Earnest Sweat 00:13
So, Eric, one reason I was really excited about this conversation is because you’ve just done a lot, not just as an allocator, but like in general, and so you’ve been a founder, a fund investor, and now, CIO of a sovereign platform, Could you walk us through your path and journey to being the CIO of a sovereign wealth fund? Yeah, let me give it

Erik Balck Sorensen 00:41
a go. Let me give it a go. Kind of a weird journey. It. It started out basically back in the, I think, to about 2005 I was living in the US, I decided to come back to this part of the world where I am right now, in Denmark, Scandinavia. And feeling very inspired by what I had seen in the US, by, you know, everything that was going on in Silicon Valley, essentially, sort of the whole concept and idea around startups, and the whole formula for essentially setting up companies based on the venture model. And I met up with a younger version of myself, and we essentially decided just to, just to try to copy what we had seen in the US and start building companies. And we built our first business in in 2008 and you can probably not imagine what it was like back then, but, but essentially, nothing going on, nobody understanding at all what startups were really all about, and introducing the venture model at a time where Denmark is a fairly traditional society, especially people are used to just making a living by by by through through honest work and normal jobs. So making the decision to start building businesses based on the venture model was nobody understood what the hell was going on. And then we were both lucky and also doing rather well in building sort of serial businesses and working our way through a number of different applications in the next, I think, 10 years to come. So between 2008 and 2017 we basically built seven different businesses in sequence, experiencing the build up of an entire ecosystem in Denmark at the time. So if you could really imagine that nobody understood what we’re talking about, there were no professional venture funds. The banks would laugh at us. There were no community structures. The sovereign wealth fund did exist at the time, but really in a form that wasn’t really fit for purpose. There were no family offices. So with all the individual elements of a professional sort of startup community, were not there in 2008 and looking back almost 20 years later, it’s, it’s almost a miracle that we’ve been able to sort of adapt some of the models. And I say we, I mean, I’m not talking about myself, obviously, but, but being part of of of seeing that system sort of eMERGE, and applying some of the model was certainly based on the certainly based on the inspiration that I got from, from the US, and then we got to a point in 2017 where we were essentially a small group of founders sitting on on the boards and the sea suites of all of our businesses all the same time. And my aspiration was essentially to keep building, to keep incubating new companies. And we couldn’t find the proper model to do so. Essentially we want to be equipped to find operators to put into our own businesses. So I ended up letting my other founders know that I had to either be able to go back to the incubation model or to do something completely different.

Earnest Sweat 05:51
You know, so many people, even our ecosystems, try to replicate what they’ve seen in the US, and specifically in Silicon Valley, when you went back to Copenhagen, what did you observe? What was missing, and then, how did you do? That is a tall task to try to replicate anything in Silicon Valley. What was your approach like? How do we build something that’s true to us?

Erik Balck Sorensen 06:19
I think in the beginning, we weren’t considering building a sort of a community at all. We were just inspired by being entrepreneurs, and then we sort of went with it at the get go. What dawned on us quite quickly was the need for us to team up with like minded people. So the community sort of grew out of our common aspiration. And then, you know, little by little, we did see the emergence of more professional VCs in the beginning, particularly from the US and from other parts of Europe. And then again, little by little, you start getting engaged in also what, what comes out of universities. And you start seeing the emergence of interest from, from sort of early, early family offices. Because once you start having that sort of fly wheel of founders actually making it to successful exits, they start forming either VCs or family offices, and then you get the momentum going. So he was, I would be exaggerating if I said it was very much a conscious effort at the get go. It certainly wasn’t but, but what came out of it, sort of 567, years down the line, was a number of people, sort of the core people that that were entrepreneurs and trying to build something early stage that they came together, and we still see that very close knit society where it’s very easy to reach out against something that we copied from the American model, this easiness, this easy goingness, in a startup community where you certainly should not be afraid to reach out and say, This is why, and this is what we are struggling with. How can you somehow help? And giving back to the community feeling is certainly also something that we see in our community today. So the eagerness for the accomplished founders to then start giving back and start contributing to, to continue to build, you know, and fill out the pockets of the ecosystem where, where we still need to mature.

