#76 Lars Stenlund on Driven by Curiosity

Summary

Podcast Summary: Investing by the Books – Episode #76: Lars Stenlund on Driven by Curiosity

Date: October 21, 2025
Host: Eddie Palmgren (Redeye AB)
Guest: Lars Stenlund (Co-founder & Chairman, Vitec Software)
Book Discussed: Driven by Curiosity: The First 40 Years of Vitec

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Overview

This episode explores the remarkable journey of Lars Stenlund, co-founder and long-time CEO (now Chairman) of Vitec Software, a $1.5 billion listed Swedish company specializing in vertical market software. Using Vitec’s 40th anniversary and the company’s newly published book, Driven by Curiosity, as a springboard, the conversation delves into the power of curiosity, lessons in entrepreneurship, building a sustainable organization, the evolution of tech and business models, and reflections on growth, leadership transition, and legacy.

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Key Discussion Points & Insights

1. Early Life, Education, and Formative Experiences

• Family and Upbringing

  • Grew up in Skellefteå, northern Sweden, with deep family ties to both the energy sector and early Swedish industry (Boliden).
  • “My father was working for the hydropower plant company...my grandparents were farmers...my grandfather...was making the drilling for prospecting in the late 20s..." (Lars, 01:47)

• Mentorship and Career Path

  • No direct business mentors, but a high school encounter with an engineer taught him not to stress about having a rigid life plan.
    • “He said...I’m not really sure what I’m going to do in life, but this is pretty interesting. So I'm doing that in the meantime... [that] felt a lot of weight fell over my shoulders." (Lars, 02:56)

2. Education and Founding of Vitec

• Studied physics at Umeå University, driven by a desire to continue learning rather than start working right away.

• The roots of Vitec began with his PhD supervisor Olov, who proposed collaborating on software to process energy consumption data for real estate owners, leveraging Lars's experimental physics work.

  • “He said, 'My friend...we need to have a hobby.' ...He could get money for a personal computer...I could teach him to code." (Lars, 08:11)

• The initial years – dubbed the “dark ages” – involved working nights, self-funding, and slow, incremental product development with a focus on technical improvement over financial reward or growth.

  • “I usually refer to the first five years as the dark ages...working with the company was done during nights when the sun was out.” (Lars, 10:28)

3. Motivation and Drive

• Curiosity as a Driving Force

  • Title of the book is highly meaningful: “I have said in the past that one of my absolute biggest achievements in life is that I spent 22 years in school and I came out still curious.” (Lars, 07:15)
  • “We are both curious, probably. That’s probably our driving force.” (Lars, 07:47)

• Continued, annual self-reflection was critical to persistence.

  • “Every summer during holiday...pondering and thinking and trying to make an analyze the situation, I came always back with my best options to have an interesting future is to keep stick with the business.” (Lars, 13:41)

4. Growth, Luck, and Pivotal Decisions

• Growth attributed to both luck and resourceful adaptation, including an early advantage from Microsoft technology and embracing GUI/win software when competitors favored IBM solutions due to resource constraints.

  • “We came out several years ahead of competition. That’s just pure chance...scarce resources...put us on the proper place.” (Lars, 14:40)

• First major acquisition in Germany failed quickly; pivoted to acquiring specialized software companies (M&A), which dramatically scaled the business.

  • “We made the first acquisition, proper acquisition in 98 and then we made a number...quadrupling the size...in 18 months, which brought havoc, of course, to the organization." (Lars, 16:28)

• Was among the earliest in Europe to build a serial acquirer of vertical software companies; only learned about Constellation Software years later.

  • "We were absolutely sure we were the only one in the universe doing this kind of stuff." (Lars, 18:19)
  • “Well, we started with nothing, and they started with a shitload of money. That’s the difference." (Lars, 18:46)

5. Evolution of Business and Revenue Models

• Early switch from license/maintenance to a subscription/recurrent revenue model – “software as a service” – decades ahead of the trend, out of necessity when dealing with utilities.

  • “Olov came back one day and said, ‘I think we should sell this as a newspaper like a subscription.’ So they pay per month instead of this licensing model..." (Lars, 19:29)

• Focus on KPIs: Recurring revenue as a threshold to covering labor costs; added value relative to labor.

  • “The first hurdle is when your recurring revenue will cover your labor cost. Then you know any new sales...will hit the bottom line...” (Lars, 22:33)

6. Leadership, Motivation & Culture

• Internal motivation is key; culture and mission matter more than leaders trying to “motivate.”

  • “I can't motivate people to do a good work if the people working in our company is not motivated in doing a good job... Motivation has to come from inside.” (Lars, 24:20)

• Keeping bureaucracy minimal: Decentralize decisions, offer group-level support only where necessary (esp. IT/security); small, demand-driven HR.

  • "More or less all decisions in the business units... very small HR department..." (Lars, 25:32)

7. M&A and Capital Allocation

• Active acquirer: 300 companies evaluated, 200 analyzed, 35 non-binding offers, 7 closed deals in one year.

  • “Last year we...looked at approximately 300 targets...35...closed seven deals." (Lars, 26:57)

• Capitalization: Mix of cash flow, leverage, occasional equity raises but preference for self-funding:

  • “The ultimate goal...should be...to be able to grow from your own cash flow which can be a bit demanding in software..." (Lars, 27:50)

• Market perception has shifted: Software multiples much higher today than 25 years ago.

8. Lessons from Mistakes

• Integration Pitfalls: Rushed product consolidation after early acquisition led to customer loss.

