Survey of investment returns from the
Finnish PE & VC market
May 2023

Introductiono Annually, Tesi publishes a comprehensive survey that examines investment returns in the Finnish venture capital andprivate equity market (VC & PE). This survey is designed to provide general partners, investors, and other industry
stakeholders with the most recent information on the sector's performance. First launched in 2018, the survey has
been published consistently since 2021.

o The sample for this year's survey consists of 44 funds raised in Finland between 2009 - 2020 divided equally
between buyout and venture capital funds. The sample has been divided into two groups based on their initial yearof inception (vintage year): Mature funds (19 funds formed between 2009-2025) and new funds (25 funds formed
between 2016-2020)o This year's survey diverges from previous editions in two key ways: First, we have excluded the 2002-2008 vintage
funds from our analysis, as their portfolios are nearly fully realized. Secondly, we have expanded the scope toencompass vintages from 2016 to 2020 in order to demonstrate the performance of more recent funds. Lastly, thisyear the survey includes more detailed analysis of PME’s of the whole fund sample.
o A more detailed explanation of the survey's methodology can be found on slides 22-24 at the conclusion of thisdocument.
o Should you have any inquiries regarding this research survey, please do not hesitate to contact Tesi's Investment
Associate, Jens Färm, at jens.farm@tesi.fi or +358 40 566 0067.

Summary: Main changes compared to previous survey

VENTURE CAPITALFUNDSBUYOUT FUNDS

1.
2.

MAIN FINDINGS IN PREVIOUS SURVEY

MAIN FINDINGS IN THIS SURVEY

o Returns from the old funds continued to be excellent and showed
improvement to previous survey

o The returns from established funds have remained great, albeit
with a minor correction.

o As stated in the 2020 survey, exits from VC funds only occur
during the final years of the funds – Old funds have also excelledin their realized gains compared to last year

o Additionally, new funds are demonstrating impressive returns,
achieving an IRR of nearly 20 percent.

IRR1 old funds

IRR1 new funds

IRR1 old funds

IRR1 new funds(inception 2009-2015)(inception 2016-2020)(inception 2009-2015)(inception 2016-2020)

25%

N/A2

22%

19%

o No marked change. The returns of old funds remained steadylevelo In alignment with previous surveys, the established buyout funds
continue to exhibit a stable return of 17 percent.

o Old funds repaid called-up capital to the investors last yearo Meanwhile, new funds display an IRR of 11 percent, with aportion of the portfolio companies still valued at, or in close
proximity to, their acquisition cost.

IRR1 old funds

IRR1 new funds

IRR1 old funds

IRR1 new funds(inception 2009-2015)(inception 2016-2020)(inception 2009-2015)(inception 2016-2020)

17%

N/A2

17%

11%

Market weighted
Not in the sample of previous survey

3.5.2023

3

Summary: Returns from the Finnish PE & VC market, 31 Dec 2022
IRR

TVPI
2.9x

RVPI

RVPI

DPI

DPI

1.7x

MARKET WEIGHTED1
1.3x

1.5x

1.8x
0.4x

1.3x

1.4x

1.4x

1.0x

2009-2015

0.3x
2016-2020

0.0x
2009-20152016-2020

VC

18.7%

16.5%
11.2%

2009-20152016-20202009-2015

VC

Buyout2016-2020

Buyout

23.8%

3.2x
1.6x

EQUALLY WEIGHTED2
1.5x

2009-2015

1.9x
0.4x

1.3x

1.4x

1.4x

1.0x

2016-2020

VC

15.7%

1.4x

0.0x

1.
2.

21.8%

15.9%
12.5%

0.3x
2009-20152016-2020

BuyoutEach fund is weighted according to its size when calculating returns → Market returns as a whole
Each fund is equally weighted

2009-20152016-2020

VC

2009-20152016-2020

Buyout3.5.2023

4

Finnish VC funds

Performance of mature VC funds (vintages 2009 – 2015)
PERFORMANCE 2017–20221
4.0x

COMMENTARY
24.7%

RVPI
3.5x

25%

IRR

2.9x

o To date, mature Finnish venture capital funds havegenerated an impressive annual return of 22 percent.
The robust performance in the past two years has
served as a buffer for the current year, maintaining a
TVPI of 2.9x.

1.7x

o Despite the uncertain market conditions, older funds
have nearly doubled their distributed capital, marking
the best year on an absolute basis during the 20172022 period. The DPI now stands at 1.3x, with over halfof the value still pending realization.

21.8%

DPI
20.0%

20%

3.1x

3.0x

2.5x

15%

2.2x

2.0x

2.4x

11.3%
1.5x

1.2x

8.0%

8.8%
1.3x

o The global market turmoil has impacted the venture
market as well, with later-stage companies, in particular,
experiencing a noticeable decline in valuations.

10%

1.4x
1.9x

1.0x
1.1x

1.0x

1.2x

5%
1.3x

0.5x

0.0x

0.7x

0.2x

0.2x

0.2x

0.3x

2017

2018

2019

2020

1.
2.

