From Business Angel to Rocket Science: Ted Elvhage on Investing, Innovation, and the Future of Deep Tech — sTARTUp Day - Most Startup-Minded Business Festival

From Business Angel to Rocket Science: Ted Elvhage on Investing, Innovation, and the Future of Deep Tech

Ted Elvhage, a pioneering investor with a portfolio spanning over 45 companies, shares his journey from enterprise software entrepreneur to co-founding Stockholm Business Angels.

In this candid interview, Ted delves into the art and methodology of early-stage investing, the importance of learning from diverse industries, and why Europe's innovation ecosystem holds untapped potential.

From tales of adventurers sparking revolutionary ideas in space tech to insights into the future of AI and deep tech, Ted's story is as inspiring as it is thought-provoking.

This interview was conducted by Rene Rumberg, a member of the sTARTUp Day communications & marketing team.

What inspired you to venture into the world of investing, particularly in early-stage and scale-up companies, instead of getting into real estate or space technology?

I was running my own company, selling enterprise software. On my way, I recruited one person who told me about Swedish Venture Capitalist Associations, which have a lot of money, and that we should meet them and sell our software to them. That’s what I did.

Then, one day, I met with a guy from the association who was a professor at KTH, Sweden's largest technical university. I called him up, and I discovered that he’s also a business angel, and we met. He told me that he could not buy my software, it’s his portfolio software that needs it. I asked how it works, and he explained to me that he invests in his portfolio companies, and if they need my help, then they will buy it from me because he didn’t have any money anymore since he had put all his money into this company, so I need to go to them.

If I asked what exactly business angels are doing, then he told me about it, and it turned out that he had written 20 books about how to do best practice venture capital in the early stage. He spends half of the year in San Francisco, interviewing people, and 2nd half of the year in Sweden, writing books.

When he told me what he was doing, I told him to forget about the software. I wanted to learn what he was doing, so I offered to do anything for free: marketing, sales, negotiations, shopping, making coffee, everything until you taught me what you know. He started laughing and asked if I would really work for free. I told him that yes because my business was generating money in the background.

That was the beginning of Stockholm Business Angels, and from there on, I was hooked.

Another thing he taught me about investing was that investing in the early stages is not a lottery ticket but a methodology and research that he pointed out to me, such as how to predict the future, where it turns out that the experts are usually wrong and the masses are usually right.

Also, people like Nassim Nicholas Taleb, the Black Swan author, have said that humanity doesn’t wanna have calls and losses, but they don’t mind winning a little bit every day and then having a giant loss, which would be a minus. But if you know that, you can actually turn it around.

Finally, you have people like Daniel Kahneman, the author of Thinking, Fast and Slow, who tells you a story about how it’s not risk aversion people who are bad, but loss aversion. That’s why people buy lottery tickets - you don’t mind losing one or 10€ on a lottery ticket, all though you are not gonna win, but you will read about people who are winning. That’s why, if using those theories properly, you have an advantage when investing early stage.

That's how I came to think about doing that. We started Stockholm Business Angels in 2008, the second fund in 2014, and our third fund, Scitech.
However, these days, I’m only doing space- & defense- tech personally.



Could you share a memorable success story or learning experience from your portfolio of over 45 companies?

(Laughing) We can spend about two days talking about all the mistakes I’ve made and the money I’ve lost. I was at dinner in Silicon Valley a few years ago, and I happened to sit next to a guy named Tom, who told me how he’s an adventure and how he did the Three Poles Challenge in the book of Guinness Records - climbed the Mount Everest, visited the North Pole with his wife, and also visited the South Pole, all unsupported. While doing this, they were at the lower levels of Mt. Everest, and his wife looked up at the stars, pointing somewhere. Tom asked his wife what’s up, who told him, ‘We need to go there!’, pointing towards the summit of Everest. Tom’s first thought was that they’re gonna die there because the hardest part of climbing a mountain is not getting up but getting back down alive. Tom realized that if something is gonna happen there, like getting sick, they’re both gonna die there.

After climbing Everest, he got a new idea - he wanted to climb the highest mountain in our solar system - Olympus Mons on Mars. So they went back to Silicon Valley and started building the rocket engine, including SpaceX, which has a limitation that requires you to go up at the speed of 27000 km/h to get out of the Earth's gravity field, and when you’re at Mars, you somehow need to get back to Earth again. So, they invented a new propulsion system, something that NASA planned to do when they went to the Moon in the 1960s, reinventing it by looking at things on the internet to understand how it works and eventually creating an engine that can take people to the Moon and Mars back-and-forth.

So here I am, sitting next to this guy, thinking, ‘What does he even know about space and technology?’, but then I learned that he’s a technology genius, as they put the internet up in the base camp, which sounded impossible and later, he invented something called Google Glasses, because they had to have their hands free while climbing, but still film it. So here you have someone who has no idea what is happening in space and decides to build a rocketship to go to Mars and send up more satellites as a business case.

The lesson I learned from this story is that you don’t need to be born in that industry, similar to Richard Branson, who understood that you don’t need people from the industry when you’re building a new airline because you want people from the outside, who can look at things from the different perspectives. When you see disruption, you see it coming from people outside the industry, not those in the industry. You need people from the industry as well, but normally, it comes from someone from the outside who wants to do something different.

