Skype, Spotify, Supercell – they all have one thing in common: they were born, raised and thrived in the Nordics before becoming a global phenomena and changing their industries. And these are not the only examples of great startups emerging from that region. Top Tier Capital Partners, a San Francisco-based fund which invests in venture capital funds, recently conducted a study looking at the “unrealized and realized exits” in the Top Tier dataset according to geography in order “to determine if any of the regions was outperforming.” What the study found:
- China has strong realized exits, value/cost multiples and cost and value medians. These high returns are most directly due to very high average realized exit values.
- Rest of Asia without China has low realized exits.
- Europe has high realized exits and value/cost multiples however not as high as China.
- Rest of the world including Canada has low realized exits.
However, when Europe is broken down into three regions; the UK, the Nordic Region (including the Netherlands and Belgium) and the Germanic region (which includes the rest of Europe) new trends emerge.
Nordics: By the Numbers
- The Nordic Region greatly outperformed any other part of Europe. This region had strong realized exits and a high value/cost multiple. This is due to much higher average realized values and a high amount of multinational acquirers.
- Research points out the Nordic region is the fastest growing startup region in Europe and one of the fastest growing startup regions in the world. Sweden, Denmark, Norway and Finland account for 2% of the world’s GDP but 9% of global billion dollar exits.
- 2015 was the best year yet for the Nordic region as it saw three $1B exits and more than $13B in total exit value.
- Past 5 years have seen more than one billion dollar exit per year
- Sweden accounts for over 50% of the Nordic Region’s number of exits and exit value.
- The average realized exit value per company for the Nordic Region was $1.5B compared to $154M for the Germanic Region and $80M for the UK Region.
In a recent blog post, TopTier notes:
Despite recent economic uncertainty, China has a high average realized exit value per company at $555M compared to $81M for the rest of Asia, $342M for Europe, and $89M for the Rest of World (including Canada, excluding US).
Our analysis showed that the Nordic Region was greatly outperforming the rest of Europe and China, with a multiple of 4.78x compared to 2.39x for China, 1.89x for the UK Region, and 1.33x for the Germanic Region.
While the large exit and multiple of Finnish gaming giant Supercell (62x) did skew the data, removing it from the data set still produced a multiple for the Nordic region of 3.03x, 50% to 100% larger than that of other regions. The outperformance of the Nordic region is most notably due to fewer exits with much higher realized values and more multinational acquirers.
Some of the notable exits from the Nordic region include Belgian company Tele Atlas. Tele Atlas (acquired by TomTom for $2.76B), Supercell was acquired by Japanese company Softbank for $2.1B for a 51% stake and Skype was sold in 2005 eBay for $2.6 billion.
Finnish: Sauna of Startups
I personally believe Finland is a unique ecosystem and while it is still mourning over Nokia, it shouldn’t. There is a lot of creative and entrepreneurial energy in the country, brimming with smart ideas, and it is one of the reasons why we have made careful investments in the ecosystem. True VEenture’s current investments in the region include Iceye, Callstats, Everywear Games and Yousician and they are heading for big time.
From my vantage point, what I like about Finnish companies, they are global from the very start, because they have a very small domestic market and like Israel they need to play on a larger scale. Sweden is larger and as a result it has a larger domestic market so the focus on global efforts is not as immediate. Finland is becoming a hub for gaming which is really a growth industry. There are already over 250 gaming companies, led by SuperCell and Rovio. And it all started with Remedy.
I could go on, but I believe the mobile UI/UX expertise from Nokia heritage will be a growth sector. Take for example, Rightware, which is one of the great emerging stories and is developing software and user experience for Audi. Embedded systems are going to be another area where Finland can shine. GE has been bulking up its connected medical devices business in Finland. I keep going back, because every single visit leads to interactions with great founders.
If you have read my writing for the past decade or so, you’ll have noticed that I’ve consistently pointed out that the Internet has opened up entrepreneurship and opportunities to a wide gamut of creative and talented people. And sometimes it means going to distant places to find these people — whether they are in Finland, Portugal or in South Africa. I love being part of this social makeover and am always excited to meet talented people around the world.