20 VC Morten Lund on Skype, Bankruptcy, Fintech and Why Banks Are Full Of Lots Of Stupid People Doing Nothing



In this episode of "20 Minutes VC," host Harry Stebbings interviews venture capital icon Morton Lund, renowned for his seed investment in Skype and involvement in over 100 startups, such as Air Help and Tradeshift. Lund shares his journey from a digital advertising agency to becoming a significant figure in tech investment, discussing the origins of his Skype investment, his subsequent bankruptcy, and the lessons learned from both experiences. He also delves into his current endeavors with Coders Trust, aiding coders in developing countries, and his excitement about the potential of financial technology, highlighting his role in the growth of Tradeshift, a company that revolutionized electronic invoicing and raised over $200 million. Lund emphasizes the importance of curiosity, stamina, and the ability to secure large clients as key to startup success. Furthermore, he reflects on the European fintech landscape and the necessity for startups to understand finance, while also expressing his personal ambition to win a Nobel Prize through his educational initiatives.

Summary Notes

Introduction to the Podcast Episode

  • Harry Stebings introduces the podcast 20 minutes VC and wishes listeners a Happy New Year.
  • Harry announces an exciting lineup of guests including Ariel Zuckerberg, Tim Draper, and Gil Pancina.
  • Morton Lund, known for his seed investment in Skype, is the guest on the show.
  • Morton has founded and co-invested in over 100 startups, such as Air Help, Bullgard, Maxton, and others.
  • The interview will cover Morton's investment in Skype, his financial journey, and his current work with Coders Trust and Tradeshift.
  • Harry mentions a two-minute takeaway summary available on his website and Medium page.
  • Matamark is thanked for providing data and analysis for the episode.
  • Harry encourages listeners to read Mattermark daily as a New Year's resolution.

You are listening to the 20 minutes VC with your host, Harry Stebings. And once again, a very happy new year to all of you.

This quote sets the welcoming tone of the podcast and introduces Harry Stebings as the host.

And joining me today is a legend of the industry and a personal hero of mine. It is, of course, Morton Lund, best known for his seed investment in Skype, and he's also founded and co-invested in more than 100 startups, including the likes of Air Help, who you might recognize as we interviewed their CEO, Nicholas Michelson in episode 32.

Harry introduces Morton Lund, highlighting his achievements and relevance to the podcast's audience.

Morton Lund's Entry into Technology and Investing

  • Morton Lund got into the technology industry during his university years before being expelled.
  • He and his friends utilized computers to create direct marketing materials, leading to the formation of a digital advertising agency.
  • The agency became one of the largest in Scandinavia and was later sold to Leo Burnett.
  • With some money from the sale, Morton began building companies and created a small incubator funded by a local bank.

Yeah, well, so basically, when I was visiting university before I got kicked out, I had a couple of friends where we were playing with just the maximum capabilities of the computers in the early 90s was to do mail merge, do direct marketing and use the computer basically to make pre made direct marketing, which was not possible before.

Morton describes his early ventures into technology and marketing during his university days, which led to the creation of a digital advertising agency.

And then I had a little bit of money in my pocket and I started looking at building companies instead of building websites for others.

After selling his digital advertising agency, Morton shifted his focus from service-based work to creating and investing in companies.

Morton Lund's University Expulsion and Annoying Questions

  • Morton Lund was expelled from university due to his impatience and persistent questioning of the relevance of the curriculum.

Oh, it was mostly because I was annoying, because I kept asking questions about the relevance of whatever they were teaching us.

This quote explains the reason behind Morton's expulsion from university, highlighting his inquisitive and impatient nature.

Skype Investment and Bankruptcy

  • Morton Lund is often asked about his investment in Skype and his experience with bankruptcy.
  • Skype came about through Morton's connections with Nicholas and Janus while working on a project for Telo two.
  • Morton was initially approached to invest in Kazar but was skeptical due to its similarity to iTunes and lack of negotiation power with record labels.
  • During Kazar's legal troubles, the idea for Skyper (later Skype) emerged as a Wifi sharing network but was initially rejected by investors.

Oh, yeah, of course. That's major flashes.

Morton acknowledges that his involvement with Skype and his bankruptcy are significant and well-known parts of his career.

