Sami Lampinen, founder of early-stage venture capital company Inventure, and his team completed fund-raising for Finland’s largest venture capital fund, € 110 million Inventure III, in record time. Lampinen believes that there are many attractive opportunities for investors in Finland. He has, however, a message for Finnish start-ups: speed up your execution phase.
Founded in 2005, Inventure has made Finnish fund-raising history and demonstrated how to translate thought into action. Fund-raising for the first € 40 million Inventure fund took nearly two years in 2007. € 70 million Inventure II fund took just over a year, and was founded in 2013. Last year Inventure III raised € 110 million from investors in less than a year.
Lampinen is very pleased that each round brought new institutional investors into the fold. Tesi has invested in Inventure from the very beginning.
“Tesi and Inventure share a strong common interest in developing the Finnish venture capital market. We’ve also joined forces to seek ways of attracting international expertise, co-investors and capital to Finland,” says Lampinen.
“Tesi and Inventure share a strong common interest in developing the Finnish venture capital market.” Sami Lampinen, Inventure.
Tapio Passinen, Investment Director at Tesi, emphasises that Inventure’s latest fund-raising is quite an achievement even at a European level. Inventure III is the first Finnish venture capital fund to reach € 100 million in over 15 years.
“Although the venture capital market has recovered strongly since the dot-com bubble, fund-raising is still not easy in Europe. Inventure’s success is a testimony to investors’ confidence in the team. Inventure has impressed us with its broad vision of how the market will develop. The Inventure team has the will and the ability to develop their portfolio companies,” comments Passinen.
Earlier planning of financing rounds
The raising of a large venture capital fund is good news for Finnish early-stage technology companies. Tesi’s Investment Manager Petteri Laakso points out Finnish venture capital funds have previously faced challenges in attracting capital, meaning that the funds have been quite small in size.
“When the fund is larger, Inventure can provide follow-on financing to companies for longer than before. Portfolio companies get more stability for business development and investors get a possibility to grow their returns,” Laakso explains.
Inventure finances companies’ growth with venture capital investments up to € 5-10 million. On the other hand, it continues to invest in the seed phase of companies, with investments ranging from € 200,000 to € 500,000.
“It is important that Finland has a well-functioning ecosystem for growth financing. It’s important to start sparring and conceptualising financing rounds as early as the seed phase, and not wait until the financing round becomes a burning question. Our co-investors also expect us to continually have our sights set on new rising stars,” adds Lampinen.
One way Inventure identifies new stars is with wide-ranging studies examining the start-up ecosystems of specific markets or cities.
Does slowly but surely hold true?
Inventure’s operating philosophy has a strong international approach. The company pursues a vision of helping to turn Nordic and Baltic start-ups into global superstars. To succeed in this goal, Inventure has an international team of 10 experts, working out of Stockholm and Shanghai, as well as Helsinki.
“We want to make it easier and faster for entrepreneurs to create international success stories. We utilise our broad experience to help teams internationalise, but above all to boldly build a huge story,” says Lampinen, who has been working in the field of financing technology start-ups for 20 years.
Inventure can back this claim with solid evidence. Last year Inventure exited Beddit, a company specialised in sleep monitoring devices that was sold to Apple Inc., while Rightware, a specialist in automotive software, was acquired by Thundersoft. Inventure also implemented large follow-on financing rounds in Canatu, which manufactures bendable touch sensors, and in Blueprint Genetics, an innovator in genetics testing.
“The primary job of a venture capital investor is to accelerate a company’s business. Finnish start-ups lead the world in many ways, but we could definitely accelerate the cycle in the execution phase. Many international companies, for instance, build up their marketing and broadly develop the company as early as the product development phase,” Lampinen says, and continues:
“The idea of ‘slowly but surely’ is still firmly entrenched in Finland. The flipside of a leisurely approach, however, is that failures also come slowly.”
Responsibility also addressed in failures
Inventure has three or four large exits planned for 2018, plus five follow-on rounds and ten new investments. The strong international approach raises the question of whether Finnish knowhow is being sold piece-by-piece to large global corporations. Is that happening?
“We think it is extremely important to find the right partners for exits – partners who can help the team to grow the company. In many cases, these are large international technology companies. Our experience shows that this has a positive impact from Finland’s viewpoint: Finnish companies have been able to employ more people in Finland and also to benefit from more international expertise.”
Corporate responsibility plays a key role when selecting portfolio companies, as well as when exiting from them. Inventure’s portfolio includes Beiz, for instance, which develops interactive and educational games for children, and Yogaia that brings yoga into every living room. Canatu and Wirepas, for their part, offer solutions that promote the efficient use of energy.
“Tesi has given us a professional investor’s perspective on our administration and governance. We receive guidance about responsibility issues on a regular basis and, of course, certain reporting requirements. This knowhow we pass on to our portfolio companies, and we then support them in responsible decision-making,” explains Lampinen.
He points out that responsibility is, however, particularly needed when all does not go well.
“Failures are not unheard of in the world of start-ups. Responsibility involves bringing matters to a fair conclusion with regard to taxes and creditors. Due regard must also be given to entrepreneurs, and there should be no finger-pointing. I’ve always said that when things are handled properly, bankruptcy is just an experience,” concludes Lampinen.
- Founded 2005.
- Mission: To invest in innovative and rapidly-growing hi-tech start-ups in the Nordic and Baltic countries, and turn them into global success stories.
- Portfolio: 38 companies.
- Fund investors: Tesi, Elo Mutual Pension Insurance Company, European Investment Fund EIF, KRR funds-of-funds, Ilmarinen Mutual Pension Insurance Company, Nordea Life Assurance, Sandvik Eläkesäätiö, and The Finnish Innovation Fund Sitra.
- Team: 10 people, plus three more being recruited. Sami Lampinen, Managing Partner; Timo Tirkkonen, partner; and Tuomas Kosonen, partner.
- Website: inventure.fi
The article was first published in Tesi’s Annual Review 2017.