8. VC-backed exits: Close to the bottom?
In 2020, many exit processes were put on hold or pushed to the new year when the pandemic hit. On the positive side, there was a slight increase in the number of exits following three years of decreasing numbers.
“Weak revenues and a mismatch in the valuation of companies between buyers and vendors can explain the low exit numbers. If we follow the positive scenarios for vaccinations and normalisation, we can expect a strong exit year in 2021. If we are realistic, venture funds might push some processes to 2022,” says Joachim Høegh-Krohn, CEO at Argentum.
Venture funds completed 55 exits of Nordic companies in 2020. The number was a minor upswing following three years of decreasing numbers (see graph below). In comparison, the number of exits was twice as high in each year between 2014 and 2016. In 2020, the coronavirus pandemic affected exit processes (read about exits in the buyout segment), and many were put on hold or pushed to 2021.
Most VC-backed exits involved companies in the ICT sector, making up 60 per cent. This is a relatively high share compared to the last five years, where about half of all exits have been in Nordic tech companies.
Bottom reached? In 2020, VC funds carried out 55 exits of Nordic companies. This was a slight upswing following decreasing numbers in the previous three years.
“A maturation among Norwegian tech start-ups”
Notable exits include Spacemaker, a Norwegian start-up that has developed AI-supported software for urban development, which US-based Autodesk acquired in a trade sale. Atomico and Northzone were among exiting investors in a deal valued at €206 million. Teodor Bjerrang, Founding Partner at Oslo-based SNÖ Ventures, sees this as a sign of a Norwegian tech start-up scene that has matured.
“We see a good variety of exciting companies from Norway. Kahoot, Cognite and Pexip have been leading the way lately, with new ones like Memory, Tibber, PortalOne, reMarkable and others coming right behind. We also believe that Norway’s strong roots with industrial companies now seem to move into tech, for example with a highly skilled workforce moving over from the oil and gas industry, as well as exciting companies coming out of this area,” says Bjerrang.
“What is also particularly interesting is that there are few dominating VC-backed tech companies in Norway that suck up all the talent in the ecosystem. It will be quite interesting to see how this shift in workforce from oil and gas leads to new, interesting ideas and companies in the future,” he adds.
Another notable ICT exit involves Boozt.com, the Swedish online fashion retailer. In May, Verdane sold its shares in the company representing a 5.4 per cent stake, an investment that has returned 6x multiple on capital for the fund manager.
“Verdane had an all right exit year in 2020 and made two major exits in the Nordics, Boozt.com and Royal Design Group. We put some exit processes on hold last year, and 2021 is shaping up to be a stellar exit year, with no less than three realisations signed in February, one of which is the listing of Desenio at Nasdaq First North Growth at a unicorn valuation. Looking some years ahead, we believe that tech can be an enabler in the green transition and lead to great returns for companies in this segment. We look for both deals and exits in this space,” says Frida Einarson, Partner at Verdane, a growth investor focusing on tech-enabled businesses in Northern Europe.
Healthcare and life science on the rise
Companies within the sector made up 20 per cent of all exits, second-most, and four percentage points higher than the average for the sector in the last five years.
Notable exits include the biotech company Symphogen, a leading Danish antibody discovery company that Servier, a French pharmaceutical company, acquired in April. Exiting investors included Sunstone (DK), EW Healthcare Partners (US), and Gilde Healthcare (NL). Further on, Blueprint Genetics, a Finnish company providing genetic testing and clinical interpretation, was acquired by US-based Quest Diagnostics. Exiting investors included MTIP (CH), Inventure (FIN), and Creathor (DE).
Ingrid Teigland Akay, Managing Partner at the life science investor Hadean Ventures, experienced more LP interest in the sector during 2020:
“We see a lot of generalist interest. However, in our segment, specialist knowledge is important. There are many pitfalls when investing in health care and life science, and you need much expertise. For instance, understanding the scientific data and estimate the probabilities of the data converting to positive results in clinical trials,” says Akay.