The Nordic VC scene is flourishing – but still more room to grow

A new Copenhagen Economics report The Role of Venture Capital for Economic Growth in the Nordics 2018, published on the new online site Nordics.vc, commissioned by the four Nordic venture capital and private equity associations, shows that the Nordics are growing towards a central hub for VC’s, startups and talent.

The recent years have seen a revival of the Nordic venture scene with more than 3 billion euros raised by VC funds in the Nordic region over the last five years.  Companies founded in the Nordics attract investments increasingly both from within and outside of the region. Over the past five years, a total of 2.7 billion euros was invested into Nordic startups, out of which non-Nordic VCs’ contribution amounts to a whopping 1 billion euros. Adding up to the strengthening internationalization of the region, Nordic VCs have invested a total of 600 million euros into startups based outside of the Nordic countries within the same period.

The Nordics is full of success stories. VC’s are showing strong optimism towards the future, undoubtedly driven by a growing number of prominent Nordic startups and thus, high-quality investment opportunities. Nordic venture capital investments have been a key factor in creating 15 growth companies each with a market cap exceeding € 1 billion. These unicorns are true evidence of the flourishing Nordics VC scene, comments Pia Santavirta, Managing Director of FVCA.

Even though venture capital investments as a share of GDP ranking above the OECD average in three out of five Nordic countries, the region still lags behind Israel and the US. 

Despite the great development in the Nordic VC scene, we haven’t yet fully utilized everything that the Nordic innovation environment has to offer. The Nordics have potential to grow to a world-class central hub for venture capital, startups and talent, Santavirta states.


Increasing in the regions attractiveness builds growth and jobs – new policy recommendations

71% of Nordic VCs believe there is room for larger VC funds in the region. Currently, many of the successful later-stage growth companies in the Nordics must find funding abroad once they have reached a certain size – typically in relation to international expansion, as analyzed by Copenhagen Economics.

Although fundraising has been strong and average VC fund sizes have grown during recent years in the Nordics, fund sizes still remain below the average of Western European and U.S. funds. Further, statistics show that the average investment size in the Nordics is 1.2 million euros, while European average reaches considerably higher figure of 1.7 million euros.

The smaller size of the Nordics VC funds means that startups need to compete in the global markets for funding – even though the sums might be substantially smaller. We need to enhance to business environment for startups and VC industry in the Nordics and Finland, so we can continue to attract excellent startups and talented people to the region, continues Santavirta.

To increase the region’s attractiveness, the report defines a set of new policy recommendations that fall under the following categories: clear, competitive, and foreseeable tax environment (1), proportionality in regulating VC funds (2), mobilizing institutional investors (3), and creating and incentivizing talent (4).

Many startup-friendly policies are already in place in all the Nordic countries. Certain measures could, however, still be taken to develop the operational environment further. Companies choose a country that best supports their growth, and we are dedicated to working at all levels to urge policymakers to put the Nordic startup and VC scene and its attractiveness in the eyes of global investors, talent and companies on top of their agenda, concludes Santavirta.

About the report:

The Role of Venture Capital for Economic Growth in the Nordics 2018 report is a joint project between Finnish Venture Capital Association FVCA), Danish Venture Capital & Private Equity Association (DVCA), Norwegian Venture Capital & Private Equity Association (NVCA), and Swedish Private Equity & Venture Capital Association (SVCA), carried out by leading Nordic economic consultancy Copenhagen Economics.

 

The new Nordics.vc-site.
Main findings from the report.
Supporting slides for the report.