  • “You can't kill off software unless you have made a transition that is..seamless for your customers...that will take some time but eventually that will pay off." (Lars, 31:08)

• Monopoly Misstep: Acquiring both competitors in a small market led to pushback and the creation of a new competitor, but was serendipitously offset by a valuable software found within the acquisition.

  • “The only way they could compete was with pricing...Real Estate Agents Federation said, 'We need to develop our own software.' So the competition came back..." (Lars, 34:14)

• Worst Advice: “You can’t be this diversified.” Lars disproved this by being profitable in two verticals others thought were incompatible. (Lars, 35:39)

9. Leadership Transition

• Long-term succession planning for smooth transfer to current CEO (Ullr).

  • “I spent...10 years trying to mold the organization in order for me to step down. So the transition has been extremely smooth..." (Lars, 36:21)
  • “I've known Ullr for 20 years or more...there was a small opportunity in time when he was available...” (Lars, 37:22)

• The Board: Diversity of thought and early, collaborative involvement prevents groupthink.

  • “It sorts itself out because of the people who are in the board and stuff get questioned." (Lars, 38:25)

10. Local Presence and Giving Back

• Company rooted in Umeå has contributed to the local tech ecosystem; high education in the region supports recruitment.

  • "Why is it not possible for us to have HQ in Ume? ...it's a university town...so there's a lot of both smart and educated people." (Lars, 42:03)

• Engaged in local boards, university-affiliated seed investment, and community mentorship.

11. Technology Shifts, Longevity, and Curiosity

• Pragmatism on tech: “Be on the leading edge, not the bleeding edge.”

  • “You overestimate the impact of new technology in the short term and underestimate it in the long term...when new stuff comes along, you have time." (Lars, 47:52)
  • Early adopter of AI-powered customer support, but careful, evolutionary approach to major changes.

• Most vertical software logic remains stable for decades: "You would be surprised on how much software around that is 30, 40 years or older...but the business logic...is not changing." (Lars, 51:36)

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Notable Quotes & Memorable Moments

• “I have said in the past that one of my absolute biggest achievements in life is that I spent 22 years in school and I came out still curious.” (Lars, 07:15)

• “Well, we started with nothing and they (Constellation Software) started with a shitload of money. That's the difference.” (Lars, 18:46)

• “I can't motivate people to do a good work if the people working in our company is not motivated in doing a good job...Motivation has to come from inside.” (Lars, 24:20)

• “You can't kill off a software unless you have made a transition that is more or less seamless for your customers...that was a big mistake, which maybe could have been a real, real crisis.” (Lars, 31:08)

• “You overestimate [new technology’s] impact in the short term and underestimate it in the long term...when new stuff comes along, you have time.” (Lars, 47:52)

• "We should be on the leading edge of technology, not the bleeding edge of technology." (Lars, 49:00)

• “You can’t be this diversified...Well, we looked at the numbers and so we were profitable, so obviously it worked. So we disregarded all those code advice.” (Lars, 35:39)

• On book selection: “I start with the book and after 30, 40 pages I know, okay, this is the thing. And now it’s 270 pages of the same stuff. And then I tend to get bored.” (Lars, 54:40)

• On Lord of the Flies: “If you’re nearsighted, you cannot make fire. It’s not focusing the sunlight, it’s dispersing it. So the whole book...is built on something that is physically not possible.” (Lars, 56:48)

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Key Timestamps

• [01:47] Upbringing and family influence
• [07:15] Meaning of “Driven by Curiosity”
• [10:28] Founding Vitec and early years
• [14:40] Critical luck and early technical pivots
• [19:29] Early adoption of SaaS (subscription model)
• [22:33] Measuring business success—KPIs and recurring revenues
• [24:20] Employee motivation and company culture
• [26:57] M&A process and statistics
• [31:08] Lessons from failed product integrations
• [35:39] On diversification and bad advice
• [36:21] CEO succession and leadership transition
• [42:03] Importance of local (Umeå) roots for Vitec
• [47:52] How to approach new technology
• [51:36] Longevity and maintenance of vertical market software
• [54:40] Reading habits and book recommendations

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Concluding Insights

The episode’s tone is humble, pragmatic, and at times wryly humorous—reflecting Lars Stenlund’s trademark curiosity and intellectual honesty. Building Vitec has been less about one grand plan and more about persistence, a thirst for learning, and a willingness to experiment, fail, and iterate. Curiosity has fueled personal growth, organizational resilience, and the ability to adapt to—and shape—the evolving technology landscape.

Lars continues to approach business and life with an open mind: “Most everything that I don't really know.” (Lars, 53:22)

Where to Follow Lars Stenlund & Vitec

• Company Website: Vitec Software
• Annual Reports & Press Releases
• Attend the Annual General Meeting in Umeå (“We have the best dinner in Sweden.” – Lars, 58:03)

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Transcript

[Eddie Pangun]

Hello everyone and welcome to Investing by

[Podcast Host / Narrator]

the Books, a podcast by Red Eye. I'm your host Eddie Pangun and today we're thrilled to have Lars Stian Lund on the show. In 1985, Lars Co founded Vitek Software in Umil, a city in northern Sweden with 130,000 inhabitants. Still headquartered in Ume, Wittic is today a large cap company [e-mail] with a market cap of about $1.5 billion. Lars Sternlund was born in 1958 and was the CEO of Witec for 35 years, since 2021. He's the chairman of the board and remains one of the largest shareholders with 19% of the votes. Celebrating Witek's 40th anniversary in 2025, the company and author Patrick Sirian compiled a book about a remarkable journey from a small venture at Ume University to becoming a leading company in in vertical software solutions. This summer Lars and Witek's CEO Uli

[Eddie Pangun]

Bachmann were kind enough to give us

[Podcast Host / Narrator]

a copy and the book's title is Driven by Curiosity.

