Investment flows into Nordic startups from all directions

Автор: | 07.07.2018

Banks, IT firms and private investors are all wading into the Nordic tech startup scene from different angles.

Across the Nordic region, leading Swedish, Danish, Norwegian and Finnish private equity firms are showing an increasing level of interest in startups and maturing IT enterprises developing products in areas including digital finance and artificial intelligence (AI).

The higher level of capital invested by private equity firms in IT startups mirrors a parallel development where leading banks in the region, including SEB, Danske Bank and Nordea, are forming equity-based partnerships with tech enterprises that specialise in producing digitised financial products and services (fintech).

Some of the more established Nordic IT groups, including Helsinki-based Tieto, are also entering this arena.

Reasons for investing vary. Banks are primarily looking for long-term tech partnerships, while private equity firms want to invest in IT startups with proprietary technology that can be commercialised and fast-tracked into sales and profits.

Long-term funding

For those IT startups that can roll out technologies sooner rather than later, rewards can be reaped in the form of multi-level long-term funding to drive innovation, growth and profits.

This scenario was played out in March when Swedish private equity firm Nordic Capital bought fintech startup Trustly. The online payments startup was valued at €97.6m in December 2017. The acquisition deal struck by Nordic Capital three months later valued all shares in the company at €683m.  

“We tracked Trustly very closely. It’s a third-generation account-to-account real-time payments firm. With less use of cash and cards as payment forms, we see huge long-term potential in Trustly and the growing market area it operates in,” said Fredrik Näslund, a partner and head of technology and payments at Nordic Capital.

Nordic Capital is ranked among the top-line investors in tech startups. In July 2017, the company divested out of Swedish omni-channel payments firm Bambora, selling on the business to the online payment giant Ingenico Group for €1.36bn.

Taking ownership

Nordic banks, such as Danske Bank, are now beginning to look beyond simple strategic partnerships with IT startups. Banks are starting to take significant equity ownership positions in these companies, while launching initiatives to develop tech clusters dedicated to producing next-generation payments and automated financial services technologies.

The bank established Danske Bank Growth, a dedicated pan-Nordic adviser network for IT startup companies, in 2017. The service has provided development capital and mentoring expertise to more than 100 tech firms since its inception.

Danske Bank’s acquisition of the Aarhus-headquartered fintech startup Spiir A/S in May alerted Denmark’s IT software community to the changing landscape for early stage funding, and the elevated receptiveness of banks to entertain funding pitches from newly formed IT enterprises.

“We collaborate with several fintech businesses on developing new customer solutions within open banking. However, our acquisition deal with Spiir is the first time Danske Bank has become a shareowner in a fintech. This is something new for us, but certainly not a one-off,” said Lars Malmberg, global head of business development at Danske Bank.

Spiir came under Danske Bank’s radar when the IT company sought funding to develop a Nordic application programming interface (API) gateway. This is intended to make it easier for third parties to build smart customer solutions on the basis of consumers granting third parties greater access to their bank data. The platform being developed by Spiir will allow Danske Bank customers to view their accounts with other banks using the Danske Mobile Banking app.

Certain private equity groups, such as the Helsinki-based CapMan, are favouring a more selective and narrow-range interest in tech startups, with a focus on companies developing IT network defence solutions, and in particular cyber security technologies. CapMan acquired a minority stake in the Finnish cyber threat intelligence analysis specialist Arctic Security Oy in April.

Stockholm-based equity group EQT has been, by some distance, the most active private equity investor in IT enterprises over the past 12 months. Recent acquisitions have included SUSE, a global provider of open source infrastructure software for large-sized enterprises. Established in 1992, and with annual revenues of around €300m, SUSE is the world’s first provider of an enterprise-grade open source Linux operating system.

In May, EQT merged two of its portfolio companies – Candidator and DGC IT Services – into Candidator DGC Ab. This larger managed IT services provider is projected to deliver revenues of €94m in 2018. EQT had acquired Candidator in February and bought DGC IT Services in June 2017.

Technical assistance

Marking the IT industry’s territory against the backdrop of increasing investment activity by banks and investors, Tieto has launched a new accelerator initiative to support tech startups in the development of digital and artificial intelligence solutions.

Tieto rolled out its AI Accelerator scheme in Sweden in April. The initiative will adopt an initial focus on backing startups engaged in the development of healthcare solutions that utilise AI technologies. Tieto is partnering with Vinnova, Sweden’s state-funded innovation agency, to co-finance the project. The scheme gives participating IT startups access to Tieto’s technical platform, customer base, experts and business mentoring coaches.

“Driving an idea through the various stages from development to commercialisation is a challenge for many startups. They often lack practical experience with AI. Our team has veteran entrepreneurs with extensive experience of the Nordic startup scene. It can help these firms really sharpen the business potential of their ideas,” said Ishtar Touailat, the head of innovation incubation at Tieto.

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