Interview with XY Ventures Managing Partner Simon Olson (VC Lab Alum)

My name is Dustin Betts. I'm the content editor at the Founder Institute, and I'm here today with Simon Olsen. He's the founder and managing partner of XY Ventures. The fund is an FIVC Lab alum focusing primarily on disruptive software. Simon Olsen, thanks so much for joining me today.

Thank you so much for having me. This is a very fun and interesting concept, so I'm very happy to have this chat with you today.

Yeah, so before we kind of dive into it, I'd like to ask this question first, you know, just a little bit about your own background story. What were the experiences, professional or personal, that led you to founding XY Ventures?

Sure, so actually I have a background as an entrepreneur and I was a part of an accelerator program actually at MIT a while back. And we burned through some venture cap and weren't that successful, I'd say. So I ended up doing IT and working with a big IT company. At the end of it. And as I sort of, in a big IT company, there's usually a big focus on doing one, profits, and the second finding the next sort of big thing. So I was actually in charge of doing a lot of the innovation stuff at this big company in the Nordics called Tietoevry. And from there I started to doing a little bit more pro bono things together with other startups in the region. And also through a little bit of my network with the accelerators in the States and specifically Bay Area, and that's why I came in contact with you a while back and became a mentor. And so that sort of led me to this chance or the opportunity to join VC Labs. I was invited to join and— or actually invited to apply. I didn't really have any background or understanding of what it actually means to do venture cap before starting. So I had this pre-notion that going into VC is a little bit of an uphill battle if you don't know or understand the industry. So VC Lab has definitely helped me in that regard to really understand what it means to do investments in this specific space, while also sort of leveraging the, my knowledge working with startups for years.

Yeah, exactly. That's what I was gonna say. So sort of new to VC, but you already had like this big startup network, had already been involved in software industry. So really had like a good sort of foundation coming from the entrepreneur or the startup side, sort of moving into it. Yeah, that's awesome. Very cool. So now I know because I'm already, you know, somewhat familiar that XY Ventures, you know, you're working with some of the largest accelerators in the world. So not just Founder Institute, I guess this is in terms of sort of sourcing, like deal flow, but let's hear it sort of straight from you directly. Please give us your short kind of high-level pitch. You know, what is XY Ventures?

Yeah, sure. So what we actually do is we look through these accelerator programs specifically or usually in the Bay Area, but we also like to collaborate with some other accelerators in the US as well. But where we already have a mentorship in place, so it's either me or someone of my general partners who is a mentor at these accelerator programs, which means that we get to work with the entrepreneurs quite early and also establish relationships way ahead of Demo Days, which is usually where you get to meet the entrepreneurs. So that is sort of our in, in the network, working with both the angel aspect and also the accelerator aspect. But what we actually do is we look for startups that has a connection to Nordics. So it's not just any startup in Bay Area who's been through an accelerator, but rather the Nordic, startups that has been through the accelerators. And what we try to do is essentially build the connection between the Bay Area and the Nordic region to make sure that we can, well, make for a very good bilateral relationship between the two regions as they are in fact the two top unicorn dense areas in the world. So we think that that sort of matches pretty good with our investment thesis, which is that we look for digital disruption companies or opportunities that has that specific background.

Yeah, perfect. No, I really love kind of your emphasis on mentorship and how that fits in really nicely with being really early stage, pre-demo day even when these companies are really early. So yeah, really cool. You mentioned this a little bit. It's sort of like Founder Institute in this respect. I think it seems like XY, you focus very closely on the founder himself or herself, as you mentioned, sort of at this early and mentorship stage. Stage, you know, what are, I guess, you know, for the right person, idea, talk to us about the most important attributes that you look for in an entrepreneur when evaluating them for a potential investment? What sort of is that magic when you see it?

Well, it sounds a little bit cliché, but we really look for grit and for people who are almost on the verge of— they essentially don't have any other alternative than to succeed, to really go for what they're they're building. And I think this is more of a problem in action in the Nordic region than it is in the States, because a lot of entrepreneurs in the Nordic region, they have their full-time day job and then they do their startups on the sideline until they get venture cap. And those are not really the people that we primarily invest in, but rather the people that has sort of made the jump already. And We know that it's a little bit of a scary sort of scenario you put yourself through when you actually do the jumping. And that's why we're really sort of— we're targeting those people and we're making sure that they have everything they need in order to build a successful startup. So that is one of the aspects that we really look for, the biggest one actually. Then we obviously look at the standard things. So we're looking for for some kind of market that is interesting and growing. I would say that is the second thing. And the third thing is if they actually have a product in place in the market. So we don't really do that much pre-market or pre-product-in-market investments. But grit is the main component of it.

Yeah, yeah, no, really interesting. I mean, obviously, like, it's kind of hard to look for, but so when you can see somebody persevering actively, I guess, it's sort of proves that they do have that underlying grit. Yeah, totally makes sense, really cool. I guess kind of firstly to focus for a second sort of on the sort of up-and-coming technology or innovation, you know, what excites you most that's new in the world of software at XY Ventures? What types of companies, technologies are on your radar right now and why?

Sure, so I wouldn't do my job unless I get the deep tech aspect into my pitch. Which we really look for— more than just deep tech, we actually look for interesting markets. As I said, the second factor is interesting markets. And I think that the things that most excite me right now is, for one, manufacturing, because there's a lot of automation going on within manufacturing. That sort of— that space, I have a background in manufacturing, so it's I have a little bit of a bias towards as well, but that space has so much potential for automation and disruption. And so that's really something that we look for. Another place that really excites me as well is automation and borderline AI when it comes to fraud detection in financial services, so financial transactions. And given that a lot of the successful startups in, sorry, in the Nordic region actually comes from the fintech background, it makes it even more interesting to go into fintech from that perspective because we know it works and there is plenty of still unexplored unexplored opportunities in the value chains in fintech that I think is really sort of only on the verge of unfolding right now. So it's a very interesting two topics I think that I can talk about forever.

