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Investments in Nordic venture deals
In the first half of the year, a total of 123 transactions were completed within the venture segment (venture, VC). Consequently, the number of investments in this segment has fallen to its lowest point since the first half of 2017. Our estimate places the total invested in Nordic venture at EUR 514 million, in line with the low level in the second half of 2022, though signifying a 50 percent reduction compared to the five preceding periods.
123
Investments by seed, venture, and growth funds in Nordic companies in the first half of the year.
Lower level of activity: The relatively low level of investment in the venture segment has persisted in the first half of 2023, in terms of both the number of investments and the amount invested.
The number of venture investments dropped significantly in the second half of 2022, and has remained low in the first half of 2023, amounting to 123 investments. The venture market is cautious as these numbers show, and the Nordics are no exception to the overall global outlook. The cost of capital is vital, and in periods of higher interest rates, there tends to be a reduced appetite for risk-taking. Hence, as investor preferences shift towards stability and profitability, the new mantra within the VC industry has transitioned towards minimizing cash burn and becoming profitable.
The level of activity in the first half of 2023 remained comparable to that of the second half of 2022, during which 128 investments were made in the VC segment. However, in comparison to the average for the first half of the last five years, the number of investments saw a notable decline of 33 percent. The investments made in 2023 so far have been fairly evenly distributed between the first and second quarter.
In all the Nordic countries, the number of venture investments have declined compared to the first half of 2022. There is, however, a significant disparity in the extent of this decline. In Denmark, the number of investments in VC has only fallen by 7 percent, whereas Norway have experienced a decline of over 80 percent compared to the same period in 2022. In Finland and Sweden, the number of investments decreased by 36 and 44 percent respectively.
The amount invested in Nordic venture was EUR 514 million in the first half of 2023. The amount invested remained relatively stable compared to the second half of 2022. Nevertheless, the two most recent quarters marks the lowest amount invested in Nordic ventures since the first half of 2020 when the Covid-19 pandemic began. In comparison to the average for H1 over the past five years, the amount invested is down 50 percent, however, this was a period with historically high investments in the Nordic venture market. Approximately 60 percent of the capital was invested in the second quarter.
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€514 million
Amount invested in Nordic venture in the first half of the year.
Sector and country distribution
Technology still dominates venture investments, although to a lesser extent than before. Technology companies attracts half of the investments. This is a 7-percentage point decrease compared to the average share for H1 the last five years and might be considered a tiny correction after the pandemic years, during which we witnessed a significant surge in technology investments.
Furthermore, health care and life science attracted 15 percent of investments, followed by the cleantech sector and the financial sector with 10 and 8 percent, respectively. These three sectors are attracting a larger share of venture capital than they have in the past five years, especially cleantech.
There is a 2 percentage point increase for financials and a 7 percentage point increase for cleantech compared to the average for the first half the last five years. Cleantech has experienced strong growth. It is particularly technology-intensive companies within electronic equipment and technology hardware that attract investment. Consumer goods attracts 5 percent of investments, which is 5 percentage points lower than both the first half of 2022 and the average over the past five years. It is natural to think this is a consequence of larger macroeconomic trends, as people are dealing with tighter household budgets, resulting in less disposable income to spend on non-essential purchases.
Half of the investments in Nordic venture are aimed at technology companies, but the proportion is somewhat lower than previously. Health care, as well as cleantech, are attracting an increasing share of venture investments, representing 15 and 10 percent of investments respectively. This is also the case for cleantech and financials, attracting 10 and 8 percent of investments.
While activity has been lower in the Nordic region during the first half of the year, the trend in activity levels varies among the countries within the Nordic region:
- Norwegian companies attracted 12 percent of Nordic VC investments, a slightly higher share of the Nordic market when we look at the average share over the last 5 years.
- Danish companies attracted 23 percent of Nordic investments, which is 3 percentage points higher than usual.
- Swedish companies continue to attract the highest investment, making up 40 percent of the market.
- As a share of the Nordic market, Finnish companies attracted 25 percent of investments in Nordic ventures, which is roughly the same share as in the past 5 years.
Danish venture is capturing a growing share of Nordic venture investments, although Swedish companies still remain the top attraction. Nevertheless, the level of activity decreased in all Nordic countries during the first half of 2023.
In the first half of the year, Finnish companies attracted the largest share of capital in the venture segment, accounting for 48 percent. The second largest share went to Swedish companies, amounting to 23 percent, closely followed by Danish companies at 22 percent. Norwegian venture companies attracted the smallest portion of capital, comprising only 7 percent of the total amount invested. This marks an 18 percentage point decline from the first half of 2022.
Finnish companies attracted 48 percent of the amount invested in the venture segment, followed by Swedish companies with 23 percent. Danish companies attracted 22 percent and Norwegian companies 7 percent.
Large single transactions
If we focus on new investments, one venture transaction stands out due to its substantial size:
- The Finnish company Hostaway raised USD 175 million in a round led by PSG Capital. The company specializes in providing all-in-one vacation rental software solutions, and this financing round is the largest in the sector to date (read more).
This transaction accounted for 31 percent of the capital invested in the first half of the year. This trend is consistent with previous years, where one or two investments have a significant impact on the overall amount invested.