Alexa Binns 09:09
Can you give us a little lay of the land of your I think, biotech, green tech, some, some of these places where you were going to be able to build this ecosystem. Denmark, yeah, yeah.

Erik Balck Sorensen 09:30
I think a number of a number of elements started coming together when there was a little bit of maturity into the ecosystem, we did see some of the larger corporates starting to get engaged with with the startup ecosystem fairly early on again, trying to figure out how they could either replicate the innovation that came out of the startup ecosystem, or even. Make acquisitions into the larger corporations, and as you say, in particular in green tech, in biotech, and nowadays some pockets, also in other types of deep tech. We continue to see that. And what we have also seen, in parallel to this, is the emergence of real, sort of real large corporations, which we essentially didn’t have, like 20, 3040, years ago. And that has happened also over the course of this period. So really large companies. And with that, again, an insight or an experience into how to run businesses and how to start building this close collaboration with startups. So it’s, it’s, again, it’s a it’s, there are many joints in this chain that you have to start operating.

Earnest Sweat 10:52
I’m also very excited, because you’re our first representative of a sovereign wealth fund, and so for our entire audience of you know, us and North America and European managers and allocators, what is Denmark’s export and Investment Fund? In plain English, what does it mean to be a sovereign wealth fund that must deliver both financial and societal returns?

Erik Balck Sorensen 11:23
Yeah, that’s an interesting question, because it is in some cases, I even say that you know, being inside a sovereign wealth fund is sometimes a, even a schizophrenic exercise, in the sense that our ultimate stakeholders are the Danish tax are the Danish taxpayers. So we have to constantly balance between, you could say, between purpose and profit, between impact and interest. That’s the constant, that’s the constant balance. That’s a constant seesaw for us. For me, it’s also what makes this extremely sort of purposeful on an everyday basis, and certainly something that we when we when we recruit in the market, it’s something that that most of our, especially young talents, are certainly looking for to be part of, of actually generating real purpose, of actually moving the needle. And so what does that mean? So everything that we are involved in revolves around this idea of building value into the innovation economy in Denmark. And we can probably double click on that in a second. But that’s really the core we have to ask ourselves, whenever we get involved in any investment, be it, you know, the sort of plain vanilla fund or direct investments that we make, and certainly when we make the more sort of we call them transformative investments. How is this going to trickle down, or how is this going to affect and improve and accelerate innovation in Denmark. It’s so that that’s essentially what we strive to do every day at the same time. And this is where it becomes a little bit tricky at the same time if you don’t produce a sustainable financial return, if you are unable to generate that, you know, things will change very quickly for you.

Earnest Sweat 14:38
How has your approach, you know, changed over time, and finding the right balance for that with opportunities that are in front of you, as well as like, with how macroeconomic and geopolitical situations have changed greatly so

Erik Balck Sorensen 15:39
over time, certainly to a very, very large extent. And let me start by saying what you were talking about. What you’re essentially asking about is, how do you stay very much aware of the political momentum? Because you know, on the one hand, when I talk about being sovereign, it is also about being owned by, I mean, we are, we are owned by, by the Danish taxpayers, essentially so. So we have an obligation to safeguard that capital, which means, which translates into an awareness of political momentum. So if we, if we, all of a sudden, were to solve, it doesn’t matter who cares, whatever is important to the politicians, then, then they will change the framework within which we operate, for sure. So, so that’s one, one side of the equation, and the other side of the equation is obviously and that has also happened even in I’ve been part of our company for eight years now, even at the very beginning, where I was part of our direct investment team, we would certainly do investments where, In hindsight, you can certainly question the the commercial viability of such investments because we basically overweighted the political impact of such investments. So really, when you’re asking, how are we changing? How have we seen this evolve? I believe that today, we put a lot of emphasis on being very professional as an investor, basically practicing the discipline of investment professionalism, which, again, is needs to be at the heart of any investment organization, and then it’s up to me and my colleagues at our sea level to to master the contact, to to our owners, and to listen to to the political momentum, and then really being able To dance the dance between, as I said, you know, purpose on the one hand, a little bit to the left and then a little bit to the right to reach, to reach profit.

