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Nordic Secondary Fund is the only fund in the Nordic region, and among the largest in Europe, to invest in “second-hand” shares between investment rounds – so-called secondaries. This provides liquidity for early investors, founders and employees alike – and has proven to be a lucrative business for the fund.

Sponsored: The article is published in collaboration with Nordic Secondary Fund.

When a fast-growing startup announces a new investment round, it’s usually earmarked for growth. The founders give up a percentage of their ownership and the money goes into the company where it is spent on new employees, more marketing and international expansion.

When Nordic Secondary Fund (N2F) invests, it’s different. The new fund buys shares from founders, employees or early investors who want to sell out before the whole company is sold. So it is the previous owner who gets money in his pocket when N2F invests, not the company.

“If there’s a CTO who quits, a CEO who wants some money off the table, or an early investor who wants out of their investment, we can come in. We only buy ‘used’ equity,” explains Peter Sandberg, who is Co-Founding Partner of N2F along with Frank Lyhne Hansen.

The fund seems to have found a gap in the market that both the fund’s investors and the rest of the ecosystem have been missing: since 2018, N2F has raised two funds totalling €140M from 375 private investors, invested in 30 companies and already sold four of them back at a profit.

Gives the founder room for manoeuvre

Startup growth is supposed to be explosive, but still, the journey from idea to selling a successful company can easily take 10 years. On successful growth journeys, the ownership stakes held by co-founders and early investors become worth millions on paper. Paper money that’s hard to pay the rent or buy a new car with.

If they want to turn some of that value into cold hard cash before the 10 years are up, N2F comes into play. The fund typically invests around €3-5M for a small stake in mature scaleups that have raised a Series A round of at least €5M. Wee-established scaleups that still have growth potential. The portfolio includes GoMore, Goodiebox, Varjo, Kilo Health, Acimo and Klarna – of which the last two have been sold again at a profit for N2F.

“You want hard-working founders, but they don’t get any less hard-working by having room to manoeuvre.

“You want hard-working founders, but they don’t get any less hard-working by having room to manoeuvre. Instead of selling their company now for 200 million, they can sell a small stake to us, so they get some money here and now – but at the same time have ownership when the company is built on and sold later as a unicorn. They still get a lot of money from the sale, but on the way to the exit they also have a little more luxury with their husband or wife and children,” says Peter Sandberg.

Angels with bigger muscles

N2F buys into companies between traditional investment rounds – and typically at a discount of around 25 per cent to the latest valuation.
“We don’t do the pricing ourselves. We look at what the price was last time and then get paid a premium for taking on the risk, in the form of a discount that also reflects the price of illiquidity that unlisted shares have,” explains Peter Sandberg.

While early-stage business angels look for startups that can return their money 20-30 times, N2F seeks to invest in companies that return 3-5 times on a sale. Peter Sandberg knows the role of an angel investor very well, as he was one of the most active angels in Denmark before founding N2F. And that might be why the fund has more than 100 business angels from DanBan behind it, who see advantages in joining the large syndicate and getting some different investment opportunities than they normally have.

“We buy into companies that are done with business angels. They’re talking to venture funds or close to private equity. They’ve typically raised DKK 50-100m or much more. So it’s probably more about when there’s an exit and how big it is,” says Peter Sandberg, adding that it’s also a different calibre of companies than business angels normally invest in.

After four lucrative exits in the first fund, N2F expects that there will be companies in the portfolio that are not going to be profitable. Therefore, the fund also spreads the investments in each fund across 20-30 companies to reduce sensitivity.

“You would never get near companies like GoMore, Klarna or Kilo Health on your own. And if an angel can get exposure to 20-30 of those companies, it’s a whole different ballgame – they’ve already proven they’re a good business.”

A better flow in the ecosystem

Peter Sandberg does not see N2F as a competitor to business angels, venture funds or private equity. They will own a maximum of 10 per cent of a company – in some cases down to 0.5 per cent – and as a minority investor they do not seek board representation, but are in close ongoing dialogue with the companies, updating the fund’s investors quarterly on developments in each company.

“There’s also a cool purpose that has an impact: there are some founders who can sweeten their lives. “

He sees the fund as an important complement that helps increase liquidity in the entire ecosystem – because when founders or early investors get money back, it is often reinvested in the ecosystem.

“I do it because it’s great fun and super inspiring. The fund is doing well with some great returns, but there’s also a cool purpose that has an impact: there are some founders who can sweeten their lives. There are some early risk-takers who can derisk and invest somewhere else. It does something for the ecosystem that wasn’t there before,” says Peter Sandberg.

About N2F

  • Founded in 2018, Nordic Secondary Fund is the first and only fund in the Nordics to exclusively invest in secondaries. The Private Equity “Secondaries” asset class is an attractive alternative investment with high yields and is a source of diversification for investors to mitigate overall risk.
  • Nordic Secondary Fund acquires secondary stakes in companies that have completed a Series-A capital raising from venture capital or corporate venture. Companies with a proven business model. N2F aim to invest at a substantial discount to the latest funding round and expect to see a 2x-5x upside and an exit within 5 years.
  • The fund has invested in 30 companies – including GoMore, Varjo, Kilo.Helath, TransferGo, Bob W.Funderbeam, Klarna, Pixieray, Bokio and Unacast.

The article is part of the magazine “The Guide – A comprehensive overview of the Danish startup ecosystem”, published by Heyfunding and

Read the full magazine here: