Based on the key takeaways from PitchBook’s latest US Venture Monitor and European Venture Report the US and European VC markets are currently trending towards fewer, but substantially larger investments and the fundraising of fund managers remains strong with fund sizes growing. Both trends are supported by a favorable exit environment. In this blog post I aim to summarize some of the developments in the Finnish VC market to see whether they are in line with US and European trends.
According to statistics recently published by Talouselämä, it seems that 2018 is on track to be a record-breaking year in terms of both deal count and deal value. Also, the number of large investments is on the rise. If the second half of 2018 is as strong as the first half, the Finnish VC market would thus combine the best of two worlds in tracking the US and European trend of larger investments, but without the decline in overall deal count. I have found no data on Finnish financing rounds sorted by financing stage, but most financing rounds of Finnish companies seem to fit in the categories of angel/seed, A and B. Time will tell whether the current US trend of VC-backed companies staying private longer will arrive in Finland bringing with it even larger and later stage rounds.
In 2017 and 2018 we have seen strong fundraising as a number of Finnish VC fund managers, led by Inventure and Maki.vc, have raised new funds. Several other Nordic fund managers, such as Spintop and Verdane, have also raised new funds which is set to increase the funding available to Finnish start-ups. Despite a few larger funds and strong fundraising, the average size of Finnish VC seems to be lagging in comparison to both the US and the rest of Europe. One explanation for this might be support for smaller funds provided by Business Finland Venture Capital.
When it comes to exits of VC-backed Finnish companies the most notable ones from recent years revolve around the gaming sector. One exception is the sale of Ekahau that was announced a few weeks ago. The Finnish start-up eco system is still less mature than its US and European counterparts and relatively small in size and this is reflected in what might seem as a lack of big exits. The Finnish IPO environment has been strong the last few years offering an exit route also to VC-backed companies. It remains to be seen whether the positive sentiment will take a hit from the drop in public stock prices as the OMX Helsinki has tumbled by more than 10 % in less than two months.
All in all, the Finnish VC market appears to be in excellent health for the time being, but that shall not be taken for granted. Amidst, or maybe due to, the booming Finnish VC market several investors have voiced concerns over potentially inflated valuations. In order for the evolution to continue in a favorable direction it seems to me that Finnish start-ups and growth companies need to progress through the lifecycle towards becoming more mature and larger, thus attracting more capital for larger and later stage rounds and eventually providing investors with strong exit opportunities.