American financiers investing in Finnish growth companies
In early 2011 more money has already been invested in Finnish growth companies than in the whole of last year
After a long while, young Finnish growth companies have received some long-overdue good news. Investments in companies in the early stages of growth have already exceeded last year’s level.
“This was the first positive news since the collapse of the Lehman Brothers Bank in 2008. I believe that we have now passed the nadir of the crisis and investments are picking up vigorously”, says board member Mikko Suonenlahti from the American Chamber of Commerce (AmCham) in Finland.
Already during the early part of the year, a hundred million euros have been invested in Finnish growth companies, when the total sum for the entire last year was a mere EUR 79 million. AmCham predicts that in the remainder of the year additional investments will be made to the tune of EUR 75 million.
Around half of the investments made in early 2011 have come from abroad, primarily from American-British funds.
“In my understanding there are around 100 technology firms in Finland that are seeking a EUR 500 million investment pot. In the United States interest has now sparked in the Finnish technologies”, Suonenlahti explains.
Before the recession, in 2008, companies at the early stages of their growth were still able to receive around EUR 250 million per year in the so-called venture capital. Now such a figure is difficult to reach, Suonenlahti says.
“I would say that the normal level of investments in young growth companies is around EUR 150-200 million per year. The most interesting firms are found in the fields of IT, the gaming industry, social media, cloud technology, and pharmaceutical and biotechnology.”
A growth company is a firm that aims systematically to increase its business either through sales, or staff or a combination of the two.
According to Suonenlahti, a restructuring is currently taking place in the building of the investment base.
Traditional finance companies, such as CapMan and Eqvitec, no longer act as funders for companies at the early stages of their growth.
New investors are now being sought to replace them.
”In Finland there are just under ten companies that are trying to set up venture funds, from which to invest in growth companies. I hope that a couple of them will succeed in accumulating a funding pot of a hundred million euros or so. Should this happen, private funding for Finnish companies would be sorted”, says Suonenlahti, who himself also acts as an investor.
In Finland entrepreneurs have often been criticised for selling potential growth companies too hastily to foreign firms. After Nokia, finding a new economic locomotive is not easy, it seems.
Suonenlahti does not see a problem with this.
“Our entrepreneur generation has changed. Many newcomers want to be serial entrepreneurs. In practice, the company is sold on at the first suitable opportunity, and the entrepreneur embarks on the next venture. This too generates work and tax revenue for the country.”
Previously in HS International Edition:
Funding for start-ups and growth businesses needs to double or even triple in the next couple of years (21.4.2011)