the world? To be honest, not much.

SCS:
And as a, I guess, a Finnish company doing this, you know, I mean, you've got such a interesting perspective because you were an entrepreneur at a time where entrepreneurship was almost a bad word.

Tom Henriksson:
Well, he was the real entrepreneur. I was only working for him.

SCS:
But again, working for an entrepreneur, right? I mean, that would be a risk when your parents would have probably said, this is not a stable job. What are you doing? Yes. How have you seen the landscape evolve for Finnish companies?

Tom Henriksson:
Massively, massively. I mean, back then, there were not that many companies de facto. There were even less really strong companies and then even less such that had the greatest ambition of them all to become a global category winner in whatever field niche they were in. There were just not many of these. It was so hard for people to even think that big, right? 

I mentioned that the CEO must have been crazy because he took me on. He was also a little bit crazy when it came to other things. So we had a good run for one year, but then I decided that probably due to the culture of the firm, it's never going to be a really big company. So I went back to the consultancy, the startup consultancy, which I had worked for part-time while I was doing my MBA. And there we had lots of customers that were Finnish startups that had, let's say, decent ambitions and had some international business and so on.

And we helped them, among other things, raise funding. And after having a number of successful such, we wondered, why do we only get, let's say, 3% of the raised capital instead of being shareholders enjoying the value increase of the shares of the company? So we decided to become venture capitalists. So we decided in 1998, and in 1999, we became venture capitalists. We first set up a €1 million approximately fund with our own money.

So some corporate profits, some investments from some of our shareholders, and we made all of four investments from this fund, and we managed to lose them all over time. So not a good fund. We learned what portfolio theory is in practice the hard way. Fortunately, during that time, we had also been raising a fund with external investors. So around the same time we closed a 52 million FINmark fund. About €9 million in today's money.

SCS:

So hold up here. I mean for the VCs that are tuning in, if you had lost your shirt with the first four investments, which would in today's age, the terminology is we're doing private investments to build our track record. If you fell in all those four, how did you then go on to raise so much more money?

Tom Henriksson:
Because we raised the real fund while those companies were still progressing.

SCS:
I see.

Tom Henriksson:
So two years before they all went belly up for various reasons.

SCS:
Okay.

Tom Henriksson:
Luckily, these were not simultaneous.

SCS:
So balancing the vintages, basically.

Tom Henriksson:
Exactly.

SCS:

Which is an art in itself.

Tom Henriksson:
And actually, we talk about a very short time. I mean, we raised the first one in 99 and we built our own in ‘99, late ‘99. And in early 2000, we had the first closing of our first real fund.

SCS:
So you mentioned portfolio theory. The first four burns must have been tough as well, right? Because it's your own personal money. And you always remember the first check where you burned it all. I remember mine.

What did you learn about yourself and investing?

Tom Henriksson:
Very good question. I'm not sure I have a perfect answer, but of course they hurt tremendously because they were probably the ones where we had put in even more blood, sweat and tears and capital. Yes, we learned the portfolio theory. We learned that venture investing is actually quite random.

Tom Henriksson:
As we know today, even the best VCs, early stage VCs in the world, lose up to half their companies, right? Yeah. So, you just need to have a large enough amount of them that serendipity doesn't work too negatively on your portfolio. And regardless of how great they sound at stage minus one or stage zero or stage one or even stage two, which all are still fairly early, anything can happen with them over time. 

So you just need to have enough of those and then some of them will be able to get through all the different problems and crises that every startup has and go on to be successful.

SCS:
So how has that experience, you know, other than having, I guess, a more diversified portfolio, helped you think about verticals to invest in? I mean, I assume this was already software because from your early days, you were looking at software, right?

Tom Henriksson:
Yeah. Well, it was more generally speaking tech, but mainly indeed software. And then in that first fund, which was the €9 million-ish fund, we made nine investments. So more than double the portfolio from the first one. Here we actually had three good companies, which I think is a hit rate, which showed that luck also plays a role.

SCS:
That's a pretty high hit rate, right? I mean, these days.

Tom Henriksson:
One of them, we didn't enjoy the fruits because we had actually gotten diluted out during the long journey before it became a very good exit. The second one, we had an exit, I mean, in seven months from investing that brought 5x the money, which was of course great for the cash flow of the fund and was a great proof point for our business model in general.

SCS:
And what was that company if you can speak to it?

