Editor’s Note: The last paragraph has been changed to reflect that the €994 million is not in fact the value of exits. It is the total number of investments that have exited, the exit value is likely to be higher.
The Finnish Business Angel Network (FiBAN) and Finland’s Venture Capital Association (FVCA) released their collected statistical data on investments made into early stage growth companies in 2013 by private investors and VC companies.
The data reveals some very interesting trends in the market, that might indicate the things to come. We have already written that the upcoming years might be rather active, as many VC’s have closed funding rounds and the angel activity is increasing, at least when it comes to the quantity of startups that get early stage investments.
When it comes to domestic VC investments, they were around €90 million while foreign VC’s have clearly raised their interest in Finland with a €159 million invested in Finnish startups.
In total, startup investments in Finland reached €280 million in the past year, which is an increase of €120 million when compared with 2012, even though it is to be noted that Supercell’s €100 million funding round in the beginning of last year is clearly visible in the data. Even if we ignore that though, the increase is still significant at €20 million, or 12.5% growth.
Business angel activity has also been on the rise, both on a domestic scale as well as internationally. According to FiBAN, business angels are growing an interest towards more organized business networking organizations. Last year, the Finnish business angel network of Finnvera moved under FiBAN, who has since become one of the largest and most active business angel networks in Europe with more than 350 registered members and 100 associated events.
The effects of more organized networking can be seen as increasingly angels co-invest together with other angels, referred to as “syndications”. This also happens because of the risky nature of reaching the target company’s growth goals. Thus business angels are more cautious with their investments and prefer to share the risk with other. 39% of all angel investments made in 2013 were syndicated investments with public institutes, VC’s and other angels.
When it comes to the actual numbers, the total amount invested by angels in 2013 amounts to €11 million, which is a €3 million drop compared to the previous year: Even though the amount of investments didn’t rise from the previous year, the amount of companies who received investments has more than doubled (from 69 to 169). This, could potentially be a more important indicator of the startup activity in Finland.
An average angel investment was €49 000 for 8% of equity in the company, making the average early stage valuation – €612 500. The investment is most likely to be done at an early stage (47%), but not the seed stage as those dropped from 23% to 13%, as a result of the market becoming more mature.
Sweat equity is also on the rise, with 57% of deals including some sort of sweat equity, compared to just 25% in 2012. Most of that is either in marketing and sales (32%) or financial consulting (29%).
Everybody knows that gaming is a hot topic right now, but what is interesting is to see some other industries becoming of interest to investors. The biggest jump was in the Healthcare industry, which doubled from 8% to 19%. This was seen rather clearly in our publications as well, just take a look at Mendor’s impressive €4.7 million round. Manufacturing also saw a rise from 6% to 11%.
With that in mind, the ICT and Mobile industry invesments dropped from 47% to 21% and from 10% to just 3% respectively. The drop spread somewhat into Retail, Finance, Logistics and Biotech.
Perhaps one of the more important things though is exits and this year seems to have been good up in the sky. As one of the investors recently told us, they are not in the investment business but in the exit business, which is also what we are pursuing with our Arctic15:Exit Path.
In 2013, there were over 99 VC & private equity exits, totalling in €994 million. This amount is the total amount that has been invested and subsequently exited, the actual exit value and the profits are likely to be higher. Out of those, VC’s have exited 43 companies at €62M, again just the summed amounts of the original investments.
Additionally, there were 32 angel exits. On the angel side of things, 56% of exits were positive, where 9% saw a 10X or better return, 19% got 5X-9X, 16% got 2X-4X and 13% got their money back. All in all a good year for Finland.