Urban technology and the built environment companies are attracting investors – some large investment rounds have raised this year’s volumes to record levels
The ecosystem that has formed around sustainable urban development has raised over €800 million in growth financing in just under 10 years. Although the number of companies receiving investment backing has fallen since the peak years, a record sum has been invested in 2023: at the start of November, altogether €257 million.
The 92 Finnish companies identified in the review as operating in the sustainable urban development sector have raised financing totalling over €800 million in the 2015–2023 period. The companies in this sector account for some eight per cent of Finland’s entire growth financing market. The median size of investment rounds is three million euros.
The sustainable urban development ecosystem encompasses real estate technology and space usage, the electrification of traffic, construction innovations, circular economy of the built environment, and intelligent infrastructure. These companies share the common aim of reducing the environmental impacts of the built environment or renewing the built environment in a sustainable way.
“The weak economic climate characterising 2023 has slowed the transition of early-stage startups to their next growth stage. The higher volume of seed financing of the past few years, however, raises hopes that at least those urban technology companies less vulnerable to changes imposed by economic cycles could raise larger later-stage financing rounds over the coming years,” comments Samppa Sirviö, Investment Manager at Tesi.
The number of investments (13) during the current year has fallen to 2018 levels. In 2021, a peak year, altogether 39 investments were made, while in 2022 there were 33 investments. The total sum of investments reached a new record during the current year, €257 million. This is due to a few larger investment rounds raised by, for instance, Virta, Haltian and Valoo.
“The total sum for the year does not include the recently announced growth rounds raised by One Click LCA and Carbo Culture, the latter of which Tesi joined as an investor,” Sirviö points out.
Companies focusing on urban technology and the built environment have formed a new cluster of expertise since 2019. The theme-based companies that have raised the largest growth rounds include players connected to the value chain for electric vehicles (EVs), companies offering renewable energy solutions (storage, solar energy, intelligent infrastructure), and companies focused on real estate applications of the Internet of Things (IoT).
The number of players investing in urban technology and the built environment has risen in recent years. The number of international investors is also rising. The proportion of international investors in the market has been around fourty per cent since 2018. One of every five investors has invested in more than one Finnish company operating in the sustainable urban environment sector.
“International investors have been more keenly interested over the last few years in growth companies operating in the built environment ecosystem. Although the current year has been quieter owing to the challenges faced by construction companies and the widespread economic uncertainty, technology that reduces emissions is one of the most globally attractive focus for investment,” explains Esa Koponen, Investment Director at Tesi.
“Some 40 per cent of global greenhouse gas emissions are generated by built environments, and innovative solutions are needed now more than ever. That offers investors, startups, and society at large an opportunity for sustainable growth that will mitigate the impacts of climate change and help people adapt to them,” Koponen points out.
The review covered altogether 260 companies, of which 182 are startups and 78 later-stage growth companies. Tesi’s data selection is hand-picked from the Finnish ecosystem by sampling companies that meet the urban tech and decarbonization criteria. Companies have been manually screened from Dealroom, Pitchbook and Vainu data and categorized under Experience, Operate, Build and Enable by our investment research team.
The companies were then sub-divided into two groups: Venture Capital (VC), and Growth. The VC group included companies that have raised pre-seed, seed, series a, series B onwards. The Growth category included companies meeting Tesi’s criteria that are further along in their development.
Fund round data is based on primary equity financing rounds as this data is often disclosed and can be verified. This is often not the case with growth segment where deal size or round data is not available with exception of IPO’s, thus we have excluded buy-out and other secondary share transaction data.
More information about the review:
Esa Koponen, Investment Director
esa.koponen@tesi.fi +358 50 577 9166
Samppa Sirviö, Investment Manager
samppa.sirvio@tesi.fi +358 50 518 6063
Contact for communications:
Saara Vettenranta, Communications Manager
saara.vettenranta@tesi.fi +358 40 723 3516