Alexa Binns 19:07
Correct me, if I’m wrong, it feels like there is this sort of geographic focus on the purpose. It’s about your citizens, your innovation sector, but you’re looking outside of Denmark for the investment opportunities. How? How do those managers or founders’ opportunities get sort of tied into the ecosystem if they’re coming from outside of Denmark? Before I answer,

Erik Balck Sorensen 19:35
Let’s just get some facts about Denmark. We are a very small country. So we are just about 6 million people, and when you are a very small country, you have to open up to the outside world. It’s just that’s just the bottom line. So when we talk about Danish competitiveness, we are all. So and always talking about at least European competitiveness, and also in the context of global competitiveness, we constantly have to be aware of and that’s certainly the case when we are making, say, fund investments in the US or in Europe. So we are constantly looking at how this affects and how this can help to accelerate our innovation economy in Denmark, but it is really a trickle down effect. If we look at our own market today, it’s going to be, obviously, way too small for us to to to focus at solely so we have a very broad strategy and and we have a larger part of our allocation that is that is focused outside of Denmark, especially when you look at our our fund investments, what we try to do is still to build partnerships that actually contribute to a growing value in Denmark also. So we shy away from, I mean, we, we are speaking every year to a number of GPS and we start out by asking the question, so is Denmark really an area of interest to you? And if, and fortunately, most of them are quite honest, and some of them, you know, some of the most well known venture funds in the world will say, you know, not really, thanks for asking, but no, we have no people on on the ground and and that’s not really the focus area for us. You should be an LP in our fund if you, if you believe in financial return, that’s essentially what we are, what we’re looking for, in which case we politely decline and say, okay, you know, we need to find somebody with an actual interest in either in the Davis ecosystem or in building something alongside us. So we are made. Just as an example, we made a couple of fund investments in the US where the intention was essentially to to benefit from all of the insight they had on a particular vertical, in this case, AI defense and so on, because they these funds were so far ahead of any funds in our close geographical vicinity, and so we basically told them, we we are looking for, we’re looking to build a partnership. We are looking for you to engage with us. And even though we have, I mean, take locked capital as an example. I think we, we are a less than 1% owner of the latest of Luxe funds, yet they have gone to great lengths to to help us out, to make introductions to the right people in the verticals where we are building something.

Alexa Binns 26:39
I did read that you had recently sort of re-examined your five year plan and the 2030 strategy you’re looking to move faster and smarter. Can you share with us what that means? Like, how are you actually implementing that as a team to help folks know how to work with you, or what you’re looking for?

Erik Balck Sorensen 27:04
Great thanks. Thanks for the interest. Yeah, certainly. So we are looking to do more. That’s point number one. We will. We have already been accelerating our our investment initiatives over the past couple of years and over all the way through 2030 we’re looking to to accelerate that even even further and internally, we will continue to professionalize our processes and continue to work smarter and try to sort of reduce complexity again, some, some of it comes with being sovereign, and we need to be we need to be aware of that where it touches the market, and that’s probably what you are, what you are looking for me to to address what touches the market is we in our new strategy, we are much more focused on, say, designated verticals and designated stages, which means that we will allocate a lot of our capital into areas where, where Denmark is already in a we call it a stronghold position. So in a position of international leadership in essence, we have spent quite a bit of time identifying those verticals, and also two stages where we will certainly double or triple down, and again, looking for four key partners to make that happen. We believe that if we can build on something that is already well established, instead of trying to build everything from the ground up and a multitude of areas where, you know, we decide to leave that to the to the private part of the market, or we decide that, you know, it’s going to take too long for Denmark to catch up, or maybe it’s not even possible for Denmark or Europe or our close Nordic partners to catch up in an area, in which case, I don’t see a point in us continuing to allocate our capital in those verticals. So the essence of our strategy is really, to a great extent, more about prioritizing, you know, and then doubling down and building clear strategies in virtuals and inviting international partners to join on that, to join us on that quest, to essentially also. Build.

