Spotify's Progress is Significant For Northern Europe

In the previous post with Nexit Ventures we talked about the maths behind venture capital. In the post we basically outlined with the help of very basic level maths and assumptions why venture capitalists aim for ten fold returns on their investments. As the business of venture capital and risky investments is mainly a hit business, similar to the music industry - big hits and home runs are needed every time. In this light, there are a handful of companies in the region that have a huge significance to the valuation of the ecosystem itself.

Back in 2005 Ebay bought Skype for $2.6 billion. In early 2008, Sun announced it will acquire MySQL for $1 billion. Every now and then this region needs huge home runs to keep the ecosystem active and alive. Investors need it, but entrepreneurs and the countries need them too.

Spotify is currently one of the most highly valued companies from the region - if you focus on startups. According to the rumour, DST was looking to invest into the company at a $1 billion valuation. The company was founded in 2006 and is thus just 5 years of age. If the $1 billion valuation would hold true, the company has managed to add $200 million each year to its value.

Venture capitalists naturally need home runs to be able to run their business. They need the home runs to be able to show LPs that there's a market for investing and pushing money into early stage companies.

Entrepreneurs need these home runs too. They need role models and success stories. Most of all, entrepreneurs need the investments venture capitalists do into the region through bigger success stories.

Essentially, one could conclude that it's these home runs that to a certain degree make the whole ecosystem tick. Naturally there are huge possibilities in companies with smaller growth, but its the larger ones that make the world notice us and realise that there are world class things taking place there.

-----
This post is part of a series of posts supported by Nexit Ventures.

Nexit Ventures is a mobile venture capital firm focused on wireless technologies and services. Leveraging its extensive network in the global mobile marketplace, Nexit invests primarily in Nordic and US-based earlystage companies with products and services for a global market. For Nordic mobile companies, Nexit provides a bridge to Silicon Valley markets and exit opportunities.

Share to help us grow the ArcticStartup community!

blog comments powered by Disqus