Tom Henriksson:
It was a company called Remix Technologies, which did software for optimizing logistics and where you should put your manufacturing plants, etc. when you're operating a global business. Flextronics bought it quite early on. And then the third one was MySQL. This was year 2000 when we started the fund, and it took until 2008 before we had the actual exit of MySQL, which of course then was a very significant.

SCS:
Yeah. And for those that are not experts in software as you are, can you share with us the significance of MySQL?

Tom Henriksson:
MySQL was, well, for Finland, definitely a very, very big thing because it was the first startup that reached a billion dollar valuation in the exit.

SCS:
And what year was this?

Tom Henriksson:
So 2008 was the actual exit. There had been nice, smaller exits before that. Actually technically it was not a Finnish company. My colleague Monty was the CTO and developer of the database. I hired CEO who actually started when my firm invested, Morten Mikkos, he's a Finn as well.

But the company was technically incorporated in Sweden. So two of the founders, one who took care of the community, one who took care more of the back office, were in Sweden and incorporated it there. So it was an important one for Finland and I guess Sweden as well, although we like to remember the Finnish part more. 

The other one was that it was the first open source software business to actually monetize with open source before that free software. So they innovated on the so-called dual licensing GPL scheme, so that if an enterprise buys the software, they need to pay so that they don't come under the open source licenses with their own software solutions.

SCS:
Yeah, makes sense. So after you sold your firm, you then went back to corporate. And as most Finns do, they would have a stint somehow in Nokia as you did.

Tom Henriksson:
That is true.

SCS:
What was the Nokia that you knew back then? I mean, this was a very different time. I mentioned to you I was with Tarun, where he was explaining sort of the whole structure, the corporate innovation framework, which is extremely impressive. But frankly, for a lot of the audience, Nokia, we still remember it as a failed mobile company, frankly, but it has done many things that we don't know of. Can you speak a little bit about your time, how Nokia has actually evolved beyond the 3310 that we used to play with.

Tom Henriksson:
So this is late spring 2002. We have exited the investment bank, rolling my thumbs and thinking about what to do next, getting a bit nervous about that, right? And I had a number of friends who were working at Nokia in the venturing arms of Nokia, which was a very rich environment of various ways of building new business. Some of them asked me to join them, and I did. I literally didn't know what I was going to do next.

And I thought, you know, Nokia is an up-and-coming mobile manufacturer, and mobile was getting really hot, and Nokia was an amazing international, and more and more international all the time companies. So it sounded pretty exciting.

SCS:
And what was the time that we were in? I mean, in terms of where Nokia was back then to where it is today, it's safe to say a complete evolution of how they've developed over the last 20 years.

Tom Henriksson:
Yeah, of course. So, I mean, back then Nokia had various businesses, Nokia Networks, which they still have, was one of the big legs for Nokia. But then of course, the mobile phone business was where the real growth and the real market cap attribution. I went into the Nokia Ventures Organization, which was a business group. A business group that had bought some major businesses, like billion dollar businesses, had venture capital funds, the Blue Run Ventures nowadays, called back in the day Nokia Venture Partners was a fund where Nokia had just been an NLP. 

Nokia Growth Partners where Nokia had a more strategic investment and many of the portfolio companies would work closely with Nokia once they invested was another one. Innoven which was a fund with a purpose of learning for Nokia so investing small pre-seed, seed checks in the US on the edge, bleeding edge things, and then actually writing up the learnings from those for the executives of Nokia. 

And Nokia even had an internal fund that was just dedicated on spinning out things from Nokia into independent companies, things that might not be in the scope of Nokia in the future. And we had internal venturing, all kinds of ideas that were funded internally that then might become a business of Nokia's in the future.

So we had all the possible tools you can think about at Nokia in those times.

SCS:
Just to remember the time and the significance here, Nokia was ahead of its time. I mean, thinking about corporate venturing, right, and how to have a separate entity, the way you spoke about it as learnings versus strategic investments, which executives sometimes get caught up in, right, and they don't see it as a write-off and expect returns when the way you said it, look, it's learnings.

Tom Henriksson:
Back in those days, there were kind of three major corporate innovation case studies in the world. One was IBM with its strategic business areas and how they had grown IBM through that. The other one was Intel with its ecosystem funds, investing in enhancing the ecosystems that then result in processor growth. And the third one was Nokia with its richness of tools for doing various kinds of venturing.

