Nordic tech's transatlantic ambition

Tech startups in the Nordic region have a growing selection of options when it comes to deciding on venture capital investors, and they are increasingly deciding on those with US track records and connections. As a consequence, local investors are keen to create a competitive advantage by strengthening links with the US.

Tanya Marvin-Horowitz, founder and managing partner at Capital A Partners, moved to Stockholm five years ago. She has noticed a shift in sentiment, with tech startups now eyeing the global market, rather than focusing on northern Europe. "A typical tech startup from the Nordics would value series-A funding from the US," says Marvin-Horowitz. "They see that investor as having a global perspective and the US is an important marketplace to penetrate."

Indeed, a number of Nordic companies have recently raised fresh capital to fund expansion into the country, including Oxx- and SEB-backed Apica and Balderton Capital-backed Labster.

A typical tech startup from the Nordics would value series-A funding from the US. They see that investor as having a global perspective" – Tanya Marvin-Horowitz, Capital A Partners

US- and Nordic-based Capital A recently launched its latest investment vehicle, Cap A Fund II, with a target of $60m, focusing on Nordic companies operating in B2B technology. Cap A intends to become the preferred US series-A and seed investor for Nordic tech startups, providing a global perspective and helping them market themselves to other countries in Europe and the US.

Figures from Unquote Data point towards a maturing market for early-stage, seed and startup investments in the Nordic tech sector. A total of 15 deals were recorded in 2017, with an aggregate value of €51.55m. Similarly, in the previous year 13 deals were inked with a value of €49.66m. However, 2015 saw a much higher total of 34 deals but with a significantly lower aggregate value of €31.05m. The highest five-year volume in tech investments was recorded in 2014, with 48 deals completed at a value of €49.43m, according to Unquote Data. These figures suggest considerably larger funding rounds for early-stage tech startups, despite decreasing deal volume.

Joint deals
While US firms such as Capital A only established a physical presence in the local market fairly recently, established Nordic players have had a head start when it comes to offering the potential of US expansion to local entrepreneurs.

Finland-based VC Conor Venture Partners specialises in early-stage transactions, deploying equity tickets of €500,000-1.5m for companies operating in the technology, electronics, new materials and optics sectors in the Nordic region. The firm recently announced its plans to raise a third fund, and the increased target of €80-100m reflects the ambitions for the new vehicle to have an enlarged geographic focus.

According to Jari Mieskonen, managing partner at Conor Venture, tech-focused startups looking to enter the US market often seek out support and expertise from local VCs. This is particularly the case with B2B and ICT-focused companies, the latter of which represents one of the largest single markets in the Nordic startup ecosystem, he says.

"Before going to the US, firms want local support," says Mieskonen. "Sometimes we see syndications and joint deals with other venture capital partners." As a result, the investment team has been growing to include additional partners. "We have a US partner in the team and we have good relations with New York and Silicon Valley," he says.

Conor’s investment in Neo Technology, founded in 2000 by three entrepreneurs in Sweden, is one example of a portfolio company that has benefited from the firm’s support when seeking expansion in the US market. After Conor led a $2.5m seed round for the open source graph database platform developer, the business subsequently moved its headquarters to Silicon Valley in 2011.

Neo is not alone when it comes to VC-backed firms that have made the move to the US: Creandum-backed Mixmax was founded in Sweden and is now headquartered in San Francisco, while Trident Capital Cybersecurity-backed BehavioSec, which was founded in Sweden, is now headquartered in London and recently raised $17.5m to fund global expansion including relocating its corporate headquarters to the US.

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