Earnest Sweat 31:17
Eric, what? What are those verticals that you all are doubling tripling down on, and the follow up question is, do they change based on your fund investments or direct investments, or, as you called it in our prep call, transformative bets. Will they change over the years? Or do you have different focus areas? So for your fund investments, you’re looking for these verticals, and what are those? There’s a common,

Erik Balck Sorensen 31:51
yeah, sorry, there’s certainly a common thread in all we do so, so we, we basically run a three tiered fund. You know, a part of our team focuses on fund investments, a part of our team focuses on direct and a part of our team focuses on these more transformative, more infrastructure based bets. But they are all sort of interconnected. So when we talk about these highly prioritized front running positions, we have identified, and Alexa, you also mentioned this earlier, biotech or life science as certainly an area where we have world leading companies. We have world leading research institutions. We have, we have these very large, they’re actually corporate funds, very it’s not something that exists in many places outside of Denmark, but most of our large corporations are owned by these funds. And months, and we collaborate. And they sit on, you know, huge assets and huge amounts of capital. And they are engaged in also building the Danish ecosystem, and in this case, the life science or the biotech ecosystem, to a very large extent. So they are also engaged basically in the same mission as we are. So we team up with the private partners, with their capital, we team up with universities, we team up with, obviously, with big corporations. We team up with other Capital Partners, and then we build a comprehensive strategy around that in biotech, life science, in selected green technologies, okay, and also in when it comes to quantum computing, they are actually because all of it emanated from from the nearest boy Institute back 100 years ago, located right in The sense of Copenhagen. So we actually see an opportunity, because there’s so much talent in that particular space, and given that quantum computing might be one of the core components of the future of computers, all of a sudden we see an opportunity to be, let’s say, also a manufacturer. Imagine a TSMC actually, it’s its ambition to that extent. Imagine a TSMC in Combinator producing core components for the future of computers emanating from this quantum industry. So, a life science project, certainly quantum with particular focus on quantum computing and quantum chips, and then selected green technologies, again in particular in energy but, but there are also a number of such. Smaller sub verticals, where, where we see, where we see an opportunity. Those are some of the core verticals. And then we have an agnostic stage focused on growth. You probably don’t know this but, if you are an accomplished scale up in Europe, and you want to raise $200 million there are no European funds to support you, as in NO ONE. And that has to change if we want to keep evolving and building our ecosystem, obviously we need fund structures also to cover that part of the value chain. So that’s why we have to do that agnostically. We cannot do that based on a specific sector because the market is too small. So when it comes to growth in particular and the fairly large, large rounds that that’s a separate focus of ours to contribute in the building of such structures at a European level and at a Danish and an ordinary level as well.

Earnest Sweat 36:14
Is there, especially us ones, are there any misconceptions that that you kind of have to are kind of like fiction out there about you, and they’re not approaching you the right way, just curious on, on that?

