Business environment
The year 2012 in the Finnish venture capital and private equity market went fairly well despite the general economic environment. New venture capital and buyout funds were raised successfully, and investment volumes increased slightly compared to the previous year. A number of exits took place in the beginning of the year and then again at the year end, which is important for the sector continuity. It was also positive that international investors and Finnish business angels kept up their interest towards Finnish companies.
Investments
In 2012, Finnish Industry Investment’s (FII) investment operations remained brisk both in fund investments as well as in direct investments. FII screened 200 projects seeking investments. The company made new investments totalling €57.1m. Investments and commitments totalled €718 million at the end of the year.
FII made new commitments to four funds amounting to €32.5m. Fund investments focused on new venture capital and mid-market buyout funds. The company exited from two funds that came to the end of their term. Capital calls amounting to €60.1m were paid to funds. Altogether €29.3m was returned to the company from funds.
FII made direct investments amounting to €22.3m. Direct investments focused on technology companies, buyouts, and the mining cluster. First-round investments in six companies amounted to €14.2m and follow-on investments in 11 portfolio companies €8.1m. During 2012, the parent company exited fully from altogether five portfolio companies and partially from three. The impact of the exits on the company’s financial result was €1.3m.
The subsidiary Start Fund I Ky invested a total of €2.3m in five portfolio companies and exited from five portfolio companies. The impact of the exits on the company’s financial result was €0.2m. At the end of 2012, Start Fund had 32 portfolio companies and the fund had called in €60.9m of its total capital.
The Stabilisation Financing Programme was terminated at the end of the year. Investments made through the programme in 2009-2012 amounted in total to €60m in 15 companies. The net sales and profitability of the investee companies showed gains during the period covered by the programme.
Result
The profit for the financial year was €7.3m. Profits, both from investments and from liquid securities, improved compared to the previous year.
Capitalisation
Investing capacity was strengthened by the Finnish State’s capitalisation of 50 million euros, which is targeted at mining cluster investments and growth-stage investments.
In total, Finnish State’s investments of €470m in FII have grown into equity of €575m. During the company’s entire operating period, the return on invested capital has achieved the general level of inflation.
Corporate responsibility
FII emphasises responsibility in all its activities and also requires that its portfolio companies operate responsibly in the environmental and social arena as well as in matters relating to finance and administration. The company’s corporate responsibility policy focuses on key themes for a government-owned investor: economic impact and responsibility, responsible investment, human resource management and internal procedures.
Prospects
FII’s goal is to channel venture capital into growth companies over economic cycles. In March 2013, the Finnish Government decided to strengthen growth company financing and capitalise FII for the establishment of FoF Growth II. The capitalisation enables FII to start fund-raising from Finnish institutional investors for the new fund. At least half of the capital of the new fund must come from private sources.
Special focus areas for FII’s investments will be high value-added growth companies, the mining cluster, the bioeconomy and cleantech sectors, and the marine industry’s cluster companies. The company’s aim for 2013 is to make new investments amounting to some €70. The prevailing market situation and deal flow will have a strong effect on the volume of new investments.
The venture capital and private equity industry in Finland will be affected in 2013 by the implementation of the Alternative Investment Fund Managers Directive (AIFMD). The legislation aims to improve investor safety and increase transparency.
Annual General Meeting
The new Board of Directors was appointed at the Annual General Meeting on 26.3.2013. The Board of Directors comprises Jukka Alho as Chairman of the Board, Urpo Hautala (Financial Councellor, Ministry of Finance), Sari Lounasmeri (CEO, The Finnish Foundation for Share Promotion), Inka Mero (Chairman, KoppiCatch Oy), Leena Mörttinen (Director, Confederation of Finnish Industries EK), Mika Niemelä (CFO, Ministry of Employment and the Economy), Tuomo Rönkkö (CEO, Maintpartner Oy).
More information:
http://annualreport.industryinvestment.com
Juha Marjosola, President and CEO, Finnish Industry Investment Ltd
tel: +358 9 6803 6811, e-mail: juha.marjosola@industryinvestment.com
Finnish Industry Investment Ltd is a government-owned investment company that promotes Finnish business, employment and economic growth through venture capital and private equity investments. The investments of Finnish Industry Investment amount to 720 million euros. www.industryinvestment.com