Alex Farcet (Q): Can you give me a short bio?  What’s your background and why did you end up in Denmark?

Eric-Alan Rapp (A): Have lived in Europe for a total of, what, 16 years all together now.
5 years in France off and on, back to the States and then DK since 97.
After 2 years background started in commercial banking.
After 2 years in France, started commercial banking in 80s in Chicago, then got my MBA in France 91 and started doing M&A work.
Met a Danish woman in grad school, transferred back to Chicago in 94 for three years, came to DK doing corporate finance work, worked at TDC (then TeleDanmark International) in their M&A group then jumped out and co-founded a mobile app company.
Have been with this team since 2002, doing venture capital work and loving it – combines the best of everything I’ve done until now.

(Q): What does ‘M&A’ work mean concretely, what did you do?
A:  Working with companies and their owners, primarily to sell them. Doing extensive business analyses, preparing detailed business plans, performing valuations, locating potential acquirors throughout the world and (hopefully) selling the company.

(Q): Where you were at TDC, I presume you were on the buying end of M&A?
A:  I was Director in the M&A group of TDC International. Not just M&A though, and not just buying also some license work.

(Q): TDC was, and still is, a gigantic company.  Was the culture any different to what you had experienced elsewhere?
A:  It was both a great place and very different from the investment banking environment I’d come from. Much larger organization with different dynamics. Very, very competent people and an international environment (American telco SBC shareholder).
I left because I’d always really had this dream to start and build a company

(Q): Was there a Danish dimension to it?  How is working in Denmark different to working France for example?
A:  Ahh, the culture question. I’m curious to hear your reaction to my France / Denmark / USA angle. Here goes:
Culturally, it was actually much easier for me to integrate into France. Part could be that I’d lived there with a family and then studied there, so made some great friends.
It was easier for me to learn fluent French (a year) too. Ironic – fewer people spoke English there, but maybe that helped me integrate more easily.
Working in France is different in that (here come the generalizations) in a French environment, many of the decisions are actually made before meetings take place, and the meetings are more formality. In DK the meetings are a forum for democratic decisions. In the USA it’s really hub-and-spoke – managers make decisions and people execute.
One of the things I like about DK is that people are used to working independently. You give someone a general task and know that they’ll work it out and come back with a solution.

(Q):  Well, I’ve had the same problem with learning Danish – you sometimes have to insist to not speak English (though I must admit I used that as an excuse for years).
In  terms of work culture, I’ve found Denmark much less formal, less hierarchical.  On the other hand, today’s decision could very well be reversed tomorrow if something better comes along.

A: Completely agree! More flat structures in DK, less flat in USA, much less flat in France.

(Q):  Back to you.  What was the name of the mobile startup you co-founded?  And what happened to it?
A:  It was called Hellodies and it was just about the time the last bubble popped. Mobile space – a “media fusion platform” that could merge different kinds of media and send them as an interactive voice call. fx combine a voice menu, then a music clip, then a recorded message or text-to-speach, then another menu.
First application was music messages. Very avant garde back then.
You ever hear of “Lydbesked” from Sonofon – TV ads with (I’m going to misspell his name) Polle fra Snave? We did the backbone for that.
Send an sms and your friend receives a voice call from Polle, etc.
You asked what happened to it.  Aside from being an incredibly enriching experience from a personal and professional point of view, it didn’t become a resounding success. Lots of reasons for it, and lots of lessons learned. We were chronically under-funded in a very tough funding environment (although in hindsight probably not as tough as now). We had a great product, best-in-class, but the market quickly became saturated with other products that looked and smelled like it.

(Q): I presume you teamed up with a techie and brought the business / funding side?  Did you partner with a Dane?
A: To be totally honest, the fact that I teamed up with the people in Hellodies is why I’m still here in Denmark today.
Another former TDC guy (Thomas, you reading this?), someone from Ericsson, people from the creative industry. A great team that showed me what it can be like in Denmark. I spent a few years really “finding my legs” here.
One of the funding sources for Hellodies was Vaekstfonden, and when I rolled off Hellodies (Cellpoint AB eventually bought it) I started working with VF doing early-stage investing. Sunstone Capital spun out from VF in May last year.