[Eddie Pangun]

We're excited to have one of his

[Podcast Host / Narrator]

main contributors on the podcast today.

[Eddie Pangun]

Here comes our conversation with Lars Steenberg. Hi Lars, and welcome to Investing by the Books podcast.

[Lars Stian Lund]

Thank you. Thank you for having me.

[Eddie Pangun]

It's great to have you here in Red Eye Studio in Stockholm. Thank you for taking the time. Where do you normally live and work?

[Lars Stian Lund]

I usually say that I pay my taxes in Ume, where I am. That's up for debate.

[Eddie Pangun]

And to begin, I'm curious, how did you grow up and how did that shape you?

[Lars Stian Lund]

Maybe you should ask my mother. She's still alive and she has very, very firm opinions on stuff. But I grew up in Schlefte, which it's about 130km north of UMO. I came to him as a student close to 50 years ago now. But growing up? Yeah, my father was working for the hydropower plant company. I was brought up within the energy sector or electricity sector, whatever. But my grandparents were farmers to various degrees. My grandfather on my father's side was actually one of the first employees in Boleden and was making the drilling for prospecting in the late 20s or something before the mine actually opened. And Bolin is, as you know, still a well known Swedish company.

[Eddie Pangun]

Did you have any natural mentors during this time when you grew up for

[Lars Stian Lund]

running a company or whatever in life? Well, not really. I had one experience or encounter. The last year is the proper high school Ivnasiat. We were on a study visit at an engineering firm and was shown around and looked at different stuff. And then we came into electronics laboratory and a guy was sitting there, a very old guy, probably in his 40s, and we were curious, how did you decide to go into electronics? And he said, well, I'm not really sure what I'm going to do in life, but this is pretty interesting. So I'm doing that in the meantime, so making long term plans for what I'm going to do or what I'm going to become and so forth. It felt a lot of weight fell over my shoulders at that point in time and said, you don't have to decide so much.

[Eddie Pangun]

After military service and a summer job at a metal plant, you chose to study physics in umeo. Why did you do that?

[Lars Stian Lund]

I wasn't prepared to go to work, so I wanted to find being a student for a while and since I still was interested in natural science and it was fairly easy to get in that education or that line of training. So yeah, ended up in physics and mathematics.

[Eddie Pangun]

And if you wouldn't have studied physics, what do you think you would have done in law?

[Lars Stian Lund]

Maybe.

[Eddie Pangun]

Well, it was lucky that you did study physics and eventually that made you co found Witek, which we will speak about today. Fittingly enough, the book driven by curiosity, the first 40 years of WITEC. How did this book come about?

[Lars Stian Lund]

It was people around within the company said, oh, we are coming up to 40 years and it's been on the table several times in the past. Also, if you shouldn't document something about the company and as long as I was the acting CEO, I said, we don't have time, but since I left four years ago, obviously we had time to make a book now at the 40th anniversary, so it's not my decision, but I happily contributed.

[Eddie Pangun]

Yeah, and Patrick Sirian is the one who has compiled the book and is the author. Who is he?

[Lars Stian Lund]

Part of him is a sort of a cultural geek, but he's also been the investor relations guy at knowit, Swedish consultancy company and he has his roots in Ume also, so he's qualified in every respect.

[Eddie Pangun]

And what are the ambitions with the book? Who is it for?

[Lars Stian Lund]

Well, it's mainly for our own people, for our own co workers, maybe to document history, of course, and to maybe get inspiration that you don't need to know everything for the future. You can be curious and that's good enough.

[Eddie Pangun]

A lot of times it's been a real pleasure to read the book and it's quite extensive. It's 260 pages there's a lot of photos, a lot of documents. I'm sure that many of our listeners would like to read the book, but I didn't find it online to buy and as you said, it's for employees mainly. Is it possible to get hold of it?

[Lars Stian Lund]

I think the only way to possibly get a hand on it is to contact our investor relations department. And I know there are some discussions internally whether or not there should be a second edition or not. I'm not sure where that is at this point in time.

[Eddie Pangun]

We'll see. The title of the book is Driven by Curiosity. Can you tell us a bit what this means to you?

[Lars Stian Lund]

I have said in the past that one of my absolute biggest achievements in life is that I spent 22 years in school and I came out still curious. And there's a lot of stories of me as a kid being so curious that people just wanted me to shut up. So I think that's one part of it. The other part is 20 years or so ago, people started asking me and Olo, my co founder, what's your driving force, guys? And we looked at each other and said, driving force? I don't know. Like this is fun. But we eventually came up with. We are both curious, probably. That's probably our driving force.

[Eddie Pangun]

So let's go back to the beginning of etec. You mentioned olov. How did it all start?

