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In 2023, Finnish startups experienced a significant reduction in funding, down from the previous year's record highs, reflecting a broader trend of economic slowdown affecting startup investments across Europe and the United States. According to the Finnish Venture Capital Association (FVCA), total growth funding for Finnish startups was approximately €871 million, a sharp decline from the €1.7 billion raised in 2022.

This downturn in startup funding is primarily due to a reduction in the size and number of large investment rounds. For example, Hostaway, a leading provider of vacation rental customer relationship management software, secured the largest funding round of 2023 with €162 million. This contrasts starkly with the €440 million and €500 million rounds secured by Wolt in 2021 and Relex in 2022, respectively. The decrease was particularly pronounced in foreign investments, which plummeted by 58%, although domestic investments also fell by 17%.

Despite these challenges, 2023 was a robust year for Finnish venture capital funds, which raised a total of €507 million in new capital, nearing record levels. Notable contributions included Finland's largest venture capital fund by Lifeline Ventures, which amounted to €150 million. New entrants like Greencode Ventures, Kvanted, and Failup Ventures also marked their debut, broadening the domestic financial landscape.

Domestic venture capital remains a vital support for Finnish startups, especially in light of dwindling foreign capital. Jussi Sainiemi, Deputy Managing Partner at Voima Ventures and Chair of FVCA’s Venture Capital Committee, emphasized the resilience of Finnish startups amidst tightening markets, highlighting their efforts to enhance capital efficiency.

The fundraising success of domestic funds is critical as it allows Finnish startups to continue receiving essential financial backing. Jonne Kuittinen, Deputy Chief Executive of FVCA, pointed out that while the scale of domestic funds is growing, reliance on foreign investors remains significant for larger, later-stage financing rounds.

Interestingly, investment companies of wealthy Finnish families, known as family offices, have become more prominent in the venture capital scene, contributing €167 million to the funds raised in 2023. Their increased activity reflects a growing recognition of the potential returns from venture capital investments.

As the Finnish startup ecosystem adapts to these new economic realities, the focus is also on attracting more foreign fund investors and addressing regulatory challenges that limit investment possibilities, aiming to further strengthen the foundation for domestic venture funding.

HT

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