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For most Nordic startups thinking about scaling internationally, the natural next step is a neighbouring Scandinavian country. Many often perceive the US market as a business mecca that is out of reach and often requires piles of capital and know-how.
But maybe it does not have to be that way. At least not according to the venture and technology fund Scale Capital, that since 2012 has invested in young Nordic technology companies and helped them enter the US market.
“Many founders should look to the US earlier than they expect. Because contrary to popular belief, a big budget is not necessarily a requirement. It’s often better to start small, test and find out if the product fits the market before expanding the budget,” explains Lars Jensen, Partner at Scale Capital, who has lived in Silicon Valley for a number of years.
There is a lot to be gained if a Nordic startup manages to succeed among American companies with strong purchasing power.
“Once you get a grip on the American market, you suddenly have a very strong foundation as a company,” he explains.
- Based in Copenhagen with locations in Stockholm and San Francisco, the venture fund helps Nordic B2B companies expand to the US market.
- Initially invests between €1-3 million
- Typical company size: €1-2 million turnover, 20-40 employees
- Specialising in Future of Work, Digital Health, AI, Deep Tech
Americans are open to collaboration
The venture fund’s Scandinavian portfolio companies that have expanded to the US typically earn around 50-70 per cent of their revenue from the US market. And that is no coincidence, says Lars Jensen.
“The US is the world’s largest software market, where companies spend on average 70 per cent more on software than European companies do. And with a population of 330 million, it is one of the largest and most homogenous markets in the world – both in terms of purchasing power and appetite for new technology, products and services.” He continues:
“At the same time, Nordic startups can raise significantly more capital at higher valuations because the approach and especially the risk appetite among investors is completely different than in Europe.”
One of the reasons for this is the American way of doing business.
“Many of our portfolio companies have been very successful in establishing partnerships with large companies and distributors. Given the openness of Americans, there are many opportunities to partner in the US,” says Lars Jensen.
USA i tal
- The US accounted for 50% of global venture funding, which in Q4 2022 was USD 75bn.
- 56% of venture capital in the US comes from Silicon Valley
- The size of exits in the US is on average 3.5 times higher than in Europe
‘The kissing period’
The people behind are some of the most important elements in a company. That is why Scale Capital works with a so-called ‘kissing period’ to ensure the right match and alignment.
“Every team is unique. That’s why we’ve turned due diligence on its head, so when we invest in a company, we see it as a mini marriage of 5-7 years. This means we spend a lot of time figuring out if we share the same values, ambitions and goals and how we can best utilise each other,” explains Lars Jensen.
As a portfolio company in Scale Capital, Mazepay, a B2B payment platform for larger organisations, has benefited from this approach.
“We have received help with everything from operations to strategic decisions, market insights and entry strategies for the US market. Scale Capital has extensive knowledge of the US market landscape, customer behaviour and regulatory requirements. The company registration alone and the other more practical and time-consuming tasks are just easier to get done when you have someone who has been through the process many times before,” says Dan Kortegaard Nielsen, COO at Mazepay.
The US market can be a jungle without the right experience. But as a former founder and 9-year resident of the US, Lars Jensen has no doubts about what impact the American market has if you succeed.
“Over the past decade, I’ve seen many examples of how once companies get a foothold in the US, they never look back,” says Lars Jensen.