COVID-19 has a negative impact on Finnish venture capital and private equity backed companies, but most of them will be able to raise further financing from current investors

A market pulse survey for Finnish venture capital and buyout investors conducted by Tesi, Finnish Venture Capital Association, and Business Finland Venture Capital in April 2020 indicates that COVID-19 is negatively impacting 50% of VC portfolio companies and 62% of buyout portfolio companies. The survey does, however, show that in over 85% of companies, current owners can wholly or partially meet their financing needs over the next year. It seems that only a small proportion of companies is facing an immediate liquidity crisis.

“We’re in this rather good situation because these funds are well managed and they have taken sound precautionary steps,” comments Matias Kaila, Tesi’s Director, Fund Investments.

One-third of VC backed startups will run out of money in less than six months and one-third in 6-12 months’ time. One-third of startups have cash reserves for a year. The financing situation for startups does not, however, differ much from normal because many of them are financed in a way that they can manage short-term loss-making.

The situation has had a more adverse impact on later-stage growth companies, and their situation is rather worrying. Investors estimate that some 40% of later-stage growth companies will run out of funds in less than six months, and many of them in less than three months without follow-on financing. This differs clearly from the situation enjoyed before the crisis by profitable and established growth companies that were pursuing rapid growth in normal conditions.

In 58% of cases, buyout investors are able to meet the financing needs of later-stage growth companies over the next year. However, for more than half (59%) of the later-stage growth companies, it is uncertain whether they will receive further financing. 42% of startups will ride out the crisis with additional investments from their current VC investors. External financing, on the other hand, is available for only 30% of startups. Less than 15% of startups and later-stage growth companies completely lack follow-on financing.

“It’s important that we take the whole ecosystem into consideration. Taking action during the crisis will ensure that we have high-growth companies and success stories in different sectors in the future, too,” comments Pia Santavirta, Managing Director of the Finnish Venture Capital Association.

Although COVID-19 has a negative impact on one-half of startup companies, for 8-10% of them it has opened up new business opportunities and boosted demand. Only some 2-3% of later-stage growth companies are reaping the same benefits.

“At present, investors are willing and able to provide follow-on financing to their portfolio companies. We’ll continue to closely monitor the impact of COVID-19 on the Finnish venture capital and private equity market,” says Matias Kaila.

About the survey:

• Altogether 27 investors responded to the market pulse survey, of which:
  16 make venture capital investments
  11 make buyout and/or growth investments
• The survey was conducted 9th – 16th April 2020.
• The survey covered 412 companies, of which 345 are registered in Finland.
• Fund managers completed the survey comprehensively for all their funds and answered all the questions.
• The company base was widely distributed across different sectors and development phases, and gives a fair representation of Finnish venture capital and private equity backed companies.

Survey results

For further information, please contact: 

Matias Kaila, Tesi
Matias.Kaila@tesi.fi, 040 720 1324

Pia Santavirta, Pääomasijoittajat ry
pia.santavirta@paaomasijoittajat.fi, 040 546 7749

Tesi (Finnish Industry Investment Ltd) is a state-owned investment company that wants to raise Finland to the front ranks of renewed economic growth by investing in funds and directly in companies. We invest profitably and responsibly, hand-in-hand with co-investors, to create the world’s new success stories. Our investments under management total 1.3 billion euros. Ambition for ownership and success www.tesi.fi | www.dtg.tesi.fi | @TesiFII

The global outbreak of the COVID-19 pandemic brings unprecedented challenges and everyone is affected one way or another – humans, societies, businesses and the economy as a whole. People across the world are struggling – with the disease, the pressure of potentially losing their jobs, or at the frontier, where healthcare professionals continue to work under tough conditions.

Today, EQT is proud to announce that the EQT Foundation has decided to support its first initiative in response to COVID-19. A donation of EUR 1 million has been made to the COVID-19 Therapeutics Accelerator (launched by the Bill & Melinda Gates Foundation, Wellcome Trust and Mastercard). The initiative is designed to help accelerate the global response to the pandemic by identifying, assessing, developing and scaling up potential COVID-19 treatments. Committed to equitable access, the COVID-19 Therapeutics Accelerator provides fast and flexible funding at all stages, from discovery and development to manufacturing.

In addition, the members of EQT’s management team have decided to make a EUR 1 million donation to the academic laboratories at Science for Life Laboratory and Karolinska Institute in Sweden. The donation is earmarked to further increase the capacity for testing for the COVID-19 virus, primarily within the elderly care system. The donation will be made by various members of the EQT management team as private individuals as a contribution to the caregiving of the elderly and most vulnerable in the country where EQT AB is listed.

Conni Jonsson, Founder and Chairperson at EQT, commented: “By supporting the COVID-19 Therapeutics Accelerator, the EQT Foundation becomes part of a movement of making future solutions accessible to millions of people across the globe. By supporting the Science for Life Laboratory and Karolinska Institute in Sweden in their work to accelerate access to tests, we hope to be able to provide at least some relief in this difficult situation.”

Christian Sinding, CEO and Managing Partner, continued: “We are also tremendously proud to see how the whole EQT organization is mobilizing to support those in need. There are so many local initiatives, big and small, and we encourage our staff to continue supporting relief efforts for COVID-19, both by allocating time and donations, which EQT matches through local fundraising programs. The situation is tough, but it is comforting to see all the dedication, creativity and determination to help both people and societies. These actions further illustrate the EQT mindset of making a positive impact with everything we do.”

The EQT Foundation was founded in June 2019 by a core group of Partners at EQT with the purpose of hosting and driving EQT’s global philanthropic activity, as part of the firm’s efforts to have a positive impact with everything it does. The contribution is aligned with the EQT Foundation’s strategy; to leverage partnerships and support innovative philanthropy that promote a more inclusive tomorrow.