Tom Henriksson on VC Insights, OpenOcean’s Mission, and the Legendary Slush Poker Tournament

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In this insightful interview, we delve into Tom Henriksson‘s journey: from a Finnish childhood influenced by educator parents to becoming a venture capital leader underscores a blend of serendipity and strategic pivots.

His career transitioned from consulting to co-founding a startup advisory, leading to significant roles in venture capital and impactful investments like MySQL.

Oleksandr: – Let’s dive into your journey. Can you share insights about your childhood and the key influences that shaped who you are today?

Tom Henriksson: – Certainly. My parents were both teachers—my father was a high school headmaster, and my mother was a class teacher for the second and third grades. Growing up in Finland in the ’70s, venture capital and startups weren’t on my radar. Despite this, I was always drawn to business and pursued a bachelor’s and an MBA. After my MBA, as I had worked in consulting, I now aimed for strategy consulting but took a different path when some friends started a startup advisory firm in the mid-’90s. This marked the beginning of my entrepreneurial journey.

Oleksandr: – Did they invite you to join the startup advisory firm?

Tom: – Yes, they did, even though my consulting background wasn’t directly related.

Oleksandr: – What did you know about startups back then?

Tom: – Nothing much. I perceived them as smaller companies. During my MBA, I worked on a project for Sitra, Finland’s National Fund for Innovation, the country’s first institutional venture capitalist. As part of that project, I sifted through hundreds, maybe not a thousand, of software startups, offering my initial exposure to the startup landscape.

The data collection back then was far from the automated methods we have today for startup sourcing. I remember sifting through those software companies—our task was to curate a list of the 50 most intriguing ones. This project marked my initial exposure to startups. Following that, during my MBA, I worked for a hardware vendor, Co-Jot Communications, focusing on multiband antenna systems.

They sold to various entities, including police, ambulances, and government agencies, streamlining radio systems in vehicles with a single antenna and radiofrequency filter. Due to the eccentricities of the CEO founder, I managed their exports for less than a year. 

Afterwards, I returned to the startup consultancy with a bit more experience. The earlier startup had minimal revenue, around 2 million euros or 10 million Finnish marks, but selling internationally was an enjoyable experience despite my limited knowledge. 

Upon my return, we quickly shifted to assisting clients also in fundraising. In the late nineties, some clients achieved success, raising substantial rounds, and we typically got 3 per cent of their raised capital.

We realised it would be better to be shareholders in successful companies. In 1999, we set up a micro fund with 1 million euros, sourced from our shareholders and corporate earnings over the years, and invested in four companies. Unfortunately, we lost all four over time, resulting in the loss of those earnings.

Fortunately, in 2000, we started a larger fund with 52 million Finnish marks (around 9 million euros), investing in nine companies. Despite the small size, three out of nine became successful. 

One had a good exit, but not for us as we had been diluted; the second, Remix, a logistics software optimisation company, was sold to Flextronics for a 5X return within nine months of investing. MySQL’s third success was returning 40x the investment and linking me to the OpenOcean story. 

This journey summarises my trajectory from a micro fund to working with successful software businesses.

Oleksandr: – The story seems straightforward now. You’ve covered your journey.

Tom: – Yes, it might seem that way, but there’s a lot of serendipity and very little planning.

Oleksandr: – I’m intrigued. Your parents were teachers, so it may have influenced you to be more structured.

Tom: – Surprisingly not. While we had discussions at the dinner table about the world, they were amazed at how I was constantly negotiating prices, even during family trips to the Canary Islands. They thought, “He’s going to be a business person.”

Oleksandr: – What qualities did you find most crucial for success in transitioning from a consultant for larger companies to working with startup founders?

Tom: That’s a great question. Initially, I worked as a consultant with larger companies, but the shift to smaller ones required different skills. Our startup consulting primarily focuses on helping startups with limited resources with business plans, go-to-market strategies, internationalisation plans, and fundraising.

