Fund that made 10,000% Spotify bets looks for new winners

A Spotify Ltd. logo sits on display inside the music streaming company’s offices in Berlin, Germany. (Bloomberg pic)

OSLO: The investment fund that made a 10,000% return as one of the earliest investor in music streaming giant Spotify Technology SA now has similar hopes for a trio of Swedish startups.

Neo4j, Kry and Epidemic Sound AB have “Spotify potential,” said Johan Brenner, the general partner at Creandum, in an interview. “We only enter companies where there’s a chance that it can became a leading global company.”

Creandum, a venture capital fund which manages about 500 million euros (US$590 million) from offices in Stockholm, Berlin and San Francisco, invests at an early stage in so-called seed and A rounds. About 85% of its capital usually goes to A rounds.

Brenner sees fast growth for digital health care provider Kry, and Neo4j, the company behind one of the tools used to analyse the Panama Papers, and music library Epidemic Sound. The companies could be ready for an initial public offering or similar within three to four years, according to Brenner.

“We continue to invest in those that are successful,” he said. “Within venture capital not all, and not even half, result in anything positive. Of 10 companies, 5 go bad, 3 OK and 2 very good.”

Tight selection

Of the 1,000 companies Creandum looks at every year, it ends up having meetings with about 300 and will invest in five to ten after a tight selection process. Each fund has a 12 year perspective with five years of investing and five to seven years of reaping returns. Creandum has invested in Klarna, Kahoot!, itslearning and Planday among others.

The industry doesn’t really matter, according to Brenner. “Each industry can be disrupted with new business models,” he said. “The most important for us when we select is how good the founding team is, that they have a unique business idea and first and foremost that it’s a big market they enter.”

So far that has paid off. The Creandum II fund, which started in 2007, has returned about 1,000%. The fund in May sold its stake in iZettle AB to PayPal Holdings Inc. It was also one of the first institutional investors in Spotify in 2008, but has now started to exit the investments after the company’s listing in New York in April.

“No matter what we think of the company, it’s not our profile to hold listed companies,” he said.