Creandumâs Carl Fritjofsson on the Differences Between the Startup Ecosystem in Europe and the U.S.
On this episode of the LA Venture podcast, Creandum General Partner Carl Fritjofsson talks about his venture journey, why Generative-AI represents an opportunity to rethink products from the ground up, and why Q4 2023 and Q1 2024 could be "pretty bloody" for startups.
Creandum is a European VC firm that invests in early stage startups â typically at the âlate Seed to Series Aâ stage. The firmâs investments are focused across six major buckets: fintech, health, climate, SaaS, infrastructure and consumer internet.
Some of Creandumâs most prominent investments include Spotify, Klarna, and Trade Republic.
âWe started to build our own confidence that what we were doing was actually pretty good,â Fritjoffson said. âI think we've come now to a position where we've seen enough high quality companies throughout the years, we know what good looks like and we've also seen the best of the best firms have invested in some of our companies and we've sat along boards with them, so we come to learn from them as well.â
Working in the VC industry for the last decade, Fritjofsson has developed a unique approach to identifying opportunities for startups. His approach starts with recognizing that there are only so many types of large software categories that exist in the world (CRM, ERP, and Cloud Computing, to name a few)
âEach one of them are, to some extent, reinvented every X number of years. The reason why they are being reinvented is because the underlying core infrastructure has innovatedâ and the âwinners of the last cohortâŠdo not innovate as fast as the market expectsâ he said.
Fritjofsson thus spends a majority of his time waiting for significant inflection points- those moments when new technology comes along that fundamentally changes an individualâs experience interacting with a software product or service.
Take Generative AI for example. Fritjofsson believes that recent innovations represent a âhorizontal waveâ that impacts each of the six investment buckets mentioned above. He further believes that AI changes how we âengage and interface with softwareâ, which necessitates fundamentally rethinking the way companies service a market
As Fritjofsson puts it, âI actually think that more or less every software category can be rewritten with a Generative AI-first approach. Now the question is, of courseâŠhow much better does that experience become?...I'm not necessarily convinced that it'llâŠdisrupt every software category in the world, but I can at least build excitement around the potential.â Where thereâs an inflection point, thereâs opportunity.
Despite the present opportunity with AI, Fritjofsson described a bleaker outlook for the cohort of startups that raised their last round of financing in 2021.
Fritjofsson believes that âQ4, Q1 is gonna be pretty bloody.â He reasons that many startups cut costs in Q1â23 and Q2â23 to avoid coming to market when investor sentiment was negative. While these startups may have prolonged their runway, they likely did so at the expense of growth, which new investors will not like. As Fritjofsson puts it, Q4 â23 and Q1â24 will âbe the moment of truthâŠwhere there's gonna be a lot of bodies in the wake because a lot of firms have slowed down.â
Given his experience as a founder and now a VC, Fritjofsson advises younger folks to veer away from entering the world of venture too early.
âI think there's a really dangerous path when you get stuck in venture too early in your career,â he said. âBecause it's very hard to climb the ranks in a venture firm. Most venture firms are small and it's not a super clear path on how you become a partner.â
While heâs content in his own role, he cautions others who view a junior role at a VC firm as a stepping stone to an operating role inside an organization. The skill set, while valuable, is not necessarily transferable.
Finally, Fritjofsson shared the similarity he sees between the startup ecosystems in Europe and Los Angeles.
Homegrown success stories like Spotify helped Europe, as a startup ecosystem, âbuild confidence and trust their own intuition.â
In Fritjofssonâs view, LA is similar in that respect. It is significantly smaller than Silicon Valley, which simultaneously creates âa little bit ofâŠinsecurityâ but also a willingness to âprove ourselves.â
While Creandum and the team are constantly evolving, Fritjofsson has experienced various instances where the team won competitive deals by âthinking outside the box.â
One example he points to was a time when Creandum was looking to win over Better Stack, a company in the observability space and said the firm was up against big names in the U.S. and Europe.
One of their products is a monitoring solution. Fritjofsson said Creandum created a sub page on the firmâs website, which looked like they were using the companyâs product.
âWe were building our conviction for the company,â he said. âObviously the founder loved this. No one else did this. This was unique to him and he will remember it for the rest of his life, and we ended up winning the deal. I'm not sure if we won it because of that, but it definitely played to our advantage.â
dot.LA Reporter Decerry Donato contributed to this post.
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This podcast is produced by L.A. Venture. The views and opinions expressed in the show are those of the speakers and do not necessarily reflect those of dot.LA or its newsroom.
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