New FVCA Chairperson Sami Lampinen – “This is People’s Business – in the future co-operation will matter more than ever”
Sami Lampinen, elected as the new FVCA Chairperson of the Board in March, sits at the Inventure office at Maria01. Inventure, established by Lampinen and partner in 2005, has already had the time and growth to collect their third 120 million euro VC fund – Inventure III, announced in 2017, is by far the largest Finnish early-stage fund. However, Lampinen’s own story had already started a long time before Inventure.
“My first touch with Venture Capital took place at Boston on a school bench. I studied different types of powder-based coatings and paint components at MIT’s library for a local VC-fund”, starts Lampinen with a smile.
After a career in the paint component business, Lampinen continued to work as a consultant. After that, his career path took him to CapMan’s investment team. The team invested particularly intechnology and software, which were close to Lampinen’s heart. But the most impactful career path that really got him interested in VC was a Swedish partnership called Sweetstart. Sweetsart worked and invested specifically with early-stage technology.
“Sweetstart, bought by CapMan, showed me the best of VC. I got excited when I saw first-hand how VC investing can also be made with a very small team, dynamically and with quick decision-making, as well as working very closely with the entrepreneurs. I drew at lot from Sweetstart to Inventure’s culture”, reminiscences Lampinen.
Inventure’s strategy was since the start “exceptionally sharply” focused on evolution-based strategy according to Lampinen. In practice, evolution-based strategy means that 1/5 of the fund’s capital will be invested in the first rounds and the remainder will be continued in the later rounds of financing. In this way fund works as a portfolio itself, making constant internal prioritization.
“Fundraising was hard work, ” recalls Lampinen. “In 2007, we raised 40 million euros to our first fund. Despite Lehman Brothers, we made great investments that convinced our investors for the next fundraising round. Inventure’s second fund was 70 million euros. While Inventure grew, the entire venture capital industry developed rapidly in Finland. In 2017 we were already the largest early-stage fund with Inventure III.”
During the action-packed years, Inventure has grown from a small three-person team to a 10-person investment team, which works and invests active in Finland as well as in the Nordic market. Over 60 investments have already been made and portfolio companies include such recognized names as Blueprint Genetics, Wolt and Detectify.
Venture Capital still a young sector in Finland – but finally flourishing after financial crises and internet bubbles
Let’s take a step back and talk about to the development of the Private Equity industry, and especially Venture Capital, in Finland during the last 20 years. How does Lampinen, a long line investor in the VC business, see the development and growth of the domestic VC industry?
“Finland fell behind during the 2000’s dotcom bubble”, says Lampinen.
At the turn of the millennium, there were many international investors and their subsidiaries investing in Finland. But after the dotcom bubble burst Finland lost over 15 foreign investors from the domestic market over 6 year.
“Firms either discontinued their operations, their VC investments or their entire investment business. During these years, there was a lot of telecom and tele operator funding available, but a lot of these active players also downsized their investment activities. There were not many left behind. Nexit Ventures is, in fact, the only Finnish VC team that drove through both the millennium dotcom bubble and the Lehman Brothers crisis in 2008”, says Lampinen.
“So we are not only talking about a relatively young industry but also relatively young players in Finland.”
The Finnish VC field experienced a total rebirth in 2005-2007. As a result of the growth of the market and the volume, a handful of new VC funds were born: in addition to Inventure also Conor Ventures, Lifeline Ventures and Open Ocean were established.
“So we are not only talking about a relatively young industry but also relatively young players in Finland”, Lampinen continues when talking about the VC industry, “However, positive developments have been quick to arise after those years. Institutional investors have become active while new moves have emerged at grassroots level, such as Slush, Aaltoes and Startup Sauna. At the same time, the domestic game industry and app development gained momentum.”
According to Lampinen, the Nokia crisis in 2012, in all its horridness, gave a new boost to the Finnish startup field: it released a lot of potential entrepreneurial power and market know-how.
“It was like the first wave of entrepreneurship that gave birth to some great startups. The next wave of entrepreneurship was born of the Slush generation. I look forward to the forthcoming third wave of entrepreneurship in Finland, which I think will come from the more experiences employees of current top companies. There is already a high level of expertise, also from an international perspective.”
More internationalization and cooperation will be required from Private Equity investors in the future
As a new chairperson, Lampinen has a clear vision for the coming years. In addition to develop Finland’s competitiveness and attractiveness, decision-makers should also sharpen legislation to make Finland more favorable to Private Equity funds and their establishment in Finland. At the same time, building new businesses and growth should be awarded and new talent sought from abroad.
“There are still relatively small funds in Finland because fundraising is hard work and takes time. The more we have bigger funds, the easier it would become to Finnish success stories even further with domestic capital. Finnish funds should also boldly seek out and attract foreign capital”, encourages Lampinen.
“Venture capitalists should be more confident in recruiting diverse teams, including foreign talent.”
In the future, internationality will become more prominent in Private Equity investors’ activities – also through more diversified teams.
“Venture capitalists should be more confident in recruiting diverse teams, including foreign talent. Both the Buyout and VC teams have become more diverse: for example, technology-based experts such as data analysts are already more common than before in the teams This know-how is a big profit for Private Equity investors, because we get to explore the market in a whole different way”, Lampinen says.
According to Lampinen, the bounds of asset classes will start swinging in the future – the Private Equity industry has become more diversified itself. On top of Buyout and VC investors, we now have also Growth investors and secondary investors as well as an increasing amount of the loan side actors. Banks have also been involved in investment rounds.
“I predict that in the future, the domestic VC industry will grow and start creating larger growth companies, while Buyout will start to look even more at the younger growth companies. In the coming years we will also see the first co-investments – and perhaps a VC fund sells part of its holding to a domestic Buyout or Growth Fund. If that happens, the co-operation in the Finnish Private Equity markets works already quite well”, thinks Lampinen.
That’s why Lampinen encourages investors and other FCVA members to work together to grow and develop the entire industry, funds, portfolios and teams. Benchmarking other top doers from the Nordics is also a good way to learn how things can be done better and more quickly, reminds Lampinen.
“The whole Finnish ecosystem has developed hugely positively over the last ten years. This is a joint effort by entrepreneurs, big players, investors, business angels, Maria and accelerators such as Kiuas. This is now “People’s Business” and the work is done genuinely together. I believe this trend of working together will accelerate in the future.”
Read more about FVCA’s Board of Directors and Committees for 2019 from here!