These skills were essential as an investor, too, but the journey didn’t end there; it was just the beginning. The commitment became much longer as an investor, especially when taking a board seat. It became crucial to help them create solid plans, recognising that the real work starts after that.

In the 90s, before we started investing, my colleague Mikko and I embarked on a trip to California, London, New York, and San Francisco. This was around 1998. We offered a unique product in the Finnish market —selling one-pager profiles of startups. These profiles covered biotech, software, and hardware companies.

For a fee, we promised to introduce each startup to five international investors during meetings where we’d present and leave these one-pagers. Surprisingly, we financed the trip and even turned a profit with this product. Significantly, it marked the beginning of our real relationships with venture capitalists as the discussions shifted from transactions to meaningful content dialogues.

Fast-forwarding a bit, after investing in MySQL in 2001, we sold our venture capital firm and startup consultancy to an investment bank in anticipation of its IPO, which didn’t materialise due to the 2002-2003 events. In June 2002, we faced challenges with the new owners and decided to exit. Subsequently, I joined Nokia for nine years, gaining invaluable experience in management, leadership, and international business. This stint at Nokia, a world-class company, proved to be a crucial learning phase in business, complementing my earlier experiences in consulting and startups.

During my nine years at Nokia, I started by managing a small internal startup venture, then transitioned to investing in companies and acquiring technologies for Nokia. Eventually, I became the Director of Business Development, overseeing a portfolio that included a fund for seed investments in the US, focusing more on learning than financial returns. 

Notable investments from this fund included Ping ID, now a significant public security company, and Podio, which eventually became Twitter. This period coincided with Nokia’s role as a case study for corporate innovation in the early to mid-2000s. 

I was deeply involved in this transformative phase, learning extensively. One of my teams initiated a new venture for Nokia, aligning with its shift toward services, particularly in maps and music, with an opportunity for advertising monetisation.

Nokia thus ventured into mobile advertising, and my team convinced me to lead it. Fortunately, I accepted because it began with just a few people and an idea. I started managing it when my first child was only a few months old, having taken a break to care for him initially. Within three years, we grew it from concept to $50 million in revenue, including acquiring a Boston-based company, Enpocket, generating $15 million in revenue. 

We expanded to 250 employees and became the world leader in premium mobile advertising during the initial wave. Our main competitor, AdMob, focused on the long tail of mobile advertising, akin to AdWords’ self-serve model. Google subsequently acquired AdMob!

Our network included 800 publishers and major American media publishers, following the theory that a diverse network attracts advertisers. This phase provided invaluable startup, leadership, and rapid growth experiences, albeit with an advantage – leveraging the Nokia brand and resources to propel our business rapidly.

Oleksandr: – Having the right people and fostering a positive culture is crucial, even with money and brand power.

Tom: – Absolutely. At that time, we began by licensing 24/7 Real Media ad servers and focused on mobile web ads. We quickly realised the potential and achieved $10 million in revenue within the first year. While the Nokia brand made attracting advertisers easy, we always knew the importance of mobile-specific technology for various ad formats. To achieve this, we acquired Enpocket and relocated to Boston. 

The Nokia name opened doors in the ad industry; a call from Nokia would prompt CEOs and leaders from major agencies and brands to meet us, thanks to our position as leaders in placing ads in premium mobile services. The brand name played a significant role during that period.

Oleksandr: – What happened next? How did you transition from Nokia?

Tom: – In Nokia, the norm was to have a job for two or three years before moving to a new one. Following Nokia’s acquisition of Navteq, valued at around eight billion dollars, Finland’s largest acquisition at the time, the Navteq ad monetisation business was integrated with Nokia’s operations. Subsequently, I assumed the role of Global Head of Corporate Business Development.

Throughout my time at Nokia, I have always maintained that I would return to venture capital someday. After spending about two years in business development and working with venture capitalists who were stakeholders in our internal and external ventures, it was the right time to transition back to the venture capital landscape.

