Why Serial Entrepreneurs Make Top VCs: Google & Groupon Exits; Ōura & Kickstarter Investments w/ Jyri Engeström

Sarah Chen-Spellings (Intro):

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Today we have the pleasure of speaking with Jyri Engestöm, who had early success with exits to Google and Groupon. A serial entrepreneur and investor today, Jyri remains multifaceted as a GP at his own fund, Yes VC, that he started with his wife Catarina Fake, who, yes, co-founded Flickr.

While he also is building and investing in startups with Petteri Koponen at Lifeline Ventures, Finland's leading VC with winners from Wolts to Supercell, which were both snapped up in multi-billion deals.

Of course, we discuss opportunities and technologies, lessons learned from the valley, and how Finland, of all places, could become a leading global startup hub.

And beyond that, it is to me, Jyri’s deep understanding of network theory and social dynamics, curiosity of where the markets are heading from space colonization to geopolitical opportunities. That makes this a conversation you want to be tuning into.

Sarah Chen-Spellings:

I wanted to start with you on your thesis. In your PhD on the innovator's dilemma, because I kind of feel that that has shaped a lot of your thinking and the work that you do.

Can you tell us a little bit about why the innovator's dilemma?

Jyri Engeström:

Clay Christensen, a Harvard professor, who's now passed, famously wrote this book, The Innovator's Dilemma in the nineties that described how essentially these products that seemed to be inferior at the beginning would ultimately take over the world.

Because they were either cheaper or they were easier to use, or they freed people from going to an inconvenient place. So for example, digital photos overtook print photos, even though the first digital cameras were not as good. You know, the resolution was very poor and the photos were kind of grimy. You didn't need to go and develop your pictures anymore at a photo shop physically.

This theory of disruptive innovation. That's where that word comes from and it's proven itself over and over again. So when I was working on my PhD thesis, I was super interested in startups and I wanted to create my own company.

And so I thought one of the good ways to do that would be to learn, to really understand well. So that I would know the theory before I had a company on my own, but you know, I wanted to make sure that I would do things as well as I could.

Sarah Chen-Spellings:

Yeah. So growing up in Finland, I know you spent a little bit of time in the US, but as a young Jyri, why sociology? Was sociology sort of like the natural path because of your parents or how did that come about?

Jyri Engeström:

Yeah, I think because my both parents are academics. My dad's a UC professor. I mean, he's retired now, but the Laboratory of Comparative Human Condition still exists over in UC San Diego. And it was a good way to grow up for me.

Cause you know, when I was in the eighties and when I was small, we would spend time at places like Xerox PARC or, you know, the Berkeley campus, Stanford, those places where one of my close friends at the time, Eric Norman, was the son of Don Norman, who worked at Apple.

The best place to hang around in PARC I later realized was most likely Doug Engelbart's room because it had these toys which I later realized were prototypes of the mouse.

Sarah Chen-Spellings:

Oh my goodness, wow.

Jyri Engeström:

As a fin I think that just exposed me to the valley at an early age at an early time in the valley's history as well.

Sarah Chen-Spellings:

And so you came back to Helsinki. You studied at a University of Helsinki and not long after decided to actually start a company from Finland.

Why this decision versus starting it in the US?

Jyri Engeström:

I was into film and movies when I was a high schooler in San Diego. So I went to film sets in la to work on the weekends and evenings after school and I wanted to be a film director. But then I was also programming computers and I loved making computer games. And those two obviously started to merge around that time.

There was a high school here called Helsinki High School for Fine Arts. I wanted to apply to that school because I thought, oh, I want to go to an art school and it'll be a good path for me to become a better film director.

So I moved here when I was 15, my parents and my brother stayed in the US. And then pretty quickly, with a bunch of my classmates, started a company that then later merged with another company and IPO-ed actually in the first internet bubble here. And so I had this early exposure to internet and kind of hyper growth you could say.

And also the crash of 2000 we IPO-ed and just two months before the whole Internet bubble crashed and popped in a really major way. I think that really informed my decisions about what I wanted to do later in life for sure.

Sarah Chen-Spellings:

What was the idea then? Like, give us a quick snapshot of what that was.

Jyri Engeström:

Oh, it was game development companies wanted multimedia presentations. So, we would create those. I worked as mostly as a graphic designer and UX designer at the time. It was a good way to learn the tools I’d say, some of the old people might remember tools like, the early Photoshop versions, Debabalizer, Macromedia Director.

All these tools that were around at that time and the scripting languages that later, you'd start learning PHP and things like that, once the internet and the first versions of the web came around.

We had one client, which was Nokia. That was a small company at the time, but that started hyper growing. Together with a couple of my friends, we were kind of running the Nokia website, which then started getting a lot of hits, obviously, because people started buying their phones like crazy.

So that was probably how I ended up later then working at Nokia. And then, you know, I ran for a while, a venture inside of Nokia to create this internet phone.

Which at the time, I kind of disagreed about how it should look. For example, I wanted this touch screen and the Nokia people wanted a pen. And so I quit because I felt it wasn't going to turn out right and started the same idea but as a software only company, which was called Jaiku, which was an early competitor with Facebook and Twitter.

It was like a social media platform, but the thing that made it different was that it was an app you would say now on phones at the time, the only phones that could run software, like a third party software successfully were Nokia phones. So it was pre-iPhone.

We sold that to Google, which is how I ended up moving back to the States to work at Google. From that was 2007, I've sort of been, I bi-continental in the sense that I've always had a house here as well as a home in the Bay Area.

Sarah Chen-Spellings:

Yeah. And so you joined Google, and not long after you also felt disillusioned in Google.

Jyri Engeström:

Yeah. Yeah. I mean, I got to say it was not a great time to be at Google. I mean, I saw probably more of like Larry Page and Sergey Brin kite surfing than I did at the Google campus.

Because it was run by Eric Schmidt. I mean, I think Eric's fine, but it was just like a moment when I think the founders were a little bit checked out. Facebook.

Sarah Chen-Spellings:

What years was this?

