6. VC & Growth exits: Decreasing exit trend in the venture segment
Venture funds completed 28 exits in 2023. Over time, there has been a decreasing trend in exit activity within the venture and growth segment, with the exception of 2021 when activity rose considerably. More than one third of all exits last year involved ICT companies, health care and life science was the second largest sector.
The decreasing exit activity may be due to several factors. One significant factor could be the volatility in interest rates observed in 2023, which likely introduced additional uncertainty into valuations. Another factor may be longer holding periods for venture funds.
Jessica Schultz, Partner at Northzone can relate to the findings:
"Exits have certainly been fewer and harder to come by. However, exits are always tough, and there’s seldom an easy way there,” she says.
“What this means for us is that we need to work harder and think outside of the box as far as engineering exits goes. For instance, we’ve seen a lot of opportunities via secondary brokers,” says Schultz.
“We need to work harder and think outside of the box”
Yearly view: In 2023, VC funds made 28 exits from Nordic companies.
Notable exits in the VC & Growth segments
Notable venture exits during the year include:
- The software company, Working Group Two, was sold to Cisco by Digital Alpha Group and Telenor. The transaction valued the company at USD 150 million (read more).
- Almi Invest sold the Swedish scanning and data innovators Minalyze. The transaction valued the company at approximately USD 104 million (read more).
- In March 2023, Inflexion acquired Nomentia from Verdane and PSG (read more). The Finnish software company delivers solutions to the cash and treasury management segment and has a reported turnover of EUR 15 million.
- Standout Capital sold its shareholding in SignUp in May 2023. SignUp is a software company who is a global leader in Accounts Payable Automation. Standout Capital sold all their entire shareholding to Insight Partners, who made a public offer for all the outstanding shares in the company in April 2023 (read more).
Majority of exits involved tech companies
Within the venture segment, most exits involved companies in the ICT sector, accounting for 36 percent of all exits. However, the proportion of ICT companies among all exits was significantly lower compared to the average of the previous five years, with their share of exits decreasing by 30 percentage points. Additionally, the ICT sector experienced a 79 percent decline in the number of exits relative to its five-year average. A potential explanation for this downward trend in ICT exits could be that the valuations of ICT companies are more susceptible to rising interest rates, as their valuations are more heavily dependent on future earnings compared to companies in other sectors that generate higher immediate earnings.
The healthcare and life science sector emerged as the second-largest, accounting for 29 percent of exits. The share of exits involving healthcare and life science companies increased by 15 percentage points in 2023 compared to the five-year average.
Industrial companies constituted 18 percent of exits, ranking as the third-largest sector by the number of exits. Among the notable exits was the sale of the Swedish company Newton Nordic by Almi Invest to Star Innovation Group.
ICT sector dominating: ICT exits accounted for 36 percent of exits in the venture segment, followed by health care and science and industrials companies.
The number of exits fell across all four Nordic countries. Most exit transactions involved Swedish companies, accounting for 43 percent of exits. However, the number of exits in Swedish companies was down 29 percent compared to 2022. Finnish companies accounted for 36 percent of exits, down 38 percent compared to 2022. Norway experienced a decrease of 54 percent compared to 2022, accounting for 21 percent of the Nordic exit market. Danish companies were involved in no exits (see graph below).
Most venture exits were sales to other fund managers (secondary exits). The share of secondary exits was 43 percent, compared to an average share of 30 percent during the previous five years. Trade sales had an equivalent decrease in the share of venture exits, making 30 percent of venture exits in 2023.
Increase in secondary exits: Secondary exits made up 43 percent of venture exits in 2023, compared to an average share of 30 percent of exits in the previous five years The second most popular exit strategy in 2023 was trade sale, with 30 percent of exits.