Tesi’s impact review 2019: Path to transformative growth by financing Finnish growth companies

Impact - 9.9.2020

Compared to other Finnish companies, our portfolio companies grow faster on average – total net sales grew by 12 %; total exports by 8 % and the number of jobs by 20 % -, employing some 43 000 people. Besides being profitable, we want our portfolio companies to use their expertise and solutions to make a net impact on society that is as beneficial as possible.

At Tesi, we develop the venture capital and private equity market and improve the availability of private equity. We promote companies’ growth and internationalisation as well as business operations that are profitable and have a significant social impact. VC/PE investments to funds and directly to growth companies form the core of our operations. Also, per our new strategic theme, we produce insightful information in co-operation with our stakeholders that develops the PE market and supports investing.

“Tesi’s role is to develop the venture capital and private equity market so that Finnish companies have sufficient financing and know-how for a new magnitude of growth. We support companies’ growth and internationalisation and we promote skilled ownership. Companies play a central role in solving global problems in a sustainable way. Consequently, the whole society benefits from what these companies, and the investment markets financing them, achieve,” says Jan Sasse, Tesi’s CEO.

Growth and internationalization

Through VC/PE investments, Tesi enables companies to grow and take more risks in international markets. In 2019, Tesi’s portfolio companies’ – either through fund or direct investments – revenue totaled €5,899m (+12 % from last year) and exports €1,631m (+8 % from last year). These companies employed some 43,000 people and amassed tax revenue worth more than a billion euros.

Diverse financing alternatives for Finnish growth companies

In 2019, Tesi made investments amounting to €133m. Tesi made commitments to invest in 10 funds totalling €89m and made investments directly in 25 growth companies totalling €43m.

TESI acts as a long-term investor in VC/PE funds and in this way strengthens the availability of growth financing for Finnish companies. Investors also provide valuable business expertise and useful networks alongside the capital they invest. In 2019, Tesi gave commitments of altogether €75m to seven Finnish funds. Commitments to these funds from other investors totalled €810m, of which €574m was Finnish capital and €161m was international capital. In other words, Tesi’s commitments were a catalyst for attracting over ten times more financing for these funds. In addition, Tesi gave commitments of €14m to three international VC funds.

Tesi makes direct investments in fast-growing Finnish tech companies, SMEs pursuing growth, sectoral restructuring, buyouts, and industrial projects. The direct investments are always made as minority investments together with other investors and on market terms. Tesi made direct investments amounting to €43m in 25 companies during 2019. Overall, a total of almost €180m in new risk capital was channelled into these portfolio companies, over four times the amount invested by Tesi.

Tesi internationalises Finland’s venture capital and private equity market. In addition to Finnish funds, Tesi invests in international funds that complement the Finnish VC/PE market with their investment focus and know-how. We aim to improve Finnish growth companies’ access to later-stage VC financing, simultaneously enabling larger, internationally competitive, financing rounds. Alongside fund investments, Tesi directly co-invests in companies with international investors. In 2019, Tesi’s international investor partners invested altogether €134m in Finnish growth companies.

The KRR fund-of-funds concept was launched in 2008 to meet two needs: first, Finnish VC/PE funds could raise capital from Finnish institutional investors, and by doing so create sufficiently large funds to meet portfolio companies’ needs; and second, to offer Finnish institutional investors a resource-efficient way to invest in Finnish funds. In 2019, KRR III gave commitments to four funds. In total, KRR have been one of the catalysts in the formation of over 30 Finnish funds and in the internationalization and growth of hundreds of Finnish companies.

In addition to being profitable, Tesi expects its portfolio funds and companies to operate responsibly and make a positive social impact. Tesi promotes wide-ranging diversity, in its own activities and in its portfolio funds and companies, for example in recruitment processes and by developing diversity reviews and reporting. In 2019, most of Tesi’s portfolio companies (directly and through funds) had corporate responsibility development targets. Personnel and customer aspects are highlighted in corporate responsibility, and often less attention is paid to environmental goals. The boards of portfolio companies are still male dominated (61% of portfolio companies have boards comprised entirely of men). Management teams have slightly more female members (38% of portfolio companies have teams comprised entirely of men).

Tesi produces and distributes insightful data about Finland’s VC/PE market. We will enhance our understanding of market gaps so we can target our investment activities at those areas in which they will have the maximum potential impact. We collect and refine our own in-house data as well as that from a public domain. We will combine this data with our charted experience in collaboration with stakeholders, and then share the data and insight in cooperation with them. In 2019, Tesi arranged several events that offered investors and growth companies opportunities for networking and learning.

Finnish growth companies as solvers of global challenges

Per our strategy from 2019, we prioritise making a positive social impact a key driver of our operations. We plan to deepen our understanding of the social impacts of our more diversified activities, and to find new ways of guiding those impacts. The innovations created by growth companies play a vital role in the technological and social breakthroughs associated with solving global challenges. The main methods for promoting positive social impacts are: producing new information on the impacts of economic activity; and channelling capital to companies that will use their expertise and solutions to make a net impact on society that is as beneficial as possible. We will target our impact goals at reaching carbon neutrality, mitigating climate change, and achieving the UN’s Agenda 2030 Sustainable Development Goals. We want to promote socially beneficial and environmentally sustainable economic growth.

We have selected five impact themes, that will form the framework for guiding how we support and encourage companies to solve challenges:

◆ Sustainable production and efficient use of resources

◆ Sustainable consumption and cities

◆ Renewable energy and energy efficiency

◆ Health and wellbeing

◆ Learning and equality

 

Read in more detail:

Tesi’s impact review 2019

 

Additional information:
Jan Sasse, CEO, Tesi
jan.sasse@tesi.fi, +358 40 861 9151

 

Tesi (Finnish Industry Investment Ltd) is a state-owned investment company that wants to raise Finland to the front ranks of renewing economic growth by investing in funds and directly in companies. We invest profitably and responsibly, hand-in-hand with co-investors, to create the world’s new success stories. Our investments under management total 1.3 billion euros. Ambition for ownership and success www.tesi.fi | www.dtg.tesi.fi | @TesiFII