(Q):  I’m really curious now – what do you mean ‘ what it can be like in Denmark’?
A:  I’ll answer that but this is funny: as soon as I wrote Thomas’ name above my phone rang and it was Thomas from Hellodies. We haven’t spoken in several months.  This story about Thomas is actually related to what it can be like in DK, though
(In my opinion, the laws of probability stop at the borders of Denmark. I have a million of those stories here. Everyone knows everyone. I meet someone new, and within 5 minutes we’ve found 10 people in common, often in another country. It’s also because it’s a small country here – and that took me years to really get used to)

(Q):  That I’m starting to be completely convinced of.  It’s amazing how interconnected everything and everyone is.  
A:  What it’s like in DK?  I’m interested in your opinion here: We moved here from Chicago, where the city itself had more people than in DK. To be honest, for several years I felt, well…
…it’s a small country. But it turns out Piet Hein is right. It’s greater than it’s small. My time with Hellodies and that team showed me that you can either let the size squeeze you out, or embrace it and work with it.
Working with the team here at Sunstone is for me simply amazing. I can’t imagine another place I’d rather be. Period. My point is, I realized you can find your place if you have the right attitude.

How’s it for you, coming from France?

(Q):  I’m not really French.  I grew up in Africa, went boarding school in England, then an American high school in Zaïre, the university in the States.  I have a very critical, subjective, view of French formalism and elitism.  But I’ve never worked for a French company so what do I know?  It’s my mother tongue (litterally and figuratively) but not my mother culture if I can say that.
I think one is much more critical of one’s home country when one has lived away from it.  That’s probably why I’m much happier here than my Danish wife who finds it provincial sometimes.  She’s ready to go anytime. I think I’ve found my roots for the first time ever (never lived anywhere more than 4 years in a row and that was because it was university).
A:  OK, I get it. Sounds like your mother culture is a combination. Maybe you’re just as culturally confused as I am…  I totally agree about the roots.  Before moving here I’d never lived more than 2 years in any one place. In my life.

(Q): I appreciate the simple things.  I bike to work.  The city is beautiful and safe.  People are straightforward, though very reserved at first. I like that the ocean is never more than a few minutes away.
A: Oh, I love this – talking about the good stuff. I’ve started using my bike too. I like being near the ocean. It’s truly a great place for kids. Close to other countries.  Let’s not talk about the negative stuff, ok?

(Q): Copenhagen has all the pluses of a European capital but in a miniature, user friendly way.
Let’s turn to your current adventure.  What is Sunstone Capital?  What was the genesis of the company – I understand you put together a lot of the early documentation / business case?
A:  I’ve also seen a growing entrepreneurialism (seque back to the interview).
Sunstone Capital (www.sunstonecapital.com) is a venture capital investor. We’re managing around EUR 400 million in funds, we invest in early-stage tech and life science companies.
I’ve been with our team since near the beginning, but we’re really a result of team effort. Sounds cliché but it’s true.

(Q): So at some point your sitting in Væksfonden and you say to yourself (-selves) Denmark needs another VC?
A:  That’s a long story. The vision of Sunstone came from the CEO of VF. It wasn’t a short-term thing.
The team that we have today all joined because they bought into the vision. May 2007, when completed our spinout, was the culmination – and also the start, really.
We all want to build companies here. That’s sort of our life blood.

(Q): What was (is) the vision?  How is Sunstone different?
A:  Good question. Instead of saying how we’re different, I’ll try to explain a bit who we are.
In the Tech team (where I am), we’re all international. I’m the token foreigner in DK, but everyone has worked abroad, lived abroad. Everyone has been involved in start-ups from the other side of the table.
We bring a combination of tech skills, financial skills, business development skills and a great enthusiasm for our companies. It’s really all about people and business development in the end.

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(Q): You seem really enthusiastic – what is it you love so much about working at Sunstone?
A:  Even when there’s a lot going on, every day I get up and want to go to work. My wife thinks I’m working even when I’m not working, but that’s also an American thing maybe . I like working with great people, meeting new people, seeing opportunities and working with challenges. We get all of that. It isn’t alway easy, far from it. But it’s so important to really like what you’re doing, especially when it’s tough.
I also really like the entrepreneurial spirit. People who say “Yes I can” (I had to slip that one in!). In the past 10 years there’s been a huge growth in entrepreneurial spirit.  Janteloven is still around of course. And there is still way too much intolerance of failure. But it’s moving.