And there we met Nicholas and Janus. They became bosses of that project while they worked at Taylor two. And I built a good relationship with them and they ended up calling me whether I wanted to invest in Kazar.

Morton recounts how his relationship with Nicholas and Janus led to his investment in Skype, starting with an initial offer to invest in Kazar.

But I was just helping on a business development level and some guys came up with the idea of making something called Skyper, which should be a Wifi sharing network.

Morton describes his early involvement in the business development of Skype, which was conceived as a Wifi sharing network named Skyper.

Early Involvement in Skype

  • Morton Lund provided initial funding and helped with fundraising and branding for Skype.
  • He supported the team by paying for their apartments and received stock in return.
  • Skype gained significant traction, reaching 300,000 users in just 20 days after launch.

"And then I helped on fundraising, on building the brand, and I basically paid the guys apartments and got some stock out of that. And then the thing exploded as soon as it was launched. It was 300,000 users after 20 days."

This quote explains Morton Lund's role in the early stages of Skype and highlights the rapid user growth following the launch.

Return on Investment

  • Morton Lund's initial investment of $50,000 yielded a return of over $50 million.
  • He acknowledges the financial gain and the social opportunities that arose from his involvement with Skype.

"Yeah, I'm not sure exactly how much. I think actually it was a little bit more. I put in their apartments, but I ended up getting a really sweet deal and everybody was. I was really. I mean, the money was one thing. Another thing was suddenly to know invited to stuff that a normal guy from Denmark was never invited to."

Morton Lund reflects on the return on his investment and the unexpected social benefits that came with the success of Skype.

Highlights and Cultural Impact of Skype

  • The success and functionality of Skype were primary highlights for Morton Lund.
  • He takes pride in Skype becoming a verb and its clean, user-friendly interface compared to competitors like ICQ.

"I think it was when it took off and it actually worked because everything else was a little muddy with selling and blah, blah, blah. And I think then the highlight is, of course, anytime today you see a movie or anything where Skype is referred to as a verb."

Morton Lund expresses pride in Skype's cultural integration and its recognition as a common term for video calling.

Personal Development through Skype

  • Morton Lund's involvement with Skype improved his international perspective and English language skills.
  • He acknowledges his shortcomings in English during the early days of Skype.

"It was short, I think, becoming international because my english was so bad in the beginning of Skype, that they didn't want me to be in conference calls because my english was so crappy."

This quote shows Morton Lund's personal growth in communication skills as a result of his work with Skype.

Bankruptcy and Personal Change

  • Morton Lund experienced a wake-up call with bankruptcy after a series of successful ventures.
  • The bankruptcy forced him to refocus, reassess his career, and gain a deeper understanding of business areas outside of finance.

"So getting restarted and have nothing was very today. I mean, I thank God that it happened because I was losing it a little bit."

Morton Lund reflects on the humbling experience of bankruptcy and how it helped him to regain perspective and drive.

Importance of Financial Understanding

  • Morton Lund emphasizes the importance of financial literacy, even for those outside the finance industry.
  • He regrets not understanding finance earlier but acknowledges it may have impacted his creativity.

"Well, it's very hard for me to say right now because everything I do is financial technology and financial products, and there it's everything."

Morton Lund discusses the centrality of financial knowledge in his current work and its general importance.

Criteria for Impressive Individuals

  • Curiosity and stamina are key traits Morton Lund admires in people.
  • The ability to absorb information and persist through challenges is essential in the modern internet era.

"I think it's always curiosity and stamina. I mean, you have to be endlessly curious and be able to absorb endless amounts of input, because that's the new thing with the Internet."

Morton Lund highlights the importance of curiosity and resilience in successful individuals, given the vast amount of information available online.

Admiration for Successful Founders

  • Morton Lund admires founders like David Helgason from Unity and Reid Hoffman for their ability to see projects through multiple phases.
  • He values the determination and commitment required to bring ideas to fruition.

"I would say David Hilkeson from unity is one of mean, really, really a guy who took it all the way through many faces. And then of course Reed Hoffman, I mean, the superstars."

Morton Lund expresses admiration for founders who have demonstrated the ability to lead their companies through various stages of growth.

European Fintech Scene

  • The transcript ends before Morton Lund can elaborate on his involvement in the European fintech scene.

