Varma ups its investments in growth companies – four new investments in promising Finnish businesses

In its role as an investor, Varma has recently participated in funding rounds supporting the scaling and international growth of four Finnish growth companies: space technology company ReOrbit, AI cloud service company DataCrunch, battery technology provider IONCOR, and quantum computer company IQM.

“Private equity investments in unlisted growth companies are a key element of the modern capital market. Investing in growth companies also offers security, which is essential for a pension company’s investment operations. Additionally, for us, private equity investments are the most natural way to finance Finnish growth,” says Varma’s Deputy CEO Markus Aho.

Investments in growth companies are closely screened

Finland has currently many interesting growth companies that stack up well against international investment opportunities. From a diversification standpoint, a further benefit is that the return on growth companies does not necessarily reflect the performance of equity or real estate markets. This mitigates the investment portfolio’s total risk.

“We invest in growth companies that we see as having attractive return potential in relation to their risk profile and the potential for global business expansion. Each investment undergoes a strict screening process in accordance with our investment principles,” says Varma’s Head of Private Equity and Debt Tommi Walther.

“Return-seeking investments in growth companies are naturally at the higher end of the risk spectrum in our broad private equity portfolio. At the same time, however, they act as an element of diversification, which can improve the return-risk ratio of the portfolio. We gain diversification benefits and the chance to participate in the creation of innovations,” Walther says.

Quantum technology and satellite software for the private equity portfolio

All of Varma’s recent growth investments are united by a shared vision of evolving into major international companies in their respective fields. The companies may also hold the potential to become key strategic players for Europe’s competitiveness as a whole.

Of these four companies, the largest overall funding has been raised by IQM, which provides both on-premises full-stack quantum computers and a cloud service to high-performance computing centers, research labs, universities and enterprises. The newly announced funding will enable not only international growth, but also further investments in chip fabrication in Finland, as well as support for the company’s strong R&D efforts. Varma was an investor in the company already prior to the latest funding round.

The space technology company ReOrbit is an example of the new type of business emerging around space and defence technology, which plays an important role in maintaining societal stability. The satellites and connected systems for national security manufactured by ReOrbit can be controlled in a sovereign manner, securing critical communications also in a geopolitically changing environment.

Transport electrification and cloud services powered by renewable energy

DataCrunch offers cloud services for AI and has high-growth potential based on the growing need for computational capacity, i.e., computers’ and data centers’ ability to process massive amounts of data and run AI models. DataCrunch addresses the EU’s shortage in computational capacity, reduces the dependence on non-European providers, and utilizes only renewable energy sources, which also supports Varma’s sustainability goals.

The battery system supplier IONCOR recently split off from the automotive industry service provider Valmet Automotive. The company has attractive growth opportunities especially in the electrification of heavy-duty transport and off-highway vehicles.

Closer co-operation between Finnish growth companies and investors

Varma is a minority investor in its growth company investments, with a long investment horizon and a strong follow-up funding ability. Finnish financing is needed to create opportunities for early stage growth companies in particular.

“I’m happy to see the closer co-operation taking place between Finnish growth companies, Finnish growth funds and other investors. We can achieve results through cohesive and open collaboration,” Markus Aho says.

Foreign investors can bring with them contacts and international business expertise. To foreign investors, having a stable, local pension insurance company as an investor is often a sign of a high quality, reliable company.

Investing in growth companies aligns with the pension reform

The pension reform that is currently under preparation in Finland will increase pension insurance companies’ opportunities to invest in a high return seeking manner. Investing in growth companies thus aligns with the goals of the pension reform. Varma’s ability to bear risk in a more return-seeking investment environment is excellent thanks to the company’s strong solvency.

Around 20 per cent of Varma’s investments are invested in Finland. The proportion of unlisted growth investments in Varma’s total investment portfolio has been growing.

Additional information: 

Tommi Walther, Head of Private Equity and Debt, tel. +358 40 5019 975 or tommi.walther(at)varma.fi 

Marjut Tervola, Communications Manager, tel. +358 45 673 0120 or marjut.tervola(at)varma.fi