Gorm Petersen and I chatted over Skype about the role of the Danish Venture Capital Association.

Alex Farcet (Q):  What is the DVCA?

Gorm Petersen (A):  The Danish Venture Capital and Private Equity Association (DVCA) is a member association for a broad range of high technological investors in Denmark.  It was founded in 2000 and its goal is to strengthen its members’ businesses, networks and competences.
 
DVCA covers the whole investment chain from individual business angels to venture companies, private equity firms and institutional investors.
 
Our team consists of:
Jakob Lyngsø, CEO, has a background as CEO of a major Danish IT-firm
Jane Eis, Vice-CEO, formerly a “kontorchef” in the MVTU
Jette Baade, Political Consultant and a background as employed in a major Danish party
Morten Worsaa our communications consultant, Student at CBS
and myselft, Gorm Boe Petersen, Chief Consultatant and a Background from Økonomi- and Erhvervsministeriet
 
Our Chairman is Ole Steen Andersen, Formerly CFO at Danfoss.

(Q):  Four staff only? A light structure.  How are you funded?

 (A):  We are entirely funded by membership fees. You can see information about the DVCA here.

(Q):  What kind of people and companies and individuals are members?

 (A):  Broadly speaking, four segments:

1. Early stage investors: Business Angels; 75
2. VC’s [Venture Capitalists] approx 20;
3. PE [Private Equity firms] approx 25
4. and 65 associated members (lawyers, accountants, corporate service provicers, PR-houses, etc.)

(Q):  What is your definition of VC and PE?  What’s the fundamental difference?

 (A):  Its a tricky question and there is far from any international definition here. But a defining difference must be on leverage and the risk for bankruptcy for portfolio companies.   For VC-investments (in very general terms), 6 out of 10 portfolio companies shut down; 2-3 lives on but never turns into stars; 1-2 turns in to stars. Hence debt leverage is never achievable for the VC.
 
PE-investments; the risk is much lower. We have had over 300 PE-investments in Denmark. And only seen 1 (one) failure. That means that you can finance much of the acquisition with debt.

 
(Q):  By definition, private equity firms must be investing in later stage firms.

 (A):  Well that is often – but far from – always the case. We have seen early stage LBOs [Leveraged Buy Outs] too. But of course most of the time, you’re right.

(Q):  Is DVCA’s mission essentially to lobby on behalf of venture capital?

 (A):  I prefer to say that we represent risk capital towards the political system. But that is only the half truth. As any other interest organisation we also provide a professional network for our members.
 

(Q):  Where do the ‘udvalg’ fit in? Are these are selected members who work on specific topics?

 (A):  They’re not selected.  Some members show interest for a committee and then it all develops from there…They provide us we essential knowledge about what the DVCA opinion towards topics should be. And provide Networking opportunities for members.

(Q):  DVCA was in the news recently, announcing the ‘branchekodeks’ – essentially some guidelines about private equity transparency.  Can you tell me about these guidelines?

 (A):  Since the autumn of 2007, a broad circle of Danish and foreign private equity funds have worked on drafting the DVCA’s new guidelines intended to set new standards for how private equity funds communicate with the external community in Denmark. The guidelines follow the principles known from the British guidelines (the Walker Working Group), but go one step further in some areas, for example with respect to requirements to the financial reporting of businesses controlled by private equity funds and to requirements to the communication with the employees of businesses controlled by private equity funds.

  [pagebreak] (Q):  How we the guidelines received in Denmark? Former PM Poul Nyrup Rasmussen has been a vocal advocate for openness in the area of private equity.

 (A):  The guidelines were well received in Denmark. Most prominently our minister of taxation said that he didn’t see any further need for regulation of PE-firms in Denmark. We are very happy for this.

(Q):  Will you be tracking that the guidelines are implemented?

 (A):  Yes. We will set up a 3 man group to survail the guidelines.  1) Chairman of the DVCA  2) An independent industrial representative, 3) and an accountant

(Q):  What are the important topics for DVCA’s discussion toward the government at the moment?   What areas need to improve from your members’ point of view?

 (A):  Right now we have a big governmental committee on Venture Capital and the political framework for the VC-industry. Here there I expect to see something in the spring, when the committee is finished.  You can see a copy of the mission of the committee here.

(Q):  I can see from your site that DVCA membership is broad, so there’s no formal screening / nomination process?

 (A):  DVCA is an open organisation. You apply through the Secretariat. If we have any doubts about it we consult the board.

(Q):  How would you describe the current state of entrepreneurship in Denmark?  What are your members saying?

 (A):  Our members report on a good deal flow still – despite the downward trend in the general economy.   What is very important is to get more growth-entrepreneurs. That is a challenge.

(Q):  What do you mean by growth-entrepreneurs?

 (A):  Entrepreneurs who want their business to take off and not only supply themselves and their families. Following the VC hit rate I mentioned earlier, all 10 investments need to have star potential. Hence the DVCA VC-members are very interested in growth-companies.

(Q):  Can we talk a little bit about you; what is your role, how do you spend most of your time?

 (A):  I am an octopus so to speak. I do communications; I am in charge of getting new memberships, I am the secretary to our Board and a couple of subcommittees, I am charge of international relations;  Everyday is different and I love my job in an exciting and constantly changing business where I have the privilege to meet a lot of very interesting people.

Thank you very much.