It’s indeed a challenging process. To elaborate on this further, during this period, my fund, which still existed, had a significant exit in 2008 when Sun Microsystems acquired MySQL. Even while I was at Nokia, I remained involved in that transaction, continuing to serve on the board of the VC firm.

In 2010, I reconnected with Monty (Michael “Monty” Widenius), the founder of MySQL, and Ralf, the angel investor in MySQL (where my firm had led the A round investment), and Patrik, a new acquaintance who had been brought into MySQL’s management team by Ralf. Together, they initiated OpenOcean to transition from a small private investment portfolio to an institutional venture capital firm.

As OpenOcean was shaping its first fund, I joined the board for a year. Upon the fund’s formation, I officially joined OpenOcean as a General Partner from Nokia. It’s worth noting that the mission of OpenOcean, which has remained constant, is to assist European entrepreneurs in experiencing journeys similar to those we encountered in and around MySQL. At the time, such successes were relatively scarce, but now, with more serial entrepreneurs and increased success, the mission continues to guide OpenOcean’s endeavours.

Oleksandr: – Considering your mission, you’ve mentioned helping European entrepreneurs enjoy similar journeys to MySQL. Given your experience, why do you think MySQL’s journey was so successful compared to many other startups?

Tom: – Startups are inherently challenging, and even the most skilled venture capitalists often get things wrong. Factors such as the idea, execution, markets, or other unpredictable elements can influence success. It’s a tough game; even the best may only succeed with half of their investments.

Certain unique aspects contributed to MySQL’s success. First, it was the first open-source company to build a business model around software licensing and subscriptions. MySQL pioneered innovative approaches to utilising the GPL (General Public License), an open-source dual license, to sell enterprise products effectively.

Tom Henriksson, General Partner at OpenOcean
Tom Henriksson, General Partner at OpenOcean

Oleksandr: – Were they doing it for the first time?

Tom: Yes, MySQL was indeed the first to pioneer this approach. Around the same time, Red Hat focused more on the service side of things. Building a business around open source was groundbreaking when we invested in MySQL. 

At that time, expectations were not for billion-dollar companies. I vividly remember presenting to the investment committee and stating that, based on certain factors, this could potentially become a hundred-million-dollar company. 

In the end, it exceeded expectations and became a billion-dollar success story. Open source as a revenue model was not initially apparent, but MySQL proved it could work.

Oleksandr: – How would you describe your day-by-day?

Tom: – Regarding the day-to-day activities, the focus is identifying and supporting European software businesses. The digitalisation of the world has proven that they can come from anywhere, whether looking at the MySQL story with people in nearly 30 countries working in a community-distributed model, the experience with the Nokia ad business operating in 13 countries, or the now many startups becoming global category leaders from smaller European countries.

The key takeaway is that great software businesses can come anywhere in Europe. The mission is to help entrepreneurs build successful ventures and category winners—large, impactful software businesses. The ambition, influenced by experiences like the MySQL journey and the rapid scaling of the Nokia business, is to encourage entrepreneurs to think big early on in their journeys.

Oleksandr: – How do you support the founders to whom you invested? What do you think is unique? 

Tom: – One unique aspect of our support for founders is the deep technical expertise within the OpenOcean team. While I went to business school as a businessperson, everyone else on the investment team at OpenOcean had an engineering background. We are all product people with a profound understanding of data products, software technology, and more. This technical depth allows us to delve deeply into products, understand them thoroughly, and provide valuable insights to entrepreneurs even in this area.

We always start by evaluating the product—whether we, along with the entrepreneurs, love the product, see the opportunity, and envision its potential. Once clear, we discuss building the business, organisation, scaling, and implementing sales and marketing strategies. Financial considerations come into play as a natural consequence.

Our technical expertise and depth of understanding of data products set us apart, particularly appealing to technical entrepreneurs who appreciate the support of a team that genuinely comprehends their domain. We are a specialised VC focused on scaling B2B data software businesses, further distinguishing us. While many VCs now invest in B2B software, it was less trendy a decade ago, making our specialisation and background a unique advantage.

