I interviewed Stig Hølledig in his office at Næsseslottet, a beautiful estate which is also an office hotel for startups.

 

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“Quote.”

-Stig Hølledig

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Alex Farcet (Q): So as I said the audience is, I wanna speak to entrepreneurs, who are typically entrepreneurs or people with the great idea of product or service, maybe they are expert in technology, or biotech or they don’t know about, everything else takes two to race to two to start a company, like who do I go through is it money, what do they want from me when they get their investment. So I’m trying to get people tools an information like a shortcut how to go creating the company. So I’ve spoken to some entrepreneurs, I’ve spoken to more high end VC, I’ve spoke to Business Angels. So I contacted the Business Angel network, I can’t remember your colleague’s name, (Stig Hølledig: Copenhagen)  He presented at the connected market event, I can’t remember his name, that’s how I get in touch with you. And so the way I do it is we start a little bit with you, who you are, and how you established your credentials and then I wanna talk what you’ve done, and then I wanna talk about Denmark and entrepreneurship and what’s going on now, and has it become harder, or  what projects you’re going on, how you see the market, just give a Business Angel point of view, what kind of deals you’re interested in, what size, how it works, you’re different in VC. So first question is what’s your background? I saw you had this big exit of Corebit, so how did you start an IT? Are you an IT? Are you programmer? or technical background?

Stig Hølledig (A): No, I’m an engineer, production engineer actually. I was finished in 85, same year, the first pc came to the market and I have worked with software and programming since I left my education. I came into a company that was  specialized in Oracle, that Oracle was very new and was  (2:51 can’t get the word) as consulting and got a big profit in Oracle,  it was in Denmark, and then in Belgium and then in Switzerland, and then I got the opportunity to buy the company, because the owner [died], and then I developed the company to be a company of, I think we were around 70 people.

 

 

Q: How did you raise the money to buy?

 

A: We were only three people at that time.

 

Q: Okay, so you took it from three to seventy employees. 

 

A: But then the problem with this, that would be focusing on Oracle, consultancy in Oracle, and practically in Oracle. With this, I made a company with same concept  but focused on Sitebase, it was a competitor in Oracle. And then later on the company focused on the SAP, at the same time I had to find out, that I have three company, what should I do with this company?

 

Q: Did you also become owner of the others?

 

A: Yeah, I was the majority owner, and as manager, so we to had to find out what to do these three companies, should we continue with three company or should we do something else? Another time, IP also was coming up, and I went to the bank and presented the companies, and they said we have a good opportunity for going on the stock exchange but we have to be larger, that time we were 180 people I think and we had to be larger and we had to be one  name only not three names, one brand.  So let me describe to you of putting these three companies together. We did that in 1998 and at that time we also moved to this place because we need a new office, and then I found this place and I think this was a good place to supervise the people, one company, one house. And we put the company together to Corebit and that went very well and then in 2001, a lot of things happen in the market, the web companies has went into the market and we didn’t quite understand what they were doing, they were [5:21..unclear] the price was on the shasp but extremely high. But we decided to break a strategy, change of strategy and try to find one of these web companies and join them because we were experts in all of the vacant system and they were expert in fronting system and we foresee that on one time these two things has to speak together. If it’s taking much longer time than we believe that time but that was a strategy so we will find one of these in 2001.

 

Q: So you didn’t do the IPO then..

 

A: No, we didn’t do the IPO, incept in 2001 we merged with [06:10 unclear] icon. And that was just few which before I own this IT (6:21..) just risk it. It was a little bit hard time because instead of billing out  and we had to cut people down until reinfrastructure and firing people and firing people so that was not a good experience. So I got the opportunity to leave the company after a year or something.

 

Q: You sold? or..

 

A: Yeah I had shares in the company but I was also manager in the company I can (6:55 unclear) you a lot. So I got that opportunity to leave in 2001, and when out of all  and my concept issue with icon. I got all villager in this place and so we made a big deal when I was leaving and good faith and..