[Lars Stian Lund]

It started I was a PhD student and he was my tutor, sort of. So we had working together on a daily basis with my PhD project and halfway through my PhD studies he tapped on my shoulders one day we were having lunch and he said something like, my friend or boy, I'm not sure. You and I, we need to have a hobby. I asked him what. What do you really mean having a hobby? I'm working 247 with my thesis. Yeah, well, sure, but we needed to have a hobby together. But he has, you know, folks behind the ear, so I reckon something was up. So now he said like this, then I can get money for us to buy a personal computer. This was in 84, maybe early 84. And you know, software. You can teach me how to code making software and then you can have the PC every second week. And there was. Okay, there was an idea that we could make computer software to support real estate owners in Sweden to keep track of their energy consumption. Because energy consumption, consumption and conservation was in principle, my thesis. So that was what I actually was doing. And in order to be an experimentalist, which I was, you make a lot of measurements and in order to make any sense of all those measurements you need to compute. And in those days you needed to write all your software yourself. So I was actually coding every week, every hour of the day in order to process my data.

[Eddie Pangun]

But you said you had so much to do, you were working 247 with your thesis. How come you still jumped on this opportunity?

[Lars Stian Lund]

Possibly because I'm curious.

[Eddie Pangun]

That makes sense. And how were those early days building the company?

[Lars Stian Lund]

We started out with trying to produced this software and we actually had some contacts within the property management consultants businesses and they wanted to use our software in order to promote their consultancy services. We made a deal with them to actually to sell it. So we didn't meet any customers for the first five years. I usually refer to the first five years as the dark ages because working with the company was done during nights when the sun was out.

[Eddie Pangun]

Yeah. And was there the monetary aspect. Was that important at all to you at that time or what?

[Lars Stian Lund]

From one point of view, because every penny we made, we could buy new stuff for technical stuff. Yeah. First one computer, then two computers and then some acoustic modems so we could communicate and then some more measurement stuff and so forth and software development kits and whatever.

[Eddie Pangun]

Did it feel easy doing this or.

[Lars Stian Lund]

Well, that's. I would put in the. In the cabinet of interesting questions. I can't tell. I mean that was just. I was 25, 26, 27, full steam ahead. I don't know.

[Eddie Pangun]

I see. Did you ever consider giving up during those time, those years or.

[Lars Stian Lund]

No, not really, no. No. I was eventually kind of fed up with the academic system. So I was. At the end of my PhD, I got actually a tenure as an associate or assistant professor. I'm not sure. Teaching professor anyway, in electronics, which I upheld for a couple of years in between before actually I could draw a salary from the company.

[Eddie Pangun]

You did make some success with the early ventures. The first business that you created with those energy systems.

[Lars Stian Lund]

It was possible to sell it.

[Eddie Pangun]

Yes. Yeah. But you also had quite some struggles during those times.

[Lars Stian Lund]

Oh yeah, sure. When you start with nothing, virtually nothing. So you have funding has to be provided by what you can sell and no other means of funding. So you have to prioritize harshly or very rigid or whatever word you would like to use. But I think you get the picture.

[Eddie Pangun]

And as you got more and more successful, many entrepreneurs, at least today, maybe it wasn't available at the time, but many exit and then they do something else. Was there a moment where you considered that or what kept you from selling the company when you grew from say 25 million to 100 million, something like this.

[Lars Stian Lund]

I think the proper answer is an annual analysis of our whereabouts from the point of view of where the business was. So every summer during holiday there was for my part anyway always reconsidering is this something I rather would not do and jump on something else. And after a couple of weeks pondering and thinking and trying to make an analyze the situation, I came always back with my best options. To have an interesting future is to keep stick with the business.

[Eddie Pangun]

Well, it was good that you did and that you didn't sell out because you managed to scale this business and build a billion dollar plus company. How was this possible? This journey of growing first organically.

[Lars Stian Lund]

Lots of the times it's just stroke of luck, something happens and it's a good thing. A lot of things that happen are not good things. But when good things happen, you can profit from them and realize that you have had a turn of luck. I mean one early not incident but event was we didn't have that much money. So in the late 80s graphic user interfaces were coming along. It was called Ms. DOS for old people, they know what it is. It was an operating system for the PCs. The big thing was IBM's OS 2 as an operating system and to jump on a new technological platform. We didn't have money to buy that development kit, but we had. It was much cheaper to go with Microsoft and with Excel and the Windows development. So that's why we chose that way in the next generation of our software. And we came out several years ahead of competition. That's just pure chance or maybe scarce resources that at that point put us on the proper place. I mean another happy or lucky coincidence, which was actually quite unlucky. We made a sort of IPO in 98. The first equity we raised really in order to expand our business to Germany. We went to Germany and within six months we realized we're only going to spend all those money and not make any return. Coming back to the board and saying it's not going to work. And they said okay, you have promised now 3,3000 shareholders that you are going to conquer Germany. You need to have a plan B. Which we didn't. But that led us into the track of acquiring since we had the money and we had sort of partners which was also very specialized providing software for the property management sector. So picking up the phone and saying should we meet, maybe we could coexist and we have money and you have stuff. So we made the first acquisition, proper acquisition in 98 and then we made a number of those, quadrupling the size of the company in 18 months, which brought havoc, of course to the organization. But further on a couple of years, everything was in order and we realized that, okay, that's one possible line of action, trying to find other very specialized software companies, which at that point in time was not very much in demand.

[Eddie Pangun]

Now, were there any others that you saw who also were acquiring these type of businesses? Did you?

[Lars Stian Lund]

No, we were. People were questioning what we were doing. Everyone from the board, from, from, from the bank to the board to people around.

[Eddie Pangun]

When was the first time you saw someone else doing the same as. As you were doing? Because now it's more popular.

