Tesi´s study shows that Finnish deep tech companies are growing and raised a record amount of growth capital in 2022. Although the number of players investing in the sector has risen, funding rounds have proved challenging, especially for later growth stages. The number of deep tech companies is also declining. What is now needed is multi-player cooperation to create more deep tech companies and enable them to scale and grow.
This is Tesi’s first study of Finland’s deep tech scene. It covers 241 Finnish growth companies with science & research-based operations, leading technology in their field, operations in technologies with a high threshold to success. The companies’ business relates to, for instance, new materials, digital infrastructure, energy & environmental technologies, optics, artificial intelligence & robotics, and health & biotech. There is no unequivocal definition of a deep tech company, however.
Based on our sample group, nearly twenty new deep tech companies a year were created in Finland over the last decade or so. This figure has been declining since its peak in 2016. Average annual growth in net sales of this group has been nearly 50%, although this growth is very concentrated: one-fifth of the companies generate 90% of the net sales. Growth in net sales is slow in the early stage. Even for the fastest to market, scaling net sales takes between 5 and 15 years.
Finnish capital insufficient for increasingly large funding rounds
According to our study, Finnish deep tech companies raised almost two billion euros of growth capital in just over a decade, while over the same period the amount invested in the sector has grown and diversified. The role of Finnish investors is most important in the smaller, early-stage funding rounds, but fundraising becomes more challenging as the size increases. Therefore, international investors become increasingly important. Overall, international investors account for some 70% of the total investment in Finnish deep tech.
“Amongst the population of deep tech companies are the pearls that will solve the big challenges of the future. This also presents a huge opportunity for Finland, with its high level of expertise and knowhow. To succeed, companies need to share risk and raise several funding rounds, and they also need patient capital and partnerships with different players,” comments Henri Hakamo, who heads Tesi’s Development Team.
“The challenges facing deep tech companies grow with the larger funding rounds of a later stage, for which it’s more difficult to find a lead investor. The size of Finnish VC & PE funds is not then sufficient, so we see an obvious target for developing the country’s VC & PE market. Also, going forward, it’s crucial to focus on creating new templates at the system level and getting them from the research stage into actual business activities,” adds Hakamo.
Tesi wants to raise Finland to the forefront of transformative economic growth. We develop the market, and work for the success of Finnish growth companies. We invest in private equity and venture capital funds, and also directly in growth companies. We provide long-running support, reasoned insights, patient capital, and skilled ownership. tesi.fi | Twitter | LinkedIn | Newsletter