Estonian National Venture Capital Fund Increases Its Value, Improves Investment Capabilities

SmartCap, a venture capital fund owned by the Estonian state, had a net value of €84 million, increasing by 14 per cent compared to the previous year. The state-owned investment fund showed stabile growth, and attracted a €10 million investment, which will be used to invest in the high tech industry this year.

While at the end of 2018, the total value of the state venture capital fund was €70.4 million, the value had increased to €84 million by the end of 2019. According to Sille Pettai, the Member of the Management Board of SmartCap, the growth came from a €10 million contribution and an increase in the value of active investments.

“The long-term and systematic development of the state-owned investment portfolio has yielded notable results – the fund that was launched during the times of the Estonian Development Fund has grown threefold since its founding,“ Pettai said.

The organic development of the investment ecosystem and the consistent effort from the state is mirrored in the statistical data on the startup industry from 2019, where, albeit the stabilization of the yearly investments at around €300 million, the share of local investors in growing. “Venture capital funds financed through SmartCap and KredEx play an important part, as they have taken the total value of Estonian investments in the Estonian startups to a record level, growing from €14 million in 2018 to €27 million in 2019,“ Pettai added.

The SmartCap investment portfolio currently includes two early-stage venture capital funds operating in Estonia, which, together with private venture capital investors, invest in early startups that have a large potential to grow internationally, thereby giving them an important boost towards development and International growth.

€10 million invested by the state last spring is targeted towards improving the access to capital for small and mid-sized deep tech companies. To map the investment possibilities and develop the concept, SmartCap involved the Estonian startup scene, academic institutions, and venture capital investors. “We have finished the preparations, and an open competition will be arranged for investing the €10 million that has been allocated from the state budget. We are currently working on the terms of the competition, but due to the COVID-19 crisis the call for participation has been slightly postponed, and it will be announced latest by the end of 2020,“ Pettai added. The investment will be made according to the strategy of the early stage fund of funds.

According to Pettai, Estonian startups have a global reach, which means that the Estonian state should pay even closer attention to keeping in Estonia those local companies that have a large International growth potential. “The role of SmartCap is the ensure better seed and growth funding through private venture capital funds throughout all economic cycles. Today’s global economic crisis shows the significance of this focus and the overall importance of state’s involvement,“ Pettai noted. The investment strategy is implemented by experienced SmartCap venture capital fund managers, who also have the capabilities to offer early-stage startups versatile and professional support.

In 2020, in addition to managing ongoing investments, SmartCap plans to continue with working on expanding the possibilities of investing into new venture capital funds, as well as with the development of science-based businesses for redirecting Startup Estonia program funds.

SmartCap is small fund manager registered with the Financial Supervisory Authority, and since 2017, SmartCap is operating as a subsidiary of Foundation KredEx. The venture capital fund assets managed by SmartCap are invested in venture capital funds which, together with private investors, place capital into research and technology-intensive early stage small and medium-sized companies with large international growth potential, mainly located in Estonia.