Archangel

Morten Lund thinks most VCs are gutless. He dismisses most of them as living off the fees they charge their limited partners and he believes that most won’t risk their own wealth in the hopes of seeing a big return from a start-up’s success. “I don’t sit around thinking about IRR,” he declares. “Start-ups need help from smart people—not takeovers from smart asses.”

Lund was the first investor in Skype, the Internet phone start-up bought by eBay for $2.6bn. Since then, he has invested in more than 50 other companies, including Chinese browser company Maxthon.

As the venture industry struggles to find its identity in a world awash with eager money, Lund stands out as an example of why VCs were successful in the first place and what will keep them relevant. He doesn’t over-think and he doesn’t let himself get bogged down by institutional processes. He just does. Quickly.

Connect the dot-coms

Lund’s skills rest in making connections and marketing. No business plan? No problem. Lund has automated much of his value creation process by creating a new media accelerator chock full of engineering, design and marketing savvy. All he has to do is stick a start-up in one end and it flies out the other, equipped with the latest Web Widgets and features, packaged in a sleek user interface and ready to plug into a handful of affiliate marketing partnerships.

Then he leaves the entrepreneurs to call him if they need him. They do call him, about once a month after Lund pulls the ripcord. And while he’s helping them, he’s picking their brains for leads on his next round of investments.

Born in 1972, Lund grew up in a thatched-roof house in Roskilde, a hamlet 20 miles outside of Copenhagen. He went to Syddansk University at Odense in 1991 just long enough to meet his wife, but not long enough to graduate. Hoping to earn some pocket money, he started selling caps, blue books, sweatshirts and other products he designed on a 486 computer at his the kitchen table.

Boom and bust

Two years after Netscape’s first browser was released, Lund started prospecting with the other pioneers of the Web. He co-founded a Web advertising agency called Ne@tWork Aps in 1996 and rode the wave till 2000, selling out to mega ad agency Leo Burnett just two months before the tech stock market crash.

Eager to mass produce Internet start-ups, he launched an incubator called Prey4. But as fortuitous as the timing was for selling his ad agency, the timing for starting his incubator (January 2000) couldn’t have been worse. He had to lay-off half his staff in a matter of months. But one good thing came out of the experience: He got to meet Niklas Zennstrom and Janus Friis, who pitched him on a music-swapping service called Kazaa.

After the failed incubator attempt, Lund did some consulting work for TeleDenmark, staying in touch with the Kazaa boys to help them along. The pair wanted to differentiate their service by making it safer, but big corporates treated them like they were radioactive. Lund answered their call by co-founding BullGuard in April 2002. He licensed technology from the makers of BitDefender and, almost overnight the BullGuard brand was getting 10,000 trial subscribers to its service every day via Kazaa.

It wasn’t until BullGuard got its first round of venture capital, a $2.5m Series A from DFJ ePlanet Ventures, that it actually started creating its own intellectual property. Lund owns one-third of the company, which expects to reach $15m in sales this year. At its inception, he was spending 60% to 70% of his money on it, he says. The degree of Lund’s involvement in BullGuard is unusual. He usually only helps one of his start-ups for about a month, providing the guidance and connections it needs to get off the ground. BullGuard is the only company he’s started on his own and he feels guilty if he doesn’t do something for the company at least once a week.

BullGuard helped Lund cement his relationship with the Kazaa founders. So when Zennstrom and Friis morphed the technology behind Kazaa into an IP telephone company, he was there with the seed money in October 2003.

He won’t say exactly how much he made on his $50,000 investment in Skype, though he says it was 300 to 500 times what he put in, which suggests he made between $15m and $25m. Lund could afford a stable of Ferraris, even with Denmark’s 180% luxury tax on cars, but his primary mode of transportation is a three-wheeled bicycle with a seat in front, which he uses to commute between his work and home.

