Why Investinor should keep its direct investment mandate

Power laws govern venture, and they govern VC fund returns too

Nikolai Astrup there are many reasons why Investinor should keep its direct investment mandate.

1. One main reason LPs invest in funds is to get access to co-investment opportunities.

By being invested in certain funds, LPs are invited and get preferential access to top investment opportunities that otherwise they would not have access to

LPs like this because while investing through funds is less risky -meaning that the chances to lose your money are lower- you have less of an upside potential -meaning that your chances to maximise your returns are also lower. With direct investments you can make 5, 10, 20x or even 100x your investment, but with indirect investments you are lucky if the fund gives you more than 3x your investment.

A combined FoF and direct mandate would enable co-investment opportunities in the next reMarkable, Superside, or PortalOne, Inc via funds like Startuplab, Alliance VC, or SNÖ Ventures, maximizing returns while reducing risk

Without a direct mandate, Investinor would settle for moderate risk but moderate returns, leaving significant money on the table.

2. A FoF mandate alone does not solve many founders problems today such as the scaling funding gap, the gender funding gap, the climate funding gap or the deeptech funding gap, just to name a few.

If every funding gap in Norway requires the creation of a new fund or the investment on a given fund, that would be unsustainable and not fit for purpose. Nordic funds today take an average of 2 years to reach first close, and another 2 years to final close -if able to close at all. By the time the fund is raised and ready to invest, half the companies in the space may already be gone

Investinor needs to maintain a direct investment team, separate from the indirect team, with the freedom and flexibility to invest in the most promising Norwegian companies at any given time -protected from shifting political tides. This team should also have the resources to provide matching capital at all stages, including scale up and growth stages

Successful examples abound, such as the EIFO co-investment in Corti €60M Series B round alongside other international growth investors, or Tesi, direct investor in ŌURA, today valued at $5 billion

Direct strategies like these are a win for startups, state investors, taxpayers and even politicians

3. Power laws governs Venture, and it governs VC fund returns too

This is, just as most startup investments return less than 1x the capital invested, most VC funds will also return equal or less than 1x. In young ecosystems, where most fund managers are emerging -managing three funds or less- power laws are even more pronounced.

There is a joke in the venture industry that goes: “How do you call a VC that does not return the fund?

It is called a VC”.

Meaning that picking fund winners is as hard as picking startup winners.

Let's keep both and instead focus on maximising the chances of Norwegians winning

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