Jyri Engeström:

This was 2007 to 2010 I think is when we left with Petteri. We basically left as soon as we were fully vested.

Sarah Chen-Spellings:

How many years was that to earn all your equity?

Jyri Engeström:

That was a little bit under three years, I think. That was a long time ago nowAnd then I started another company, Ditto, which I sold to Groupon.

Sarah Chen-Spellings:

Before going into that, it's hard for us to imagine, pre iPhone days, first of all.  your company was acquired by Google. What did you sense these tech companies in the Valley did wrong?

Jyri Engeström:

Oh, well, there was a reason why Google bought us on, we had a bunch of other acquisition offers from other companies as well. Cause we were one of the fast growing social media platforms alongside of Facebook and Twitter at the time, kind of going head to head with Twitter.

Our challenge was cause we were here physically here in Helsinki, just a few blocks over at an office. We didn't have the same kind of access to capital because at the time there weren't really any VCs here and most US VCs that I would go in and speak with in the Valley, didn't invest in Europe at the time.

Sarah Chen-Spellings:

Right.

Jyri Engeström:

And these companies back in 2006 didn't yet have a business model anyone could trust. I mean it later turned out they very much have a business model which is ads.

But you needed a lot of users and all the apps were free to use and so we would burn through all, every time we got a new user, we would essentially, our costs would go up.

At the time, a lot of people were still receiving SMS, for example, on their phones because they couldn't use our apps to communicate and send tweets or whatever.

Sarah Chen-Spellings:

Because this was pre App Store and the whole interface.

Jyri Engeström:

Exactly. So all of that would cost us money. And so we ran out of cash and, you know, we sold everything.

I remember Petteri sold his car. And then we had no more money. Oh my goodness. You know, we had to keep the servers running somehow. We were just getting lots and lots of new users every day. And we couldn't raise any financing. And so ultimately we were forced to sell the company because of that.

I teared up when we signed the documents cause I was very unhappy about it. I wanted to keep going as an independent company.

Google made one move, which I think turned it in favor of Google out of the other alternative acquirers we were speaking with, which was that they came over and they showed a prototype of Android, which was not yet launched at the time.

I had worked at Nokia, so I could appreciate the power of having a mobile platform that a lot of people used, because I had seen how Nokia grew very big. At the time, Facebook didn't yet have like a mobile app, and neither did Twitter, so they were websites. If you could build an app that was kind of like your main social media that was integrated into the phone itself, then you could probably beat Facebook.

And so we joined Google and sold the company with the explicit intent of building this kind of default communication app into Android. It turned out then later at Google that didn't work, because the mobile operators refused to, in that incarnation, that first incarnation required you to sign in with a Google account, a Gaia account, as it's called, inside of Google.

But the mobile operators still had a lot of power at that time, and they felt that Google had to rip out basically, it was called de-googlifying Android inside of Google, where we had to sort of rewrite the whole operating system so that you could use it without having a Google account. And that's when all of that stuff also got ripped out.

Sarah Chen-Spellings:

So it took Steve Jobs, really, to change things.

Jyri Engeström:

Yeah it was Jobs, really, was able to launch the iPhone with AT&T with a better deal than Google was with Android at the time.

Yeah I learned a lot from that, and I think that, you know, ultimately, That was what made Google lose its edge. And, you know, Google was never really able to compete against Facebook, or even Twitter, really, with its own social media property.

The way that Google has been successful, for example, in video. It had its own Google video service, but then it acquired YouTube. Which is obviously nowadays, in addition to TikTok, like, the largest, the place to watch video. And Google's done this for a lot of other things successfully as well, including things like Maps or Gmail.

But really, Google lost the competition against Facebook and Meta. I think Larry's original instinct was correct about this is all going to be on mobile. But, because they weren't able to build it into Android, they never really recovered from that and were never really able to come back.

Sarah Chen-Spellings:

And this happens a lot, right? Strategic acquisitions where startups are acquired by bigger companies. The end story is often what you experienced where, in the end, the integration didn't really work for some.

It is strategic, right? They're trying to kill out the smaller competition, but for some, it's just David and Goliath. What would you say is your advice to sort of the big tech companies and also to the founders that are looking to actually succeed even post acquisition?

Jyri Engeström:

You know, I sold my second company to Groupon a few years later, and so I had a very similar second run.

Sarah Chen-Spellings:

So this is Ditto.

Jyri Engeström:

Ditto, which was a early kind of recommendations app.

Sarah Chen-Spellings:

Sort of like a Foursquare.

Jyri Engeström:

Yeah, kind of like a Foursquare, yeah. Kind of like a cross between a Foursquare and a Yelp or something like that, I guess. I knew to kill the app immediately after the acquisition or at the time it was announced because I knew that you couldn't really continue developing this independent app anymore.

Whereas when we're bought by Google, we kept Jaiku alive, which I think was a mistake because I ended up spending a lot of my time with angry users explaining why we were no longer developing the app and we shut down new registrations. Like, why were we still keeping it alive? Actually, there wasn't really any point.

So I have advised a lot of founders who have sold their companies where I have been an investor ever since then to always, you know Just shut down your old company because, unless the acquire is really doubling down and putting a lot of effort and capital behind that brand, then you're probably better off just letting it go.

Sarah Chen-Spellings:

So what, you just think that for founders who have exited in a strategic acquisition, you just assume that it's death of your company? Is that what you're saying?

Jyri Engeström:

I think a lot of times, yeah, I think the founders are better off just letting go instead of trying to…

Sarah Chen-Spellings:

Hold on, hold on to it.

Jyri Engeström:

Yeah, of course there are exceptions, like I call them media acquisitions, which is when like with YouTube where Google explicitly wanted to build, continue building that brand.

Definitely for a bunch of the acquihires where you have a smaller team with a smaller app. It's better to just kill it right away.

Sarah Chen-Spellings:

Painful. How did you feel at that point in time?

