The state of Nordic private equity 2019

Argentum

Several large venture exits in overall meager year

Nordic venture exits (excluding write-offs)

Venture exits by year and home country of company

Interview: The structural growth trends with most potential

Number of deals by home country of investor, 2019

Total fundsraising by fund size in Nordic buyout

Buyout funds with public closing in 2019 and fund size (€)

 Summa Equity II had its first close in 2018.

Median entry multiples for Nordic buyouts

Median entry multiples, buyouts vs. all Nordic deals

Entry multiples (EV/EBITDA) for Nordic buyouts

Buyout exits by year and home country of company

Private equity-sponsored listings in 2019

In focus: How the coronavirus affects business

In focus: A breakthrough year for sustainability

Environment has grown in importance among Nordic institutional investors in the last five years

PE most preferred strategy for private market impact among Nordic institutional investors

In 2019, the activity in the venture segment increased for the second straight year, both in terms of the number of investments and the amount invested. The amount increased by 50 percent and surpassed the €1 billion mark for the first time, totaling €1.2 billion.

ICT (information and communications technology) was by far the sector that attracted the most investments, constituting as much as 176 out of 268 companies. Companies within ICT attracted almost six times as many investments than industrials, which received the second most investments with 30 investments. 

“Nordic tech entrepreneurs are at the forefront because of a long tradition of comparing themselves to a global benchmark and planning for international expansion from the get-go, instead of only serving a national market,” says Daniel Blomquist, operating partner at Creandum, a Swedish early-stage venture capital firm focusing on the ICT sector.

Historically, Blomquist thinks that the Nordic market has been underfunded, compared to a market like the Israeli, which in his words has had four times as much capital. Still, the Nordics have produced more exit value, and have been especially good at creating ‘category-leading opportunities’ that are guiding stars for others, he argues. 

“This category can be global like Spotify was for music online streaming, or iZettle is for mobile payments. It can also be regional, like the digital health provider Kry, with its European focus. Nordic cases like these have shown that technological disruption can be something positive for ordinary people, and they focus heavily on privacy. They are proofs of an ICT sector that in many ways has grown up,” Blomquist says.

2009

2014

2019

Venture capital deals by sector historically

The number of investments in industrials doubled from 15 in 2018 to 30 in 2019. Other sectors that attracted several investments were health and life science (27 investments) and the consumer sector (18 investments).

“What we find attractive with the start-ups in the Nordics, is the exceptionally high-quality science that is being developed into medical products. Furthermore, we see that these companies typically are being priced relatively lower than peers in other mature regions,” says Ingrid Teigland Akay, founder and managing partner at Hadean Ventures, a life science fund manager based out of Oslo and Stockholm.

“What is more lacking in the region is the access to experienced teams, which means that investors like us often work closely with companies in our backyard and amongst others help them recruit team members. Hence, we can help build value in our portfolio companies beyond the capital we invest and differentiating us from generalist investors,” she adds.

Like Blomquist in Creandum, Akay points to the heavy investments in basic research from the Nordic governments in the last decades, paving the way for innovation and academic institutions wanting to commercialize their products: “The quality of the health and life science cases in the region is on par with the best in the world because of this dynamic,” Akay says.

Sweden

Finland

Denmark

Norway

Venture capital deals by home country of company

Record-high share of non-Nordic investors 

The share of investments in the Nordic venture market from international, non-Nordic fund managers continues to increase. In 2008 the share of investment made by non-Nordic fund managers was 3 percent, in 2013 it was 21 percent, and in 2019 it rose for the third straight year to a record-high 34 percent.

This is a clear indication that Nordic venture companies are receiving capital – in other words, are perceived as attractive investment cases – from investors outside the Nordics. 

“We definitely experience more international investors in the Nordic market. If you go back ten years, Nordic startups needed to move out to attract capital. Now, global investors are coming here to invest in the best cases,” Blomquist in Creandum says.

“Typically, these international fund managers want to invest a high amount, which is why they enter later in the venture phase, in a series A or B. In this growth stage, the competition is incredibly hard, making the rounds increasingly bigger. For the earlier stages, you primarily see local, specialized players,” he adds.

Nordic fund managers

Non-Nordic fund managers

Nordic and non-Nordic fund managers' share of investments

A total of 268 transactions were completed in 2019, up for the third straight year, and closing in on the all-time high levels in 2014 and 2015. The 268 transactions amounted to €1.2 billion, which translates to an average deal size of €4.4 million. This is more than €1.4 million higher than in 2018.

The high average deal size is driven by a few large outlier transactions above €100 million, namely Dragoneer’s investment in Klarna and Technology Crossover Ventures’ investment in RELEX Solutions. If we exclude these two deals, the average deal size falls to €3.4 million. This is still above any previous years on record. 

Denmark, Norway, and Sweden saw a moderate increase in the number of investments, whereas Finland experienced a small decline in VC investments. Swedish companies attracted the highest investment number with 108, or 40 percent, followed by Finland with 65 investments.

Norwegian companies attracted 43 investments, an increase from 37 last year, and increasing for the fifth year in a row. However, Norway still has the fewest investments out of the Nordic countries, amounting to 16 percent. 

Fundraising split by home country of fund manager

 Only includes funds with a public closing in 2019.

The state of Nordic private equity 2019

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