Investment data collected by Tesi highlights a large difference in the returns produced by Finnish venture capital funds between the two periods 2002-2008 and 2009-2015. Funds raised during the latter period, meaning after the financial crisis and the beginning of the Finnish startup boom, have generated 11% in returns for investors (IRR). At this level, venture capital funds perform well in comparison with stock markets and buyout funds.
The improvement in returns is largely due to a greater degree of professionalism and internationalisation in Finnish companies and technologies, as well as investors. According to the Finnish Venture Capital Association’s statistics, write-downs of investments fell from 40% to 20% during 2012-2017. During the same period, Finnish companies have increasingly often succeeded in raising large follow-on financing rounds. It is likely that in the future we will see a further improvement in returns as M&A activity among Finnish technology companies continues and as the investment portfolios of younger funds develop.
“Although Finnish venture capital funds have in recent years successfully grown their portfolio companies and generated good returns, investors still imagine venture capital to be the same as at it was at the turn of the millennium. The market environment has changed completely, and we want to bring the facts about today’s returns to the attention of private investors, so that venture capital funds will once again be an attractive option. Innovative companies would then have access to more financing and expertise to help them grow to the next level,” says Tesi’s Investment Director Riitta Jääskeläinen.
At present, Finnish venture capital funds raise large commitments from the European Investment Fund, Tesi and the KRR funds-of-funds managed by Tesi, as well as from a few Finnish institutional investors. Venture capital funds would particularly need investors that can make commitments of 1-10 million euros. There are plenty of investors making small commitments, less than 1 million euros.
“Investors are increasingly confident in the venture capital sector’s ability to build competitive growth. Fundraising by venture capital funds broke all records in 2017 – new funds and versatile investment teams raised altogether 169 million euros. We expect this favourable development to continue and new fund investors to start supporting the growth of innovative companies. Expected returns will rise hand-in-hand with the sector maturing,” says Pia Santavirta, Managing Director of the Finnish Venture Capital Association.
The data used in Tesi’s analysis consists of the investment data as at 31 December 2017 from Tesi, KRR funds-of-funds and Business Finland Venture Capital’s portfolios, covering practically the entire venture capital and private equity market in Finland.
Further information:
Riitta Jääskeläinen, Investment Director, Tesi
email: riitta.jaaskelainen@tesi.fi, tel: +358 50 309 2733
Pia Santavirta, Managing Director, Finnish Venture Capital Association,
e-mail: pia.santavirta@paaomasijoittajat.fi, tel: +358 40 546 7749
Tesi (Finnish Industry Investment Ltd) is a venture capital and private equity company that accelerates companies’ success stories by investing in them directly and via funds. Tesi always invests together with other investors, providing them with access to high quality deal-flow in Finland. Our investments under management total €1.2 billion and we have altogether 700 companies in portfolio. www.tesi.fi/ @TesiFII
Finnish Venture Capital Association (FVCA) promotes the interests of venture capital and private equity investors and their positive impact on growth companies and the national economy. Most Finnish private equity investors are members of the association. Private equity investors – Building growth. www.fvca.fi, @FVCAfi.