Erik Balck Sorensen 36:54
Oh yes, it. And I think some of the misconceptions and some of the reputational ideas of who they’re dealing with, you know, we have put ourselves in a position, certainly with how we operated some years ago that, you know, has to change. I mean, some years ago we were fairly slow in our processing that has changed. We were less direct again, in our relationship management. That has definitely changed. And I think a little bit bringing in, as I said before, bringing in the founder energy, bringing in that con. Let’s get this done. And if I may be a little bit, you know, tough on some of the financial sector, if I may, sort of broadly. You see me now, because I’ve been to all kinds of and I just got in. I’m in my home office here. But, and this is exactly well the church should have been blue, probably, how the financial sector presents itself in general and in particular. If you look at, you know, investment firms that are doing private equity or or or currency, or whatever it is, you know, a little bit a little bit backward, leaning a little bit complacent, if I may, and that that is not a valid currency in nature. You have to lean in. You have to be present. You have to, it has to matter. And I think when we talk to GPS, when we talk to funds today, they understand, most of them understand our interest. Most of them understand our purpose. And again, just to be clear, I have the utmost respect for, let’s say, American Excel. For instance, they have no presence in Denmark, and I can’t remember if they have made any Danish investments. Again, you know, it’s a brilliant fund platform, and so I don’t expect everybody to buy into what is important to us. But what I am expecting is the ones that we team up with, they need to understand. They need to buy into our narrative. They need to buy into this idea, this, this very serious idea of close partnership and building something together, and we are seeing that today. So I would make the argument that maybe I’m being too cocky here, but I would make the argument that we have shown to the funds that we’re working with and all of the funds that are in our partner. And today, over the course of the last, certainly the last couple of years, that we are serious player in the market and and through this sort of comprehensive, very strategic approach to the market and our ability to also invest in, let’s say, supporting infrastructures in Denmark, we are part owner of an AR super computer. We recently acquired a quantum computing facility as well.

Alexa Binns 41:05
Can you share with us just briefly, the categorically you’re doing, fund investments, direct investments, what? And it sounds like, also infrastructure,

Erik Balck Sorensen 41:22
yeah, and basically infrastructure in a sort of, in a broad, sort of, maybe even even an abstract definition. So again, coming back to our high priority, virtuals in life science, for instance, in life science, there is a broad strategy to build what we call innovation district, Copenhagen, trying to replicate Kendall Square. I was just in Boston the other week to walk around to meet companies and funds and and obviously, key stakeholders from MIT and Harvard and really, to understand the formula that they have been, you know, the best at building in the world for the past, I don’t know, 2530 years, and and so on. In life science, we see an opportunity to sustain such an ecosystem, and if it requires us also to take a look at being, you know, part owners of important pieces of infrastructure, you know that that might be part of that equation. And already, some of these life science startups that are prevalent in our part of the world are already using the AI supercomputer that we are part owner of, so in quantum it obviously makes sense to have a quantum computing facility. If we want to be part of essentially building the core components for quantum computing or the future of compute, we need those types of state of the art, pieces of infrastructure that will, that will help, sort of, you know, constantly accelerate. The momentum that is in the market right now. So it really, it is less of it is not necessarily sort of a normal piece of infrastructure that you would expect. We are already very one of the most digitalized countries in the world, but it is certainly this idea of supporting bringing in technology that is state of the art, to support the constant acceleration.

Earnest Sweat 43:51
Eric, I think, I think in our pre prep conversation, we spoke a little bit about this term called technological sovereignty, right? And what does that actually mean? And I think ever since we that was a couple, almost a month ago, since we had our first conversation, a lot has changed, where I think that even means more today, and I’m curious on what that means to you and your in your platform, given there’s even some movements of European government bodies looking to kind of focus more on their own domestic innovation, looking at public dollars and so you being kind of this middle of public and Private. How does that influence, like what you focus on and what that means for you for the next 10 years?

Erik Balck Sorensen 44:48
It’s kind of sad that we are in a spot where we need to talk about technological solvency and sovereign sovereignty in general, to a much larger extent. Let me start by saying that I. It but, and it wasn’t part of the conversation at all. I mean, you guys would obviously know this, but, but I can’t recall that I even used the word and even talked about the sovereignty aspect within the context of innovation two years ago. So I do feel slightly concerned how this will affect the way of thinking, and how this will affect the way we deal with one another, how this will affect the partnerships, the alliances that have been built over the past 2030, years. That said we have also to look at reality. And reality is that, it seems to me that some of the superpowers of the world are becoming more sort of interested in containing technology for themselves, which you know, I understand the interest and the priority and the subsequent reaction. And I could just look at Europe as obviously what happens just outside of our window. It becomes imperative now to own your own technology, because what happens if you cannot access technology tomorrow. So the core of the discussion on technological solvency is concern, is this almost panic, that we will all of a sudden be unable to access technology because somebody else owns it. Just Look at, and now it becomes even quicker. If you look at computer chips today, Europe is not even on the map. If you look at AI today, Mistral has built a great model and that’s it, you know. And we have ASML as obviously, a great sort of hardware technological company providing key technology to in the production of computer chips. But beyond that, we are training every other part of the world and and that is critical for for for Europe, to either figure out how to team up with the right people, so that, you know, we don’t become overly dependent on on other parts of the world where, you know, We can’t really rely necessarily, on, on, on the relationship, or start building their own technology stack, and we need to do both. And defenses, obviously another critical example of that.