There’s an interesting paradox in venture capital. It might be a red flag if an entrepreneur seeks too much help. Entrepreneurs who need excessive guidance may be too influenceable or need more knowledge to solve critical problems rapidly enough. Ideally, you want entrepreneurs seeking targeted assistance—specific expertise and perspectives—while fundamentally driving the business.

The entrepreneurs I appreciate the most on boards are those who engage with the board, seek advice from advisors, study markets, and present well-thought-out proposals. They say, “We should decide on this; here are the reasons, and I’m 99% sure it’s the right way.” Strong entrepreneurs with solid reasoning tend to have a better chance of success.

VCs are not miracle workers; they provide support based on their experiences. For great entrepreneurs, the support may be somewhat limited—assistance in finding talent, connecting with customers, securing funding, and occasionally offering valuable insights. The entrepreneurial journey is long and challenging, and success ultimately depends on the founders’ capabilities and decisions.

Oleksandr: – Thank you for sharing the value. You removed the barriers for them, and you are not the one who decides for them.

Tom: – Absolutely, it’s a delicate balance. While being supportive, investors must challenge entrepreneurs and encourage them to think critically. We want them to think it through properly and be sure about it. We have seen many things that could have been improved. So why would it work now? And we’re not the yes people. 

Oleksandr: – That part about learning from great entrepreneurs is crucial. What specific lessons or moments do you recall that brought significant value?

Tom: – A memorable learning experience came with our biggest exit, Truecaller. The founders wanted to hire an HR manager early on, and we initially questioned the decision. Later, we realised it was the right move for them, as hiring wasn’t their forte. It taught us the importance of recognising entrepreneurs’ comfort zones and supporting decisions that might deviate from the norm. Continuous learning is inevitable and fascinating, especially in dynamic fields like AI.

Oleksandr: – It’s about adapting to what works best for each entrepreneur.

Tom: – Yes. Every entrepreneur and business is unique. Recognising and adapting to their needs and preferences is crucial for success.

Oleksandr: – Reflecting on the VC landscape of 2023, what trends do you anticipate for the next year?

Tom: –  Firstly, we predict 2024 to be challenging for startups. The advice is to brace for difficulty in fundraising, focus on saving money, and plan for the long term. We foresee continued challenges in raising funds and acquiring new customers. I am concerned about some pre-IPO stage unicorns; there haven’t been many big write-downs yet, but indications suggest they might come. Growth investors in the U.S. anticipate more challenges, especially in consumer-facing companies. When these write-downs happen, it could impact the market, leading to a more cautious financial environment.

Oleksandr: – When you mention the impact on the market, is it more likely to affect Europe, the U.S., or is it a global concern?

Tom: – This will have a global impact and not be confined to specific regions. It pertains to highly scaled companies that face challenges due to their high valuations compared to public comparables. Funding such companies becomes difficult due to the complex cap table and unrealistic valuations. This trend is more about the type of companies rather than regional variations. The impact might affect the overall investment appetite, making investors, including ourselves, more discerning.

Oleksandr: – So, is it more about selecting companies with sustainable business models rather than indulging in aggressive funding for high burn rates?

Tom: – Exactly. We’re moving away from excessive investments where you put in 10 million to generate 1 million in revenue or 100 million to get 5 million in revenue. The focus is shifting towards companies with more natural growth trajectories, lower burn rates, and potentially more predictable futures. However, exceptions exist, such as in AI, where a compelling story or plan can still attract substantial funding. For instance, Mistral is a good example, demonstrating that the right team and story can secure significant funding in specific domains like AI.

Oleksandr: – Do you have an anti-portfolio?

Tom: –  Of course. Who doesn’t?

Oleksandr: – When you think afterwards, is it more that the decision not to invest was due to how you see the market unfolding, or do other factors influence it?