"And you mentioned about being immersed in european fintech"

This quote introduces a new topic that Morton Lund is involved in, but the transcript does not provide further details.

Tradeshift Origins and Focus

  • Morton Lund discusses the origins of Tradeshift and its current focus.
  • Tradeshift was conceptualized during a financially challenging time for Morton.
  • The company was born out of the realization of the immense potential in financial technologies.
  • Morton was approached by Christian and his partners with the idea of digital invoicing for the Danish government.
  • They decided to create a cloud-based platform for electronic invoicing for governments and large corporations.
  • Tradeshift has raised over $200 million and has seen Christian become highly influential in the field.

"Well, so trade shift was when I was in this mood of being empty on cash and they picked up the art in my house and I just barely survived staying in my house."

This quote explains the personal financial struggles Morton faced before the inception of Tradeshift and sets the stage for the company's origins.

"But something that was like 1015 times larger was financial technologies."

Morton identifies the vast potential and market size of financial technologies compared to the internet as a media business.

"And then these brilliant guys, Christian and his partners, came to me and said that they built the digital invoicing infrastructure for the danish government."

Morton introduces Christian and his partners as the technical experts who proposed the initial idea that led to the creation of Tradeshift.

Key Drivers of Tradeshift's Growth

  • The ability to secure large clients was crucial for Tradeshift's growth.
  • Convincing major organizations to adopt Tradeshift's platform was a significant achievement by the founders.
  • Large clients include DHL, Nike, and the British NHS.
  • The concept of usage being a key driver in most companies is highlighted.

"The ability to close huge clients. Because the whole equation wouldn't work unless you had some really large companies who would buy into this vision even though it was a very unstable young company."

Morton underlines the importance of acquiring major clients for a startup's success, emphasizing the founders' skill in securing such clients despite the company's instability.

Future Roadmap for Tradeshift

  • Tradeshift is transitioning into an operational phase.
  • The focus is on continuing to develop the product and becoming a network business.
  • The goal is to simplify invoicing processes for suppliers dealing with multiple large corporations.
  • Tradeshift aims to leverage network effects as more suppliers adopt the platform.

"I think that tradeshift is now in a phase where it's what most people refer to, it's an operational company."

Morton outlines the current phase of Tradeshift, indicating a shift from startup to operational stability and product development.

"There's a huge network effect and when a huge corporation rolls out, trade shift to all their suppliers, a lot of the suppliers are huge companies and then they will start seeing hey, wow, if we do it like this."

The quote describes the network effect that Tradeshift is aiming to capitalize on, where the adoption by one large corporation can influence many other companies.

European Fintech Community

  • Morton compares the current European fintech community to the early internet era of the 1990s.
  • He notes that banking legislation is becoming more accessible and that there are significant opportunities as traditional banks are slow to innovate.
  • The potential for internet banking platforms to offer more services and act as a media is discussed.

"I think it's very equivalent to all the early ninety s from the browser."

Morton draws a parallel between the nascent stage of the European fintech sector and the early days of internet browsers, suggesting a similar growth trajectory.

"And the banks are just sleeping and they're locked in, in stupid contracts with IPM managing their whole technology, all of that is going to unwind and it's just one big opportunity."

Morton criticizes traditional banks for their lack of innovation and suggests that the current state of the industry presents a significant opportunity for disruption.

European Companies and Silicon Valley

  • Morton discusses the necessity for European companies to eventually move to Silicon Valley for successful exits, especially for acquisitions over a billion dollars.
  • He mentions that while building a business in Europe is feasible, the most significant exit opportunities are in Silicon Valley.
  • Recent changes include global players like Alibaba and Tencent becoming capable of acquisitions, potentially setting up M&A teams in San Francisco.

"Well, endgame. You have to take a plane to San Fran at some point to sell your company, because nobody can swallow a company in Europe over a billion dollars."

Morton emphasizes that for large-scale exits, European companies must engage with Silicon Valley due to the lack of European entities capable of such acquisitions.

"But now, remember, there's a big change in the last two, three years where Alibaba, Tencent. A lot of these companies are the largest companies in the world, so they're going to also be able to buy stuff, but they're probably going to put up their M A teams in San Fran as well."

