Nordic VCs welcome cooperation with international investors

To anyone in doubt, tech start-up conference Slush – held in Helsinki on 17-19 November – was clear evidence the Nordic tech hub has the attention of investors across the world.

"26% of exits in Europe in the past five years have come out of the Nordic region," said Slush CEO Miki Kuusi at the event's opening. Kuusi was referring to research by Sunstone Capital that showed a quarter of all tech exits by private equity and venture capital firms over $100m in the past half-decade had come from the Nordic region, despite making up just 4% of the European population.

A similar point was made by Mattias Ljungman, general partner in investment company Atomico. His firm's research shows 61% of billion-dollar tech companies have been created outside of Silicon Valley in recent years: 6.3 billion-dollar companies per million people were created in Stockholm, second only to Silicon Valley's 6.9. Helsinki created twice as many as London, with 0.8 per million inhabitants compared to the English capital's 0.4 – though Berlin has both beat at 0.9.

Additionally, almost 40% of the total value of all exits in Europe made since July 2009 was generated by divestments in the Nordic region, according to unquote" data.

United we stand
Rovio, Supercell, Spotify and Zendesk are all examples of Nordic tech start-ups that made it big and have helped focus the attention of non-Nordic investors on the region. The increased attention has meant that the relatively few Nordic VCs are now being joined by investors from the US, Asia and the rest of Europe.

Though the increased international investor presence could be imagined as an unwanted competition for firms based in the region, investors at Slush generally saw the development as positive. All of the Nordic VCs unquote" spoke to said the same thing: this is not unwanted competition, it is an opportunity for cooperation.

Ekaterina Gianelli, director at Finnish VC Inventure, said non-Nordic syndication can help Nordic companies' international reach, leveraging the international investors' local expertise and spreading investment risk.

Tech start-ups, the focus at Slush, particularly benefit from the cooperation, as their business models and products are often highly suitable for scaling outside of its home country or region.

An investment manager with one Nordic VC attending Slush told unquote" the firm did not "see any point in investing in internet start-ups with only a Nordic focus". Because the internet allows for rapid international expansion with relative ease, start-ups based on ideas that are not applicable in other regions do not fit the metric of global scope, which forms a key part of VCs' investment strategy, the investment manager said.

Free lunch
With a number of Nordic LPs also present at Slush, the trend of direct co-investment was also brought up when talking to several VC firms.

The consensus seemed to be that while an uptick in co-investments from LPs had been noticed, it was hardly a popular development among fund managers. "We're asking ourselves how many more free lunches we can give," said a partner at a Nordic VC, referring to the fact that while the firms originate the deals, co-investments result in the potential loss of their management fees.

His stance was shared by another Nordic VC who also said there was some research to suggest a selection bias in co-investment deals, with the end result being they generally underperform other investments in the same fund.

unquote" recently explored this topic in detail – click here to read our analysis.

_{Photo by Sami Heiskanen}

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• Sunstone Capital A/S
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