[Lars Stian Lund]

I heard of, of Constellation Software maybe around 2010, I'm not sure when, but it was several, several years later. We were absolutely sure we were the only one in the universe doing this kind of stuff.

[Eddie Pangun]

And for those who don't know, Constellation Software is a Canadian company. What do you think of their journey compared to the one that you have done?

[Lars Stian Lund]

Well, we started with nothing and they started with a shitload of money. That's the difference.

[Eddie Pangun]

And you have both been successful in your own ways and they are much, much bigger. Yes. As of now, when it comes to these type of businesses, software you came in with like programming and this interesting computers. Many investors looking at this type of businesses today, they really value the stability, the predictability of these revenues. This was not really common at the time. But you were very early, one of the first probably who started with what is now called software as a service. How did that happen?

[Lars Stian Lund]

The traditional model is license and maintenance fees, which we with success had done business within the property management. But trying to use the traditional model, when we were dealing with utilities, they were fewer maybe instead of 1,000 possible customers in Sweden we had 60. So we thought we needed to hike the license price, which was impossible. It was now everywhere. Then Oluv came back one day and said, I think we should sell this as a newspaper like a subscription. So they pay per month instead of this licensing model. And we provided some extra services bundled in with the software. And for the sake of the argument, we tried to charge about €10,000 for the license, which was a big no, no. And then we came back and said, you can have this as a subscription and it cost about €10,000 per year. Oh fine. So it's. And I know it has to do with buying something is an investment and that will trickle up the command chain. And if it's only a subscription or opex, someone Else is making the decision.

[Eddie Pangun]

You've been very successful acquiring businesses with that and also doing that in your own businesses for since 1995. Then when you, when you started, what are your thoughts now on this? Like fluctuations in your earnings, how you keep a stability in that over the

[Lars Stian Lund]

years, Since a couple of years back, we have acquired companies that has a more transactional based business model for reasons that are not possible to object to. So you have to go with the flow. And that means that there can be a bigger volatility in earnings in the long run. It will even out. And there are some. Sometimes these kind of companies, when they try to find their business model includes the transactional items. We have it in other parts also, but it's to a much less extent than it has been what the last three or four years.

[Eddie Pangun]

And if you look at the longer term, you've definitely been able to grow VTEC very successfully in many dimensions. Speaking about growth, I'm curious, how do you measure whether you are successful in what you're doing?

[Lars Stian Lund]

Well, we have a few KPIs and the first hurdle to reach is when your recurring revenue will cover your labor cost. Then you know any new sales you do will possibly hit the bottom line or a big chunk of that will hit the bottom line. And then there is constraint. Also when you reach more or less 100% recurring revenue, which is too complicated to. It's easy on paper, it's more complicated to say it. And the other one that I'm really interested in is comparing added value to labor cost since we don't have any inventory and so forth. It's just some 75 to 80% of our cost base is our employees. So tracking the rest is okay. Could be interesting. But really you need to keep track of efficiency and that we are always improving within our own operation. That's key. And if we are successful in doing that, we will improve our profitability and our cash flow, which we then can invest for future growth. Both in our own software, but hopefully a couple of acquisitions also per year.

[Eddie Pangun]

You mentioned the people in your company. That's an important aspect, of course, and this book is a good testament to that I think as well. How do you motivate the right people to work for witec?

[Lars Stian Lund]

I think I wouldn't answer that question in the way you put it. I think people need to be motivated by their actual job description. I can't motivate people to do a good work if the people working in our company is not motivated in doing a good job for the customer for themselves or for their co workers, you're lost. So motivation has to come from inside. And of course the job is then possibly to enable a culture and a place and a mission that attracts enough people in order for them to find it interesting and rewarding to work in our company.

[Eddie Pangun]

I like that. And when it comes to the growth you have become a larger organization. You're still not a huge organization. But how do you work to avoid unnecessary bureaucracy creeping into the administration and the organization to keep

[Lars Stian Lund]

more or less all decisions in the business units? And the overhead we are carrying today, is it because all those small verticals we have, they are doing an extremely good job. But when it comes especially to it security you need to have some extra resources and muscles in order to stay on top of things. And so to a great extent that can we provide from. From the group level then as internal consultants or maybe control part of our organization we have a very small HR department which are used by the business units on demand. So it's just provided for internal services. And since they are internal also they know pretty much all about culture and so forth. And that can be in play very early on in especially recruitment processes and

[Eddie Pangun]

acquisitions is a big part of what you're doing and a way to grow. Can you say a bit more about how you're working with M and A?

[Lars Stian Lund]

We have a small group of people, depending on how you count, three or four maybe that is working full time. And today it's a lot of incoming. So I know last year we vetted or looked at approximately 300 targets more deeper analysis of about 200, made a non binding offer for 35 and closed seven deals. So that it's a lot of work.

[Eddie Pangun]

And the funding of these acquisitions is both with your. The cash flow that you generate from businesses, it's also from leverage. But you also have raised some capital. Historically you are one of the largest shareholders. What are your thoughts on raising additional equity?

[Lars Stian Lund]

I think being a bit opportunistic and sometimes if you make the math it can actually be cheaper to have equity than to have going into that. There are some boundaries that has to be fulfilled in order for that to work. But at a particular point in time that can make sense. The ultimate goal anyway is of course should be I think to be able to grow from your own cash flow which can be a bit demanding in software since investors value the recurring income stream very highly. So if you are a serial acquiring industries they will go with a lower multiple because of the volatility in that business

[Eddie Pangun]

and has this changed over time.