Jyri Engeström:

Yeah, no, I cried when we sold the company because I lost my baby. But the second time around I was more prepared for that. And I knew how it works and it was a much better experience for me. I felt like Google just made a series of mistakes around social at the time that ultimately led me to quit.

I had kind of like the opposite experience with Groupon, which is actually ironic because a lot of people would congratulate me on like, wow, you've been acquired by Google, the greatest company at the time. People were very excited by Google. It seemed like Google wasn't over, you know, it was the most successful company ever.

And Groupon was a little different because Groupon at the time was growing very fast. I think it was actually the fastest growing company in history and was a billion dollar company. But then very quickly also kind of, you know, crashed after its IPO.

And so people were like, oh, Groupon, I'm so sorry. Whereas I was having a great time. I mean, I left with Dan, very shortly after Andrew got fired. I had a much better experience. And so I attribute that a lot to my own expectations and probably also a closer relationship with the founder.

Sarah Chen-Spellings:

Yeah. You've essentially become a repeat founder, serial entrepreneur.

For some first time founders that are building right now, what were the simple mistakes that you had to readjust your expectations and how you did it better the second third time and so on?

Jyri Engeström:

Well, I think there were a lot of things I did differently about negotiating how to sell the company and the terms of that deal and you know my life Inside of the acquired company, the larger company once. I switched over to work for them.

One thing was as a second time founder, it was much easier for me to raise capital. I think it took me like, I don't know, four days to raise my seed from great investors. I really had great, True Ventures with Jon Callaghan on my board. I was just a much better prepared founder with better backers and I kind of knew what to do, I hired a great CTO from Apple.

Ultimately though I think with Ditto it wasn't as strong of a product proposition as the first company was. And so I think it was also important to recognize that it was something that really should be sold and I think that was the right decision for that company.

Very few people use Foursquare now, Yelp's still around, but that whole local recommendations space actually didn't really exist. Most people still go to Google Maps when they want to find out local recommendations. That's true. It's a bigger platform play.

Sarah Chen-Spellings:

What would you say helped, I guess, shape your leadership style and how did you evolve as a leader in those three chapters?

Jyri Engeström:

Yeah, I don't know. I don't really consider myself a leader, to be honest. Look, I'm a VC. I like to play midfield and, you know, in soccer terms, make good passes. And I get excited when the founders score, so to speak. That's kind of where I like to be.

Groupon, I had a fair number of people reporting to me, or even at Google. I think that's the kind of leadership I like better is one where, you know, I think a lot about where might the world be going and what sorts of opportunities are overlooked right now?

Coming back to that early question about disruption and innovation, like, you know, the Clay Christensen's innovator's dilemma and these kinds of ideas. So that's kind of, you know, my domain. And so I get excited when I think I've discovered something that not a lot of other people have realized yet. And then can finance that or find a founder who wants to work on it.

We're here in helsinki now with Lifeline Ventures and we were just discussing with my partner Petteri, who was my co-founder in Jaiku, by the way, and now we're partners in this VC firm about this nuclear company that we started here called Steady Energy.

The great thing about VC is that if you're intellectually curious, then it's an infinite opportunity to learn about new things. And that's really what motivates me. I don't know if that's leadership, but it's how I operate.

Sarah Chen-Spellings:

So what, what did you do immediately after your third, after Groupon took over?

Jyri Engeström:

I joined True Ventures, which had backed my company Ditto, and they made some money off of that exit and then they were kind enough to invite me in.

And I thought, oh I've now been a startup founder, three times over. Maybe I should look at this investing part also by that time I was wealthy. I had made money, I mean, I wasn't a billionaire and you know, I recognized that billion dollar moves, really I need to correct that.

So hopefully next time you do this interview, I can authentically present myself as a billionaire, but I think also I had enough money to begin investing. I kind of joined true ventures. I insisted on being an EIR an entrepreneur in residence, cause I thought, oh, I'm just here for a while and then I'll go back and start another company.

But then I think what happened was some of the investments I made, like my investment in Ōura, the smart ring, or Unity, this kind of ad platform and app development platform and tool, as well as a few others, started doing really well.

I invested in a satellite company here called ICEYE and a few other companies that have grown pretty big and so while not all of my investments did well, I started realizing, oh, this is actually like a real job. It's not retirement.

And ultimately started my own, small funds together with my partner, Caterina Fake in San Francisco called Yes VC. And so now I'm sort of dual threat, I collaborate with my partners here at Lifeline Ventures in Helsinki. And then also Yes VC funds, I'm involved with in San Francisco as well.

Sarah Chen-Spellings:

So when you think about your transition from founder to investor, I think we're starting to see a lot more that of that, right? Sort of operators who understand what they're looking for.

What were some of the patterns that I guess helped you pick up the Ōura rings of your portfolio that continued to do well.

Jyri Engeström:

Well, I was a famous founder at the time, particularly in this area. And so, you just tend to attract more deal flow. And I think that's always a additional benefit to founders turned investors.

We're LPs in a bunch of our founders' funds. For example, Rahul Vohra of superhuman has his own funds together with his partner Todd, those funds are doing well. We like it, like all the top entrepreneurs basically are also investors. Elad Gil, Justin Kan, everyone who's successful also ends up investing and oftentimes they attract the best deals because they're already well known as successful founders.

And I think I even saw some research on this that the most successful VCs on average tend to be successful ex-founders and that turned out actually the next most successful category of VC were VCs that did not have a founder background at all.

So they came from finance or some other industry. And then the least successful VCs were the failed founders turned VCs. So, if you want to be a successful VC, I think it's best to start out by being a successful founder.

Sarah Chen-Spellings:

Yeah. And what would you say, I guess, was the adjustment? I mean, it's almost a slightly different skill set, right? Of trying to invest versus being a builder and actually execute upon it.

Jyri Engeström:

It's definitely different to play midfield, so to speak. The nice part about it is, though that, I mean, I do both. I'm a CEO of a company right now that I started. I did this company Primary Health, that started from COVID testing we organized in Bolinas.