SCS:
Yeah. So what would you say, I mean, having been in there for close to a decade, made the difference for Nokia to be able to think in this modern way?

Tom Henriksson:
Nokia had a dream team, management team back then. I mean, it's the people who are nowadays in Finland legends. They're all at least retired from Nokia already, but they came from different functions and different parts in Nokia together. And they were just very progressive back then. Then obviously, eventually Nokia lost out to the iPhone, which is a bit of a paradox because there you can say that Apple out-innovated Nokia. And despite all these great tools and platforms for innovating, Nokia was not able to find that next thing, even within its core business. But I guess that's why it's called the innovator's dilemma. 

SCS:
Yeah, tell us more about this. I mean, it's interesting you mentioned it because we had Jyri Engestrom, and that was the title of his PhD. This is my third time in Finland. I now have a lot of good friends that are Finns and as I'm learning the culture, the innovator's dilemma is one thing that you all actually speak about somehow. Why is that? 

Tom Henriksson:
Even I had the pleasure of meeting Clayton Christensen back in the days who is the father of that because Nokia was using him as a consultant quite a bit. As a young business person to this company that was getting very, very global, learning about management, learning about leadership and combining many of the things we do with the top academic research and academic views of how to go even beyond. 

That was just an amazing environment to be in. I learned so much. I'm so much of a better venture capitalist because I had that opportunity.

SCS:
So tell us a little bit more about the innovator's dilemma in your opinion. It's a big question mark, right? Today's version of Nokia and iPhone, Apple is, I guess, I want to say OpenAI and Bart and many others.

Tom Henriksson:
I'm not the foremost expert on it anyways, but in Nokia's case, the value created and the experience for the end users who then decide on what devices they use moved away from the hardware to the software and to the app layer. Nokia had a more complex software architecture consisting of several different platforms, which probably brought some inertia to it. 

And we were partly because of that never able to really build that app layer where then Apple and the iPhone truly succeeded. They developed a user experience that was superior. And to the innovators' dilemma and Clayton Christensen's theories, one could say that it was a bottom-up, low-end innovation, because initially it didn't look that special, right? 

But then they very quickly were able to deliver something that was much better. So it came from nowhere. It was hard to see for the incumbent, but then indeed it became much better than the theoretically stronger party was able to do.

SCS:
Yeah, interesting. And of course, Nokia today has also become a corporate innovation case study. One of your investments when you were in Nokia was actually Podio, which eventually became Twitter. Tell us a little bit about this story and I guess how you also then went on to lead the ads business.

Tom Henriksson:
Yes. So before I was leading the ads business, I was managing a bunch of business development activities. Podio, I have to be very honest and say that it was not my investment. I did inherit the portfolio, which included Podio and some other interesting things in this Innovent learning mechanism. 

Did we see that Podio would become Twitter, which would become a revolutionary communications method in the world? Probably not at that time, right? We actually ended up selling the InnoVent portfolio to another investor on the West Coast in the US. But linking to Twitter, you mentioned Jyri Engström earlier. 

So Jyri was doing his PhD research by sitting with the same management team at Nokia Ventures organization where I was one of the managers at that team. And he would study us. So I'm actually a part of his PhD thesis.

SCS:
I love it.

Tom Henriksson:
But I am Mr. B or X or something, because he wouldn't name the parties, but he actually observed how we interacted with other making decisions. And it was a sociological behavioral approach to the whole thing. So we know Jyri very well. As a result of that, and here comes the Twitter link, when Jyri started Jaiku, his first company, which was kind of the European Twitter. We were the first investor in Jaiku.

Tom Henriksson:
The investment was a loan where we had an option, a right to buy Jaiku if somebody wants to acquire it. So right of first refusal. Then Google came in and we actually said, no, Nokia doesn't need this. Maybe Nokia should have, but Google bought Jaiku, but quite close to Twitter. It was the European Twitter.

SCS:
I love it. In Finland, you know, you better do things right because people will remember you through different chapters.

Tom Henriksson:
Yes.

SCS:
And so one of the chapters, you mentioned your time in Nokia, you made a couple of, you know, different investments, you continue to build yourself as an investor. We see the trajectory coming along and then you end up here in OpenOcean. How did this come to be and what's the thesis now that you spent so much time with Nokia, with your early chapter, how did it influence you in building OpenOcean with the others?

