Technopolis survey shows VC funding on the wane in Finland

The survey, carried out by Technopolis, reviews capital raised by private Finnish high-tech companies from venture capital funds and from angel investors, both Finnish and foreign. It draws on both public and undisclosed information from 140 Finnish and foreign investors, and 1,500 Finnish high-tech firms.

In the first half of the year, 29 Finnish high-tech companies raised around €51 million, 17 per cent below the amount raised by 34 companies in the first half of 2008, and 74 per cent below the amount raised by 26 companies in the second half of 2008. The second quarter of 2009 was the lowest quarter since 2007.

“There is a clear impact of the global slowdown in venture capital investing that we see in other markets like the US, Israel and India,” said Will Cardwell, CEO of Technopolis Ventures. “We do not have the large bellwether transactions in Finland this year that we had in companies like WinWinD and Blyk in 2008. We see more than 50 companies seeking to raise funds right now in the Finnish market, and we hope that the environment will improve in the second half of the year.”

Likewise, Cardwell said there is a need to see the start of the return of the significant exits that have been lacking for several years. “There are certainly a number of firms well positioned for exit as the economic climate begins to rebound.”

In the first half of the year, 11 companies attracted more than €1 million each. Of these, three companies Eniram, Silecs, and EpiCrystals raised €5 million to €10 million each. Only one company, Imbera Electronics, raised over €10 million. The average size of financing rounds was around €1.8 million, about the same as in the first half of 2008.

Software companies attracted more investment than any other industry, a similar picture to the first half of  2008. Altogether, software companies raised almost €12 million, down from €15.5 million in the first half of 2008. Nanotechnology companies managed to raise more capital, with three companies closing deals worth a total of €12.7 million, setting the average investment size at €4.2 million. Finally, the ICT hardware & semiconductor industry received slightly more than €12 million, almost completely due to Imbera Electronics’ €11.3 million investment round.

Only one investment was made into a company classified primarily as a cleantech company. However, many of the investments had clear cleantech applications, such as Eniram, which provides software for improving the trimming of cruise ships, reducing oil consumption and carbon emissions.

Seed and early-stage companies were able to attract 27 investment rounds, a number Technopolis considers high given the economic conditions, but low relative to the number of investment opportunities in Finland. Early-stage companies accounted for a majority of the number of investments. They attracted 93 per cent of all investments in the first half of 2009.

There were some remarkable changes from the previous year in the type of investor. Domestic venture capitalists were the largest single category of investor in the first half of 2009, though the €24.5 million they contributed was only slightly above the €22 million contributed by foreign venture investors. Angel investors (nearly exclusively domestic) were estimated to have contributed €4 million. There were only six clear international investments.

But the biggest worry is that there are no significant exits. Meanwhile, many companies are seeking funds. Technopolis says over 50 are actively raising money. Many companies have scaled back the amount of investment they are seeking, and they are operating in survival mode until both product and capital markets become more attractive.