Venturing and building bridges – first experiences from our COVID-19- related investment programme

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Juha Lehtola

Johtaja, Venture Capital -sijoitukset

2020 was a year unlike any other in recent history on many fronts, including in Tesi’s VC investment activities. We continued to be active in large scale-up rounds like Swappie, Varjo, Unikie, M-Files, IQM but also ventured into new areas with the Venture Bridge programme targeted for earlier stage companies facing fundraising challenges due to the COVID-19 pandemic.

The program has now been running for 7 months. While we are not even halfway yet in terms of the planned timeline for the program (initially planned to run for two years), it is worthwhile to have a look at the results and experiences so far.

Until January 26, we have invested into 16 companies against a cumulative application volume of 37. This figure is close to but a bit lower than our initial expectations, probably mirroring the fact that many companies have continued to have access to larger pools of equity capital. This has been a very positive surprise as the initial reactions and sentiment last spring were quite the contrary.

Some statistics and observations relating to the current Venture Bridge portfolio:

  • In terms of development stage, vast majority are between seed and Series A stages and still exploring product/market fit. A few companies are later stage, having taken in multiple previous rounds of funding.
  • The context of applying to the program is typically related to postponing the next equity round, possibly (but not always) alongside deteriorating revenue metrics. At the time of applying, companies have assessed the revenue impact of COVID-19 to their businesses and the median has been -35%.
  • Of the 16 companies, seven are clearly “purpose-driven” i.e. their products are having concrete positive impact on health or environmental sustainability in various forms (including mobility/electrification, energy storage, sustainable materials, air quality among others). In addition there are a few deeptech companies that contribute to UN SDGs in a more indirect way.
  • Five companies already have international investors in the cap table.
  • In terms of investment process, we have in almost all of the cases been able to maintain the promise of completing the investment process within two months of receiving the application. If not, this typically is due to external reasons.

Assessing the opportunities is of course always the tricky part. The Venture Bridge program entails checklist- type eligibility criteria combined with more subjective assessment of the opportunity. As a guiding principle we have always looked at the “VC fundability” of the case – quite naturally as the investment is intended to provide a bridge towards a larger VC funding round. To assess this, we have looked at both the investment syndicate (quality, “skin in the game”, follow-on funding capabilities) as well as business fundamentals focusing especially on scalability and market potential.

It has been really encouraging to note the resilience and perseverance (“sisu”) of the entrepreneur teams as well as the continuing support from our co-investors to these companies in a challenging environment. Looking forward, we will of course continue to make new investments from the program while at the same time increasing focus on portfolio management including follow-on investment decisions in selected cases. We hope to be able to help as many companies as possible to close the next round. And as always, we would really appreciate any thoughts and feedback related to the program from all of you!

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Juha Lehtola
Johtaja, Venture Capital -sijoitukset