[Lars Stian Lund]

25 years ago these kind of software companies were not very attractive. So multiples has increased over time as the popularity has increased. But still there's hurdle rates. You cannot, there is a limit what you can pay if you're an eternal owner and not someone who is buying

[Eddie Pangun]

for later sale of it seems like you have still been able to do a lot of acquisitions in recent years. If we look out 10, 20 years. What do you foresee there?

[Lars Stian Lund]

There's a lot of companies and a lot of these highly specialized companies. And you. I still get surprised actually of the incoming memorandums that come. Oh yeah, of course, there has to be software in that sector also. So there is. There is a long Runway.

[Eddie Pangun]

We haven't spoken so much about geographies here. Where do you see that grow from where you are now?

[Lars Stian Lund]

I think we started out in Sweden or in the north of Sweden and then sequentially went into Norway, Finland and Denmark and established a fairly firm Nordic footprint. So the first acquisition outside of the Nordic came in the Netherlands and then in Belgium. And I think Europe as a whole is a lot bigger than the Nordics. And what we're doing here in the Nordics is I think we are frontrunners also.

[Eddie Pangun]

Do you have any other lessons from the first 40 years of building WITEC that you would like to mention here that we haven't talked about?

[Lars Stian Lund]

Well, that's the long list of mistakes

[Eddie Pangun]

or maybe one example of putting the wrong.

[Lars Stian Lund]

Put your foot in the wrong direction or in the wrong spot. Now one thing we did early on, we had made this first acquisition of a company providing more or less invoicing for property management. And then a couple of years later we bought a similar company in the southern part of Sweden and they were kind of head on competition. So we had two systems making more or less the same job. And everybody was asking me in Oudof, co workers, the board, customers and others hangarounds, which system are you going to choose? Because if you have two factories, you will close down one in order to increase usability of the one factory. Eventually we caved to this and said we will go with this software and the other version and the customers from that company. We lost about 50% of those customers over a period of five years. And then we made an acquisition and bought them back. Yeah, and the lesson from that is you can't kill off a software unless you have made a transition that is more or less seamless for your customers. And that will take some time, but eventually that will pay off. So if we Take the property management business in Sweden, which we made six or seven acquisitions early on and they were hovering around the 5% margin for many years. And we needed those license deals in order to make any profit at all. It's way higher today. And now we have one software suite, but it took us 15 years, I mean, making experiments and so forth. I think we can do it quicker today, but not within the year and not within three years. It will take more, but we know how to do it. So that was a big mistake, which maybe could have been a real, real crisis. Another mistake, which I actually, I knew it was a mistake when we made it. We had. Within the real estate agents in Sweden, there were two competing, just two competing companies and they were fully functional, both of those options. So the only way they could compete was with pricing. It's a lousy situation anyway, we had bought one of those companies and lo and behold, six months later, the owner of the other company said we should cooperate, which of course they wanted to sell their company to us. And I said, it's a monopoly situation. That is not a good way to go. But okay, maybe we can make something from that. But of course, a monopoly is never liked by the market. So the Real Estate Agents Federation said, we can't have this situation. We need to develop our own software. So the competition came back. Fortunate for us was that the company we bought had two other software solutions for other markets. And one of those was really, really a golden egg, which we found out afterwards. So we made a huge mistake, knowingly, which were sort of mitigated over time. And then within the package, we had a really, really nice operation.

[Eddie Pangun]

It's fascinating to hear how things have been evolving and all those people you meet throughout the years and all the advice you get. Different people have so many opinions, as you alluded to there. Yes, maybe you mentioned it already, but if not, what's the worst advice you ever got?

[Lars Stian Lund]

You can't be this diversified.

[Eddie Pangun]

Who said that?

[Lars Stian Lund]

Or maybe early on you can do software for utilities and the same time do software for property management. They're so orthogonal, they're so different. You can't make this work. Well, we looked at the numbers and so we were profitable, so obviously it worked. So we disregarded all those code advice.

[Eddie Pangun]

It's good that you did. And let's come back a bit more to the present time and shift focus to where we are now. After 35 years as CEO, you left a position in 2021. How has this transition been for you personally?

[Lars Stian Lund]

Well, I spent sort of 10 years trying to mold the organization in order for me to step down. So the transition has been extremely smooth for me and I have a really good cooperation with Ull, who is the CEO now. And I also have access to internal systems so I can do my own homework if I want to. I don't need to bother people if I get curious. The only big thing is that I don't have to be at the office all the time. All the time. Otherwise I spend my time once again being curious and reading a lot of stuff and trying to stay on top of things. And sometimes people ask me how I know this and that, and I say I make it my business to know stuff.

[Eddie Pangun]

How did you select your successor?

[Lars Stian Lund]

I've known Ullr for 20 years or more and he was having really demanding positions during his career. He's what, 10, 12 years younger than me. But I've seen what he's done and what kind of operations he's been involved with. And there was a small opportunity in time when he was available. And so I put the question if he was interested to come into the company as CFO at that point. We haven't worked together really. We have been on the same board for a number of years in a local company, but otherwise it's more like hi, how are you doing? And so forth. So we had a period of approximately two, two and a half years. And then I was ripe to put the question to.

[Eddie Pangun]

And in the board work as a chairman, how do you avoid group thinking?