The quote acknowledges the rise of non-Western tech giants and their influence on the global acquisition landscape, potentially affecting where European companies seek exits.

The Unicorn Obsession

  • Morton comments on the obsession with achieving a unicorn status among founders.
  • He warns against making poor decisions in the pursuit of reaching a billion-dollar valuation.

"It becomes nearly an obsession for many founders to reach that billion dollar level."

This quote reflects Morton's view on the fixation many startup founders have on reaching a valuation of one billion dollars, known as 'unicorn' status.

Company Valuations and Revenue

  • Companies often aim for billion-dollar valuations, but these are not sustainable without equivalent revenue.
  • A high valuation must be backed by substantial income to justify the investment and the company's market position.

I think a lot of companies forget that one day the billion dollar valuation is not justified unless you have an equivalent revenue.

The quote emphasizes the importance of having actual revenue to back up a company's valuation, highlighting the disconnect that can occur between valuation and financial reality.

Career Ambitions of Morton Lund

  • Morton Lund aspires to win a Nobel Prize before he turns 100 years old.
  • He is actively working towards this goal through his involvement with Codis Trust, focusing on education and student loans in the third world.

So basically, just to put the bar really high, I would really like, before I'm 100 years old to have a Nobel prize.

Morton Lund expresses his lofty personal ambition of winning a Nobel Prize, setting a high standard for his career objectives.

Codis Trust Initiative

  • Codis Trust aims to improve education and provide student loans to individuals in the third world.
  • The program educates hundreds of people monthly, allowing them to increase their hourly wages significantly.
  • The initiative is designed to be profitable and sustainable, ensuring that loans are repaid and that the best people manage the project.

And we're working really hard with Codis Trust to try to use education and student loans in the third world for people who are on freelance portals to get in that direction.

Morton Lund describes the core mission of Codis Trust, which is to leverage education and student loans to help people in developing countries improve their earning potential through freelance work.

Economic Empowerment and Middle Class Growth

  • Codis Trust's efforts contribute to the creation of a blossoming middle class in developing countries.
  • Morton Lund contrasts the stagnant middle class in Scandinavia with the dynamic growth seen in Asia and other regions.
  • The initiative helps individuals transition from low to higher wages, enhancing their quality of life and economic status.

Yeah, yeah. But that's the whole mean. I'm a little bit sad on my kids behalf that they're not seeing the blossoming middle class that I grew up in.

Morton Lund reflects on the socio-economic changes and expresses a desire for his children to experience the vibrant growth of the middle class that he witnessed growing up in Denmark.

Personal Reflections and Experiences

  • Morton Lund shares his childhood experiences in Denmark, where the middle class was thriving and people often celebrated new purchases.
  • These personal anecdotes provide context for his passion for fostering economic growth and a thriving middle class in other parts of the world.

Yeah, 100%. I would always be invited to the neighbor to see their new food processor or whatever crap they bought.

The quote provides a glimpse into Morton Lund's personal history, where the acquisition of new items was a source of communal interest and indicative of a prosperous middle class.

Quick Fire Round

  • Morton Lund's favorite book is "Shantaram" due to its depiction of a man's extraordinary experiences.
  • A career highlight for him is the invention within a new factoring company he launched.
  • He enjoyed a NECA event with Richard Branson, which focused on climate change and exchanging knowledge.
  • The investor he respects and admires most is Tim Draper.
  • His preferred reading material is The Economist.
  • Morton Lund's recent investment in Hippocorn, a platform for deal-making, is a source of pride.

Because it's just a man who went through crazy shit.

This response to the question about his favorite book, "Shantaram," conveys Morton Lund's appreciation for stories of resilience and personal journey.

Hippocorn: A New Venture

  • Hippocorn is a platform that acts as a placeholder for deals, allowing individuals to be compensated for their contributions to a deal.
  • The system is designed to reward people for introductions, fundraising, or other forms of help in deal-making.
  • Hippocorn has already facilitated 15 deals and offers a solution for those in corporate jobs who want to engage in entrepreneurial activities.

Hippocorn, where we're a placeholder for deals because I've tried so many times to help somebody or ask somebody for help, and then there was no way to compensate them.

Morton Lund explains the concept behind Hippocorn, highlighting the need for a system that allows for fair compensation for those who contribute to the success of business deals.

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