Fund of Funds profile: byFounders

In November last year, we sat down with Tommy Andersen, founder and managing partner of byFounders, which is part of Molten’s Fund of Funds programme. This is as part of an ongoing series profiling our rich and diverse portfolio of seed fund partners backed by Molten’s Fund of Funds.

Tommy Andersen raised the first byFounders fund in 2017 with Eric Lagier—the firm’s name indicating that both partners have a founding and entrepreneurial background. Four years later, in late summer 2021, the team launched their second fund - both of which Molten has invested in. Together, the two funds total €210 million with currently 45 portfolio companies. Crucially, says Andersen, byFounders is not just a financial institution, but also an “operational fund that offers more than just the initial cheque.”

Based out of Copenhagen and Stockholm, Andersen tells us that their primary mandate is to invest in the Nordics and Baltics (increasingly known as ‘the new Nordics’) but they “also invest in Nordic founders based elsewhere, from London and Berlin to the US.”

In terms of the makeup of the firm itself, Andersen says: “We’re a small team of 11, which is split nearly 50/50 male and female, and we’re quite diverse when it comes to nationality too: three Swedes, three Danes, one Norwegian, one Australian, one Finn, one German and one French. So it’s an interesting melting pot.”

But its reach and influence flows much further. The byFounders Collective is a group of roughly 50 accomplished entrepreneurs that help with deal flow, offer operational support, board seats, and advisory roles, and help with exits. They also open their professional and personal networks to the portfolio companies and to potential new deals. This collective is a key differentiator for the fund and is very helpful to the portfolio companies.

Primarily an agnostic tech fund, Andersen says that around 80% of its overall investments are within the software services and data space. Fund II, however, also has an impact-awareness layer, which they hope to grow to be an equal split between pure tech investments and “companies that also have a radical or higher aspiration to solving major issues such as CO2 reduction and sustainability.”

Have the firm’s values evolved since the first fund was launched?

“Absolutely,” replies Andersen, firmly. "Why? At byFounders, we've always been proactive and forward-thinking in our approach. We recognized early on the growing importance of impact and ESG, not only from our LPs like pension funds, public money, and professional funds, but also as responsible players in the global market. This foresight allowed us to stay ahead of the curve and be among the frontrunners in adopting an impact-aware approach within the VC industry."

Andersen continues, "We've also been eager to explore new territories, leading to an expansion of our fund's mandate. Our Collective now includes not only startup founders but also operators from scaleups and larger companies. This evolution necessitates investment professionals with a diverse range of skills, such as the ability to analyze impact-driven business models in climate tech or the next paradigm of internet and frontier tech like AI."

"By being proactive in addressing sustainability, ESG, and impact, we position ourselves as industry changemakers, creating a more resilient and future-oriented portfolio, while setting a higher standard for the VC ecosystem as a whole," concludes Andersen. 

Picking the right investments

Asked about the qualities byFounders look for when making investments, Andersen points to the 8Ts, listed on the byFounders website: Team, TAM (Total Addressable Market), Timing, Traction, Tech, Transformational, Transparency and Tomorrow. “We assess market size, competitors, timing, and transformative potential, as well as whether the company has a place in a future megatrend,” Andersen explains.

Then we get into the difficult subject of nailing down trends—why they happen and why following them is useful. Andersen thinks the veracity of ‘megatrends’ is grounded in what’s fuelling them. “I think there's a lot of companies these days that are influenced by public legislation and regulation, or the unlocking of a new capability somewhere else in the landscape. As long as they’re tangible and provable, each can create a surge of businesses either starting up or pivoting to a particular direction—that’s how megatrends begin.”

And then, as always, there’s the team. “In any company, you can have half-baked team do good stuff, if they fit together and can work together. But they can also destroy a company. Good teams, on the other hand, know how to pivot as they go along and thus create long-term sustainable success in their businesses”. 

Onto the future element, Andersen tells us: “The Tomorrow aspect is becoming more and more important for any company. How is the company contributing to a better tomorrow? It’s paramount to us that you have a conscious approach to driving the impact of your company. We don't invest in companies with a net negative impact, so we need to see that you continuously strive to do better.”

Have the 8Ts evolved? No, but the method by which they are applied has. “For Fund II, we've initiated a stronger collaboration with the LPs (Limited Partners) who seek more insight into what we're doing. They are also using us as a ‘radar’ to bolster their own deal flow. We strive to offer the LPs the involvement they want by providing a sourcing channel for their direct investments. Collaboration between us and our LPs has become much stronger.”

Working with Molten

So often we write from the perspective of the GP, but the beauty of our Fund of Funds programme allows us an insight from the other side. But what do our GPs make of Molten as a limited partner?

“It’s been great,” smiles Andersen. “We've been able to bounce ideas off each other about what to invest in, what trends we're seeing and so on. Having a British investor also gives us a perspective we wouldn't have otherwise, since most of our other investors are Nordic.” “LPs are a rare bunch,” he continues. “They tend to co-invest with people they know and like, getting good references from them.”

Molten first invested in byFounders in 2019. The relationship began with Molten’s interest in the region and keenness to partner with a prominent Nordic VC. Since then, we’ve seen a period of intense highs in 2021 and – later – the 2022/23 correction. It’s a trying time for those invested in the European technology market.

But are there any benefits? Andersen thinks so. “Particularly with the current crisis, ours is likely to be a longer-term relationship than anticipated. Molten has been extraordinarily helpful and we have had similar advanced dialogues with our LPs throughout Europe. Some of these dialogues would never have materialised without Molten leaning in and providing access to their networks. It would be foolish to say we didn’t need more of that.”