One of the things I've realized is that when there's an opportunity, it oftentimes comes when something changes very rapidly and takes people by surprise. Just yesterday I was at an event, with some students and we were talking about this exceptional rise of NVIDIA, which has now right now as we're recording this, probably the most successful public markets investment you could have made a few years back. And you know, some people were saying oh gosh I wish I had invested in NVIDIA, just two or three years ago. Because now like, look how much more money we would have.

But then if you think project forward, which is what I think, you know, you learn to do always as a VC, you recognize that the world is very uncertain. So, I mean, all you have to do is, I literally Googled like where are Nvidia chips made and they're made in Taiwan, obviously.

At the time they were around, you know, like China organizing military exercise around Taiwan. So at the same time, Taiwan's obviously under threat. And nobody wants any sort of conflict to emerge between China and the US, and definitely not around Taiwan, but there's a risk of that. Just on the off chance that were to actually happen, what would happen to NVIDIA's share price?

Or what would happen to that, the steady supply of GPUs that are all being made in Taiwan right now? I don't know, but maybe that would be disrupted. So that could create a new opportunity for someone else to build GPUs somewhere else. Right. And so while you can look at things we're hearing Europe where there's a war going on in the Ukraine right now, and it's the same thing, or you look at what's happening in Israel and Gaza, those are horrible conflicts.

But at the same time, whenever there's a crisis, like I learned with COVID, with Primary Health, if you can address that in a good way, like, you know, we started doing testing of for COVID really quickly and then vaccines. There was big demand for that and so that company's revenue grew very quickly into tens of millions of dollars.

Sarah Chen-Spellings:

And this was during the George Floyd time as well where people were…

Jyri Engeström:

That's right. Yeah, so there was a lot of The Black Lives Matter was going on. There were a lot of demonstrations on the street. A lot of mayors actually were calling me and saying, hey, can you come and do this in Minneapolis, which is where we went after Bolina, San Francisco and so anyway, so it was like a time of turmoil.

So oftentimes you can look at that as sort of like, oh, no, it's a really bad time to start a company. But I look at it the other way around, this is actually the best time. Because now you can do something about this. You can fix this social injustice perhaps or there's some kind of a problem in the world that needs fixing.

And if you look at that and address that, oftentimes you can figure out a business model that helps you do good, but also generate good returns from that.

Sarah Chen-Spellings:

And with Yes VC, I mean, I've heard you say, and hopefully you don't mind me saying this. You're going to turn 47 and you were thinking a little bit about legacy and investing together with Caterina.

But you were sort of taking the super early stage approach of even pre-idea with backing the founders. Tell us a little bit about the thinking here. I've had family offices on who decided to invest in a different way.

But you chose a fund structure with Yes VC, tell us a little bit about the thinking here. What was the family discussion like on legacy planning?

Jyri Engeström:

I don't know. I mean, we've never discussed that. I think we still have a long way to go.

What would I say to that? If you wanna leave a legacy behind, you probably want to start off by helping others in some way.

And I think that's the best part about the Internet is that it's, I look at it as this, the greatest invention people have made, that helps people help other people. And so, if you start from that, then I find that there are infinite opportunities for new apps, new businesses that just think about it, like from that perspective.

And I call this oftentimes like the social objects like you want, like a video is a social object that you can bring people together around or a photograph early on. Like we're talking about Caterina Fake, obviously one of the two founders of Flickr with Stuart Butterfield. Caterina kind of created Flickr as this place where people could come together around photos. And so, you know, whichever it is that there's kind of like this evolution of these social objects online, which is now very much going towards AI generated stuff.

That's what I get excited by. And one of the things that we're doing a lot right now is investing in AI. For example, from that perspective, looking at AI agents, things that make it possible for you to actually focus on things that really matter instead of spending a lot of busy work on things that might take a lot of your effort, but actually maybe aren't that important.

I'll give you an example, we're investors in Superhuman, which is this email client really is working hard to build AI into email. And as a VC, I got a lot of pitches, a lot of entrepreneurs are emailing me and saying, hey, would you look at our pitch deck?

A lot of the time, like the name of our firm is Yes VC. And people are always like, what a dumb name. But for me, it's a reminder that every time. VC's say no a lot, obviously. What you actually want to do is, you want to say something to that founder you're not investing in that genuinely will help them in a direction that makes that company more investable.

Or if the idea is really just not good, helps them understand that and then maybe they can come up with something else to do. So you're actually trying to say yes every time which is really hard, it turns out that so we have this whole categorization of different rejections like from like, how do you reject someone?

And try to accomplish this. And I learned this actually when I was at True Ventures where we would, you know, True has a lot of founders and big funds now. And we were looking at our stats and saying, well, what we want to do is have all these founders that we've backed help us source new deals because they, we know the founders oftentimes see the best new deals earlier before the VCs.

And we would like them to share those deals with us. But then at one point I'm realizing like, this is just the founders we backed, but we see like 10 times that many founders that we reject. And so what we want to do is actually get the people we reject to also share their deals with us because maybe they thought that rejection was so helpful.

And so that was part of the reason why at Yes VC, every time we reject someone, we try to do that in a way that that person feels like, wow, that was such a great, like, thank you for this insight on. This is really moving me along. Of course, you can't do that always, but you can at least try.

And so superhuman is very useful in that because their AI helps me respond to emails faster, and I've trained it in this way so that it can help me identify points in the emails that I can pick up on. And then, as I formulate, if I'm rejecting a founder, it just makes it a lot faster for me to say helpful things.

Sarah Chen-Spellings:

So how do you turn a no to a yes? I mean, what have you seen as patterns for those that you said yes to and actually succeeded? I mean, you're investing super early, right? Even before there’s real traction.

Jyri Engeström:

Yeah, yeah, I mean, we like to invest pre-company, sometimes we invest pre-founder. we'll put together a company and then I'll be the CEO until I find a founder for it, if I think that company's worth building as a business.

I just think that what is happening in VC right now is that there's too many VCs. I recently heard a stat, and I don't know if this is true, that the last class, graduating class of Harvard, 7% were going into VC, which is way too many VCs.