[Lars Stian Lund]

No, I think that has to do with the composition of the board and the board members. And it's a board we have assembled over a long period of time with different experiences from different industries and with. There is no hesitation to. To question the suggestions that come along. And that was the case also when I was the CEO. So I think it's. It sorts itself out because of the people who are in the board and stuff get questioned. And things sometimes stops in the board, not when it's presented as a. For a decision, but earlier on we have some sort of a process that discussions are coming along pretty early when new ideas or whatever is on the table so the board can have their feedback or make their feedback. So when things don't evolve into actual things happening, it has probably gone away during those discussions. So the board is very much not sitting as the final place for decisions to be made, but is involved previously also in important aspects of the business development or business strategy, maybe I should say. And that's a discussion that is present on every board Meeting. It's not something we discuss once a year. It's on every board meeting.

[Eddie Pangun]

And besides being the chair of witec, what other commitments do you have in life?

[Lars Stian Lund]

I have three or four other boards. I have a share of two others and sitting on the fourth board also. So it's that kind of activities I pursue.

[Eddie Pangun]

What type of companies and where are they based?

[Lars Stian Lund]

One, it's up north, it's close to family, close to home. One company is the holding company who is a subsidiary to the university, which is actually doing seed investments in early startups, deep tech emanating from research and the system for fostering innovations and trying to make real businesses and not just fantastic ideas. And the other one is a small family, more or less family owned investment company, making not many investment, but have made a substantial investment in a company that is actually run by my brother, which is sort of a local serial acquirer, but in the industry sector, just starting out or 10 years down the line, but still early stages.

[Eddie Pangun]

Everything is about the perspective. It's clear from reading the book that UMEO has been very important for witec and WITEC has been very important for UMEO as a city. This local presence, how is that these days in VTEC and also for you?

[Lars Stian Lund]

As we have grown, when we need people for senior positions within the group level, if we choose to make that kind of recruitment in Ume, we get creme de la creme. We get the best the city can provide, the town can provide. There is another aspect. I'm stubborn. Why is it not possible for us to have HQ in Ume? No, I think it's a good place to be and it's a university town. You need to keep that in mind. So the university is very present within the city. For one thing, people having studied at university are still working within the city. And I think the statistics is that the level of the education level of people living in Ume is, if not number one, but number two in Sweden. So there's a lot of both smart and educated people. And maybe that's an environment I like.

[Eddie Pangun]

And you being there is probably one reason for many people staying there as well, working for you and others in the ecosystem there. When it comes to the local community, is there something else that Witek as a company or you personally are doing to help the community?

[Lars Stian Lund]

Well, there is some payback, of course, and advisory boards and presentations, maybe. I'm going on a trip to Italy soon where I'm going to have a keynote speech for. I'm not sure, maybe 50, 60 entrepreneurs from four Nordic, not counties, but regions of Sweden. So it's payback for more or less in that respect. We are not putting a lot of money into sports or whatever, but. Students doing their final paper.

[Eddie Pangun]

Speaking about sports, I know you also play some golf, which is both a physical and a mental game. Has playing golf in any way influenced how you run Vitek?

[Lars Stian Lund]

I hope not,

[Eddie Pangun]

Because golf is usually a very individual sport, but it can also be very social. And in the book we learned that you play golf with Olav, your first business partner and the co founder. We haven't talked so much about him. How much do you talk with him these days? And how is that relationship nowadays?

[Lars Stian Lund]

It's few and far between our talks. But going back in time, I mean, we spent hours per day discussing whatever and trying out ideas and comparing facts and views and stuff and so forth. And then once in a while you need just to let the steam off. And then that's good to have someone that you are actually so closely connected to. That has been over the years. We spent a lot of time together and nowadays it's not so necessary. We have other people doing running the business better than we ever did.

[Eddie Pangun]

But both of you have remained large shareholders of iTech. Have you done any other investments yourself or with him?

[Lars Stian Lund]

We haven't done anything together and I made some small failed attempts.

[Eddie Pangun]

But it's probably been a wise decision to keep most of the money in the business. You have been growing that pile at a good clip over the last decades. How has that impact you to get, at least on paper? Lot of. A lot of money.

[Lars Stian Lund]

I have a car. I only use it during summer. I can take off the roof and this. And then people say, why do you have a convertible up where you live? Well, that's when we. Where we live, that's actually the place to have it. You don't take down the roof every day. So otherwise not to a great extent.

[Eddie Pangun]

You mentioned in the beginning you bought those. You could buy those technical stuff, those computers with the money you earned. But maybe that came to a halt at some point. You had enough to buy what you wanted to have.

[Lars Stian Lund]

Well, from computers and stuff. Yeah, sure. And I'm not really that excited anymore to get the latest equipment. I tend to stick with what works nowadays. So now I'm not buying a lot of things.

[Eddie Pangun]

And speaking about technology, it's been so many shifts and you've seen this firsthand, how technology has changed. And you mentioned Windows there as one example, and also many technologies, of course, the. That someone believed in and they didn't play out as expected. What have you learned from this? When we look at what companies make and the mistakes they make when there are these kind of technology shifts.