Yeah, absolutely. So yeah, so, you know, all kinds of software, but really specifically, you know, disruptive automation in financial services and in manufacturing supply chain. Yeah, really both really interesting areas of disruption and big things happening right now. So Makes sense to me. Final, or not final question, but next question I want to ask you, and you also mentioned that you're focusing specifically on Silicon Valley companies often, but that have this Nordic connection. I want to ask you sort of about the Nordics in general, very up-and-coming startup scene geographically. You mentioned like really high density of unicorns. I think you're based in Stockholm. What excites you right now in the region or the local innovation ecosystem, Stockholm, Sweden, Nordics, kind of What's most exciting locally?

I think the fact that there's a lot more people wanting to become entrepreneurs now than 10 years back, it's something that is really exciting about our ecosystem. And the ecosystem traditionally has been quite small in Sweden. So a lot of the entrepreneurs know the VCs already and all the VCs know the famous entrepreneurs, I'd say. But now there's sort of a new wave coming up. Of entrepreneurs that has, well, primarily they have impact-focused startups. And that's something that I think is very interesting in terms that it's a little bit immature at this point because a lot of the impact startups actually hasn't really made that much of an impact yet, but they are in the development cycle. So hopefully that will, we'll see more of those those startups in the future. So that's something that's really exciting. And then furthermore, I think that the VC scene is also quite exciting in Stockholm because we have this— a lot of the VCs, they actually come from private equity backgrounds and not really have the startup background, I would say, our team has. And that sort of shows But if you look at, let's say, the amount of A rounds that are going on in Stockholm, they're primarily venture-backed by private equity companies or even VCs with private equity backgrounds. But there aren't that many seed funds in the region, which is quite interesting because, well, it's another sort of ball game when you go very early. At the same time, we have quite a lot of accelerator programs in Stockholm or in the Nordic region overall, but they're more focused or geared towards ideation and really the sort of get-go of understanding what your idea actually is and then validating if it works before you actually start building something. I think that there's a natural sort of gap that is unfolding as well right now, which makes it really interesting to be a VC in this region.

Yeah, yeah, and you're in that early, you're in that space, in that gap exactly, you know, definitely between the accelerator but before obviously Series A, so yeah, X, Y, and time for XY. Cool. Yeah. Makes sense. You've obviously done a huge amount to establish and build XY Ventures to where it is today. What do you feel are some of the biggest challenges that you've faced and overcome as a new fund manager?

Fundraising. That's a quick answer to a very complex question, but the hardest thing has hands down been fundraising. Well, specifically because a lot of the LPs in the region, they expect you to have a private equity background and really understand the financial aspects of doing investments rather than just focusing on what the company actually needs to develop the company to grow as quickly as possible. So I think that it's been a little bit of an uphill battle when it comes to explaining to LPs how this actually works and how we make sure that we aren't just buying lottery tickets, but rather just understanding which lottery tickets we should actually buy. So that has been quite hard. And then the second thing that has been hardest is to really, well, until most recently, find a good team that believes in the cause and also back us up. Right now we have like, We have 8 people that are on board working for us. And it took a while. It takes a while to build trust, especially if you're a new fund manager and people don't really know you from the space before.

Yeah.

You know, you as an entrepreneur, so they need to really be comfortable with the fact that this was, at least from the get-go, an experiment to understand if we can actually build a seed investment platform here in the Nordic region. But as it has sort of grown from the graduation date, I think we're in a pretty good position right now to keep on growing and really starting to leverage some deals and doing some interesting investments.

Yeah, that's awesome. I think it's good for entrepreneurs to hear too, especially for new fund managers who may often be more in these smaller or seed kind of earlier stage funds that, you know, they're fundraising too, that fundraising is hard for everybody, you know, not just for entrepreneurs, but for especially new fund managers as well. So yeah, really, really interesting. Yeah. So where is XY headed next? I guess this is sort of, you know, one of my wrap-up questions. Any news or updates you want to share with the FI and the DC Lab community or any ask for the audience who may be watching today?

Yeah, sure. So right now we are aligning ourselves to do our final close of the fund. And what's actually happened since we graduated is that one, we've got the team together real knit, and we have some really senior people on the team that has the private equity background that I didn't have. And right now we are— we've onboarded We have one more people on board, but then we're fully stacked to start doing the final closing. And well, right now, I'm still picking up the phone trying to find as many LPs as I can that believes in this bilateral relationship between Silicon Valley and the Nordic. And yeah, we're really down to it, keeping our heads down, being a little bit under the radar until we finally make the close. But then from when And when we've closed, we'll start looking to our second fund and to sort of build up the network to make a close of our second fund in early next year. So that's sort of the timeline that we're working towards right now. I wouldn't say that this was in my dreams about a year ago because this has been quite the rollercoaster ride since I jumped on it. In a very good sense because I like roller coasters. But yeah, that's where we're at and we're very thrilled to be working with you and also be on this journey to make our final close.

Yeah, absolutely. So, you know, if you're listening and you're that potential LP interested in the connection between Silicon Valley and the Nordics at this kind of earlier or seed stage, definitely reach out to Simon, the website's XYventures.vc. Yeah, this has been really interesting kind of catching up with you, learning a little bit about where you're at and where XY Ventures is headed next. We're all looking forward to keeping up with your journey throughout this year to come and yeah, it's really interesting. So Simon Olsen, yeah, thanks so much again for joining us today.

Thank you so much for having me. This was quite the pleasure to have this chat with you.