SmartCap’s milestones 2022: launch of the Green Fund and yet another turnover record for the portfolio companies of the Venture Capital Fund
Last year, the most significant milestones for SmartCap, a fund management company owned by the Republic of Estonia, were the starting of investment activities of the Green Fund which has by now announced its first investments, and the combined turnover of all the start-ups in the investment portfolio of the Venture Capital Fund reaching 1.32 billion euros.
“Launching the 100 million euro SmartCap Green Fund financed by the European Union NextGenerationEU Recovery and Resilience Facility certainly was the most remarkable event for us in 2022 – by the end of summer, we announced a call to find two private fund managers for two funds focused on green technologies, to which SmartCap will make a cornerstone investment of 20 million euros each”, said Sille Pettai, management board member and fund manager at SmartCap. “In addition, last autumn the SmartCap Green Fund initiated a direct investment programme in order to increase the supply of venture capital for innovative and research-intensive green technology startups”.
According to Sille Pettai, by the end of the first six months of 2023, the SmartCap Green Fund reached its first investment agreements from the direct investment programme and is in advanced stages of selecting the fund managers for the two green technology funds.
Venture capital Fund investments bring 70 million in labour taxes
Another important part of SmartCap’s operation is promoting the ecosystem of Estonian start-up sector and developing local capital market through investments in venture capital funds made from SmartCap Venture Capital Fund. As at the end of 2022, the investment portfolio of the Venture Capital Fund included three Estonian-focused early-stage venture capital funds.
“As at the end of the year, the Venture Capital Fund had reached, through venture capital funds and direct investments, a total of 117 start-ups with combined turnover reaching 1.32 billion euros”, Sille Pettai noted. “The number of jobs created in these start-ups was remarkable 900 , reaching 3200 employees by the end of the year and the labour taxes paid on these employees’ salaries reached 70 million euros”.
According to a member of SmartCap’s management board Sille Pettai, one of the most important milestones for the SmartCap Venture Capital Fund was making an investment in deep tech venture capital fund Superangel Two, in which SmartCap invested 15 million euros.
Superangel Two fund will be investing in companies whose product or service as well as the business model are primarily based on research and development and the commercialization of intellectual property. “The financing of companies operating in high-tech still leaves room for improvement. However, it is precisely in emerging and disruptive technologies developed by research-intensive start-ups where future success stories and solutions for major global challenges await, so it is vital to improve the financing opportunities of these companies”, Sille Pettai added.
As on 31 December 2022, the volume of assets of SmartCap Venture Capital Fund reached 92 million euros.
Preparations for joining NATO Innovation Fund
Last June, 22 NATO allied countries agreed on launching the 1 billion euro NATO Innovation Fund for the joint development of dual-use (civilian and military) deep technologies. At the beginning of this year, the Estonian government decided to invest 30 million euros in NATO Innovation Fund through SmartCap Venture Capital Fund. The launch of NATO Innovation Fund was scheduled for NATO Summit in Vilnius, with Finland joining as the 23rd founding country.
“The purpose of NATO Innovation Fund is to increase the supply of financing for start-ups developing dual-use deep technologies in Europe. With the participation of Estonia as one of its investors, it is highly likely that the initial idea or vision of a future game-changing technology or product might come from Estonia as it also opens the fundraising opportunity for Estonian companies”, Sille Pettai characterised the potential of NATO Innovation Fund from the perspective of Estonian start-up sector.
In addition to its primary focus areas, SmartCap’s main secondary line of operation is the implementation of the accelerator activities within Startup Estonia programme. In 2022, the company signed an agreement with the consortium led by the University of Tartu to establish a science accelerator in the field of health technologies, and 14 projects were selected last year to receive business counselling and prototyping services.
SmartCap is a small fund management company, a subsidiary of Estonian Business and Innovation Agency (after the merger of Foundation KredEx and Enterprise Estonia in January 2022), registered with the Estonian Financial Supervision Authority and managing the SmartCap Venture Capital Fund and SmartCap Green Fund. The SmartCap Green Fund is financed by the European Union NextGenerationEU Recovery and Resilience Facility funds.
SmartCap provides cornerstone investments for private fund managers to foster the development of the venture capital market in Estonia and promote the global growth of ambitious and innovative Estonian companies.
