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I cornered Christian Motzfeldt at the 2008 annual Vaekstfonden meeting and he kindly accepted that we schedule an interview. I was later able to spend an hour with him talking about Danish entrepreneurial history, Vaekstfonden's mission and what he looks for in an investment proposal. (May 2008)
"Entrepreneurship is deeply rooted in the Danes."
- Christian Motzfeldt
Viking entrepreneurs, the genesis of Vækstfonden and how it functions
Alex Farcet (Q): There seems be a national obsession with innovation and 'vækst' (growth) in Denmark, why is that?
Christian Motzfeldt (A): I think that entrepreneurship is deeply rooted in the Danes. Although many believe that we have become a nation of salary earners, I still believe that basically we are a nation of entrepreneurs. Our forefathers were the Vikings who took on the most risky ventures of all, conquering the whole world with small boats. Our forefathers were a nation of fishermen and farmers - fishermen have always encountered very, very risky business, putting their lives on the line everyday. That's who we are, we have a long tradition of being business men, buying, selling, we've done this trading for so many years.
There was a period where we became more like the continental Europeans, becoming more salary earners in large companies. But now the old spirit has woken up again.
(Q): What do you say to the criticism of Danish culture, janteloven and so on? The fact that you need a large ego to launch a big venture and that Danes are more concerned with equality than with promoting very successful people?
(A): Honestly, I don't see it. There is an understanding of the importance of putting together a coherent society where we also take care of those who are less fortunate. But lately, we have seen acceptance of people becoming very rich. Not only acceptance but praise and promotion of these people. But all of this has been promoted by politicians for many years. It already started in the eighties when the Danish economy was essentially derailed, we had piled up a huge stock of debt in the public sector, there was a chronic deficit in the current account, piling up external debt. So we had this twin problem of deficit and debt accumulation. That was really a wake up call. We had moved too far in the direction of the government taking care of all citizens.
Business is about creating value and this is what we're here for. So the whole culture changed. There was a huge turnaround in both the political culture and the culture of the labor market.
(Q): Was that the genesis of Væsktfonden?
(A): No, Vækstfonden was born in 1992. Already in the eighties there was this radical change in economic thinking. People are on the labor market to get a job, and they are obliged to take a job if there is a job out there. You can have unemployment benefits if you have no chance of getting a job. But we need a carrot and a stick. In the sixties and seventies there was this acceptance of those who avoided taking a job, but it suddenly changed in the eighties, there was this huge wake up call and that's where it all started. We began to think in terms of entrepreneurship and innovation and new business policies.
(Q): So how did Vækstfonden come in the picture and can you explain how it works?
(A): Vækstfonden was founded in 1992. The government injected 2 billion kroner in base capital once and for all. The idea was simply to fund projects - risky projects - in small and medium size enterprises that companies found difficult to finance on commercial terms. It was project financing.
Later on, we embarked on a new strategy. Instead of financing projects within companies, we started looking at companies as whole. To grow new companies. Simply because we had had ten years of experience and discussion about how to promote entrepreneurship. And the way to promote entrepreneurship is to think about the company as a whole. When you focus on projects, you focus on a small part of an existing company. As from 2001 Vækstfonden became probably the major government instrument in promoting entrepreneurship.
(Q): So you are a non-profit and when you have successful exists you re-inject the money into another venture. But does any money ever go back to the government?
(A): No, it's a recycling business. We are basically a non-profit but we are here to promote entrepreneurship, to finance more new growth companies. And in order to do this of course we like to see our capital being recycled as fast as possible. The more capital we get back, the more we can invest in new companies, it's a simple as that. We do, in fact, care about profits for several reasons. One is that profit is a reflection of the success of a company and we like success not failure. Secondly, it does reflect the fact that the innovation is taken up by consumers which is ultimately a success. And then of course we get money back that we're able to reinvest.
(Q): You're covering your own costs and able to re-invest?
(A): Yes.
(Q): You don't have to go to the parliament every year to ask for more funds?
(A): No, no. The government injected capital once and for all in 1992.
(Q): And you've been running on that since then?
(A): Exactly. We do however, administer some of the programs that are on the annual budget - small business loan guarantee schemes.
(Q): The Kom-i-gang loans?
(A): Kom-i-gang and Vækstkauktion, which are small business loan guarantee schemes. These are very difficult to make a profit on. But when it comes to the venture market it's all based on commercial contracts and we expect to earn a return that is the comparable the market average.
(Q): How distant is the government from your organisation? You being the director for example, are you a political appointee?
(A): The government has appointed a number of business men on the board, and this board is ultimately deciding on the strategy of Vækstfonden. There is an act for Vækstfonden that allows the director to operate but the board has final decision.
(Q): You've been vocal in the media - do you think you have a lobbying role to play in representing the needs of the Danish venture community?
(A): And entrepreneurs as well. The government now and then calls us to understand what the community needs to move ahead. Our strategy's starting point is always a thorough analysis of the market. It might be the market for cleantech startups; how can we map it, what are the needs, where are the pitfalls, the gaps?
(Q): There's a research and a monitoring element?
(A): Yes. Our mission is to create more new growth companies. And our final vision is to create the best market for innovation finance in Europe. And for that end, we do a benchmark study every year. We compare the Danish market against other European markets. And ultimately we'd like to see the Danish market being the strongest in terms of being able to support new startups.