I heard another stats that it's like, I think it was like 36,000 VCs in the US. or something like that, which is just way too many. Even here in Finland, there's like 20 different seed funds and my partner Timo here at Lifeline Ventures calculated that Finland's unicorn birth rate, like the rate at which this country generates a new unicorn startup is about two unicorns per year.

And if you have like 20 to 30 seed funds all competing for just those two home runs each year, that means that only a couple of those, the top funds are going to survive. And so this is just the brutal fact of VC is that right now we have this oversupply of VCs relative to the number of great companies out there.

And while you can say, well, this is just, you know, it's just natural. When you're a VC, then you have to think like, okay, well, how am I going to survive or win? And one thing that's obviously, oh, go be at Sequoia or Andreessen or Benchmark or one of the top VCs that are most likely to survive because they are the biggest brands and therefore probably get the best deals.

Or, you can say, for example, oh, let's just invest a little bit later. Let's switch our stage to a stage where there's less competition because there's actually fewer later stage funds. Maybe your returns are slightly different, maybe you're not getting as high of a multiplier, but you might find some edge there.

That strategy that I've chosen is like, oh, can we increase the supply of unicorns, and actually create companies that otherwise would never get created that are great. And you can see people do this with Venture Studios. You can see, I don't know, like Jack Abram, who we backed with Milo, his first company Atomic generated several unicorn companies as a venture studio. There are a few of these.

So this sort of approach where you're saying, okay, maybe VCs, if they're entrepreneurs and founders and know something about entrepreneuring can also apply their kind of cross vision across the market and see opportunities that maybe not every founder sees and then just put together companies.

Sarah Chen-Spellings:

And how do you choose the idea? I mean, I've heard you talk about like sort of social movements. I know that's part of that. But how do you decide like, okay, this is where the next unicorn is going to be. And we want to be building it.

Jyri Engeström:

Yeah. Yeah. I mean, look, I just gave you an example with the China Taiwan thing. I will look a lot at these sorts of things and play out scenarios in my mind as to like, oh, what happens, you know, if this thing comes true?

I'm very interested in like RNA technology. I talk a lot with science fiction writers about climate change or how we might be able to start synthesizing proteins in embedded chips in our arm that will help us fight disease and also enhance our performance.

I'm very interested in that. I would write these, you know, kind of little PowerPoint decks on, I don't know, like space colonization or mitigating climate change by spraying particles into the stratosphere, to increase the reflectivity of the atmosphere, and things like that.

So I will become very interested in these topics and then dig on them. Nuclear energy, you know, I've dug on it for many years until we first made our first investment. Steady Energy, which was really a company that I was very actively putting together. I don't think that company necessarily would have come together.

Caterina invented the name, it's run by Tommy Neumann, great CEO here; staffed by nuclear energy experts. But sometimes you just have to put that little impetus in place and say, we'll fund this. Here's the capital because we know this is going to work.

Sometimes it's hard for founders who are technical to see the business side of it. And even though they might be great at creating the technology, like in that case, I'm not sure if Tommy would have made the leap from running the nuclear energy division for the sovereign research institute here in the national labs, to becoming a startup founder, without that little bit of extra support from somebody that really believed in the idea.

Sarah Chen-Spellings:

This is so fascinating. Are your days just spent thinking about different scenarios? Like, how do you pick a topic? I mean, from nuclear energy to climate change to space colonization.

I mean, that's pretty, it's not, not a certain vertical.

Jyri Engeström:

Yeah. Yeah, that's right. I'm really into solar cells or… I talk a lot with the scientists that are trying to spot aliens. I get into all kinds of weird shit. Because the weird stuff is where the biggest opportunities are often.

I wanna fund solar cells and ventures, cameras that look up and help us, there's this whole crazy discussion around like these UFOs that supposedly, you know, American pilots are seeing. And I'm very curious about tracking those and seeing if they're real.

So I don't know. I just find all that stuff curious. It's like, you know, sort of like being a kid again. And that's the way that I find the best entrepreneurs.

Sarah Chen-Spellings:

And how do you keep this curiosity so alive and vibrant? We've had so many entrepreneurs, that frankly, after a while, they get so burnt out. And they're no longer, you know, able to recreate the greatness, frankly, right?

David Rubenstein came and spoke at our Harvard class one day. And one thing he said was, you know, a lot of young global leaders come through the doors here, but it's actually really tough to sustain performance and actually really have that global significance.

And it seems that you've sort of figured out how to keep this curiosity and energy in building and creating. How do you do that?

Jyri Engeström:

I do think I have kept that and I'm not going to lie and claim that, you know, I don't have bad days. But I've just decided early on that that's what I will focus on.

And so I think that as kind of like to say, you sort of have to craft your life around this. When our kids were small, we were homeschooling and then, we ended up investing in our school, which became a unicorn. We had a coffee shop and ended up investing in, like Blue Bottle coffee, which became a great exit.

So sometimes when you just get curious about stuff and then you're curious enough, you tend to find the very, very best people in that field. And it's very easy to contact them because if you're interested in them, they tend to like that and they respond whether it's a direct message on Twitter or. When my daughter had cancer, I would travel to the cancer conferences and I wanted to find all the best people around cancer and we ended up investing in this 27-year-old woman, Sigal Kadoka, and she formed a lab.

And then, you know, out of that lab came a company called Foghorn Therapeutics that's IPO-ed now. It's a publicly listed company that came up with a solution, a cure to that type of cancer. So, you know, sometimes all you have to do is just know what you want and then go after it. And I think that mostly people just don't know what they want.

Sarah Chen-Spellings:

Yeah, that's true. I think that's true. And when you think about the founders that you've backed that have, so many that you've now helped mint into unicorns and IPOs, what's your running number now? Do you keep track?

Jyri Engeström:

I think it's over 12. Sometimes the unicorns become… paper valuation sometimes.