Earnest Sweat 49:45
every day. Yeah, it’s fascinating. It’s kind of like reliance in the past and the 70s and on. And kind of like oil with it, with the cartels and and it’s, yeah. It’s now, it’s like tech, and technology is being essentially, kind of like a scarcity mindset that can be weaponized and taken away from certain areas. And so I would just want to give you all credit from what you’re speaking about, of like having, despite all that understanding kind of your situation, where you all have advantages and still looking for partnerships with specific individuals, specific firms. And I think that’s what the world is looking for now, with globalization cracking and now things becoming more insular and regionalized. We still need a world of bridges, right? And I think that you’re doing that with a lot of your bridges or bribes, one or the other,

Earnest Sweat 50:48
We’ve overused the bribe.

Erik Balck Sorensen 50:50
It’s both a matter of obviously trying to navigate to the best of our ability, but it’s also a matter of acknowledging reality, and the reality is that we, today, are hugely reliant on defense technology. So when, when we, when we’ve been trying to, we are nowhere on defense, and so we need to start essentially from scratch. That’s the reason why I didn’t mention defense as a priority virtual for us, because I would love for it to be a power to purchase one. And we are allocating, you know, millions and millions towards a defense, but we are starting way down here and moving, you know, slowly forward. And for that purpose, we’ve teamed up with American counterparts, because, and why? Well, because they are the best in the world, and we need to start learning from the best, and hopefully we can continue to rely on our American friends. And that’s, that’s the balance. You know, sovereignty is certainly not, it’s certainly not easy to maneuver. But what we’ve seen so far is is certainly a willingness I mentioned last before they were actually the ones who opened the door for for this one particular company, cell drone, for us that we are a proud investor in, and who has already taught us quite a bit about building a defense platform, defense technology platform, and they also set up shop in Europe. So again, it’s a multitude of ways to build something on our own show without, without at the same time as, as, as I said, acknowledging that, you know, this is this. These are the ones that we need to work, to work with. It doesn’t exist

Alexa Binns 52:55
in Denmark. Currently, I would love to hear something you’re optimistic about, something that just gets you jumping out of that in the morning.

Erik Balck Sorensen 53:05
Okay, that’s actually very I meet brilliant founders every day, and every single time I sit down with a founder where there’s a sparkle, there’s a belief in the future, in building, you know, world changing technology, you know, I get, I get goof bumps, and it’s, you know, I’m, I’m 52 and it’s so rewarding For me to be part of an ecosystem where goosebumps are part of an everyday operation. So I have to say that, you know, and it brings me some time back to, I don’t regret having taken the move across the fence at all, but it allows me to still see that fantastic energy. So, that’s certainly also, I would say it brings an optimism to my heart to see that belief that we can, we can change the world. And I believe that, I think Bill Gates, that you know, through innovation, we can change the world. And that’s, that’s, that’s also part of my mantra.

Earnest Sweat 54:29
Love that. Well, that’s after I had you go through the geopolitical situation. It was great to end on, on what’s optimistic. And that’s true, like we are very blessed to be doing what we all do, and seeing people who are really trying to change the world. So Eric, if someone wants to find you, how should they reach out and find what you all are doing?

Erik Balck Sorensen 54:53
I’m very easy to find. And you know that. My initials are ebs@iphone.dk So again, my email is open, and we try to, we talked about that a little bit earlier. We try to be very open. So hook up with us. Let’s get a conversation going. Let’s, let’s start, you know, building these partnerships that are so important in order for us to actually make a dent in this sometimes cruel world.