Elo participates in building the future of Finland through fund investments into startups
/ Blog
What do startups present at Slush have in common with a pension insurance company? When looking at Elo, it means 80 million euros in investments into this pool of small to mid-sized companies
Seven years ago, Elo added an underlying investment strategy focusing on domestic early-stage funds; namely venture capital, small buyout and growth funds, to its’ private equity investments. The number of investments made with this strategy has increased steadily from year to year and currently Elo is a limited partner in 30 domestic early-stage funds. Elo has invested nearly 80 million euros with this strategy and continues to invest several millions each year.
These domestic early-stage funds have invested into over 400 portfolio companies, out of which nearly 250 are headquartered in Finland. Overall, the early-stage funds have invested hundreds of millions of euros into portfolio companies, most of which operate in the technology industry.
Impact of private equity investments – what has been achieved?
An Impact Study1 by PwC and Finnish Venture Capital Association (FVCA) notes that the revenue of domestic private equity-backed companies and startups is over 20 billion euros. This is equal to over 5 percent of the yearly revenue of all domestic companies, and it is in the same ballpark as, for example, the revenue of Nokia or Neste in the year 2021.
The private equity-backed companies employ around 76,000 people in Finland. This is twice the amount of personnel of the largest employer in Finland, the City of Helsinki. The impact startup companies have on the society is immense when looking at the employment numbers, the amount of taxes paid by these companies and most importantly, the innovations and solutions introduced to the market.
Elo, as one of the largest institutional investors in Finland, wants to be a part of supporting the growth of new businesses and innovations in Finland and also in fulfill our corporate social responsibility. Research shows that private equity-backed companies owned by funds grow faster than peers when measured by revenue or number of personnel.
Carbon neutrality through collaboration
Elo is committed to achieving a carbon neutral investment portfolio as per the Paris Agreement. We encourage companies to develop sustainable solutions and reduce their emissions. Elo mainly invests into funds that are focused on industries where the climate risk is limited or small, for example, technology and health care sectors. We advocate fund managers to consider sustainability factors in their investment activities, as well as, to report the portfolio companies’ carbon footprint. In order to reach our objective, we have to collaborate with other investors and continue active discussions with the fund managers.
A majority of the fund managers in Elo’s private equity portfolio have signed the UN Responsible Investment Principles (PRI) and adhere to them in their investment process.
We consider that by investing into domestic early-stage funds and the underlying startup companies, Elo is a part of solving the challenges in today’s world and in building the future of Finland. The domestic landscape for businesses has expanded with the changes in the market and finance. By investing in domestic early-stage funds, we are supporting the competitiveness of Finnish startups in the global market and elevating the image of Finland abroad.
Elo’s Private equity program for domestic early-stage funds:
- strategy added in 2015
- approximately 80 million euros of investments made into 30 domestic funds
- the funds have invested hundreds of millions of euros into over 400 domestic and foreign portfolio companies
- Underlying portfolio companies mainly operate in the technology industry