But no, I genuinely, I think there's over a dozen. I go back and I'm like crap, I wish I had invested in Spotify or I remember an embarrassing email where I think the founders of Pinterest who worked at Google alongside me were starting that company and then I email to my wife at the time saying like Pinterest, what a dumb name and like, ah, really should have taken that meeting.

So oftentimes I end up kicking myself for just not saying yes. And that's, I guess, my lesson that I've learned is that's why the firm is called Yes, is that really when there's someone who is smart, say yes to them, just figure out some way to. And I'd say this to younger people now, it's like, even if you're not liquid enough to fund them, you can oftentimes work for them or you can advise them.

You can just get on the cap table in some way. Sometimes they don't even know what company to start, but you can see this person's smart and then you can tell them, oh, here are some ideas, you can help them come up with an idea, which is often the best way. Because then that person really trusts you and they're much more open to having you take a piece of that company and ultimately that's it's a really long term play because obviously it takes a long while.

I mean, we were just talking about Ōura the smart ring company that was, you know, we invested in it. Exactly 10 years ago almost to the day now. And you know, we still haven't exited. But that small investment is not worth many millions of dollars.

Sarah Chen-Spellings:

Yeah, well, venture is a long term play.

Jyri Engeström:

Yeah, and a lot of people still like, you know, I remember when like the Samwerbrothers who I know were investing in Facebook, I think it was valued at $11 billion. I'm like, oh, like I can't believe they're doing this like, you know it's like $11 billion, like, how could it possibly go up?

I mean, obviously it's going to go down because it's peaked. And looking back, like, investing in Facebook or Meta at $11 billion, That was a bargain. So yeah, sometimes, when a company gets great traction, and I hope this happens to a few of our companies in the near future, I think Ōura is one of those companies now.

Even when it's already valued at single digit billions, it can still be 10x or 100x. So I'm also learning to recognize that some things can, when they get to scale, they can get really big.

Sarah Chen-Spellings:

Right. So you've used this word a lot. He or she is a smart founder. And if they're smart enough, they will solve it and they will do big things and you want to back them.

What is your criterion here? How do you drown out the noise and focus on, okay, this person has got it together, has the potential. What's your pattern recognition these days?

Jyri Engeström:

Yeah, I think that's really tough. I mean, Petteri and I were just discussing it, before we were starting this interview about a particular founder and how sometimes people are quirky and it's not easy to tell.

I think almost every founder who succeeds fails first. Like they have a bunch of failures. Like if you look at my company, it's like, yeah, like it took a few tries before I had a success. And so, I also think that you have to somehow, I guess what I do is like, I just have to believe in that founder product fit that we were talking about.

It's like a lot of people talk about product market fit, but I think a lot about the founder product fit. And if there's that fit, then that person tends to talk about that topic, the product in a way that you are learning from them. I hate it when I have to start educating someone.

I'm like, ooh, this is not good because I should know less about this topic than they do and so. That's one one sign I would say. And then really just being like respecting demand I think is really important, like even for something like nuclear energy the fact that I could go and talk to the energy companies and be like they really need this.

It gave me that extra level of confidence to say, yes, we should do this, even though nuclear is going to be really hard and take a long time. The world has changed, you know, we had Russian gas get cut off in Europe, like it required this moment. And I think oftentimes, and this is what Idealab famously learned back in the day when they did this study of all of their various incubated companies.

They were saying like, okay, what's the thing that matters most? Is it the team? Is it the financing? is it the product? Like what thing matters most for a successful startups? And their answer was actually it's timing. And same thing with like nuclear energy. I believe I'm going to be correct at this. I think I invested at the right time because all these things just changed in Europe.

Everyone hated nuclear energy here until climate change plus the war. This energy crisis kind of all hit simultaneously and then overnight regulation changed, the public's opinion about nuclear energy completely transformed from very negative to very positive. And so now there's an opportunity to move quickly and build something.

I think that's the main problem people have is that they're not ready. I saw this with COVID too, like within three weeks of the first COVID cases being reported in the US, we were putting together like mass testing for COVID and very soon after that, vaccinating. Most people were not moving that quickly.

Definitely not the big companies, the big health care providers that were the slowest. That's the key is like you recognize an opportunity and then you move fast. It requires that you kind of aren't too busy. Like, you know, I say this a lot about my friend Petteri, who is the most successful investor here in Finland, in the region, with so many unicorns.

Like, much more successful than I am with, like, Supercell and Wolt and Inven and we're in Ōura together. All of my best investments I've made with him. And I wish I had made some that he did without me. You look at him, he was just now here, and he was like working out at his private gym over there, and he kind of seems like he's got nothing to do. Like, he was just yapping and chatting while you, before you guys came for, like, 45 minutes. Like, this guy really isn't very busy. And yet he's super successful.

Why is that? It's kind of like if you ever go watch a soccer game with Lionel Messi, the famous soccer player. Sometimes you watch the game and I find myself, my friend Rosmeg works with Messi and you know, they have a fund together now. So I've gotten to see a lot of games where Lionel plays and I find myself just turning to my friend and like taking a gulp from my Coke or something and being like, oh, well he's just walking around. Like he's so full of himself. You know, he's like not even running.

Sarah Chen-Spellings:

Oh, but he's watching the terrain.

Jyri Engeström:

Exactly. When I turn my head, everybody cheers. He goes, oh, Messi just scored. And I missed it. He picked the opportunity and that's when he moves. And he's so fast. And I think Petteri is the same way in investing.

Sarah Chen-Spellings:

So it's almost like Warren Buffett, right? Like he has one meeting a day, something like that as he said.

Jyri Engeström:

Yeah, you gotta somehow stop pretending to be busy and if you're just very honest about things to yourself, then I think you recognize that a lot of the things you do, you probably actually shouldn't be doing. You could just let it be, like you can let a lot of things rot actually because they're not critical.

And so then that actually gives you the opportunity to then move fast when something actually critical comes up and because you're not busy, you're looking like you're not, you haven't turned your head away when the opportunity knocks. And I think that most people find that impossible.