Tom Henriksson:
Well, as noted, I mean, it was really my international management and leadership school. So essential. Also during Nokia, I had the great fortune that one of my teams started the Nokia advertising business, which initially was an idea and a few people, and then they convinced me to come and lead it. 

What was the Nokia advertising business? So the Nokia was starting to deliver various mobile and beyond digital services. So Nokia had maps, Nokia had music, Nokia had all kinds of services. And of course, for such services, one potential and probable monetization mechanism is advertising. One of my teams came with the first idea and then business plan to build something called initially Nokia Ad Service to help monetize the Nokia services. 

And they convinced me to come and run the business because it was timely, and because it was actually a model that was fairly easy to implement. We licensed 24-7 real media ad servers initially, so we could only deliver mobile web ads just to get into the business. So it was actually more about scaling the commercial side of it initially. And then when we realized we need richer technology for delivering various experiences, ad experiences in mobiles, we bought Npocket out of Boston so that we'd get our own platform with better experiences. 

As a result of the demand of it, the Nokia brand, of course, being a leader in mobile and then going into first generation of mobile advertising made it quite a growth story. So the first year we made $10 million in revenue. Second year we got to $30 something and the third year with the acquisition of Npocket, which contributed a good amount of revenue. We got to $50 million in revenue, 250 people. It was amazing to be part of this story. Those were the good times.

SCS:
Yeah, those were the good times. And then you decided after close to a decade to leave Nokia.

Tom Henriksson:
Yes, so after the Nokia ad service, which became Nokia Interactive Advertising, I ran corporate business development globally for a while. When you do that, natural stakeholders are other venture capitalists. So I re-met with Monty and Ralph and got to know Patrick, who had been hired by Ralph and Monty into MySQL and actually ended up on the management team of the company and running product development and business development. 

So I met this group who were starting a venture firm. When I, in 2002 summer, went to Nokia. I actually said, maybe to myself, maybe to someone else, that someday I will go back to venture capital because it is a great business to be in. And now this then became the right time. Initially I joined OpenOcean, which was the firm Ralph, Patrick and Monty had founded on the board while they were formally, they were raising the first institutional fund. And then when that one was coming together in April 2011, I joined as one of the partners.

SCS:
So the first fund was, what was the size of it?

Tom Henriksson:
Very small. We've always liked small funds with concentrated portfolios, but maybe not as small as the first one. First one was €44.6 million.

SCS:
Yeah, which frankly is not a small fund for a first fund actually, even in today's age.

Tom Henriksson:
Well, it was too small. We ran out of money. We recycled everything we could. We always had too little to follow on in the best companies. And so we learned good lessons there as well.

SCS:
So what was the thesis then when OpenOcean was started? I mean, what was the belief and what was your north star for OpenOcean?

Tom Henriksson:
Probably two things. One was that Europe was slowly coming of age. There were more people interested in tech entrepreneurship. There were even some examples of success, MySQL obviously having been that, and go-to-market methods, distribution methods were digitalizing more and more. So it seemed like a great company can come from anywhere. So that was one of the tenets. 

You know, from whatever corner of Europe, there will be great software businesses coming. The other one was that due to our different experiences in and around MySQL, we had perspectives on what it takes to have a great success story. And OpenOcean's really core value was to help other entrepreneurs on similar missions. It's never the same, but you can apply some learnings for sure.

SCS:
And so you're investing into software mostly, Series A, Early A.

Tom Henriksson:
Early A. Our current fund, we've now closed $100 million in the first closing, and we have a goal of 150, so they are incrementally growing. But for an A-series fund, it is still on the, let's say, early A side, even in Europe today.

SCS:
So you said something interesting. Venture capital is a good business, and that you wanted to get back into it. But it is a very tough business, especially with the cycles, right? I mean, you've seen more than I have, the dips and all that. 

As LPs know, the return-to-dispersion is actually pretty high between the winners and the losers, especially in the recent years. I'd love to hear if you agree. What I've seen is there's definitely a decoupling. The winners will continue to win because they've built some sort of a mode for themselves. And those that don't, they continue to suffer. 

And we, even through Beyond The Billion, in the last couple of years, have already seen funds shut, begin and shut, because people don't understand the business of venture, actually. They like to invest, but that doesn't mean you need a startup fund. What is your opinion? And how do we win in venture?

