1Mby1M Virtual Accelerator Investor Forum: With Andrus Oks, Founding Partner of Tera Ventures (Part 2)

Sramana Mitra: How do the Estonian culture and entrepreneurial momentum play into your investment strategy? Are you looking for people to have developer shops in Estonia or some kind of backend in Estonia?

Andrus Oks: Estonia is very special. To put in context, it is a small country with a population of 1.3 million. We actually have 10 Estonian unicorns. Last year, it was more than a billion dollars in investment. This year, it’s already more than a billion dollars. This is very helpful. We achieved this quite fast as well.

When I started investing 13 years ago, the annual amount raised was a few million euros. We’ve evolved very rapidly. The success of Skype happened around 17 years ago. We spent time trying to understand how to build global companies. By now, we’ve internalized that as an ecosystem.

Sramana Mitra: I’d like to ask you a few questions about that Estonian ecosystem and about some metrics. How many people work in the tech ecosystem?

Andrus Oks: I don’t know at the top of my head. If you think about the whole IT industry, probably around 10%. The startup ecosystem is growing 30% a year.

Sramana Mitra: The unicorn that has come about, what have you learned? How have they leveraged the Estonian strength?

Andrus Oks: There is no specific industry that they come from. They are across various industries. Skype was a truly disruptive company. This is like the mental model that we have. Can we find the next Skype?

Sramana Mitra: To what extent is this mindset of being ambitious and disruptive present beyond Estonia and the rest of the Baltic region?

Andrus Oks: It is certainly present in Scandinavia. In our region, Sweden is the most mature market. They also have many unicorns there. We are learning from Stockholm and the other main cities in the region. It used to be that our region was mostly excelling with tech talent. This development has now happened for such a long time that we are now more balanced with commercial capabilities.

It’s interesting to note as well that the primary goal for European startups is to enter the US market or, at least, fundraise from the US. It’s not necessary anymore. They can get funded here in Europe. US VCs have well-established teams here in Europe. Otherwise, they’d miss those opportunities.

Our initial target was to send our portfolio companies to the US, especially on the East Coast. We wanted to put our portfolio companies in front of NASDAQ-listed companies. The main way that we have enabled this is we have helped them fundraise from US investors. Also London.

We’re not just looking at European and the US markets in terms of a network. We have done several deals with Japanese investors. Two of the top names have invested in our fund as well including Itochu. When we fundraised for the current fund, we tried to raise money from those LPs who are helping beyond money. They are not investing just to get the financial return, but they are interested to do deals with portfolio companies and, sometimes, deal flow companies.

Itochu is an industrial conglomerate. We really try to get those value-adding LPs into the fund. We have several in the fund. Mostly from Scandinavia but three from the US as well. It’s a soft-landing opportunity for us.

Sramana Mitra: We have been also working with the Indian ecosystem from the very beginning. We have had a lot of success with the Indian ecosystem. One thing we’ve learned is that if it’s an India-facing B2C company, that company should be raising money in India. There’s plenty of money available in India. If it’s a B2B company, the go-to-market strategy can be fully executed in India.

Only when it comes to enterprise deals, then comes the question of having a presence in the US. Enterprise-facing companies generally want to come to the US after validating in India. US enterprise customers are very savvy in buying new technology and innovation.

How would you summarize the perspective in your part of the world in those categories – domestic-facing B2C, small business facing B2B, and enterprise-facing B2B?

Andrus Oks: I see similarities. You can find those well-matching investors that can help in the respective markets in many places. It’s not just the US.

Sramana Mitra: You’re talking about the enterprise-facing B2B?

Andrus Oks: In that category, I agree that the US is usually the most attractive market. I wouldn’t be so limiting. The world is so diverse that you can find good partners and investors for your companies in many locations. It’s difficult to focus on Europe only. We have been successful in getting investors from the US, Europe, and Japan.

Sramana Mitra: Investments in European-market-facing companies?

Andrus Oks: It makes more sense to talk to more investors. Coming back to the point about the founders, it is related quite a lot to their ambition. In some cases, they really want to go to the US. A couple don’t want to go there.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Andrus Oks, Founding Partner of Tera Ventures
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