Finnish Private Equity Investors Believe in the Growth and Development of Domestic SMEs – During the Coronavirus Crisis, Entrepreneurs Will Be Helped with Additional Financing
Private equity investors invested €720 million to growing SMEs in 2019. More than 90% of the Finnish private equity investments were made to accelerate the growth of domestic SMEs. Over the past five years, a total of €4.3 billion has been invested in growth companies.
In 2019, Finnish private equity funds investing in growth-oriented SMEs raised a total of €535 million from large institutional investors, such as pension insurance companies and other professional fund investors. New funds in Finland were raised for example by CapMan Buyout, Juuri Partners, and Evolver.
Last year, private equity investors invested a total of €720 million in 68 Finnish growth companies. Of this amount, €384 million came from Finnish private equity investors and went to 61 companies.
61% of investments were made in companies that provide B2B or B2C products and services. The portfolio companies were, for instance, Ukko.fi, which facilitates light entrepreneurship, and Foreship, which aims at the global growth of ship design services. Additionally, investments were received by the real estate industry’s “growth rocket” Bo LKV and Picosun’s ALD thin film coating technology, which will enable future industrial solutions with new, top-of-the-line coating methods.
Under normal circumstances, the portfolio companies of private equity investors have grown six times faster in terms of turnover and 15 times faster in terms of the number of employees, compared to similar companies in the same industry and of the same size. Private equity investors provide their portfolio companies with expertise on strong growth, internationalisation, as well as renewal and digitalisation of business models.
Private Equity Investors Help Entrepreneurs and Bring Additional Capital to Companies during the Coronavirus Crisis
During the current crisis, the skills of private equity investors are harnessed to cope with the corona crisis. Private equity investors support their portfolio companies by providing help and by financing them with significant additional investments.
“The measures taken to prevent the spread of the virus also extensively affect growth-oriented companies. These are companies that have been operating on a sound basis before the coronavirus and whose growth has been significant. Companies owned by private equity investors also employ a total of 94.000 people. It is important for Finland’s economic growth that these companies survive the crisis,” comments Pia Santavirta, Managing Director of Finnish Venture Capital Association (FVCA).
According to a new market pulse survey conducted by Tesi, FVCA, and Business Finland Venture Capital (BFVC), private equity investors will be able to meet the financing needs of portfolio companies in the following year in 58% of cases. Additionally, 41% of companies have access to external financing.
“What is alarming, however, is the fact that in 40% of cases, the companies’ cash reserves will run dry during the next six months without additional funding and for more than half of all growth companies, obtaining external funding is still uncertain,” Santavirta comments.
Finnvera’s Fast Track Guarantees Made Available for All Growth Companies by a Commission Decision – Increased Loan Sizes Should Be the Next Step
The current crisis financing instruments do not meet the needs of all Finnish growth companies. In addition, some financing options were not initially available to all growth companies due to the problematic EU SME definition. This problem has, however, been solved and the excellent improvement is in line with the objectives of the private equity industry.
“On 20th of April 2020, the European Commission approved a support program under which companies in financial difficulties due to the coronavirus crisis can apply to Finnvera’s guarantees for both working capital and investments. Finnvera’s Fast Track guarantee scheme is now available to everyone, including the portfolio companies of private equity investors, which is great news” celebrates Santavirta.
Next, Finnvera’s guarantees should also be extended to loans of more than €1 million.
“Working capital financing is needed for the acute liquidity problem of the larger, economically important growth companies, and the best solution here would be Finnvera’s fast and flexible loan arrangements of 1-10 million euros with an 80-90% guarantee,” says Santavirta.
“We need these successful, high-productivity companies and new innovations in the future as well, which is why we must also invest in reconstruction,” Santavirta emphasizes.
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Finnish Venture Capital Association (FVCA) is the industry body and public policy advocate for the venture capital and private equity industry in Finland. As the voice of the Finnish VC and PE community and the entrepreneurs they fund, it is our role to demonstrate the positive impact of the industry on the Finnish economy. FVCA – Building growth.