Experienced venture capital and private equity investors Nexit Ventures and 3TS Capital Partners, both strongly rooted in Finland, have travelled much the same path for two decades. Both have seen the sector develop and expand internationally. Their investor profiles, expertise and understanding of the market are similar, while the areas that differ supplement each other. Hence, the idea of a partnership has been in the air for a while. The venture capital and private equity market investing in Finland grew and internationalised in October 2021 when Nexit and 3TS officially started their cooperation, now finding its form.
Just as growth companies seek a strategic advantage through various cooperation schemes and corporate reorganisations, so can venture capital and private equity firms adopt similar methods to raise their businesses to new levels. Nexit Ventures and 3TS Capital Partners, two investors with strong Finnish roots and with focus on internationalising engineering companies in Finland and Europe, decided to follow exactly this path. 3TS’s Pekka Mäki and Nexit Ventures’ Artturi Tarjanne now shed light on why they decided to initiate a partnership.
Collaboration gives business new wings
The venture capital and private equity market has changed drastically both in Finland and globally since Nexit and 3TS began operating at the start of the millennium. Not only has the number of players grown, the focuses for investments have also shifted and become more specialised over the years.
“Our decision to start a partnership was easier because our playbooks are very similar: we’ve both succeeded in the same fields and experienced the same types of difficulties. Also, the different ways of doing things put together gives us the best of both worlds,” says Artturi Tarjanne, explaining the arrangement between Nexit and 3TS.
It was through funds that the firms took the first practical step on their common path. Nexit Fund III invested in 3TS Fund IV, and was the largest investor in the first closing, alongside co-investors Tesi and the European Investment Fund (EIF). This gives fund investors the added advantage of choosing whether to invest in Nexit’s fund, which focuses more on Finland, or in 3TS’s fund with its more European focus.
Our decision to start a partnership was easier because our playbooks are very similar: we’ve both succeeded in the same fields and experienced the same types of difficulties. Also, the different ways of doing things put together gives us the best of both worlds.
Good investments in the shadows of unicorns
The title of a unicorn – a startup company valued at over USD 1 billion – is highly sought-after nowadays. Companies strive to reach that size, and investors are keen to invest in those that have the potential to do so. This can be viewed in a different light, as 3TS and Nexit do in identifying target companies.
“Whereas others, especially newer players, are almost exclusively looking for the next unicorn, we focus on the hundreds of potential companies below the surface that have grown to their potential size range under their own steam but are looking for help from investors to reach the next,” says Pekka Mäki in describing 3TS’s and Nexit’s converging investment strategies.
The managers both make direct investments from their latest funds independently, regardless of their similar tech-oriented investment strategies. However, the arrangement does not exclude joint investments. The first of such was in Finnish IoT company Tosibox, with Nexit as lead investor and 3TS Fund III participating as a co-investor.
Ambitious for growth and sights set on internationalisation
The small size of Finland’s market sets a limit to the growth of both Finnish investors and domestic companies. The ways to transition to the next level of growth are to expand internationally and to attract international capital to Finland.
“There has been much talk in Finland recently about the need for especially the VC sector to internationalise and fund sizes to grow, so our collaboration is an astute way to get broader shoulders in our market,” says Tarjanne. “It’s also very gratifying to be building a Finnish-origin VC investor that is larger and international, because compared to their neighbours and the rest of Europe, Finnish investors are, unfortunately, not on the same level,” adds Mäki.
Nexit and 3TS plan to deepen their cooperation in coming years. Exactly how to do so, is still under consideration.
“We’re both still actively fundraising, so meanwhile our collaboration can best be described as a kind of courtship. When the last, ongoing financing round has closed, and perhaps after a few more investments, we’ll be ready to take the next steps,” conclude Mäki and Tarjanne.
It’s also very gratifying to be building a Finnish-origin VC investor that is larger and international, because compared to their neighbours and the rest of Europe, Finnish investors are, unfortunately, not on the same level.
Who he is: Managing Partner, 3TS Capital Partners.
Education: Studied at Helsinki University of Technology, Technical University of Vienna, and IESE Business School in Barcelona.
Experience: Serial entrepreneur and angel investor in promotional, media and tech companies. 3TS Capital Partners since 2003. Numerous board positions and other positions of trust.
3TS Capital: Investments focusing on European technology. 3TS invests in exceptional high growth SMEs mainly in Central and Eastern Europe, but also in Finland. The fund manager has offices in Luxembourg, Austria, Poland, Romania and the USA, in addition to Helsinki. 3TS focuses mainly on technology, media and ITC sectors.
Who he is: Partner and co-founder, Nexit Ventures.
Education: Studied at Helsinki University of Technology.
Experience: Serial entrepreneur in the software sector and moving force in the international expansion of Finland’s software industry in the 1980s and 1990s. Finnish Venture Capital Association: board member 2003–2013, board chairman 2011–2013. Venture Capital Investor of the Year in 2013.
Nexit Ventures: The oldest and most experienced technology growth fund in Finland, focusing on high-growth techs promoting digital transformation. Operating in Helsinki, Finland, and California’s Silicon Valley, Nexit invests mainly in Northern European companies while also enjoying numerous successful exits in the USA. Rapidly growing and internationally expanding companies supported by Nexit have been acquired by Google, Hewlett-Packard and Nvidia. Many successful tech entrepreneurs and international influencers have invested in Nexit Ventures’ fund.
Tesi and international investors
- Tesi’s mandate dictates it is to develop the Finnish venture capital and private equity (VC & PE) market as a minority investor.
- For the market to develop, the knowhow and capital by international investors are needed so that the local fund sizes grow, and Finnish companies become more capable to grow.
- Hence, we invest not only in Finnish funds, but also in international funds that supplement Finland’s VC & PE market with their investment focus and expertise.
- Tesi is a local partner in Finland for international investors.
Tesi (Finnish Industry Investment Ltd) is a state-owned investment company that wants to raise Finland to the front ranks of transformative 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 2.1 billion euros. www.tesi.fi | @TesiFII