Corporate Venture Capital has found Finland

Finland is well-known for its numerous tech startups that keep churning out cutting-edge innovations. These innovations have now been discovered by international corporate venture capital (CVC) investors looking to pep up their own product development or pursue other typically strategic interests. In the past year, Helsinki Business Hub acted as a matchmaker, helping CVC investors find Finnish startups with matching investment interests. As CVCs have strong cash reserves and an urgent need for business renewal, it seems that CVC investments have potential to grow further in Finland in 2019.

Corporate venture capital investments have quickly increased in Finland during the past years, and 2018 was the breakthrough year of CVC for Helsinki Business Hub. According to Global Corporate Venturing, companies based in Finland get CVC funding primarily from foreign corporations, due to a lack of domestic CVC activity.

“There has been significant growth in international CVC investments in Finnish startups, as investors have begun to see the opportunities in Finland. Helsinki Business Hub supports international CVC investors for example by organizing targeted events during Slush and meeting investors to understand their interests. These corporations have been surprisingly open to working with us, and Helsinki Business Hub has facilitated more CVC investments in 2018 than ever before,” says Venture Advisor Tian Yu from Helsinki Business Hub.

There has been significant growth in international CVC investments in Finnish startups, as investors have begun to see the opportunities in Finland.

Helsinki Business Hub was involved in four significant sealed deals with a total value of 68 million euros in 2018, while there are other agreements still in the pipeline. In 2018, the CVC investors came from UK, Germany, Russia, China, and the United States. In addition to the deals facilitated by Helsinki Business Hub, other international CVC investments – like the French luxury house Chanel’s investment in the Finnish biodegradable material developer Sulapac and the US-based 3M Ventures’ investment in the Finnish augmented reality display developer Dispelix – also show the general growth of CVC funding in Finland.

Finnish startups are attracting corporate venture capital

CVC investments are a globally growing trend. Many corporations face product development challenges, and disruptions can arise rapidly, posing huge risks. The best survival strategy is constant innovation, and that’s where CVC investment can help. CVC investors have a variety of investments motives. Some corporations choose to invest strategically, while others have a financial motive. Some investors might decide to acquire a majority position in a startup, gaining decisive control in it.

A good example of a strategic CVC investment is that of the Japanese automotive component manufacturer DENSO. The company recently invested in a Helsinki-based smart mobility startup MaaS Global. The investment convinced DENSO of the opportunities of the Finnish innovation ecosystem, and the company ended up opening its own office and R&D unit in the Greater Helsinki region to gain a better foothold in Finland.

“For startups and the local investment community, CVC money can be considered as smart money if utilized properly. CVC investments can e.g. provide new sales channels, R&D cooperation, and key contacts. On many occasions, CVC investments can create positive strategic partnerships, and that’s why many Finnish high tech companies are interested in this type of combination of funding and upside opportunity,” says Senior Venture Advisor Jukka Jokinen from Helsinki Business Hub.

Finding innovation and expertise in Finland

It is now easier than ever for Finnish startups to get international funding. In fact, innovation-driven startups and business culture, along with cutting-edge technology, research, and expertise are the very things pulling CVC investors to Finland.

“The word is definitely getting out. The CVC investors we’ve hosted in Finland have been typically very impressed. They have shown keen interest in Finnish startups working e.g. on gaming, smart buildings and cities, digital health, smart mobility, fintech, and education. An investor recently referred to Finland as the second Israel, as both countries have a bustling, innovative technology sector and a small domestic market driving companies to internationalize and seek investments rapidly. Finding and creating potential business renewal and opportunities is not easy, but Finland is an excellent location to be active,” Tian Yu says.

Nokia’s heritage in Finland includes strong tech know-how and innovative startups. One of these startups is Varjo Technologies. It recently got an investment from the Siemens-related global venture firm Next47 to bring the first human-eye resolution virtual and mixed reality product to market.

Disruptive solutions from Finland for the global market

Finland has a developed ecosystem that offers diverse technologies, disruptive innovations, and scalable solutions for many hot business sectors. For example, the first Finnish digital real estate agency Blok has recently raised funding from the leading Nordic media company Bonnier. Blok challenges traditional real estate agents with its automated broker service and lower commission.

The Finnish healthcare system has also sprouted great startups with products that have a global market. One example of this is the Finnish blood testing startup Nightingale, which is looking to solve the global burden of chronic disease with its blood analysis platform. The company works with leading universities and other customers in 20 countries.

“Europe has been the traditional international funding base for Finnish companies, but we are now seeing a lot of interest from CVC investors around the world. More and more investors on the US East Coast are turning to Europe and the Nordics, as their local market has occasionally become overheated. Japanese CVC investors are showing growing interest in Finnish growth companies. We are also seeing relatively large interest from China, and while foreign investment might currently be challenging for Chinese investors, there are always some who are willing to put in the work and make it happen,” says Jukka Jokinen.

One of these pioneers is Chinese high-tech company Qingdao Sifang SiRui Intelligent Technologies, who purchased the Espoo-based Beneq in order to become a high-end supplier of smart tech solutions.

Helsinki Business Hub: connecting CVC investors and Finnish startups

Despite the fluctuation and threats in the global economy, Tian Yu and Jukka Jokinen expect corporate venture capital interest towards the Finnish ecosystem to continue on a high level in 2019.

“The Finnish market offers unexplored innovation and investment potential. It’s not yet too overheated, it continues to produce promising growth companies, and it offers a flourishing business ecosystem. This is an ideal time for CVC investors to discover Finland and still avoid the big rush. We are more than happy to help them explore the Finnish investment opportunities and connect them with the right startups,” Tian Yu says.

Nokia’s heritage of cutting-edge technology and connecting people is strong in Finland, and Finnish startups carry on its legacy. Helsinki Business Hub concentrates on the connections, bringing together businesses and helping them work together in ways that benefit everyone.