The Business Turku Funding info session in October focused on Finnish options for commercial business funding. Beyond a strong drive for growth, funders expect target companies to articulate their current performance and future vision convincingly.
The City of Turku has invested in several funds in recent years. What kind of target companies are these investors looking for?
Startup-focused Monttu Ventures and Redstone Blue emphasized ambitious goals and market potential.
– I am most interested in companies originating from this region, either research-based spinoffs or other startups aiming directly for a larger funding round, said Anton Suomalainen from Monttu Ventures.
– In contrast, we have an industry focus. The startup must be connected to the sea, water, or maritime sector. Most importantly, there needs to be a big vision, large market potential, and a good team capable of driving that vision forward, summarized Tuomo Veivo from Redstone Blue.
SP Growth Partners offers debt financing. Their key criteria include profitability and the drive to grow. Annual revenue must be at least one million euros with ten percent growth per year. Although SP mainly grants short-term loans, customer relationships can be long-term.
– With one company, we provided four separate one-year loans, which helped their growth from 10 million to 20 million, said Manu Mäkelä from SP Growth Partners.
The trio praised the hands-on drive in Turku’s business scene and the investments in the startup community. Mäkelä also hoped to see greater growth ambition in even more SMEs.
– Growth comes from companies, not from politicians’ speeches. When businesses have the desire to grow, it drives regional prosperity, improves employment, and creates all kinds of positive outcomes Mäkelä noted.
Stricter documentation due to regulation
The Funding Info also addressed the public debate on whether securing business funding from banks has become more difficult. Sami Peura, Executive Vice President at the regional bank OP Varsinais-Suomi, pointed to increased regulation. As a result, banks require ever more information from companies applying for a loan.
– So, it’s probably not a question of whether you get funding or not, but more about how much effort you have to put in before you get it, he said.
Peura introduced a 300-million-euro growth fund by OP Pohjola and the pension insurance company Ilmarinen, aimed at supporting the growth of Finnish companies. The minimum size for funded projects is three million euros, with no industry restrictions.
– Company growth is the core issue here, Peura said.
Two-thirds of the fund consists of debt financing from the bank, and one-third of equity investment from Ilmarinen. By the time of the Funding Info event, no projects had been funded yet.
Solutions for financial management
The Funding Info also highlighted how entrepreneurs and funders do not always speak the same language.
GOS Group has developed a solution for this. GOS acts as an interpreter of sorts between companies and funders, packaging financial data into a format that funders look for.
– We’re there to tell the story, for instance to a bank, of how the company is doing, why it needs funding, and where it’s headed. Everything we address serves both the business and the funder, said Marko Nieminen from GOS Group.
Pekka Ylihurula introduced the financial solutions for growth companies provided by the fintech company Hovi Partners. The company’s flagship product is Credit Manager, which combines accounts receivable financing, payment monitoring, debt collection, and risk management.
– In short, fewer credit losses, better cash flow, and more time for the core business, allowing the entrepreneur to focus on what they do best, Ylihurula summarized.
Growth sparring from Buyout investors
Korona Invest, which specializes in SMEs, represented buyout investors who fund established companies.
Pasi Lehtinen summarized the familiar criteria of the investment world into the rule of the five Cs. Korona Invest evaluates potential targets based on commercial growth, cash flow, capability of the team, commercial profitability, and capital multiple, meaning the ratio at which invested capital is returned at exit.
– Our holding period is usually around five years. We don’t expect to turn any business into the world’s largest in that timeframe, but we have scaled several into Finland’s largest, said Lehtinen.
He noted that Korona Invest often finds its target companies through its own networks. He hopes entrepreneurs would be bolder in reaching out to buyout investors. Doing so also comes with free sparring on their growth plans.
Text and pictures: Heidi Pelander
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This article is part of the EU co-funded InnoTurku project, which supports companies in growth, internationalisation and RDI collaboration.
