Funds provide expertise and the capital needed for growth and internationalisation of their portfolio companies. International funds’ activeness promotes the development of Finnish venture capital market.
A significant part of Finnish Industry Investment’s funding to growth companies is channelled through venture capital funds. Finnish Industry Investment invests directly in funds and through the funds of funds (FoF Growth I-II). Last year marked the first year of operation for FoF Growth II, in which Finnish Industry Investment has invested along with Ilmarinen Mutual Pension Insurance Company, Keva, Elo Mutual Pension Insurance Company and State Pension Fund. FoF Growth I has been fully invested.
Director of Fund Investments Anne Riekki notes that the funds in the portfolio of Finnish Industry Investment and FoF Growth have experienced great leverage.” The amount of capital these funds have raised from other domestic and foreign private equity investors is many times more than that invested in them by Finnish Industry Investment and FoF Growth.
For example, FoF Growth I’s 11 portfolio funds have raised a total of EUR 830 million. The investment periods of the first funds have just ended, while the investment periods of the latest funds are just beginning. “We follow the investment activities of the funds and the development of the portfolio companies with great interest,” Riekki continues.
We follow the investment activities of the funds and the development of the portfolio companies with great interest."
“FoF Growth II’s investment period has had a promising start. FoF Growth II gave two investment commitments in two funds in 2014, Sentica Buyout IV and Verso Fund II,” Riekki notes.
Riekki is pleased to point out that European Investment Fund (EIF) made a significant investment in the VersoVentures fund. In total EIF has invested EUR 109 million in the funds which are in FoF Growth I portfolio.
Complementary expertise from abroad
Finnish Industry Investment invests in international funds in addition to Finnish funds. The selected international funds specialise in some sector that is important for the development of Finnish commerce and industry, they have the needed special expertise and contacts, or they are already active in the Nordic markets – or they are all of the above.
“We want to entice international investors to take a closer look at the Finnish deal flow and to invest in Finland,” Riekki says.
Foreign investors are also good partners for local venture capital investors, i.e. the parties complement one another.
Naturally, the funds make their own investment decisions, but Finnish Industry Investment seeks to partner with foreign investors who show a strong interest in Finnish markets.
“Supercell’s success story and the ongoing positive start-up wave have recently given a big boost to the interest that international venture capital investors are showing in the Finnish markets – and not just in game sector.”
Real growth through internationalisation
Riekki points out that it’s important for international investors to visit Finland in order to find out more about the domestic companies and to challenge them. This is how our venture capital markets can evolve.
Foreign experts also give Finnish companies a broader picture of what international success requires and the potential added value offered by venture capital investors.
“Foreign investors question business management, they evaluate business activities and help to develop an international business plan.”
“One of the biggest challenges in developing Finnish companies seems to be the competence related to internationalisation,” Riekki estimates.
“Finland needs additional expertise in developing business and competitiveness and in understanding customer needs. The real growth opportunities are in a successful expansion aboard.”
“Collaboration with international investors also often provides companies with valuable contacts abroad, and that can advance the company’s growth in international markets,” Riekki notes.
Fund investments and investment commitments in 2014
Finnish Industry Investment
Investment commitment, |
|Balderton Capital V, L.P.||6.8|
|DN Capital - Global Venture Capital III LP||3.0|
|Inventure Fund II Ky||5.0|
|Northzone VII L.P.||7.5|
|Sponsor Fund IV Ky||10.0|
|Verso Fund II Ky||5.0|
FoF Growth II
Investment commitment, |
|Sentica Buyout IV Ky||10.0|
|Verso Fund II Ky||15.0|