Corporate Venture Capital in Finland

Blogs March 28, 2018

M&A and Finance

Over the years, the number of investments in Finnish growth companies has grown steadily, but how big a share of this growth is from Corporate Venture Capital and what is the share of Finnish industrial companies in this market? Corporate Venture Capital (CVC) refers to venture capital investments made by industrial companies and many large industrial companies have established their own divisions, subsidiaries or funds to make and manage their CVC investments.

According to PitchBook’s recently published 2017 Annual European Venture Report, the total value of CVC investments at the European level has increased considerably over the years 2015-2017 and it is also noteworthy that the number of investments made dropped very little from last year’s peak levels, whereas the total number of investments in growth companies at the European level has dropped by as much as a third from the 2014 peak levels.

No statistics thus far give a good overall picture of the number of CVC investments made in Finnish growth companies or how active Finnish companies have been in making CVC investments. However, it is clear from public information collected from different sources that CVC investments are also made here. For example, many Asian CVC investments have been made in Finland in recent years, with globally renowned names such as Alibaba, Baidu, Yahoo! Japan and Toyota among the investors.

There are also other indicators that this market may be growing in the next few years. Large Nordic companies such as Fortum, Telia and StoraEnso have worked with growth companies for a long time both as investors and partners. At the end of last year, the German fund management company Redstone, which manages funds owned by large companies, announced that it would establish an office in Helsinki to help large Finnish companies invest in growth companies and to find potential Finnish investment targets for their international customers.

One new expansion into this field by large Finnish companies is the recently announced Reach Programme by Konecranes, which aims, through partnerships, to provide growth companies with access to new markets and harness new technology for Konecranes. Such programmes may aim at more versatile cooperation than just financial investment, but they will probably also have a positive effect on CVC investments.

“The growth rate of startups and the rapid uptake of technology in traditional industries has galvanised the traditional big companies in Finland as well. Open innovation collaboration models and startup programmes allow companies to seek partners for their organisation, test new business lines in an agile manner and search for acquisition targets,” says startup investor and chair of Industryhack Ltd, Inka Mero.

“Large companies are currently actively developing their own internal operating models, which aim to create cultural change and know-how that support digitalisation. Internal accelerators offer employees the opportunity to become entrepreneurs within a large company, and open innovation competitions seek to find the right and best people or teams from the global ecosystem to solve business challenges, for example by using artificial intelligence. However, international startup investment is still on a relatively small scale, although I think it can be said that large companies have entered the venturing field permanently. However, investing is not the only tool: the value-creating cooperation with startups and the ecosystem that is undertaken by companies such as Wärtsilä and Ponsse is equally important from a modernisation point of view,” Mero continues.