Why the Nordics are so important to Kinnevik

Since Kinnevik was founded almost 90 years ago in Stockholm, the scale at which we operate has vastly expanded, and we now have investments servicing six continents across the globe. However, it’s no coincidence that we have continued to stay close to the Nordics over this lifespan. Not only is the region our home, it has also birthed a thriving technology ecosystem that delivers world-class talent, outstanding businesses, and investment opportunities with exceptional returns. Recent years have brought immense success to some of our portfolio companies based in the region: most recently, Pleo has announced yet another significant funding round with support from the likes of Bain Capital and Thrive Capital; Oda has attracted support from Softbank and Prosus; and Budbee has cemented its status as the leading e-commerce B2C last-mile delivery player, capitalising on the opportunities afforded by increased online orders through the pandemic.

If you don’t live in the Nordics, it might be hard to understand how a small region can produce global giants such as Volvo, Spotify, Ericsson, Evolution and Klarna; or why Stockholm has more technology Unicorns per capita than anywhere in the world other than Silicon Valley. But when you understand how the region works, it all starts to make a little more sense.

Firstly, strong government policies support the digital ecosystem; Sweden and other Nordic countries have world-class education systems giving fair and equal access to higher education for all, and the government strategically invested in internet infrastructure ahead of the curve, meaning adoption of internet services has been strong and we’ve built an intelligent, outward looking, and digitally-savvy workforce.

Secondly, businesses that have been successful in the region have shown the next generation of entrepreneurs what is possible and have supported and motivated them: fostering and developing talent, pouring investment back into the region and providing inspirational examples of success that make setting-up a business less of a ‘pipe-dream’, and more of a tangible reality for budding entrepreneurs. Kinnevik’s investment in Tele2 is another prime example of this. Our early support for the ground-breaking company played a crucial role in rolling-out a strong digital broadband infrastructure across the region, allowing high growth businesses to expand, and creating a young workforce of digital adopters.

Thirdly, the small size of home markets within the Nordics encourages a competitive mindset focused on relentless international growth early-on in a company’s life cycle, with a single-minded focus on the global consumer. This means these businesses scale and expand early, creating loyal user-bases and giving them a significant foothold and competitive advantage in home markets when multinationals look to enter. A number of our investments are great examples of this model, including online grocery businesses Oda and Budbee, which have used early stage investments from Kinnevik to scale at pace and expand into new markets including the Netherlands and Germany.

And finally, the Nordics have been early to embrace the values of equality and sustainability when compared to other regions. There are policies determined at a national level to ensure equal treatment for all in the workplace, and as such we tend to gravitate towards more flat, informal hierarchies where all employees have a voice. All this creates fertile ground for new ideas to thrive.

I’ve been fortunate enough to benefit from these factors throughout my career, and can vouch for their effectiveness. The sheer breadth and depth of talent I encountered when founding Sinch, bought by CLX Communications and now listed on the Nasdaq, as Chairman of Trustly and CEO of Rebtel ahs been inspiring, and these Nordics-based digital businesses have experienced great success due to some of the factors listed above. Now, in my current role leading Kinnevik’s investments in the Nordics region, I’m fortunate enough to meet inspirational innovators at game-changing businesses each and every day, proving why the Nordics is such a hot-house of talent.

These factors, alongside Kinnevik’s unique areas of specialism, have helped contribute to our success in the region. Our expertise in understanding complex and fast-changing consumer trends has enabled us to back the most promising business models. This, coupled with our strong pan-regional brand, extensive network and deep experience in the Nordics means we get to work with the best companies that are truly transforming industries. This has helped us to build a family of category leaders in the region, and will continue to do so over the many years to come.

Since we announced our strategic pivot to focus more intently on digital businesses earlier this year, our Nordics cohort has enjoyed international success: Pleo, Karma, Superb, Vivino, Joint Academy, Simple Feast, Mathem, Budbee and Oda are the prime examples of how fruitful this change in strategy has been. They are a key cornerstone of our overall investment strategy, and are already a source of exciting returns for our shareholders.

As an illustration of performance, our 2018 cohort of companies — which include Pleo, Budbee, Karma and Oda — have class-leading internal rates of return (the annualized percent return a portfolio company has earned). Although at Kinnevik we focus on the long-term and are looking for multi-generational success that is sustainable into the future, the short-term successes from this cohort highlights Kinnevik’s strategy in the Nordics is working, and success is being replicated across industries.

So, we know what the Nordics can do for us as a business, but now it’s time to ask: what can Kinnevik do for founders in the Nordics, and beyond? Our permanent long-term capital means that we’re best placed to support fast-growing companies over many years and throughout the entirety of their lifecycle, providing hands-on support, partaking in follow-on financing as required, and being a stable partner as companies think about exits. For example, we’ve held our investment in Tele2 since 1993, supporting the business through its IPO and merger with Com Hem (now Sweden’s second largest converged operator) and we continue to be a long-standing trusted partner; we invested in Livongo early on in their journey and supported them continually throughout their growth, before assisting with their IPO and then merger with Teladoc; and we are right now supporting Babylon Health through their pending public merger.

We’re delighted to be able to offer Kinnevik’s shareholders access to promising young companies in the Nordics and beyond, including retail investors who might not otherwise be able to support their journey’s at this earlier stage. This progress among our private portfolio is fuelling growth, and it’s clear that our Nordic businesses play a very important role in this. We’re proud to be a Swedish company, with deep roots in the region, and to be supporting the next generation of winners. Kinnevik will continue to support the best digital businesses across the region over the long-term — from venture to IPO — and drive our values of sustainability, striving to make consumers’ lives better. The world is our oyster, but our own back garden is pretty spectacular too.