Sarah Chen-Spellings:

I want to come back to Petteri and how he's the most successful investor in Finland and the market landscape here in Finland. Come back to that. But I digress very quickly.

You have two kids that are at the age of the TikTok generation, right? Talking about not being busy. We're so distracted by our phones and all these things. How do you raise your children to be curious, to not be just caught up in the busy-ness that has almost become like a badge of honor today?

Jyri Engeström:

I don't know. I mean, don't take child rearing advice from me, but early on we were homeschooling. I took a few years when I was mostly just a full time dad and principal of the school, obviously we had staff, teachers, specialists we worked with.

And our kids did not have phones until they were much older and they're definitely hooked on their phones like everyone else now. But at least I feel like they got a period during which they got to be without screens. We still don't have screens in our house, which sometimes people find weird.

I think you have to lead by example and I think that's the difficult thing. I remember in our homeschool when I asked the kids to write the rules for the school because they were annoying me, because they were being so rowdy, and I'm like, we must have some rules.

And then, I can't remember what rule number one was, but I remember rule number two, because it was no phones.

Sarah Chen-Spellings:

Okay.

Jyri Engeström:

And I'm like, you guys don't have phones. You're like six years old. Like, why no phones? And like, obviously we don't have phones, but you have a phone. This rule is for you, and I'm like, shit. It's actually kind of true.

You gotta sometimes look in the mirror, and just like coming back to your question about leadership, which is why I don't think, I really lead is because that's that's a risky business to lead. I think what you want to do is you want to show people that, hey, look at this thing I found, that's interesting. And then let them make a decision about whether you're actually correct about it being cool or not, rather than leading an army somewhere, because I fear that a lot of the time, the armies, you will take places where they don't want to go, and they end up getting destroyed.

So I don't know. I don't want to get too depressed here. But I think that there's something to coming back to this question about kids. It's like where if you operate in a way that allows you to consistently somehow bounce back after setbacks. Like this happens in investing all the time, like it's the power law, right?

Most of the investments we make tank, like they're bad. But then every once in a while there is one good one. And I think it took me like 40 angel investments before I had one winner. That's a lot of misses but then that one winner basically covered all my losses and, and then, then some.

That's the great thing about investing is that you just have to begin to be at one with failure in this sense, where you start realizing that failure is just the cost of doing business. It's not really failure at all. It's what is taking you forward to your next investment and your next investment.

And I think this, it's true what Caterina often says about founders, particularly Finnish founders, by the way, is that they care too much. And I have kids that have grown up in both environments in Silicon Valley and in Europe and I can tell you that as a rule the american kids will tend to… It's like my friend Cody Steele who sometimes I would go surf with only a few times. But when I was very small and I remember that he would just take every wave while I would wait for the perfect wave.

And he became like a pro surfer like a really great surfer very quickly whereas I never did and it was just that he was taking more rides. And it's the same thing is that you just practice, practice, practice. You start another thing and another thing and another thing. I talk about parallel entrepreneurship, where I think it's great when founders start multiple companies simultaneously, which is still very much a no no, especially in Europe, you're supposed to put all your eggs in one basket.

I'm a General Partner in two venture funds in Yes VC and Lifeline Ventures, you know, just today, someone's like, how can you do that? Like, is that even allowed? But all of the very successful, the most successful, I would say some of the smartest people I know, look at, I don't know, Reid Hoffman or Jack Dorsey or Elon Musk, Twitter and Square.

You know, like they have several companies always simultaneously, they're constantly starting new ones. They have venture funds, sometimes multiple venture funds. and they have a large set of other activities, sometimes they do nonprofits. Sometimes they do politics.

Because what happens is you, when you grow this reach, this web of various things, conversations and networks and people that you're exposed to, this is basic sociology is that you become the soda straw link. The connector who understands these both information flows and can translate between them, which is very powerful.

And that's how ultimately all entrepreneurs work is that you tend to see something that's in the market. But that the customer can't solve, and then you see the technology over here, and you just bring that technology to that person who needs it.

Sarah Chen-Spellings:

And connecting those dots. So coming back to Finnish founders that care too much, of course, this was a child-led decision, so your kids really pushed you back to come back to Finland and Helsinki.

Tell us a little bit about the exit landscape, the liquidity, the market for how you've seen the ecosystem shift from when you were building here, and now you're investing here.

Jyri Engeström:

Sure. And I still build here. I mean, I just started a company that's located here. So I think that generally things are looking up. Obviously, we've had a little bit of a slump after the 2022 now it's 2024 as we're talking.

The good companies are generally always have liquidity. It's just that sometimes you have to wait. There's a very active secondary market that I think has actually had a lot of opportunities for buyers, there's a lot of people looking for liquidity in these companies, some of which are very strong. So it's been a good time to buy secondary. So I think that's starting to change now where we're again starting to see valuations come back up.

And so yeah, it's like Warren Buffett, right? It's like when things are down that's when you buy and then you wait and then when things start to are back up again. That's typically a good time to sell. And I think right now we're at that point in the big wheel turning where we're slowly coming up from a time when it's been really about an opportunity to buy and it's beginning to turn into one where, maybe in a year or two, we're going to start seeing some of our companies that are ready to IPO, for example, that have been holding back, are definitely starting to prepare to go back out again.

Sarah Chen-Spellings:

Yeah. And how is the deal flow? I mean, these days, how has Helsinki helped? You know, has it become a hub for you in looking at European deals? And what are we looking at these days?

Jyri Engeström:

Yeah, well, over here, we have two unicorns a year, roughly. It's important for us to be in all of them. Lifeline, that's what this firm is built to do, and that's their sole purpose. And I have been executing very well on that. That's my job here is to double that, right?

I want to see instead of two a year, at least four or five. I'm very focused on increasing the supply by helping make sure that we get better entrepreneurs. I talked to a lot of kids. I think it's important to start when you're in school, not wait until you're in university like myself.

I told the story of how I was already working in my first company by the time I was 15, 16. Those kids are perfectly capable of doing that at that age. The kids right now, definitely have a lot more resources than I did back in the day. So yeah, start early.

