Tesi survey reveals 'good level' of returns in Finnish PE/VC market

A survey of returns conducted by Tesi shows that the Finnish venture capital and private equity market is performing well at present. 

Returns from Growth and Buyout funds have stabilised at a good level, and investment value is being realised at a steady rate. The venture capital market is also flourishing and returns from Finnish venture capital funds have risen to an excellent level in recent years.

According to Tesi’s most recent survey of returns, the Finnish venture capital and buyout market is currently thriving. The survey analysed returns from investments in the Finnish venture capital and private equity market as at December 2020. The survey sample consisted of some 40 funds. The sample funds are divided into Venture Capital funds and Growth & Buyout funds. The funds are also grouped chronologically into new (vintages 2009-2015) and old (vintages 2002-2008) funds.

This survey is a continuation of the survey of returns published for the first time in 2018. Tesi intends to publish such updates annually in the future. The aim of the survey is to provide fund managers, investors and other industry stakeholders with up-to-date information on the industry’s performance.

The survey results show that the Finnish venture capital market is currently doing well. New funds, founded after 2009, have produced a record 20 per cent return on investment. The corresponding percentage in Tesi’s 2018 survey was 8 per cent, so there has been considerable improvement. Finnish venture capital funds’ returns have risen to an excellent level, even compared to their European peers. It is typical in the venture capital sector that one or two successful investments have a significant impact on the returns of individual funds and on the industry as a whole. In recent years, however, there have been successes in the funds of many different players. The current level of market returns is therefore not a consequence of the success of one individual player.

Most of the reported returns in the venture capital market are still unrealised. The final performance of the funds is subject to changes in both the portfolio companies and in the wider market.

“The next development goal for the venture capital market is to generate more exits. The portfolio companies of the newer fund group will reach maturity soon, so significant capital distributions for investors are expected in the coming years,” comments Samuel Wendelin, Investment Analyst in Tesi’s Fund Investments team.

Finland’s buyout market has performed well and improved steadily in recent years. The survey results show that market returns have stabilised at a good level, and investment value is being realised at a steady rate. For old funds, the return on investment has been 8 per cent and for new funds 15 per cent. The corresponding percentages in Tesi’s 2018 survey were 7 per cent and 14 per cent, respectively, so there has been some growth, although moderate.

Returns from the funds’ portfolio companies can vary greatly but this variation evens out at the fund level. The impacts of the Covid-19 pandemic on individual portfolio companies are noticeable, but the pandemic has had no significant impact on returns at the market level.

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