Morten Lund thinks most VCs are gutless. He dismisses them as “LP whores” who live off the fees they charge their limited partners. They won’t risk their own wealth in hopes of seeing a big return from a startup’s success. “I don’t sit around thinking about IRR,” he declares. “Startups need help from smart people—not takeovers from smart asses.”
Just who the hell is Morten Lund anyhow? All of 35 years old, he was the first investor in Skype, the Internet phone startup bought by eBay for $2.6 billion. Since then, he has invested in more than 50 other companies, including hot Chinese browser company Maxthon.
As the venture industry struggles to find its identity in a world awash with eager money, Lund stands out as an example of why VCs were successful in the first place and what will keep them relevant. He doesn’t over-think and he doesn’t let himself get bogged down by institutional processes. He just does. Quickly.
We traveled to Copenhagen to find this archangel investor who venture capitalist Tim Draper calls “brilliant” and VC Bill Tai describes as “a cross between Wile E. Coyote and Yosemite Sam.”
Our take: Lund is what you’d get if you took Ron Conway’s Web 2.0 savvy, mixed in the European sensibilities of Index Ventures, added a dollop of Tim Draper’s pioneering wackiness and marinated it all in RedBull.
Connect the dot-coms
Lund’s skills rest in making connections and marketing. No business plan? No problem. Lund can help you think through the ins and outs and plan a launch. He’s even automated much of his value creation process by creating a new media accelerator chock full of engineering, design and marketing savvy. All he has to do is stick a startup in one end and it flies out the other, equipped with the latest Web Widgets and features, packaged in a sleek, sexy user interface and ready to plug into a handful of affiliate marketing partnerships.
Then he leaves the entrepreneurs to call him if they need him. They do call him, about once a month after Lund pulls the ripcord. And while he’s helping them, he’s picking their brains for leads on his next round of investments.
Born in 1972, Lund grew up a thatched-roof house in Roskilde, a hamlet 20 miles outside of Copenhagen. At 6-foot-3, the Dane has literally outgrown his childhood home, but still sees himself as a “redneck.”
Lund went off to college in 1991, attending Syddansk University at Odense just long enough to meet his wife, but not long enough to graduate. Hoping to earn some pocket money, he started selling caps, blue books, sweatshirts and other products he designed on a 486 computer at his the kitchen table.
Boom and bust
Morton Lund is brilliant. He’s a great deal maker, has a great sense of the entrepreneur — since he is one — and a great sense of what might happen in the markets.”
Tim Draper, Managing Director, Draper Fisher Jurvetson
Two years after Netscape’s first browser was released, Lund started prospecting with the other pioneers of the Web. He co-founded a Web advertising agency called Ne@tWork Aps in 1996 and rode the wave till 2000, selling out to mega-ad agency Leo Burnett just two months before the tech stock market crash.
Eager to mass produce Internet startups, he launched an incubator called Prey4. But as fortuitous as the timing was for selling his ad agency, the timing for starting his incubator (January 2000) couldn’t have been worse. He had to lay off half his staff in a matter of months. But one good thing came out of the experience: He got to meet Niklas Zennstrom and Janus Friis, who pitched him on a music-swapping service called Kazaa.
After the incubator tanked, Lund did some consulting work for TeleDenmark, staying in touch with the Kazaa boys to help them along. The pair wanted to differentiate their service by making it safer, but big companies treated them like they were radioactive. Lund answered their call by co-founding BullGuard in April 2002. He licensed technology from the makers of BitDefender and, almost overnight the BullGuard brand was getting 10,000 trial subscribers to its service every day via Kazaa.
It wasn’t until BullGuard got its first round of venture capital, a $2.5 million Series A from DFJ ePlanet Ventures, that it actually started creating its own intellectual property.
The degree of Lund’s involvement in BullGuard is unusual. He usually only helps one of his startups for about a month, providing the guidance and connections it needs to get off the ground. BullGuard is the only company he’s started on his own and he feels guilty if he doesn’t do something for the company at least once a week.
Lund owns one-third of the company, which expects to close $15 million in sales this year. At the time he founded it, he was spending 60% to 70% of his money on it, he says. In 2003, he made the company a minor Internet celebrity with an irreverent marketing video. It shows a naked man walking into a room. His girlfriend says not to touch her laptop, but he does and a bulldog jumps up and bites his penis. Draper says he played the video for his limited partners at DFJ’s annual meeting and still laughs when he thinks about it.
