In the first half of 2023, Finnish startups are navigating a shifting funding landscape, marked by a discernible decrease in growth funding compared to previous peak years. The reduction in investment round sizes and a decline in foreign investments are influencing factors, but amid these changes, the domestic venture capital (VC) scene is flourishing, offering a positive outlook for early-stage startups.
Recent statistics from the Finnish Venture Capital Association show that Finnish startups collectively secured €549 million in growth funding in the first half of 2023, with VC investments amounting to €217 million.
This adjustment in funding dynamics suggests a recalibration within the startup ecosystem. In recent years, the Finnish startup scene experienced remarkable growth, with funding consistently on the rise. In 2022 alone, Finnish startups attracted €1.8 billion, with VC investments exceeding €1 billion.
The global slowdown in startup funding observed in 2022 was anticipated in Finland due to changing world circumstances. On a broader scale, this adjustment reflects a healthy correction in a previously overheated market.
Despite the total funding amount showing a decline, the number of investments in Finnish startups remains consistent with previous years. The reduction in funding is primarily attributed to the decreased activity of foreign investors, the absence of their leading large investment rounds, and a general decrease in the sizes of funding rounds.
While notable startup investments occurred in 2022, including record-breaking rounds, significant rounds are notably absent this year. The continued significance of Slush, an international startup event, in attracting foreign investors to Finland remains crucial, perhaps more so than ever this year.
On a positive note, Finnish VC funds have achieved a record level of fundraising, amassing €265 million in the first half of 2023, marking the best fundraising period in history. The success of domestic fund fundraising is a lifeline for Finland's startup ecosystem, particularly during challenging times when foreign investors are less active.
Despite the total investment amount showing a decrease, Finnish investors continue to make seed-stage investments at historically high levels, ensuring that early-stage startups still have access to funding. An empowered domestic VC investor pool ensures funding availability for the best companies, even in uncertain times.
While funding rounds may be more moderate, portfolio companies are continuously funded, and new opportunities are constantly sought. The second half of the year has not yet seen a surge in large rounds, creating an air of anticipation. The active involvement of domestic VC investors in earlier-stage investments lays the foundation for an increasing number of Finnish companies ready for larger follow-on funding rounds when the time is right.