Cautiously positive news from the deep tech sector: growth in funding volumes, encouraging outlook for the coming year

The financing of deep tech companies, which quickly became negative after the boom years, seems to have levelled off to some extent during the current year. This is the view of both the deep tech companies that responded to the survey and the investors interviewed as part of the survey. The figures also speak for themselves: Finnish deep tech companies have already raised €363 million in venture capital investments so far this year, over 40% more than in 2023.

Last year's report estimated this year's growth financing requirement at around half a billion euros. Now, somewhere in the middle of the last quarter of the year, it looks like this figure will be reached by the end of the year.

This positive development has been driven in particular by a few large funding rounds. Notable funding rounds have been raised this year by, for instance, space technology company ICEYE (€86 million), foodtech companies Onego Bio (€37 million) and Enifer (€36 million), and materials technology company Infinited Fiber (€40 million).

It takes time to grow deep tech companies and requires abundant capital. These companies develop entirely new technologies that are not commercialised overnight. Nevertheless, the results of long-term work are already visible. Companies such as ICEYE, Oura and Bluefors are rapidly becoming market leaders in their selected fields.

“Finland has world-class deep tech companies with the potential to accelerate not only technological development and the green transition, but also Finland's economic growth," comments Juha Lehtola, Tesi's Director, Venture Capital.

Early-stage funding is fairly well available for Finnish deep tech companies. The investors interviewed during the survey reported that investors were competing for the most interesting companies. Companies developing quantum and semiconductor technology are attracting most interest, while instability in global geopolitics has also turned investors’ attention to space, defence and dual-use technologies.

Declining number of deep tech companies and later-stage funding rounds pose challenges

The challenging economic climate has led to a decline in the number of deep tech companies. New entrants are fewer in number, while the bankruptcy rate has also increased.

"Although it’s typical for some startups to file for bankruptcy, at present the ratio between new entrants and companies closing down is a cause for concern," points out Samppa Sirviö, Investment Manager at Tesi.

Early-stage financing is fairly well available, but raising later-stage funding remains challenging and relies heavily on foreign investors. In Sirviö’s view, Finland’s financing sector should be more prepared to accelerate the growth of the most promising companies also after the initial phase. In practice, this would mean both larger Finnish funds and generally a wider investor base.

"We also need foreign investors. However, if there are no domestic later stage investors, Finland will sacrifice higher returns and knowhow will drain from the country. I’d like to see more Finnish deep tech companies achieving international-scale market leadership on the Helsinki Stock Exchange," adds Sirviö.

"If compared to, for instance, the rest of Europe or the USA, the financing needs of the best deep tech companies for commercial scaling are rarely decided by either the public or private sector alone, but by their sensibly dimensioned cooperation," Sirviö continues.

Although there are challenges, according to Lehtola, the outlook for next year is cautiously positive: "There are currently very interesting companies in the deal flow of investors. This would indicate that next year the growth financing of deep tech companies will exceed this year’s, perhaps even by a good margin," he concludes.

The survey covers 270 Finnish deep tech companies hand-picked by Tesi's experts. The criteria for selecting companies are: 1. Science and research-based 2. High technological barrier 3. Company operates at the technological frontier. The study was carried out by combining Tesi's data model with a survey of companies and interviews with investors.

See more study results here.