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February 22, 2019

PE & VC in the Nordics and Baltics

A few weeks ago, I attended a PE & VC conference in Tallinn. The high-level agenda focused on the latest trends and insights in the Nordics and Baltics PE & VC industry through discussion panels. In this blog post I want to share my key takeaways from the various panels.

The line-up of panelists included numerous well-known local and regional LPs and GPs. Unfortunately, some of the panels were composed of speakers doing their business predominantly in CEE countries and this resulted in some of the panels having a less relevant geographical focus for any Nordic or even Baltic listeners.

As regards the current market for fundraising of GPs and the LPs’ perspective of fundraising it was noted that the market remains bullish with fund managers raising larger funds which are geared also towards later-stage investments. A few LPs told that they are looking to decrease the number of GP relationships and are thus looking for GPs who invest across multiple strategies. The market for secondary transactions as an alternative for extending fund terms seems to be developing which provides increased liquidity to LPs. For GPs who are raising their first fund it was stressed that perseverance and believing in your own vision is key. It should also be remembered that the fundraising is only the beginning of the LP/GP relationship.

The panel on deal sourcing for VCs stressed the importance of own networks as a source of deal flow. The old adage of the team being key when evaluating investment opportunities seems as relevant as ever, but VCs ought to be mindful of their own role in the partnership by recognizing what they can bring to the table. As regards the Nordics and Baltics, times appear to be better than ever with the whole eco system thriving and entrepreneurship being valued. Recent successes such as Spotify and Supercell provide local role models and the next step is to start beating the bigger markets. That being said, the importance of international partners in e.g. London and Silicon Valley should not be underestimated.

The day came full circle with the panel on exits and also this panel recognized secondary transactions as a recent development providing early stage investors an interesting exit option. When planning an exit, the relationships with potential buyer candidates should be built at a very early stage. Some of the most common challenges in connection with exits seem to be greed, misaligned interests of different stakeholders, a lack of exit options, changes in key personnel, management losing focus due to the exit process and/or grooming the team for interaction with buyers. Geographically the US remains an attractive market for exiting also Nordic and Baltic companies, while an increase in the importance of Chinese buyers remains uncertain.

On a general level, most panels were full of optimism and such optimism is easy to share at least from a Finnish perspective with local funds raising healthy amounts of money and larger and later-stage financing rounds of Finnish companies becoming more commonplace.