 

Q: What would you call it an exit? You know what I mean by exit like you. Was that the start of, I mean somewhere to become a Business Angel,  you have this exit to build you a pile of cash, was that it?

 

A: Yeah you can say that, I got an exit when I sold the company but I got the freedom when I leave the company to do what I wanted. And then also I had another company, a distributor of cyber’s license, it’s [07:48 can't get the word] is an aluminum device still,  I sold that company in January 2001 also. So when I left I can really (7:59..) in the spring 2001, I have sold it and have worked in this since 85, so I was just staying  then, I had to find out what to do for the rest of my life. 

 

 

Q: How old are you then?

 

A: I was 42. So I have this place and I made this place to a office hotel, a  business hotel, that was the first thing and then I made it quite fast in investment in a consultancy company focused on ]8:33..unclear] so that was the start when I continue business, my first investment.  

 

Q: So how did you find that first investment for example, was it somebody new?

 

A: Yeah, it was the network. I was still on  the competitor clause, so I couldn’t work with Oracle, SAP and Sitebase. I worked in the (8:55 can’t get the word) it was okay. And consultancy was a business and new and I went into that investment, it was also a turn off to be a turnaround history because there were also  a big company and I also have to get smaller to grow again, but today  it’s extremely successful.

 

Q: You’re still an investor? 

 

A: I still invest yeah. Really one of the deepest (9:24. can’t get the word ) when I was in Denmark.

 

Q: What do they call?

 

A: Dataport.

 

Q: How did you. You were alone, how did you make that deal? How did you value the company? Did you use a bunch of people?  Lawyers and  accounts… 

 

A: We used a lawyer to make the deal and agreements and we were two Business Angels into this investment. 

 

Q: So that wasn’t a hard part, agreement, terms and all that?

 

A: No. no

 

Q: And are you used that you’re on the board?

 

A: I’m working in the board. And that’s what I usually do, I go into the board and try to help a company through the board and sometimes I’m also involved in work with Opera things but I tried to keep away from it because I see my job as investor, Business Angel is to help the company to be self- ironic and that’s my priority number one to help the company to do it themselves.

 

Q: Do you ever have to bite your tongue where you have the feeling that you used to be in charge of your own company and make things run and now you have to go through someone else?

 

A: Yeah

 

Q: And you have to resist telling them what to do..

 

A: Yeah. But that’s a big difference and I have to learn that because in the beginning I used to say, I was used to just take the decisions and as if  it was the right way, and then let’s do it this way. But when you are in the board and especially if you are not in the majority share, you are in  a minority share, then you can’t do that, you have to persuade the manager that this is the good idea to go this idea. And sometimes, it’s like a my teenage price, I want to do their own way and that’s one thing that if you’re working as Business Angel, you have to learn that, that you have to influence, you cannot  make the decisions. And that was also one of the reasons that I took a certification in a coaching last year, because that’s a way of helping the managers to better (influencing without having the power). Yeah, giving the power and giving the decision to them but have them find out to make the right decision. That’s quite interesting.

 

Q: So what’s the good board member of you, you’ve seen other board members, some better than others.

 

A:  A good member, a good member that understands the business  and understands the managers and can all the time challenge the managers and challenge them to develop the business because to develop a business is something that come and step you have. A  small company where the manager consult everything, where everybody are taking all decisions more or less and  then you go to next level where you have to have middle-managers and that’s a big step for a company it’s not just… it’s easy to drive the business construction but it’s not easy to implement and you have to be an (13:03 unclear) manager exactly.  So these steps are very important to help  the company to go through, and then something that I always do when I’m going to a board is to focus the business on earning money, because that’s what keeping the company freedom to develop in earning money and everyone’s and also being efficient all the time and that’s,.. I’m not believing in this company where you spend a lot money 2-3years and then come on and come by. I want to have profit every month.