(Q):  Yes, we could start a whole other side discussion on that.  But I hear from several sources that things have changed here.  There is certainly more visibility, and promotion, of successful entrepreneurs here.
A: I’ll talk about it any time, really. We need (see, I say”we” when I speak about Denmark) more people to dare, risk failing, and to try again and again when they fail. We need more people to go back and do it again when they succeed!
When we meet repeat entrepreneurs, we sit up and listen.

(Q): There’s no financially safer place to do it – in terms of not ending up homeless.
A : True, but too often people are concerned that if it doesn’t succeed, they’ve damaged their carreer opportunities.

(Q):  How does a VC partner spend a typical day? What are the tough parts you mentioned?
A:  Wow, there is no typical day. This week I had a Board meeting in London, we (hopefully) finalized a term sheet for a follow up investment in one of our companies, I’ve been working on structuring, business development, legal, structural and fund raising issues in another company. Had dinner with two other investors in still another company.  Looked at interesting new investments as well.

(Q): Where does your deal flow come from?
A:  One deal I’m looking at now came from a personal reference. We get a lot of unsolited approaches, but we like references – from friends, business colleagues, other investors. I always tell founders to contact us, that it’s never too early to get to know us.

(Q):  Would you also say (as I’ve heard and read in many places) that you’re more likely to invest in a venture that was referred to you as opposed to one that came in the mail?
A:  Not necessarily. But it really is all about people. When you have a lot of dealflow, and someone you trust recommends a company, it gets attention.
That said… we’ve a number of cases where a company approaches us and we hold sparring sessions with them, maybe end up turning them down. For example, it still might be too early. But now we know them. Then they come back a year later with progress.

(Q): Going back:  you didn’t answer the ‘what’s tough about being a VC’ part of my previous question…
A:  Well, it isn’t always roses. Most start-up companies don’t succeed. You have to be able to deal with that fact, take the tough decisions and work with the entrepreneurs through the process.

(Q):  You mean fire people!
A:  Well, in this market, there are many terms for it. But go find the presentations from (veteran USA  VC funds) Benchmark and Sequoia that are floating around the internet about what has to happen to get through the current crisis.
The key is to keep focus on the goal and the possibilities with the founders, but realize that the path there isn’t necessarily a straight line or easy.

(Q): You said earlier, this (late 2008) is a tougher environment than the  IT bubble burst of early 2000.  How specifically has Sunstone been affected?
A:  We’re really fortunate in that we’re one of the VCs that has just recently finished raising our own funds – so we have the money and timeframe ahead of us. But our companies are selling products to customers that are affected. We make our living bringing companies to a certain stage then exiting them. The exit window is pretty closed right now because the buyers have other things on their minds.

(Q):  How many investments have you made so far and how many are planned in, say, the next 12 months?
A:  In the Tech side we’ve made 5 investments from the new fund. We’ll make a few more in the next 12 months, and are actively looking, but aren’t in a rush.

(Q): Have your investment criteria changed?  Are you looking for different skill sets in the entrepreneurial team for example, given the environment?
A:  No, not really. One of the challenges, though, is that many entrepreneurs haven’t yet adjusted to the current conditions. Many companies are looking for funding and we have to look at every opportunity compared to other opportunities. Valuations have come down as a simple fact of market dynamics, but it takes time for companies to adjust to it.

(Q):  So, having been an entrepreneur and now a VC, which side of the table would you rather be on?
A:  Right now I have a hard time imagining doing anything else than what I’m doing. I get to be an entrepreneur in several companies at once. We’re also all entrepreneurs at Sunstone – Sunstone is our start-up and our life investment.

(Q):  What’s the latest book you read that really helped/inspired you as a VC?
A:  I’m reading a book right now called Good to Great by Jim Collins. Read it. It’s about the key dynamics in those companies that have pulled out from the crowd and really created sustained excellence. The conclusions are not always what you’d expect.

(Q):  What blog(s) do you read at least weekly?
A:  AVC.com, engadget.com, gizmodo, techcrunch, darkhorizons (movie stuff, not business).

(Q): What other sources of info do you have? 
A:  We use venturesource, industry rags, alexa.  Our venture partners are a key source of industry knowledge and just people we know.

(Q):  What is ‘venturesource’?
A:  A subscription service that gives info on the VC industry – companies that have raised funding, VCs, stats, etc.

(Q): Do you speak to your competitors?
A:  I don’t really think we have competitors. This market is more than big enough for the investors that are around. We have co-investments with almost everyone.