EQT Enlists AI Partner to Find Startups That Will Rule the World

(Bloomberg) -- EQT Ventures co-founder Hjalmar Winbladh thinks he has an answer to the question of how Europe will be able to produce a global leader in artificial intelligence. It’s artificial intelligence.

Investment assessments at the venture-capital arm of Swedish private-equity firm EQT Partners are made by Winbladh, other partners -- and Motherbrain, a software-based tool that crunches data to identify the most promising startups in Europe. Winbladh, whose company is part-owned by Sweden’s billionaire Wallenberg family, said Motherbrain gives his fund an edge in the “extremely conservative” venture-capital business.

“We are facing a technology shift that is as big as the internet, and that’s AI,” Winbladh said in an interview at EQT’s headquarters in Stockholm. “The question is not if it will happen but when, and how.”

While venture capital investments in Europe have increased, they still lag the funding provided to U.S. startups. Last year, European venture-capital backed companies raised $17.9 billion compared with more than $83 billion in the U.S., according to KPMG research. European funds are also generally smaller than in the U.S., and EQT Ventures became one of Europe’s largest VC funds when it launched in 2016 with commitments of 566 million euros ($666 million).

Global Dominance

Partly due to lower funding, Europe has little to show when it comes to tech startups that have proven their ability to command worldwide markets in an era that has seen U.S and Chinese companies such as Amazon.com Inc., Uber Technologies Inc. and Alibaba Group Holding Ltd. rise to global dominance. One notable exception is Spotify Technology SA, which expanded to become the world’s largest music streaming service. Winbladh hopes his fund, based in Spotify’s native country, can help others emulate that success.

About 80 percent of the companies EQT Ventures invests in are tracked using Motherbrain. Winbladh is convinced that as the software tool evolves, it will make the fund outperform competitors who rely mainly on physical meetings in its investment processes.

“The question is not if this is the correct thesis, the question is just how long it will take to prove that our model is better,” he said. “For me, we’re already there.”

Motherbrain Discovery

One of Motherbrain’s recent discoveries was Anydesk, a German firm that has developed software that aims to enable smoother remote access to computers. After being recommended by the software tool, EQT Ventures sent its Berlin-based investment specialist Axel Bard Bringeus, a former head of global markets at Spotify, to visit the founders on the outskirts of Stuttgart. Shortly thereafter, EQT Ventures led a 6.5 million-euro funding round in the company.

Winbladh’s fund has invested in 27 companies, including Swedish AI software maker Peltarion and Finland’s Varjo, which makes high-resolution virtual-reality products. Within 10 years, Winbladh believes there will be one or two tech companies from Europe that can contend with the U.S. and Chinese internet giants.

Winbladh is a serial entrepreneur who started SendIt in 1994, one of the world’s first developers of mobile internet technology, and then sold it to Microsoft Corp. in 1999 for 1.05 billion kronor ($122 million).

While SendIt was ultimately bought by a larger U.S. tech company, an all-too-common fate for European startups with high ambitions, Winbladh hopes that EQT’s backing can enable a company from the region to reach a globally dominant position in technologies like AI or virtual reality.

“What we need to have the courage to do in the Nordics is to invest in moonshot projects and be ready to lose it all in order to be able to build the next Google or Facebook from Europe,” Winbladh said. “That costs a bit more today than it used to.”

©2018 Bloomberg L.P.