A new €250 million package aimed at securing startup funding announced in Finland – to be available from the 17th of June
In the fourth supplementary budget for the year, the Finnish Government decided on a €250 million funding package for startups and growth companies to help them overcome the coronavirus crisis. The public sector’s contribution will be matched with private capital, bringing total funding to up to half a billion over the next two years. The new Venture Bridge funding package, managed by Tesi, will be available to startups from June 17th onwards.
The Finnish Venture Capital Association (FVCA) earlier proposed to the Ministry of Economic Affairs and Employment that a €250 million crisis funding program be created for startups, with separate programs for early-stage startups and those in the later stage of international growth. The funding program proposed was included in the Finnish Government’s fourth supplementary budget announced on June 2nd 2020. The program, managed by Tesi, will be available after mid-June.
Finland’s innovation and startup ecosystem has greatly developed in recent years – for the second year in a row, Finland ranks number one in Europe in terms of venture capital (VC) investments received by startups when measured as a percentage of GDP. Finnish startups have received more investments than their European counterparts also in the long term (2015-2019).
The funding received by startups has more than quadrupled in less than ten years, and now reaches a yearly level of more than half a billion euro, thanks to both domestic and foreign investors. The share of foreign investors of total funding has risen to approximately 60%.
Public and Private Capital Combined to Prepare for a Decline in the Availability of Funding
The Government’s supplementary budget proposal is in line with both the FVCA’s proposals and the recommendations of the Vihriälä working group’s report [that assessed the impact of the coronavirus crisis and proposed measures that can be used to limit the damage to the Finnish economy]. The Vihriälä report stated that the Finnish innovation ecosystem is strong, but the current crisis threatens it. The concern is that foreign investors may withdraw to their home markets, as has happened during previous economic crises. Equity funding solutions – not grants, but investments that also bring a return on investment for the State – were proposed as a solution to help make up for the potential funding gap.
“The new equity funding package helps our most promising startups – important for the country’s economic growth – overcome the current crisis, which in turn can help Finland achieve the goal of economic sustainability. This is great news for startups and tech companies”, comments FVCA’s Managing Director Pia Santavirta.
The Funding Package is Directed at Startups with International Growth Potential
There are two separate funding programs, first of which is intended for promising early-stage startups and covers approximately 100-150 companies. The second program will benefit about 60 companies that are already in the phase of international growth.
For a company to access the funding, a private-sector investor must also participate in the round with a 50% share. The share of private-sector investors thus doubles the amount of crisis funding available.
In practice, tech companies that are seeking international growth and have previously raised at least a seed round from VC investors are the most likely companies to access funding from the program. This is because companies benefiting from the program must have credible growth strategies, and the ability to attract larger investment rounds in the future. With these criteria, the funding can be directed to the most relevant companies in the context of Finland’s key economic policy objectives.
The new funding package will also ensure an adequate size of funding rounds. Funding for early-stage startups, with private investors’ share included, can range from €500k to €4 million. For companies in the phase of international growth, the initial investment ranges from €3 million to up to €50 million. Tesi’s share of these investments is likely to be between €1.5 million and €10 million.
The involvement of private-sector investors speeds up the funding process, as it is easier for the public sector to make an investment decision when experienced private-sector investors choose to invest additional capital in the company. In the case of smaller investments, decisions can be made in as little as a couple of weeks. In the bigger investment rounds, the evaluation phase may take up to 2-3 months.
Funding Available from June 17th Onwards
The new Venture Bridge program will be managed by Tesi, whose investment portfolio is now expanding to companies in an earlier stage of growth. Tesi will also increase its volume in the larger, later-stage venture capital rounds, utilising the joint EFSI program of the European Investment Bank and Tesi. The program will launch on June 17th, and Tesi will soon publish more information about it on their website.
“In an economic situation like this, we need to look further into the future, foster innovation and make decisions that help us compete internationally for the leadership position in technological know-how. The Finnish Government’s recent decisions and Tesi’s new funding program support these goals. We are sending a message to the world that, despite the crisis, Finland is a country with great conditions for building world-class companies and that it is worth investing here in the future as well”, Santavirta concludes.
Read More About Startup Funding:
- Tesi Launches Venture Bridge Investment Programme for Tech Companies Pursuing International Growth (Tesi’s press release 3rd June 2020)
- Finnish Startups Attract the Most Venture Capital Investments in Europe (press release 28th May 2020)
- More Information about Finnish Startup Funding in 2019 (press release 7th April 2020)
- Market Pulse Survey Results: How Long is the Finnish Companies’ Runway in the Covid-19 Crisis? (published 22nd April 2020)
- The FVCA’s Proposals for Startup and Growth Company Crisis Funding
- Images and Information for the Press
The Finnish Venture Capital Association
+358 40 546 7749
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.