Tom: –  We often reflect on this when raising funds. Fund investors, significantly larger institutions, want to understand what we missed, why we didn’t invest, and if we’ve learned from those decisions. One significant miss for us was UiPath. We were invited to top up the A round in 2015 but declined as we couldn’t foresee rapid scalability based on their proof of concepts. 

They ended 2015 with around 750,000 euros in service revenue. The following year, they had 5 million monthly subscriptions, 30 million and 150 million bookings in subsequent years. It was the fastest-growing enterprise software at that time. We learned two crucial things from this: the importance of trends as they rode the first wave of RPA and the significance of our three focus areas – data infrastructure, future software development, and enterprise automation. 

This prompted us to invest heavily in software automation, which has resulted in successful exits and high-value companies in our portfolio. 

Another miss was GitLab. We had a term sheet in but still need to sign it, and we are waiting for an American co-investor. Later, the opportunity slipped away when Koshla Ventures took over the round. It taught us never to issue an unsigned term sheet and the importance of decisive action.

Oleksandr: – Reflecting on these misses, is anything positive that emerged from these experiences?

Tom: – From our UiPath miss, we delved deeper into automation, leading to successful investments and forming a valuable relationship with Kulpreet Singh, UiPath’s sales leader, who now advises OpenOcean. Similarly, GitLab’s miss taught us always to feel confident in signing a term sheet and the significance of clear decision-making. It’s essential to learn from these experiences.

Oleksandr: – The final question concerns how you stay updated on technology and innovations. For those reading, including entrepreneurs and investors, could you share your routine, whether it involves books, newsletters, journals, or any specific resources?

Tom: – It’s not just about how I stay updated; it’s a collective effort within the team. Our AI expert, Katya, leads an annual thesis update on AI’s current and future trajectory. This is shared within the team, and Crystal, our AI venture partner and AI expert collaborates with Katya on this. We conduct thorough research, map trends, and make predictions in specific areas crucial to us, like AI, data infrastructure, and software development.

We have a bi-weekly review where we analyse every venture investment made in Europe and the main ones globally within our broad B2B data software focus. A team member compiles this information into a report, and on Fridays, we dissect it to identify new trends. Additionally, we leverage various tools, advisors, and experts in our focus areas to ensure we stay on top of the latest developments. It’s an ongoing and dynamic process to stay informed in our ever-evolving field.

For example, I follow Marc Kerremans, Gartner’s number one process mining expert, particularly for insights into process automation. His writings, analyses and interactions with our portfolio companies provide valuable perspectives on this niche area within automation. In addition to more mainstream sources, these specialised experts contribute to our in-depth understanding of specific technologies and trends.

Oleksandr: – Is there anything else you wanted to share that I didn’t ask you for?

Tom: – Yes, I’d like to mention our involvement in the Legendary OpenOcean Slush Poker Tournament. It was the ninth time we hosted it at Slush 2023, and it has become a legendary event with around 500 participants, including 100 players.

Legendary Slush Poker Tournament
Legendary Slush Poker Tournament

The tournament started with a fascinating story about a Finnish entrepreneur, Niko Karstikko, who won the first edition. At the time, the prize for winning the game was a painting that included the code to 3.1415 bitcoins, one picture worth, and later, facing cash flow issues, he sold those bitcoins to pay his rent while waiting for the funding to come into his startup. The exposure at the tournament (instead of a classical speech at the award ceremony, he made a 3-minute pitch to VC) attracted investment in his company, led to subsequent growth, and eventually sold his startup, marking a successful exit.

OpenOcean Slush Poker Tournament
OpenOcean Slush Poker Tournament

This story has become a legendary part of the tournament’s history. Poker is a fun activity and an excellent way for the mathematically gifted Slush crowd to connect and create valuable relationships. The tournament has grown significantly and remains a highlight for many during Slush.

Tom Henriksson at OpenOcen Slush Poker Tournament
Tom Henriksson at OpenOcen Slush Poker Tournament