Oftentimes still, I think it doesn't actually require that many people. It just requires one person, like one Jack Abraham or Jack Dorsey or Elon Musk to point out things. Oh, maybe Hyperloop or, you know, sometimes you don't even need to be involved in all the companies. You can just recommend to people that they should try something out.

And that's what I try to do is I just want to increase the supply of unicorns.

Sarah Chen-Spellings:

But what sort of verticals are we seeing finished companies built in? Is there a particular sort of thematic emergence?

Jyri Engeström:

Yeah, well, you tend to get clusters of talent. This is just the way the world works, is that people close by when something becomes successful, then they model themselves after that. And for Finland, for sure, it's been games ever since the nineties. I also was involved in that a little bit, and that's where I first learned my skills and, you know, computers was around games and Supercell, Angry Birds, a bunch of the games that have come out of here have obviously created this kind of ecosystem.

There are others now emerging as well. I’m very curious about things like MRNA technology, energy, nuclear, salt ion batteries, I've been into a lot of carbon capture, I look at emerging technologies.

There's a lot happening in materials right now. The nice thing, I think is that it's not all software anymore because of AI, it's also becoming easier to build physical things. And so integrating AI into processes that involve not just things like protein discovery, but also synthesizing new materials and building things. Including buildings, by the way, is where I think I'm going to be spending a lot of my time in the next life cycle of these funds.

Sarah Chen-Spellings:

And so the next life cycle with Lifeline, with Yes VC, and of course, you're CEO of a company now as well. What is Jyri's trajectory for the next five years looking ahead?

Jyri Engeström:

Like I said, I want to make sure that we double the unicorn birth rate here. And then also, yeah, that YesVC keeps investing successfully in Silicon Valley. If I can just manage to pull that off, I think I'll be very happy.

Sarah Chen-Spellings:

So what would that take? I mean, what is your message to investors? We have a North American audience, pretty much global audience. What is the message for, what is the banner? If we're thinking Helsinki and you're the poster child of it, what is your message to them on why this is an investment opportunity?

Jyri Engeström:

Oh, well, over here, it's pretty easy because there's so much, it's much less noise. You tend to have a higher average quality of an opportunity and there are certain things that this kind of geography works well for. Here, what you want to do is invest in hardware companies, which sometimes doesn't make sense for VCs.

But if you think about it, all of the really great hits that I have had, maybe with the exception of Unity, which was great, but like Oura is a hardware company, ICEYE is a hardware company.

We have things like Mario, Dysbelics, Steady Energy, and a bunch of others. The reason I think is because it's generally cheaper to hire excellent engineers here, and then there's less competition for talent, so it's easier to become the dominant company in your space here. And then keep that talent because they're less likely to go work at an Apple or an Amazon or get some kind of a crazy offer from Meta to go work on VR glasses there or whatever.

And I've seen this over and over again, where there tends to be a well funded Silicon Valley competitor, whether it's a satellite company or like a VR glasses company or maybe an automotive or material science company. But they end up at some point losing out to the Finnish competitor because they just managed to build the technology here for a longer time with less cost.

Sarah Chen-Spellings:

We've covered a lot of ground, and you've clearly made billion dollar moves, as established with your 12 unicorns and counting and all the areas that you're building.

We've now arrived at billion dollar questions, which is rapid fire. First thing that comes to mind, are you ready for this, Jyri? Alright.

A moment you felt like you failed.

Jyri Engeström:

When I sold my first company to Google.

Sarah Chen-Spellings:

What is something people don't know about you that they'd have to see it to believe it?

Jyri Engeström:

Well, I don't know if you can see this, but my last name is Swedish. And before my grandfather died, he told me this story, which I don't know if it's true, that my family had to run away from Sweden after trying to kill the king.

Sarah Chen-Spellings:

Oh! Oh! Fun fact! Fill in the blank. Success is?

Jyri Engeström:

It's to laugh often and much and to win the respect of intelligent people and the admiration and love of children.

That's at least how I think of it.

Sarah Chen-Spellings:

Failure is?

Jyri Engeström:

To fall down and knock it up again.

Sarah Chen-Spellings:

Not investment advice, but your favorite investing hack or tip.

Jyri Engeström:

My favorite investment hack or tip. I have so many.

Sarah Chen-Spellings:

First thing that comes to mind is the best.

Jyri Engeström:

Okay, pick the app that you most recently started using daily on your iPhone or Android and then invest in that company.

Sarah Chen-Spellings:

I've heard that one. It's like, look at your credit card bills and what you're spending the most on, invest in that.

Speaking of apps, what's your most used app?

Jyri Engeström:

Superhuman.

Sarah Chen-Spellings:

Superhuman. And you've invested that. First job you got paid for?

Jyri Engeström:

Our own company to that point.

Sarah Chen-Spellings:

And of course, I have to ask this because this is the work that I do with making sure that there's more venture capital going into the hands of women that unicorns and women that companies, but we're not seeing enough of it.

In fact, we had Johanna Småros on yesterday and she's only one in, I believe, in 19 in Europe and we have 166 unicorns in Europe. So what needs to change for there to be more women leading these innovations?

Jyri Engeström:

More women investors, I think.

Sarah Chen-Spellings:

And how does that happen?

Jyri Engeström:

You just make them General Partners, which is what I've done at our firm.

Sarah Chen-Spellings:

That makes sense. And last words for our Finnish builders tuning in on how to be successful on the global stage as you have.

Jyri Engeström:

Spend time in Silicon Valley.

Sarah Chen-Spellings:

And finally, where can we find more about you? You have your own podcast as well. Tell us about it.

Jyri Engeström:

Oh, it's in Finnish. It's called Startup-Ministeriön, but you can find me on X at @jyri, J-Y-R-I.

Sarah Chen-Spellings:

Great. Jyri, thank you so much for your time and keep making billion dollar moves.

Jyri Engeström:

Thank you.

Sarah Chen-Spellings:

All right, we gotta high five for this. You got grilled for an hour.