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Denmark to challenge Silicon Valley

Silicon Valley’s power to attract is not what is has been. Investors and startups are increasingly attracted to other places in the world. Denmark thereby has a historical opportunity to become a leading tech nation, says Icelandic David Helgason, winner of the IT Prize 2015 and founder of Unity Technologies.
This is the final part of series of articles about the digital society of the future - and the importance of digitalisation for the individual, the business community and society at large. The point of departure for the series was the magazine ”Win the Future” published by Mandag Morgen for the Confederation of Danish Industry. In the magazine, some of the world’s sharpest minds offer their unique perspective on digitalisation. Find links to previous articles in the text below.

He has been through the whole process himself. In many ways, David Helgason’s personal story is the ultimate illustration of the past decade’s technological gold fever. With ups and down. Albeit most ups.

For that reason, it is worth listening carefully when a man with his experience as an entrepreneur declares that Denmark in fact has the potential to conquer the position as one of the world’s leading nations for technological startups. It would require that we change a few central conditions in order to make it more interesting to invest in Denmark and easier to attract competent workforce.

“The time is just right. There is momentum right now,” he says.

But in order to understand the weight of his words, one should be familiar with Helgason’s own adventure - from the time in 2004 when he and a few Danish friends got together to create software for game developers in a modest basement flat in Copenhagen’s Nørrebro district, to the period at which they were on the verge of bankruptcy and had to fire everyone, and to the meeting in 2009 at 3000 Sand Hill Road in Menlo Park, California, when the young venture capitalists from Sequoia Capital gave them an offer one simply does not refuse: $5.5 million up front if they wanted to play along.

Helgason’s technological lump of gold, which had already provided software for more than 325 computer games, was thereby lifted up into a whole new league. Suddenly, he and his partners were keeping company with Apple, Google, YouTube, PayPal and Yahoo, among others, who had also benefited from Sequoia Capital’s benevolent support and understanding of how you really do business.

See also: Historical growth boosting the technological revolution

San Francisco was the only answer

Now the saga could really begin and, like so many others, David Helgason decided to move Unity’s headquarters to the American west coast.

“At the time, moving to San Francisco was the only answer. There is a special playbook for how you run a business in Silicon Valley, developed over the course of many years and which, among other things, stipulates that you aggregate two sides of a market - users and content - e.g. by making something enormously attractive or doing it for free. This helps to establish extremely robust businesses that are very difficult to compete against. Take Netflix and Uber,” says David Helgason and emphasises that the understanding of the new business models and the expertise in handling startups was initially so closely connected to Silicon Valley that the approach and potential simply were not comprehended other places around the world.

“Some of the business models operate at a rather high level of abstraction and, in many cases, require an insane amount of capital that was basically only available in the Bay Area. That’s why it was necessary to live over there and operate together with venture capitalists and people who existed in the same sphere 24/7.”
But the situation is changing markedly, according to the founder of the Unity group, which today has over 1,000 employees distributed across 20 countries.

“The latest development is that the power has started to weaken,” he explains, in reference to the “special power” Silicon Valley once possessed and which meant that everyone who considered themselves part of the digital future was consumed by the place.

See also: Informal event for entrepreneurs at the Opera

A special power

“The power has to do with the big, heavy capital that is necessary when you really want to boost these Silicon Valley business models. It’s also about access to the section of middle managers who are highly experienced with growth. These are sales managers who have taken a company from 20 salesmen to 200 three times in a row. And you only find those kinds of people in Silicon Valley. You simply cannot find them anywhere else. And there, you’ll find 50 of them.”

“At the same time, you have experience with these business models where people trust that it’s okay not to earn money until you have 500 million users, because you know it’s worth something. That is how WhatsApp was created. They weren’t trying to earn money at all but went after users, got 450 million of them and were sold for $19 billion to Facebook. Nowhere else in the world would you have had the guts to do that. That’s the power.”

“But other places in the world have now gained a better understanding of the new business models. Silicon Valley investors have started becoming more bold about investing abroad. And more capital exists other places. Even in Denmark and definitely in Europe,” he says and points out that the American tech companies now have billions of dollars located around the world due to high corporate taxes in the US.

“It means that it’s actually cheaper for them to buy companies everywhere else than in the US.”

The trend is indeed clear. Denmark currently has the fastest growing startup environment in the Nordic countries.

New startup clusters

The relatively new grassroots network #CPHFTW – Copenhagen, For The Win – now numbers more than 80 Danish startups. A number of startup clusters have been established, such as Founders House and Startup Village CPH, the latter of which houses over 500 people distributed across nearly 35 companies - including Vivino and Labster.

Moreover, Startup Village CPH is supported by a series of capital foundations, including Creandum, Northcap and Sunstone.

Earlier this year, the Danish Realm.io was also named best startup of the year at the Nordic Startup Awards. And to help get things going in the Danish startup environment even more, David Helgason recently joined a club of ten business angels, all of whom wish to advance the development. Together, they have started companies worth $10 billion.

“The situation in Denmark is better than ever before. I’m out meeting with startups every day, and there are really good companies and a fertile growth layer of small startups. That’s an extremely positive thing. They’re technically skilled, they’re visionary, they think globally from the beginning and they sell their products all over the world. They’re not afraid of moving abroad if they need to. But many also find Denmark a great place to live. So it’s probably just a question of time before we have people who actually choose to stay in Denmark,” says David Helgason.

Just as important are willing investors. Companies like Trustpilot and Tradeshift have raised DKK 500 million and 400 million respectively, and in 2015, they were listed on the annual so-called Unicorn list of startups with the potential to reach a market value of over $1 billion. The list is drawn up by the British investment bank GB Bullhound.
See also: Historical growth boosting the technological revolution

Heaven for startups

Whereas there were only about three European companies sold or valued at more than $1 billion in 2000 and the following years, there were eleven European startups in that size range last year - among others, the Danish companies Trustpilot and Tradeshift.

“Copenhagen, For The Win is already incredibly good at flying in venture capitalists from abroad and making sure to connect Denmark. But if Denmark is seriously to disrupt the entire field of innovation and all entrepreneurship, you would actually have to be much more aggressive. If we really were to get things going, we would have to do something big at a national level,” says the Icelandic entrepreneur, unfolding the major vision he hopes the Danish business community and not least political sphere will seize:

“First, we should proclaim ourselves to be the Heaven for Startups, that is, find a cool slogan and start big. But naturally, we also need to do something concrete and extremely notable,” he says.

If we do that, Denmark would be able to place itself in the absolute super league, beating both London and Berlin, which are the decisive centres in Europe, he assesses.

See also: Schoolchildren learning about entrepreneurship

The situation in Denmark is better than ever before. I’m out meeting with startups every day, and there are really good companies and a fertile growth layer of small startups. That’s an extremely positive thing. So it’s probably just a question of time before we have people who actually choose to stay in Denmark.
DAVID HELGASON, FOUNDER OF UNITY TECHNOLOGIES
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PUBLISHED: 1/12/2017 LAST MODIFIED: 1/12/2017