Water works

Lund recently invited Eran Davidson, CEO and president of Hasso Plattner Ventures, up to his office, which is based on the top floor of his home, to hear a pitch from WaterStillar. Tom Andersen, the company’s founder has been experimenting with water purification techniques for the last four years. He built 24 prototypes before he ran out of money and has had to take on a consulting job with a large computer company to pay his bills. He needs cash and Lund has offered to help him find it.

Lund is helping Andersen as part of his Worldwide Investments for Life Development (WILD), a category he’s created to focus his efforts on improving the world. He says that the WILD program will be his answer when his children ask him about what he does. Other initiatives in this part of his portfolio include a yet-to-be-named start-up working to fight obesity and Aresa, a company that uses genetically modified plants to detect landmines.

Not long into Andersen’s PowerPoint presentation, Davidson makes it clear that he’s disappointed Andersen is still at the prototype stage. How much would it cost to produce the water purifier? Anywhere from $100 to $300 per unit. Davidson frowns.

That’s when Lund jumps in. “If I worked on this for four weeks, I’d get that price point down to $50.” He waves his hands as if to illustrate how easy it would be to start mass production.

The simple life

Lund is an expert in the art of creating intimacy, of making a business deal uncomplicated and informal. Part of this comes from working at home. It’s just simpler to keep your family close and to treat your business associates as you would close friends.

The Danes have a word for this: hygge. Pronounced “hogie,” it is about a simple and open bond with family and friends. Morten Wulff, co-founder of Lund portfolio company TraceWorks, which tracks Internet marketing campaigns, says: “Many people who meet Morten, even though he’s had a lot of financial success, might be turned off by his style. But I like it. You don’t have to debate much with him. If it feels good, you do it.”

Maybe it’s that sense of hygge that underlies Lund’s investment strategy. He invests in people he likes, “doers” steeped in entrepreneurial spirit. “If you’re not hungry, he’s not interested,” says David Beckmann, CEO of an online obesity control start-up Lund has backed. (The company hasn’t been named yet.)

Talk to Lund about one of his start-ups and he’ll start by telling you how “awesome,” “amazing,” or “brilliant” the founder is. Only later will he talk about what the company does. He said of one of his companies: “I don’t really understand it, but I really like it.”

Actually, Lund doesn’t need to understand it. He has a whole group of people who do that for him in an accelerator he has dubbed the Hello Group. The Hello Group is part marketing department, part design team and part engineering division. It can take a next-generation Internet idea and machine it into reality in a matter of weeks, as it did with Zecco, an online brokerage.

Lund generally backs technology companies, such as a SaaS startup, a Web browser developer and an online stock trading company. But he won’t hesitate to invest in off-the-wall ideas if he likes the entrepreneur behind them. His portfolio includes an LED flashlight maker, a press-on nail manufacturer and the maker of a device that allows you to apply condoms with one hand. “It’s like an art collection of stuff I would have hated not to be in,” he says.

With such a diverse investment portfolio, it’s easy to point to Skype as a fluke. Maybe Zecco will be the investment that convinces Lund’s skeptics. Just as Skype turned telecommunications on its head by making phone calls free, Zecco is poised to change the face of stock brokerage by making online trading free. The company makes its money from advertising it delivers around its trading platform. The site had nearly 75,000 unique visitors in June and its traffic is growing at 30% a month, according to traffic analyzer Compete.com.

“If Zecco turns out to be a success, they’ll look to his record and people will acknowledge that he’s a rock star,” says Kåre Jacobson, CEO of WiseLED, Lund’s flashlight company.

LPs not wanted

At the heart of Morten Lund there’s something that drives him to go big. Perhaps hedge funds are what’s next for him. He likes the idea of being involved with a hedge fund for two major reasons. First, an evergreen fund structure frees him from having to report back to LPs or be bound to a fundraising cycle. It represents a freedom he doesn’t see the venture capitalists or private equity players enjoying, and freedom is something he has fought hard for and won’t easily part with.

Hedge funds also represent a path to making bigger returns. The hedge fund managers have stupid amounts of money compared to the wealth Lund has built investing in early stage start-ups. To Lund, big money means big power. But he may not need to do anything different from what he’s doing already. What he’s doing is working.