I learned that from Tom and his wife, Tina. The speech I’m giving at the sTARTUp Day, “Rocket science is not rocket science anymore,” - these are his words, and that’s when I realized that I can be an investor in rocket science!

How do you see the investment landscape evolving in Europe and Silicon Valley in the next 5–10 years?

I’m betting on the big change, which is that Europe will step up when it comes to Deeptech. Europe has some really cool things going on, which means that we do not need to go to Silicon Valley to get things done. We have some proven successes. Estonia has had some tremendous success, and the same goes for Sweden. We have a growing ecosystem and support network, plus we have a lot of support from governments, a lot of subsidies coming in, and ambitious founders. We’re seeing people coming out of universities, learning to be founders, and matching with 2-3rd-time founders, which is a very powerful combination.

With the unfortunate invasion of Ukraine, we see the adoption and high innovation in Europe when it comes to defense tech, for instance. We’re learning things right now in Europe that the rest of the world is not doing it. We are on the right track. Unfortunately, we’re becoming more nationalistic when it comes to geopolitics, but what it also means is that our great entrepreneurs, who have moved to the US to gather experience, will return here at one point. So, the only thing we need to do is not to screw it up, and then Europe will be the melting pot for innovation, especially in deep tech. That’s what I am betting on. We can stay in Europe and take over the world. We still need to shape up, because we have been falling behind. We like to compare ourselves to the US, but in my opinion, China is a big threat in terms of competition.

Coming back to my earlier thesis about risk aversion. Another thing we have is a fairly good standard of living in Europe. We don’t have to risk that much compared to Americans, which means that people are willing to take higher risks not to lose something rather than taking risks to gain something, and right now, we’re risking losing our advantage and sovereignty in Europe. This should be the wake-up call: smell the coffee and get the business. We have all of that that is needed to be successful!

What advice would you offer to first-time founders looking to attract investors?

There are many I could give, but the best thing I’ve ever learned is that ‘Ask for the money, you get advice. If you ask for the advice, you’ll get the money.’

That is true. What it means is that if you go around as a founder and ask for money, but you haven’t done it before, you won’t get it because people won’t trust you. They don’t know who you are, so they’ll give you advice instead.

If you go around, build relationships, and ask for advice, those people will give you money.

For instance, if you’re building a startup, and you’re doing your pitch deck, get some people onboard - business angels, other founders - a small advisory group, and ask them what they think about your pitch. Take that feedback and ask who else you should pitch to get some advice and feedback. If someone tells you ‘It’s a great pitch, but I’m not sure if I’m willing to invest in your idea just yet’. Then you say ‘I didn’t ask you to invest, I just wanted your feedback’, you’ll see them getting pissed off and say ‘What do you mean, I cannot invest if I wanted to?!’. Then you say ‘No this was just a feedback session and I’m really happy about it. But if you want to invest, we can look into it as well, but this was just about feedback!’.

This is the best advice I could give. It’s like the art of selling without selling.

With the rapid rise and adoption of AI across industries, many view it as the defining technology of our era. Do you believe AI will continue to dominate the attention and funding of investors, or do you foresee another emerging technology or sector rising to compete with AI in terms of attractiveness and impact?
AI is like software—it will trickle down everywhere. It is not good or bad; it’s just about how you use it.

AI will have a hype cycle similar to other things before - it comes up and comes down.

AI is a horizontal technology; it will be everywhere. However, AI by itself won’t be enough. You need physical interaction, or else you could live all of your life virtually. So, I think we need a combination of hardware and software. Most of the easy software and hardware stuff has been done. AI got the Nobel Prize for helping to predict the protein you could get, which is fantastic, as it was something we couldn’t do as human beings. We’re now doing a lot of material and physical experiments with different AI models to figure out what new materials we could come up with. AI is here to stay, and it will be part of everyone's daily lives, nothing more, nothing less. But it won’t change the real problems we’re having. I think the next thing we will see is that… VCs used to come from Silicon Valley, mostly focusing on computers and hardware, then it became software, and now it has been Software-As-A-Service (SaaS) for the longest.

Coming back to AI, it comes down to how many more models you can create and the data you can get. To do that, you need hardware and interaction with the real world. So, I believe that deep tech is the way to go. Energy is also another important issue—how do we get sustainable energy?  

National and regional security. Global food security. You can have as much AI as you want, but if people can't eat, you'll have a revolution. If you have too big of an income gap, and we don’t follow up on the sustainable development goals, which is right now taking a backseat temporarily, even climate is taking a backseat, even though we have half of California in flames right now. Looking at that, space infrastructure technology and applications, or deep tech in general, will be big.
Deep tech is about finding good solutions for very difficult problems with large markets, and Europe is the perfect place for that—we have universities, research, people, and entrepreneurs.

We just need to make people understand that even if you dreamed about space when you grew up and thought you could never do anything in the space industry, you actually can! Thanks to AI and 3D printing, you can! It’s not rocket science anymore. Deep Tech is not either. As an entrepreneur, you can team up with AI, professors, researchers, and students from universities and build some really good ventures.

Peter Thiel wrote in one of his books that the world wants flying cars, but all we got was the 140 characters on Twitter. With deep tech, maybe we will get both one day. AI will play a big part in that, alongside hardware, software, and people.



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