Tom Henriksson:
We come from a place of domain expertise and specialization, because we have operated, as we like to say, at least built from idea to scale and global category leadership, at least three businesses ourselves. So my ad business experience at Nokia, although I cheated, I had the Nokia brand and the Nokia money, so it was a bit maybe easier than doing it on the outside, but obviously MySQL and MariaDB and then actually been involved in some others as we invest in B2B software, we invest in data software, which are things we know quite intimately. 

So that should help. Then we always focus on building a real business first with our portfolio companies. If you get the revenues and eventually maybe even the profits, you know that you will have at least solid result with those businesses, which should bring a solid result with the funds. And actually, finally, you need luck. You need luck when it comes to timing.

You need luck when it comes to selecting or not selecting exactly that company that then becomes great or not, and so on. You do need a little bit of luck, but the more you practice, the luckier you get.

SCS:
What is your view on follow-on capital? I think there's two camps that we see. One where they believe that they're smart enough to tell which to double down on. One on the other camp is no matter how smart you are, VCs actually don't do well with follow-ons and so they don't.

Tom Henriksson:
We definitely have a model where approximately half of our initial investments receive follow-on capital. And then approximately half of those go on to a C-round and still receive follow-on capital from us, assume that those companies progress really well. So, I mean, their revenues grow and typically very strongly. They are companies that other investors maybe fight to get into because they are such great companies. So our philosophy is that in the companies in the portfolio that are doing really well, we should put in as much follow on capital as we can, at least for the next round.

SCS:
And so today you operate out of Helsinki. If you think about the MySQL days, there was Sweden as a potential base as well. Why did you choose to invest out of Finland and operate out of Finland?

Tom Henriksson:
Patrick, Ralph and Monty and I, we were all in Finland and Swedish-speaking Finns. Back in the days when we founded OpenOcean or when we started the business, actually the world's leading Swedish-speaking Finnish venture capital firm, because we were probably the only one. The only time when we know that we've actually been the best at something, because we might have been the only one.

But so that was our home base. But we always had an international outlook from the very beginning. We have been investing all across Europe, believing that the winners can come from anywhere and hopefully being able to see with our fairly particular taste and experiences and fairly tight focus. Back in the days, it was almost unheard of that you would invest in data software only. Nowadays, a lot of parties want to invest in that. But with all of those, it was quite natural that we need to see a larger geographical footprint and opportunities, and that was Europe for us.

SCS:
So you chose basically a single vertical, but you had to go horizontal to scout for data software companies. And what do you mean, how do you define data software companies? Give us some examples of your big wins from data software.

Tom Henriksson:
Yes, so it's changed over time, but broadly speaking, it's about any business to business software company that manages data, processes data, analyzes data, applies AI on top of data, etc. to make a business and enterprise run better.

So that's a very broad definition of what data software is. But today, much of the software out there in the B2B context is actually data software. So I guess we were a bit ahead of the times in our definition.

SCS:
Yeah. And where do you see this with, of course, you know, it's 2024, I can't leave you without touching on AI. Data is core to AI, right, feeding into the systems.

Tom Henriksson:
For sure.

SCS:
What is your outlook for data software? What are you excited by? What are the challenges? What are you threatened by?

Tom Henriksson:
The data explosion is absolutely massive and it's continuing, so the demand will continue to surge in general. Then we are threatened by the fact that everybody wants to invest in it nowadays. Luckily, we have that background of having operated such businesses and invested now in three fund generations in similar businesses, which helps us. But competition is much tougher than it was when we started. It's a very different playing field. And then that brings us to, for instance, in foundational models, which take maybe a hundred million at seed and billions to become really competitive over time. 

So we pick our battles, select our battles quite specifically. We love tools that help enterprises take AI technologies into use, like MindsDB from the US is a leader in one of those niches of enterprise tools and we like application level software companies that might be combining unique proprietary data sets with some machine learning and AI to bring an experience to customers that nobody else might have.

SCS:
So, talking about AI, every company now today claims to be an AI company and you have been investing in this for a long time across Europe from Finland. What do LPs and GPs get wrong about investing in AI?

Tom Henriksson:
I am a bit worried about the AI craze right now. The initial investments in some of these companies are so aggressive that they go a bit beyond my thinking and my capability. But perhaps the exits in five to 10 years time will be even bigger than we imagine now and then they might make sense.