 

Q: So that’s a good transition to question as a Business Angel, you have a a criteria, you don’t invest certain size or certain type. So what are your criteria?

 

A: My criteria is actually that I only go into a company that has a business model work  and they have customers,they have turn over, they have awesome profit  or very close to profit. I need to feel in my stomach that  this company can make profit in few months. So the law of  company in an early stage is not the company I go into. But I love to focus seeing, entering this companies.

 

 

Q: So what’s the difference  between you and them? Do they take more risk?

 

A: They take more risk, yeah. 

 

Q: What about size of investment?

 

A: The size of investment is  between 500 thousand and (14:48 .. not clear.. ) That is much.

 

Q: And how do you go about every entrepreneur has if I invite somebody in  how much is the cake do they want. So how do you go about determining the size of the piece of cake that they have to give?            

 

A: Yeah. But it’s also much easier when they have a general profit that goes in, they can use the normal models for making a value of the company. You could go in as early start of how do you value the  start of the company, you can do it. That’s something you have to find out if, the way I have seen to this that if how much money do they need, how much money do the entrepreneur need to be motivated still and then you calculate back to find out the price. And there’s nothing to do with calculating price that’s you can calculate the price when you come later on, because then, of course it’s also more expensive but then you have some substantial (forecast, you can do net present value, or that’s what you mean by the normal models right?) yeah.. 

 

Q: So has price changed? Does the external company 2 years ago making 3 million a year which was something and is that different today because the economy and everybody saying the valuations have gone down, everything. Many entrepreneurs had unrealistic view of what they were worth. And has that changed now? Are you making better deals from your point of view?

 

A: Yeah I will say if you look at the company that is the company that’s earning money and 2 years ago they have high valuation and today if they go to sell the company the valuation is lower. But maybe it’s so low that so they don’t want to sell the company. So I don’t think this company just, if you don’t find the right value then I’m not going to invest on it. And they say that the company that has a need for money for some reasons, the investor need to sell it  because something, they have a problem, some kind of problem so they need money and they think that the value has gone down, when the bank is forcing them to sell. The start of company is very very difficult for them to find money. Because, they’re very rich kids when investing and now there’s a lot of risk on top of that and when I invest I have lost half of the money the fortune, so I think it’s good that we have (17:51 unclear) than the capital of all this. (taking in a rally in a high risk)

 

Q: Did you get hit by in the market?

 

A: No. Yeah, well my public stock, yes, like everybody. I have 3 investment in IT companies and they are running very very well with lots of money. So there, up to now is everything is very very good but of course we also foresee that things can change.

 

Q: So you have three active investments?

 

A: Yeah.. 

 

Q: Have you had exits along the way or you’ve had them a long time?

 

A: I have them.. (not sleeping companies, you know the term not sleeping companies..) No. not that I’m not. In the beginning my plan was to have them 3 or 5 years. But to develop a company, so this faces are  I just got them from the phone and they say,  more time and also to make them international it also takes time so you have to be patient and I think as long as you can get the company to earn money every year then you don’t have to put in your cash all the time. Then I think it’s better to develop to states where it’s  better for them to  (19:13… unclear) So I’m not, I don’t have the need to sell my investment.

 

Q: So at the moment you’re not making money on them, it’s paper money..

 

A: No, because and I’m earning money and paying out dividence.

 

Q: So let’s talk about, how do you decide to make a dividend? Because in a way it’s money coming back to the owners that could be going and growing the company and improving there paper value, the balance sheet. When do you decide as a board to cut a dividend and when do you decide to keep the money in?

 

A: Yeah, but that’s a decision you have to decide carefully everytime because that’s another (20:02.. unclear) to put the foot on the (20:06) and you’ll be on the break and where … I’m not in favor of.. . You have to get grows in the company. But if you grow the companies too fast then you consider the risk that the managers can’t control it, because it takes time and I sold with (20:35..) that was growing very very fast and buying a lot of company and .. I love different cultures. And if you see on some of the very successful company in Denmark like (20:51.. can’t get the word ) they took many years to come in the position, it was not fast, a rapid growing up, but to grow, you cannot up sold it all the time.  