Kazaa and effect
BullGuard helped Lund cement his relationship with the Kazaa founders. So when Zennstrom and Friis morphed the technology behind Kazaa into an IP telephone company, he was there with the seed money in October 2003.
He won’t say exactly how much he made on his $50,000 investment in Skype, though he says it was 300 to 500 times what he put in, which means he made between $15 million and $25 million.
Lund could afford a stable of Ferraris, even with Denmark’s 180% luxury tax on cars, but his primary mode of transportation is a three-wheeled bicycle with a seat in front, which he uses to commute between his work and home.
His three-story row house is a block away from Øresund, the straight of water that separates Denmark from Sweden. The interior, designed by his wife Hlin is done in white—white wood floors, white sofas, while table tops. The dining room holds the one piece of interior design Hlin allowed him to contribute: a 12-foot-by-8-foot painting splattered with intense, vibrant color. If you look hard enough you’ll see the words “You Are the Artist” scrawled in gray paint in the center.
He’s a cross between Wile E. Coyote and Yosemite Sam.”
Bill Tai, General Partner, Charles River Ventures
Lund sometimes takes meetings at his dining room table in jeans, Birkenstocks and a tee-shirt, or else he invites guests up to his office on the top floor, where he keeps a refrigerator stocked with Faxe Kondi diet sodas.
He recently invited Eran Davidson the CEO and president of Hasso Plattner Ventures, up to his office to hear a pitch from WaterStillar. Tom Andersen, the company’s founder has been experimenting with water purification techniques for the last four years. He built 24 prototypes before he ran out of money and has had to take on a consulting job with a large computer company to pay his bills. He needs cash and Morten Lund has offered to help him find it.
Lund is helping Andersen as part of his Worldwide Investments for Life Development (WILD), a category he’s created to focus his efforts on improving the world. He says that the WILD program will be his answer when his children ask him about what he does. Other initiatives in this part of his portfolio include a startup a yet-to-be-named startup working to fight obesity and Aresa, a company that uses genetically modified plants to detect landmines.
Not long into Andersen’s PowerPoint presentation, Davidson makes it clear that he’s disappointed that Andersen is still at the prototype stage. How much would it cost to produce the water purifier? Anywhere from $100 to $300 per unit. Davidson frowns.
That’s when Lund jumps in. “If I worked on this for four weeks, I’d get that price point down to $50. A little China, a little this, a little that, fuck it.” He waves his hands as if to illustrate how easy it would be to start mass production.
Now that he’s got the floor, there’s no stopping him. “Look, this is Al Gore-compliant,” he tells Davidson. The VC leans back again and nods. The two discuss Gore’s “An Inconvenient Truth” and Lund admits to having watched it with the sound off while traveling.
Reaching for the stars
One thought leads to another and suddenly Lund is talking about how he’s going to promote the company. “You want Al Gore? The guy who paid for Bill Clinton’s scholarship will do anything for us.”
Davidson is anxious to get back to the entrepreneur’s pitch, and asks about his competition. Andersen flips through PowerPoint slides, discussing the technical merits, downfalls and costs of his competitors’ products. One competitor looks to be purifying water in a fashion similar to what WaterStillar hopes to mass produce, and its website claims it makes the “the world’s most advanced” water purifier. Davidson asks Andersen what that claim is based on. But before the entrepreneur can answer, Lund jumps in. “It’s just marketing,” he says. “Wouldn’t you do it?”
It was a mistake. Davidson quickly cuts him down. “This is a scientific business,” he says, folding his arms across his chest. “It’s not just marketing.”
Many people who meet Morten, even though he’s had a lot of financial success, might be turned off by his style. But I like it. You don’t have to debate much with him. If it feels good, you do it.”
Morten Wulff, Co-Founder, TraceWorks
Lund is cowed and seems to retract into his chair. The tension is thick as Davidson continues to pepper Andersen with questions.
Suddenly, all three men are distracted by the sound of feet on the staircase leading up to the office. A little blonde head pops up from between the banister posts and two big blue eyes take in the scene, looking slightly mischievous. Laura, Morten’s 7-year-old daughter, waits for approval to come any further. Lund waves here into the room. She smiles, showing she’s lost her two front teeth, and bounds into the room, pigtails flopping.
