The state of Nordic private equity 2021

Among all the transactions, ten deals stand out.²⁸ These received about half of the capital invested during the year. In contrast to previous years, where one or two investments claim large chunks of the total invested amount, this was not the case in 2021. On the contrary, no single transaction is driving the invested amount.

Two of the most high-profile investments during the year were in EQT Growth's portfolio,²⁹ Wolt and Epidemic Sound. Magnus Tornling, Partner and Head of EQT's Global Industrial Tech Sector Team, has high hopes for both:

"Epidemic Sound combines two of Sweden's largest export successes: Music and tech. It is a unique model that takes away what was complex before: License-free music for streaming platforms like YouTube, Instagram, and TikTok. EQT Mid Market Europe has been invested since 2017, and in 2021, both EQT Growth and Blackstone joined. We have a very positive view of the company's international growth. The focus in the last years has been to increase the reach and make the product completely digital; we believe it will grow exponentially onwards", Tornling says.

"Wolt is an interesting case. EQT Ventures led its Series A round in 2016, and it has now grown out of the venture phase. The company was a winner during the pandemic, and its development accelerated. Wolt was so successful that it was sold to Doordash at the end of 2021 at a EUR 7 billion valuation", he adds.³⁰

Below are the ten most significant transactions during the year.³¹ Seven are in the ICT sector, ³² two are within health and life sciences,³³ and one is within financials.³⁴

In absolute terms, the historic venture and growth activity applied to all sectors that Argentum follows. The ICT sector experienced a 19 per cent increase compared to the average number of deals in the last five years. The industry continues to have the largest share of investments (51 %), even though the average share is decreasing. In other words, transactions are still concentrated in ICT, but investments in other sectors are rising.

Verdane is one of the most significant growth investors in Nordic tech-enabled companies. Notable investments in 2021 include Auntie Solutions, Centra, Ingrid, MATCHi, Swappie and Spond.³⁵

Eline Stokstad Fjell, Director based out of Verdane's Oslo office, says that tech companies got a boost when the world went from offline to online during the pandemic. The fund manager had already invested heavily in the offline to online shift:

"With the pandemic, this megatrend got a real push, with the equivalent of several years of digitalisation compressed into a much shorter timeframe. Consumers adapted and embraced it, and it would now appear that it was not a temporary shift", Stokstad Fjell says.

"As the saying goes, software is eating the world. Companies use software everywhere, from ESG reporting to accounting and logistics, with Porterbuddy as a prime example.³⁶ In the society in general, we see how the gig economy has introduced the notion that you pay for your use of a service. The trend is not new, but it has accelerated considerably in the two last years".

The sector that attracted the second most investments was health care and life sciences,³⁷ with 63 deals and a market share of 16 %. Further on, there was a 19 % growth in the number of transactions compared to the average.³⁸ The new fund manager, Eir Ventures, was among the investors that closed its first fund in 2021.³⁹ Two-thirds of the fund's capital will be allocated in the Nordics, says Stephan Christgau, founding partner at Eir:

"The Nordics is, and I say this with conviction, a very good region for health and life science with much exciting research coming out. Previously, there was a gap between university professors and investors. Now, many incubators in the Nordics are bridging it. This makes it easier for investors like us to evaluate the investment cases", Christgau says.

"What separates the region is that it is highly digitised, making it easy to do business here, with BankID being a good example. Comparable markets like Holland and Germany also produce much great research, but they are far behind the Nordics when it comes to digitalisation", he adds.

We find the consumer sector in third place,⁴⁰ which attracted 40 deals or a 10 % market share. Compared to the average investment activity, there was a 65 % growth.⁴¹ Verdane's Eline Stokstad Fjell points to another megatrend permeating this market segment and that the fund manager is betting on: Sustainable consumption. She is part of a cross-fund team focused on the trend.

"Sustainability will only grow in importance going forward. Consumer companies experience that their customers want to buy products that contribute to a more sustainable future. Sustainable consumption will be one of the themes in our newest fund, Verdane Idun, which will be aligned with article 9 of the SFDR", she says.⁴²

To name some examples from 2021, Verdane invested in Fiksuruoka in May, a Finnish online retailer of surplus dry-food groceries and non-food products at discount prices. In December, they also invested in Auntie Solutions, a Finnish developer of 'Well-being as a Service', offering psychological support services to corporate employees.

There was high activity in all Nordic countries in the period, with an increase in all markets compared to previous years:

• In Denmark, the number of investments increased by 108 % compared with the average for the last five years. Danish companies attracted 25 % of the venture transactions, a higher level than usual.
• However, it is Swedish companies that still attract the most investments. Sweden accounted for 38 % of the market, with a significant growth compared with the corresponding period over the last five years (up 32 %).
• Activity in Finnish VC has had a more moderate upswing with an increase of 5 % compared to the average for the last five years and accounted for 19 % of the market.
• Norwegian companies attracted 17 % of the deals in the region, but the number of transactions was 72 % higher than the average in the period 2016-2020

If we look at the share of the invested amount, it reflects the number of deals, and no individual transaction dominates the total amount. Danish and Swedish venture companies each claim one-third of the amount. Finnish venture companies drew 19 % of the capital, while Norwegian ones attracted a minuscule amount of 15 % (see graph above).

As with the number of deals, the growth in invested amount was most impressive in the Danish market.⁴³ Here, we found five out of the ten largest VC deals in the Nordics: Dixa, Pleo, Vivino, IO Biotech, and Nordic Bioscience.

There was also a landmark year for international⁴⁴ fund managers. Non-Nordic GPs have neither had a higher share of the investments (41 %) nor represented a higher number of transactions (163 deals in total). Hence, the growth in investments in Nordic venture companies can partly be explained by the increase in international investors.

"We now see that US-based GPs are the second most active in the Nordics. An explanation might be that the competition in their region is so high that it has forced them to look elsewhere, not only in the Nordic countries. That said, the Nordic ecosystem has matured in the last years and is now delivering many unicorns and impressive exits, and this is catching the interest of both local and international GPs", says Joachim Høegh-Krohn, CEO at Argentum.

In total, 65 different American fund managers made 82 investments in Nordic companies, an increase of 195 % compared to the average over the last five years. Notable fund managers with three or more deals during the year were KKR, RA Capital, Tiger Global, and Lugard Road Capital.

After Sweden and the US, Norwegian fund managers were the most active in the Nordic venture segment. Norwegian fund managers made 48 investments, an increase of 15 % compared to the average over the last five years. In addition, the number of investments from fund managers in the UK and the rest of the world increased, but more moderate compared to the US.