 

Q:  So if I’m an entrepreneur and  I say I want 1million investment from you, do you have the dividend discussion right away? Do you say that I’m the type of Business Angel who wants, I’m with you for very long term by investment standards, I don’t wanna flip in 18 months,  but I kind of want some cash coming out or is that something that’s decided later in board level?

 

A: The typical thing is that the first year is no dividend, but then when you have everything controlled and everything is working then it’s a common interest because the managers are also  (21:42.. unclear) So, I never realized that it is a problem. 

 

Q: So you mentioned I asked you what  you look in investing and you said certain size and profitability or close to business model, what do you look at in the people? And this is your million dollar question because  a lot of you guys were successful entrepreneurs yourself, so you know what it takes but do you know how to see that the person across the table, has what it takes. 

 

A: Yeah, and that’s very important. That’s most important issue when it grow and making an investment, that’s management. How to find out that the man is in the right, I can’t give you any (22:40..unclear ) but it is feeling that you’re sitting with one guy or team, it can also be a team where the have different forces you believe in, but when you are in a small company, they don’t have a (22:57 unclear) they have a record that they grown the company to certain level, but you never know they can do, but if I feel that the management is not right, then it’s a show-stop immediately.   

 

Q: So what’s not right? Can you give me an example if that’s possible.

 

A: But it’s the manager that is, it’s management that understands the business, it’s the management that can do the sale, because that’s very important for the further development. And also it’s the management that is, we call it in Denmark _______ , I don’t know if you can translate it. (entrepreneurial) yeah but they have to get, they have to sell but they also have to be conscious  about cost, so that we have to get this balance in the company. And that is very important also because if, not only spending but also getting income.

 

Q: So you’ve made, you said you exceeded  icon in 2001 if I remember right?

 

A: I left  2001.

 

Q: So in 7 years, you’ve made three investments which is not very active. Is that because you’re cautious or ..

 

A: Yeah, it’s because I have not found, I say if you go to a big venture company probably like 3-5 company each, so I think it’s not (24:55 unclear) there was two company coming to me, I believed in, and I have also  invested more, and in the beginning I was told with everybody from two different companies, rich and everything, but now I realized now where I have my experienced  and I really can’t add some to the company is IT, because that’s the business I know. So now I’m focusing only in IT and, but that’s something I also seriously consider at the moment is, should I go more  actively into investment or should I stay as I do now and I have this two investment and..

 

Q: So how does the deals come to you, how does a business case end down to your desk? Do they have to know someone in your network or do they find you on the internet or the Angel Business network?

 

A: The good two of the three came through network. One of them I found myself, I was in board case, one of the competitors, where I don’t believe the management, but then I was out and looked into the market, what is in the market, and then I found this company, and then I went to the company and ask them if they like to have some investors, who has some money and some experience in the board and making a lot of compensation and then I manage to invest. 

 

Q: Okay. So that’s you picking up the phone  getting a meeting, and then taking .. So do business cases end up in your desk? not business cases but investment proposals or do they get you?

 

A: Yeah I got a lot

 

Q: Really? Like how many?

 

A: You know network maybe gets 20 every month, IT at least 5 maybe has 4 or 5.. 

 

Q: So when you say network, you mean the Business Angel network?                                           

 

A: Yeah

 

Q: So can you tell me about that? How does it work and..

 

A: The Business Angel network was started up in Denmark and I think it was  2001 or 2002 and that was money from the government and giving the seat and (27:41.. unclear) (incubators or this technology parks) and the idea was to recruit some Business Angels with this innovations and then they should have the company and then we should pick out the  interesting company that has potential and increase you to invest in the next phase and so on. But it could not really work very well, the good thing was there was recruited a lot of business angels and we got our own network started, but we moved from the (28:24…unclear) and  made our own business network here. What we reached 6 time a year and typically we have in a meeting, where sometimes we discuss what happen in the network, and then we have somebody to come and make a presentation of something interesting and then we have 3-4 cases that’s coming and presenting.

