#1 in private equity in Europe, but what’s Finland missing?


Last week, we reported that Finnish companies received the most private equity (PE) investments in Europe relative to GDP in 2023. Let’s dig deeper into the details.

In 2023, Finland stood out as one of the few European countries attracting more capital relative to GDP than in the previous five years on average. The total equity amount invested in European companies dropped 25% from the previous year and 11% below the five-year average. In contrast, investments in Finnish companies remained stable year-on-year, which propelled us to the number one spot.

Number one in growth stage investments – venture investments take a beating

When breaking down private equity into subsectors, Finnish companies’ ability to attract capital ranked as follows:

  • Buyout (3rd): It’s common in buyout-stage investments that a few mega deals drive the total value. This was apparent in Finland last year, when the three biggest investments accounted for over 80 % of the total amount. The low performance of Finnish stock market offered opportunities for public-to-private deals, some of which also had buyout funds involved.
  • Growth (1st): In these minority investments, capital to the more established companies increased from the year before. Furthermore, companies previously backed by venture capital continued to attract growth investments. In both categories, a large portion of the capital went to technology companies.
  • Venture capital (6th): Between 2018-2022, Finland topped the chart in venture capital investments relative to GDP four times in five years. In 2023, Finland missed out on the biggest VC rounds and our rank dropped. However, our number one spot in growth stage is partly due to some of the startups moving to attract growth-stage investments.

Regarding the longer-term performance, on a five-year average, Finland ranks 3rd in Europe in both venture and growth investments, but only 9th in buyout.

The other side of the coin: Finnish private equity supply falls short of domestic companies’ capital demand

Invest Europe’s statistics also offer us a view of the relative strength of each country’s private equity market. While Finnish companies’ ability to attract capital was ranked 1st in Europe, local private equity investors’ supply of capital ranks only 9th. This is measured by local private equity funds’ investments relative to the country’s GDP.

  • Buyout (10th): Apart from some exceptions, Finnish buyout funds invest domestically. They usually focus on growing companies to be national champions and expanding their operations in Northern Europe. The countries ranking high in this category, such as UK, France and Sweden, have multiple big funds that invest internationally.
  • Growth (4th): Finland ranks relatively high in growth investments. Despite some new Finnish growth-stage investors starting in the last few years we still have only a few dedicated growth funds. UK and France are the clear leaders in making growth-stage investments, and the only countries where the sum of growth investments is clearly bigger than venture capital. Growth-stage investments from venture capital and buyout funds are also included here.
  • Venture capital (6th): Finnish VC funds are on par with the local startup companies’ ranking. However, between 2018-2022, Finnish companies ranked 1st in Europe on average and the Finnish venture capital investors were only 7th. There is a tendency for the two rankings to return to parity in the long run. We’ll have to hope the Finnish companies can return to the top, and Finnish VC funds will be successful in catching them there.

International investors to the rescue

Due to the gap between supply and demand, a significant portion of investments in Finnish companies comes from foreign investors. In 2023, of all the investments, 65% came from abroad, which is above the European average and notably higher than Sweden (44%), Denmark (41%) and UK (24%).

By choosing the right foreign investors, Finnish companies can benefit from their international networks and expertise.

What is the Finnish private equity industry missing?

In the past 30+ years, the Finnish private equity industry has made big advances and accumulated a lot of know-how. In addition, the constant inflow of new fund managers raising their first funds, 20 in the last 5 years, brings fresh approaches and healthy competition to the industry.

Nevertheless, without larger funds we won’t be able to compete in the bigger investments in Finland or abroad.

Creating some bigger Finnish private equity funds in all investment stages would enable Finnish investors to lead investment rounds in later-stage startups and grow the buyout-stage companies a step further. This would also give domestic companies better access to capital in the economic down cycles when international capital is harder to get. Longer and stronger domestic ownership would give the companies time to grow their roots deeper in the Finnish soil.

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