[Lars Stian Lund]

Well, there is a very wise saying that you overestimate the impact of new technology in the short term and underestimate it in the long term. Which means when new stuff comes along, you have time. I think that's the takeaway from that statement, which I find is actually true. So new technology will eventually be very, very important, but you don't have to rush into it in order to use it in the most efficient way. So there is one saying that we have borrowed from somewhere that says we should be on the leading edge of technology, not the bleeding edge of technology. So you need to know what's happening and have a decent grasp of what's happening. But I think having a more long term view of technology and technology changes means that you can jump on the wagon in the right time. When it's mature to the extent that you can actually make good use of it, then it seems like the cycle may have shortened. With AI, there are things that you can put in practice fairly quick. And I'm not talking about coding because that is an evolution from when you had to do everything yourself. Then you can buy some stuff and then going forward you can Google stuff and now you can ask some chatgpt, whatever. So that's more of an evolution. And you don't have to copy stuff as you do when you Google stuff here. You can just ask, I want this and this and that and so forth. But you can put it into practice. I mean we use it and have already for some time in support as far as I know, we have trained models on our own tickets repository, common questions and common solutions which make it's sometimes viable to have just a bot answering questions. And that will be very precise. So it has been the constant evolution of improved efficiency within the software industry, which is maybe now also having an even greater impact on organizational aspects. I mean, we don't do our financials on paper. We never did and we never made our calculations on paper. That was early spreadsheet software and so forth. So software has always been an enabler or a vehicle of efficiency within every organization. Of course also in our. But its impact is even greater today and it provides possibilities to increase efficiency going forward for taking away dull work and improving quality for customers.

[Eddie Pangun]

And when we speak about the longevity of these products that you are developing, how far into the future do you see when you do product development for

[Lars Stian Lund]

these softwares, if you look back in the, in the rear mirror, I would say that technology changes had a longevity of about 20 years or more. And you will be, you would be surprised on how much software around that is 30, 40 years or older. But it's doing the job. Maybe you need a slick interface or a mobile interface or whatever. But the business logic that the software is supporting or serving is not changing. So the engine is the same. What is happening is maybe that you have old software with like okay, Cobol that no one knows today, or maybe no one wants to know today, even though you have hardware that can run it perfectly and that's an even longer maybe time period when software languages actually go to die and no one learns it anymore. Then you need also to refactor your software. But most of the business logic in the core is non changing.

[Eddie Pangun]

It's an evolution as you say. We talked in the beginning that the title of the book is driven by curiosity. So what are you curious about now?

[Lars Stian Lund]

Most everything that I don't really know.

[Eddie Pangun]

Anything more specific?

[Lars Stian Lund]

I spend a lot of time. I mean, I don't read scientific papers anymore, but popular science in any regard is interesting because that's new stuff or new knowledge that comes along and sometimes there's old knowledge that has been forgotten that sees the day of light again. So I'm all over that place. And that could be history or archaeology or natural science or cosmology or physics or whatever. I'm not into soap operas or reality tv. That doesn't tick my box for curiosity.

[Eddie Pangun]

Then you're at the right podcast. Investing by the books. We'd like to wrap up with some questions about reading and writing potentially as. Is this something that you're doing? Writing anything?

[Lars Stian Lund]

Okay, the most I write is of course text or WhatsApp. And that's at best one liners today.

[Eddie Pangun]

No coding program for.

[Lars Stian Lund]

If I do coding today, it's for something I have for personal use. It's not a lot. I read more online than books these days and maybe some journals or magazines. And I don't read that many books anymore. I usually, okay, I start with the book and after 30, 40 pages I know, okay, this is the thing. And now it's 270 pages on the same stuff. And then I tend to get bored. So I have a pile of books at my bedside which I've read 20, 30, 40% of. And when I get the knack of it, I lose interest.

[Eddie Pangun]

What type of books are those?

[Lars Stian Lund]

I mean there is one book. This is an Old one west of on Crowds. I actually read from first to last page. The only book resembling maybe a management literature is good to great which actually is in. It's not in one piece anymore. I have a book called the Marionettes. I think marionettana Swedish book that actually takes the start is a fake news but backtracks it to the Soviet revolution in the early 20th century where everything was fake news. And has can describe how this has evolved over time and today is known as fake news. It's pretty interesting actually how you can change worldviews by just lying intensely and very consequently.

[Eddie Pangun]

Do you think there is any book that we should avoid reading?

[Lars Stian Lund]

Well, you can have your pick, but I have read Lord of the Flies by William Golding and when I read it I was pretty annoyed because the plot point, it's all about one guy who is myopic, he's nearsighted and the struggle is for his glasses because they can make fire with his glasses. If you're nearsighted, you cannot make fire. It's not focusing the sunlight, it's dispersing it. So the whole book, very famous is built on something that is physically not possible. And to make things even worse, he got the Nobel Prize religion. So that's how I read books. As an experimental physicist, I can't tolerate when. If it's science fiction, fine, then you can make ups things but not if you not in that respect.

[Eddie Pangun]

Last, thank you so much for coming on Investing by the Books podcast to talk about you and your very inspiring journey with Witek. Where can our listeners follow you and your work?

[Lars Stian Lund]

Probably on our website with what we put out in press releases and so forth Annual report And if you're a shareholder, you're welcome to the annual general meeting in Umo. We have the best dinner in Sweden.

[Eddie Pangun]

Perfect. Do you have anything else you want to say here before we finish up?

[Lars Stian Lund]

Thank you for having me. It was a pleasure.

[Eddie Pangun]

Thank you so much for coming on. Thank you for listening to Investing by the Books, a podcast by Red Eye. Follow us on Twitter ibredi and email us at IB Podcast to improve. We'd love to hear your feedback, so please rate and review us. Notice that the content in this podcast is not and shall not be construed as investment advice. This information is meant to be informative and for general purposes only. For full disclaimer, visit Redeye se. I'm your host, Eddie Palmian, and until next time, I sincerely wish you the best of luck on your journey through life and investing.