 

Q: Basically asking for money? 

 

A: Yeah. And what is interesting then, the people go together and investing each company.

 

Q: So you can decide who you invest with, it doesn’t have to be everybody, it’s based on chemistry and what fits?

 

A: Most typically is that there’s more Business Angel who work in the case that we syndicate 2 or 3 Business Angels. 

 

Q: But you have made an investment through that network, right. 

 

A: Yes..

 

Q: Okay. One of them? or

 

A: But that’s a force investment but that’s in a movie channel that’s not in IT. And then I’m not so active that’s one of the other Business Angel has taken it. 

 

Q: So how does an entrepreneur get in, in front of the Business Angel network?

 

A: The concept of my network through our homepage in the Copenhagen, then we send the business case to thousand clients and that’s in charge and then he basically send out all, if it’s okay from the entrepreneur then he send it out to the network. And then the house select to each of these meetings where have the three to four days to complete the cases.

 

Q: So is that his job? or

 

A: No, it’s a volunteer job. There’s no money for that network so we do it for free.

 

Q: So you don’t have any staff or completely infrastructure free.

 

A: Yeah. We have used that  free lance consulting, to help to recruit more people here last year. 

 

Q: More Business Angels?

 

A: More Business Angels.

 

Q: Was it a headhunter? or curious what kind of consulting

 

A: It was a great company called Key Stone. They make also investment in small companies.

 

Q: Okay interesting. And you yourself you don’t have any infrastructure. I mean have you see have this building and people but you’re alone.

 

A: Yeah. That’s a typical thing for Business Angel, we are alone and  we have a time, we want to spend on it 30-40 hour a week, this is our limit. That’s also why we can only have 3 or maybe 5  responsible because we are filled up.

 

Q: So typically how, you join the board meeting and you said sometimes you get involved in it, operational problem like, how to open in England or whatever. So I just have the feeling, don’t you get, you know you are running this big company and there’s fire and action everyday. Don’t you feel like lonely? you know, you miss the team and….

 

A: There’s a different life, completely different life. But many ways also there’s a very nice life because it’s all stresses signal of your life, much more relax than if you work still in the company and  can influence them, but you are not involved in the daily operation at all the problem only with this is ( sweat and tears). Sometimes  I think more it could be very nice to come back do things to myself but then after thinking about that about few  minutes, I realized that I have a very good life as now.

 

Q: So do you work as many hours every week as you used to? or how do you?

 

A: Yeah, but we have more freedom we can take. You can take 2 months holiday and you know if you like, it’s just a matter of time, there’s nobody is depending on you like when you are managing a big company.

So if I should speed up my activities then it should be speeding up the investment activities and growing more of what I’ve done up to now. (It’s a fantastic decision.)  But then it stop, because I can’t do it myself, I need somebody to support me. So that’s the decision I have to take.

 

Q:  But don’t you think it’s a good time to invest somehow  because the valuations are low, the potential difference and the gain is bigger. 

 

A: And that’s  good opportunities of now, no doubt about it. So this is a good time to invest. But as I said, all of us that has money who invested in public stocks we have (also taken the hit) So we don’t have actually I think maybe, actually (33:44 unclear) if you look at my portfolio, my public stocks has went down much more that my not public stocks, so I can gain much more value investing in a smaller company not on a stock exchange. 

 

Q: Much credit control, it’s somehow risky as well. I mean the stock market is dropping 40% has no sense, has no reason other than psychology, yeah there’s no business reason for it.  Okay, cash is shown…  Do you ever look at investment outside in Denmark? 

