Saving Angels Accelerate the Rate of Growth
Many small and medium-sized companies feel that financiers have tightened their purse strings. However, business angels and capital investment companies continue to fund Finnish companies at a record pace.
“Attracting growth capital is challenging all over the world,” says risk financing expert William Cardwell from Courage Ventures Oy. “Only one tenth of companies find funding for proper growth,” he adds.
About seven per cent of Finnish small and medium-sized companies are intensely growth-oriented, reveals the barometer for small and medium-sized companies for the spring of 2015, organised by the Finnish Ministry of Employment and the Economy, Finnvera and the Federation of Finnish Enterprises. This translates as slightly less than 20,000 companies.
The desire to grow exists particularly in the industrial sector and knowledge-intensive services.
Despite the desire, growth may be slowed down by the fact that companies believe the availability of funding to have diminished. According to the barometer that considered more than 4,400 operators, almost every fifth project was unrealised or postponed due to funding difficulties.
However, Cardwell doesn’t want to sound too pessimistic. On the contrary, he encourages companies to boldly seek funding.
“There are investors in the market looking for good companies to invest in. You just have to find them,” Cardwell says.
The companies with the greatest growth have grown at an amazing rate. The winner of the consultancy company Deloitte’s list of the 50 fastest growing technology companies is ePassi Payments Oy, a developer of payment methods for employee benefits, whose turnover has increased by 8,431 per cent in just five years.
Public funding helps to get started
Cardwell is surprised by the barometer data, according to which companies – including the most growth-oriented ones – primarily seek funding from banks and public institutions. Only five per cent of small and medium-sized companies last year turned to private venture capital organisations. What’s more, their future plans follow along the same lines.
“The situation is worrying,” Cardwell admits.
He considers public funding a great idea, but in the modern, competitive world it just isn’t enough to succeed.
“Companies need private funding, and the majority of it comes from abroad,” he says.
According to a recent report by the Finnish Business Angels Network FIBAN and the Finnish Venture Capital Association FVCA, private operators invested in a record number of potential growth companies last year, a total sum of MEUR 206.
“Funding from Tekes or Finnvera provides a great financial base, but on top of that you can seek larger sums. A good rule of thumb is to get about twenty per cent of your funding in Finland and the rest from large international investors,” Cardwell explains.