The men are all smiles now, watching Laura whisper into her father’s ear. Lund makes a face of mock shock, smiles and hands her a 50 Kroner bill (worth about $8). She kisses her daddy and pads out of the room.
Now the men are silent and smiling. Davidson is the first to speak: “I’m interested. I’m in.”
Warm and cozy
Lund is an expert in the art of creating intimacy, of making a business deal uncomplicated and informal. Part of this comes from working at home. It’s just cozier to keep your family close and to treat your business associates as you would close friends.
The Danes have a word for this: hygge. Pronounced “hogie,” it is about a simple and open bond with family and friends. It’s about getting past the superficial things and getting to the heart of a person and enjoying his or her company.
Says Morten Wulff, co-founder of Lund portfolio company TraceWorks, which tracks Internet marketing campaigns: “Many people who meet Morten, even though he’s had a lot of financial success, might be turned off by his style. But I like it. You don’t have to debate much with him. If it feels good, you do it.”
Maybe it’s that sense of hygge that underlies Lund’s investment strategy. He invests in people he likes, “doers” steeped in entrepreneurial spirit. “If you’re not hungry, he’s not interested,” says David Beckmann, CEO of an online obesity control startup Lund has backed. (The company hasn’t been named yet.)
Talk to Lund about one of his startups and he’ll start by telling you how “awesome,” “amazing,” or “brilliant” the founder is. Only later will he talk about what the company does. He said of one of his companies: “I don’t really understand it, but I really like it.”
If Zecco turns out to be a success, they’ll look to his record and people will acknowledge that he’s a rock star.”
Kare Jacobson, CEO, WiseLED
Actually, Lund doesn’t need to understand it. He has a whole group of people who do that for him in an accelerator he has dubbed the Hello Group (see sidebar). The Hello Group is part marketing department, part design team and part engineering division. It can take a next-generation Internet idea and machine it into reality in a matter of weeks, as it did with Zecco, an online brokerage.
Lund generally backs technology companies, such as a SaaS startup, a Web browser developer and an online stock trading company. But he won’t hesitate to invest in off-the-wall ideas if he likes the entrepreneur behind them. His portfolio includes an LED flashlight maker, a press-on nail manufacturer and the maker of a device that allows you to apply condoms with one hand. “It’s like an art collection of stuff I would have hated not to be in,” he says.
With such a diverse investment portfolio, it’s easy to point to Skype as a fluke. Maybe Zecco will be the investment that convinces Lund’s skeptics. Just as Skype turned telecommunications on its head by making phone calls free, Zecco is poised to change the face of stock brokerage by making online trading free. The Burlingame, Calif.-based company makes its money from advertising it delivers around its trading platform. The site had nearly 75,000 unique visitors in June and its traffic is growing at 30% a month, according to traffic analyzer Compete.com.
“If Zecco turns out to be a success, they’ll look to his record and people will acknowledge that he’s a rock star,” says Kåre Jacobson, CEO of WiseLED, Lund’s flashlight company.
So where does one come across an LED flashlight company, anyway? Always talking to people certainly helps and Lund will talk to anybody. At a developer conference in Europe he chatted up a group of engineers using a new browser he hadn’t heard of. In no time he seeded the founders of Maxthon, later helping them raise $3 million from Charles River Ventures and WI Harper.
One of Lund’s best sources is a mysterious executive inside a credit card company. They meet once a quarter for lunch and he gives Lund the names of companies starting to book revenue. If a company is doing anything remotely interesting, Lund makes a cold call.
LPs not wanted
At the heart of Morten Lund there’s something that drives him to go big. Perhaps hedge funds are what’s next for him. He has been entertaining hedge fund managers for the past several weeks, driving them around in the front seat of his three-wheeled bicycle and taking them out to dinner with his wife.
He likes the idea of being involved with a hedge fund for two major reasons. First, an evergreen fund structure frees him from having to report back to LPs or be bound to a fund-raising cycle. It represents a freedom he doesn’t see the venture capitalists or private equity players enjoying, and freedom is something he has fought hard for and won’t easily part with.
Hedge funds also represent a path to making bigger returns. The hedge fund managers have stupid amounts of money compared to the wealth Lund has built investing in early stage startups. To Lund, big money means big power. It means Carl Icahn-style clout and activism.
But he may not need to do anything different from what he’s doing already. What he’s doing is working.