 

A: No, I  know Denmark, and I have my network in Denmark. And it’s enough for me to do it in Denmark. So if I go other countries, I think what the big opportunity is to take this company, to take them abroad and making them international, that’s a big opportunity. I would say there’s a few way you can do it, but basically it’s the same challenge all company have, IT company have. Because of the company you have, some set of channels if you have consulting company,  have some other challenge, but basically it’s the same in these two groups, it’s same thing you have to do.

 

Q: So how do you grow international?

 

A: One of the company we have made international very successfully, we were using distributors, that’s a cheap way to do it, because you don’t have to find a lot of cash.

 

Q: It’s fast  that you have lower margins.

 

A: Yeah, we have lower margins and not so much cost and you don’t have so much control either so you  because have to depend very much  on finding the right distributors. But if you want right distributors, set them up in a right way then  it’s very efficient, I could see because Oracle did it and Sitebase did it, and very successfully and then it did somebody to open the market for you, and then when the market is open then they buy  back. It’s basically (36:08…unclear)

 

Q: Did you know distributors in certain countries or you went to look? Did you have a network already?

 

A: Yeah I have a network.

 

Q:  I mean I’m thinking completely if somebody gave me the task of finding distributor in Germany, where do you stop?

 

A: Yeah, I know how this should look like. So I can make a precise definition of what kind of people it would be to make it work. So not the big companies, it would be individual persons.  

 

Q: Because?

 

A: Because you have to have them focus on 100% of selling your product if they, if they have a lot of problem,they don’t sell it. You have to live it like it’s your product. And they have to be the right people who can do it.

 

Q: How do you find an individual?

 

A: Yeah, that’s the channels, but it’s typical that  a very very good sales person for some reason I have left the company and I want to set up his own kind of business, his controlling it, he can run, and he can have good money, everything succeed, it was good.

 

Q: So you used to mention your network before, so you have the Business Angel network. What are your other networks? Are you part of the DVCA?

 

A: That’s a corporate network of venture. (I’ve interviewed a guy from there.) But then I have a network who cost opinion IT business for a very long time so I know…

 

Q: Are you a VL the leadership network,  is it VL?

 

A: VL yeah.

 

Q: Are you a part of that?

 

A: I’m a part of the rotary clock, but it’s not a business anymore. When I sold my company and was standing there, I also have flipped my whole network behind  me and I have to develop a complete new network. Because if you have your company this is a big part of your network in your life, and when you don’t have a specific interest, you have to find some seniors..

 

Q: I kind of been there myself on a different scale but I had every 12 years in one company and all of the sudden it  stop from scratch, so interesting. So now I’m gonna go back to Denmark, do you think entrepreneurs here are different? For example, I’ll give you a concrete questions, (cant get the word)  is always talking about Gazzelle companies in Denmark has a lot of smart entrepreneurs, but I don’t know if it’s yet too long, or because Denmark has such high quality of life and people are very comfortable, you don’t have the very hungry, extremely ambitious people, not many, so many companies has successful to a point, you know they make 3million a year and then they stop growing because they only say I don’t want grow, I’m happy where I am. So if you’ve seen that..

 

 

A: I think that’s fair enough for the people who want to stop, because it’s a choice. But in a way also many of these company has potential to be much larger and much more successful. But it’s typical when you are these 15-20 people  because there, you are the owner, you are the manager, you can control everything, and going to the next step  is involve a lot of risk, and am I the right person who [40:37 unclear..]

 

Q: So could that be an investment strategy is to go look for company that has the potential  and do like you did with the other companies and say, “Would you like me to come in with some cash and expertise in network can help you make things 10times bigger.

 

A: Yeah, but that’s what I’m doing, because there’s a lot of opportunity, growing the company and also growing international, this two things. You can also go international, it’s also a mix of variable, (41:17..unclear) but all of us why not go to Germany or to United States, because the market is… 

 

Q: I think I’m  (…) with  all my questions. Anyway I have a lot of typing to do now, I hope that work, 41 minutes..

 

A: Thanks so much..