The investments of the Estonian national venture capital fund-of-funds have reached nearly 100 companies

The investments of the Estonian national venture capital fund-of-funds managed by SmartCap have reached nearly 100 companies through both fund and direct investments as of the end of 2020 with a total turnover of approximately 400 million euros.

Credit: Kristi Sits

Photo credit: Kristi Sits

The companies included in the investment portfolio of SmartCap employ some 1,750 people in Estonia. According to Sille Pettai, Member of the Management Board of SmartCap, the objective of the company is to enable the growth of ambitious and innovative Estonian companies by developing the Estonian capital market by offering venture capital investments. “We are an anchor investor with a long-term strategic plan; we invest in all economic cycles and focus on gaps in the market. SmartCap invests in private sector venture capital funds in order to help our local ambitious companies with an international expansion potential on international markets, increase exports and create new jobs that require high qualifications,” noted Pettai.

The investment portfolio of SmartCap currently comprises two early-stage venture capital funds operating in Estonia and one startup accelerator. The net asset value of the venture capital fund managed by SmartCap amounted to 69 million euros in the previous year. “The rapid spread of the coronavirus throughout the world affected the companies belonging to the portfolio of the SmartCap fund due to lockdowns and changes in consumer behaviour, and therefore, the value of the assets of the fund decreased compared to 2019. We also focused on assessing the economic impact of the coronavirus, developing the measures intended to alleviate it, and adjusting our activities, to be prepared to respond, if necessary, to the general deterioration of the market situation,” said Pettai. 

Despite the uncertain times, according to Pettai, the Estonian technology companies in general were resilient and adapted quickly to the crisis and emerged as the winners from 2020. According to Startup Estonia, startups with an Estonian background attracted record breaking amounts of capital with more than 400 million euros in investments, which is almost 200 million more than a year earlier. The year 2020 was also significant with the sale of seven companies, including the sale of the software company Pipedrive, the value of which exceeded one billion dollars.

In 2020, SmartCap drew up new call conditions in order to find a private fund manager for a deep tech fund that would invest in research and development intensive early-stage small and medium-sized enterprises. The objective of the fund being created is to alleviate the issue of limited capital in the early stages of the activities of high-tech companies. For this purpose, 10 million euros were allocated to the SmartCap fund from the state budget in 2019; furthermore, SmartCap is additionally committing 5 million euros to the fund being created, instead of previously planned accelerator, thereby increasing the state anchor investment to 15 million euros. The conditions of the call were made public in the end of 2020.

The primary ancillary activity of SmartCap is implementing the Startup Estonia programme for accelerators. In 2020, preparations were made for a new accelerator procurement in order to improve cooperation between universities, mentors, and research-based teams operating in the early development stages. SmartCap wishes to find up to two professional partners in 2021 by means of a procurement in order to develop a research-based enterprise ecosystem and organise a business development programme for companies.

SmartCap is small fund manager registered with the Financial Supervisory Authority, and since 2017, SmartCap has been operating as a subsidiary of Foundation KredEx. The 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. The secondary activity of SmartCap is the implementation of the Startup Estonia Programme in the research accelerator strand since 2021.