SCS:
And how about Europe more broadly? I mean, you know, frankly, coming from the US, one of the key hesitations is that the exit and liquidity landscape doesn't look as promising for Europe, which is a little bit more conservative. Misperception, perhaps?

Tom Henriksson:
Well, in general, of course, the last couple of years have been quite, let's call boring.

SCS:
Yeah.

Tom Henriksson:
With less liquidity, less opportunities, be it in public markets or even even corporates spending big on acquisitions, that comes back. We live in a world of cycles. Are they five or seven year? I think we can already see a bit of improvement signals in the market from many perspectives. So we're not concerned about that.

If you find the right company that creates a great solution and gets strong traction with customers on that, they will do well.

SCS:
Well, we've covered a lot of ground. You talked a lot about your successes. What was an anti-portfolio that you missed? Like, ah, it just didn't get your conviction of your IC that today is like a crazy...

Tom Henriksson:
Well, we have an anti-portfolio that got the conviction of the IC, which is even sadder. All venture capitalists have an anti-portfolio, right? And some of them hurt more than others. GitLab does not a lot. Because GitLab became a tremendous company. I think it was worth 20 billion or something in 21. We actually had a term sheet out to GitLab after having done the full analysis and being very convinced that this is going to be great. 

We were between our first and second fund, which made us a bit slower. There were only two, three months between these two, you know, the first one closing and the second one actually being up and running with fresh capital. But because of that, we were a bit too slow. And GitLab had just, I think they had just started, were starting in YC. So they went to the US and we wanted to invest.

We gave them a term sheet showing what terms we're willing to do. One, we never signed it. So they of course didn't sign it. And that was the first mistake. We will never again give a term sheet that we don't sign when we are actually interested in a company. And two, we should have just dared to commit to it because we knew our new fund was coming up anyways. And we should have told them that we will put in this much as a part of the round and we will help you get a US investor while you're at YC. 

When YC was over, Koshla Ventures invested a lot more money into the company and took the whole round and that was GitLab. So that one still hurts, but it was a very valuable lesson. When you believe in something, go for it regardless of the situation.

SCS:
I love it. Okay, rapid fire. So what makes a leader?

Tom Henriksson:
I don't perhaps believe in the, let's call it Viking leadership where the general is ahead of the troops and fights the fight and shows example, yes, you need to do that as well. But I think it's more about somebody who listens to people, takes the input, coaches people, helps them in their work, gives them faith to carry out what they need to do, even taking more risk than they might otherwise be comfortable with. 

Then sometimes making decisions and sometimes if not bringing the vision at least making sure the vision is very clear and the plans are to be followed.

SCS:
Okay, fill in the blank. Success is?

Tom Henriksson:
A happy life.

SCS:
Not investment advice, but what's your favorite investing hack or tip?

Tom Henriksson:
Not sure I have any great ones. I mean, we do quite deep analysis of our investment opportunities and require a lot of confidence in a lot of things, not everything, before we actually invest. So I've learned that OpenOcean to be more analytical and more profound in thinking about the opportunities before pulling the trigger.

SCS:
Favorite book and key takeaway from that book?

Tom Henriksson:
One is definitely Lord of the Rings. I've read all of the books seven times. I'm a complete Lord of the Rings nerd. So many takeaways. I mean, it's such a rich story.

SCS:
Yeah, but what's one that comes to mind?

Tom Henriksson:
Probably about the smallest persons being able to make a huge difference if you believe, if you do teamwork.

SCS:
I love it. What needs to change in venture? One thing. I know there's a lot, but one thing.

Tom Henriksson:
I think we still need to be a bit more open towards new candidates, recruits, people joining the ecosystem. It's a fairly closed ecosystem that's really hard to get in. If we're a bit more open-minded, we might get people with even more different backgrounds, which might help us innovate and actually represent the world even more in our innovations.

SCS:
Love that. Last words for Finnish builders tuning in on how to be successful on the global stage.

Tom Henriksson:
Having a massive ambition, not being shy about it, communicating it to the world. Obviously one where you also bring something of substance, you know, some background, some IP, some technology, some skills that makes you the realistic candidate to take that vision to fruition.

SCS:
I love it. And for your realism and your fundamentalism, thank you, Tom, for taking this time. And we're excited to see the billion dollar moves that you'll continue to keep making.

Tom Henriksson:
Thank you so much for having me.

SCS:
Thank you. High five to that.