2021

2022

0%

Market weighted
IRR does not represent returns for the year in question, but instead the group annualized returns from inception to the last day of the corresponding year

3.5.2023

6

Mature Finnish VC funds’ performance compared to European peer group
TVPI% of funds’ total capital

100%

DPI

IRR

100%

100%
34%

75%

53%

53%

75%

42%

1st quartile
2nd quartile
3rd quartile

75%

53%

53%

13%

13%

34%

34%

2021

2022

4th quartile

18%
50%
13%

4%
10%

25%

25%

As of 2021

34%

2022

50%

24%
25%

34%
0%

50%

19%
24%

0%

2021

25%

15%
2022

0%

o In this comparison, each fund within a group is evaluated against its European counterparts based on its return figures and vintage year, with the results compiled at thegroup level. If the Finnish market's structure perfectly aligned with that of the European reference group, each of the four colors would represent a 25% share.
o In 2022, over half of the Finnish VC funds' capital is in the first TVPI quartile when compared to the European peer group, a proportion that remains unchanged from2021. Last year, 10 percent of the capital dropped to the third quartile, with Finnish funds continuing to be over-represented in the upper quartiles. Examining the IRR,
there is no change from the previous year, as two-thirds of the funds' capital remains in the first and second quartiles, along with a slight over-representation in thebottom quartile.
o Despite the challenging market conditions in 2022, Finnish VC funds outperformed their European peers in terms of capital distribution to investors. In the previous year,
approximately 50 percent of the capital was in the upper quartiles, which increased to over 65 percent in 2022.
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Distribution of mature VC funds’ returns and comparison with the listed market
DISTRIBUTION OF RETURNS MULTIPLES (TVPI)
Upper quartile limit
4.5x

Lower quartile limit

COMPARISON TO LISTED MARKET (PME)1
Median

PME

4.4x

1.84x

1.76x

4.0x
3.4x

3.5x
3.0x

2.7x

2.5x

2.1x

2.0x
1.5x
1.0x

1.2x

1.1x

2021

2022

0.5x
0.0x

2021

2022

o From the previous year, the return dispersion has decreased, as the difference
between the upper and lower quartiles fell from 3.2x to 2.3x. The upper quartile
limit is now 3.4x, while the lower limit is just above 1.0x. Despite this change, thereturns from established funds remain strong.

o In PME calculations, the cash flows of the funds are indexed against the publicstock market. This approach offers a benchmark that illustrates the performance
relative to investing in the listed stock market at the same time. In this case, theOMX Helsinki General Index has been utilized as the benchmark index.

o Although the return dispersion has narrowed since last year, the distribution
remains relatively high, which is typical in venture capital as individual fundinvestees can significantly influence the funds' returns.

o During 2022, the PME for established VC funds increased from 1.76 to 1.84.
This is an impressive figure; however, the modest rise is likely attributable to theswift correction in the listed market compared to the more gradual adjustment in
the private market.

o In 2022, the median TVPI for older VC funds stands at 2.1x.

1. The PME returns presented are market weighted. Calculation method Kaplan-Schoar PME (KS-PME)

3.5.2023

8Performance of new VC funds (vintages 2016 – 2020)
RETURN METRICS AND PME
2.0x
1.5x

COMMENTARY

18.7%

20%

IRR
RVPI

1.5x

1.30x

15%

DPI

1.00x

o When compared to the returns of the listed
market, younger venture capital funds have beenable to generate 1.3 times the return of the listed
market.

10%

1.0x
1.4x

5%

0.5x
0.0x

0.0x

0%

2022

Listed market

VC PMEPERFORMANCE COMPARED TO EUROPEAN PEER GROUP% of funds’ total capital

100%
75%
50%

25%
0%

32%

42%

o The returns for new venture capital funds currently
stand at 1.5 times the called capital, with 19
percent annual returns. Marginal realizations haveoccurred, but the DPI is still forthcoming, which is
expected for the vintages in the sample.

50%

24%

9%

9%

17%

17%

TVPI

IRR

COMMENTARYo New Finnish VC funds have demonstrated strong
performance in comparison to the European peergroup. Approximately 75 percent of these funds
are in the first and second quartiles, with only 18
percent in the bottom quartile.
o A DPI comparison has not been conducted in thiscase, as it is not relevant for funds at such an
early stage in their lifecycle.

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9

Venture capital: Key findingso The Finnish venture capital funds are performing well. Mature Finnish VC funds have generated arobust annual return, maintaining a 2.9x TVPI despite market uncertainty. These funds distributed
investors’ funds back in 2022 as the DPI nearly doubled from the previous year to a total of 1.3x.
Still, over half of the value still pending realization.

o When compared to their European peers, over half of mature Finnish VC funds are in the firstquartile regarding overall returns, but also outperformed in capital distribution, with over 65% of
total capital in the upper quartiles in 2022. The PME for established VC funds increased slightly in
2022, a modest rise attributable to the swift correction in the listed market.
o New Finnish VC funds have generated great returns on called capital, also out-performing the listed
market. New Finnish VC funds also demonstrated strong performance compared to their European
peers, with 75% of total capital in the first and second quartiles.
o Overall, the findings show that Finnish VC funds have shown resilience and strong performancedespite challenging market conditions.

Finnish buyout funds

Performance of mature buyout funds (vintages 2009 – 2015)
PERFORMANCE 2017–20221
2.5x

COMMENTS
20%

IRR
RVPI
16.8%

DPI
2.0x

1.5x

16.0%

14.4%

1.5x

1.5x

14.6%

1.5x

14.7%

1.8x

1.6x

16.5%
1.8x

15%

0.4x

o The mature buyout funds continue to track steadyreturns as in previous years, with a 17 percent IRR. The
TVPI has remained roughly at the same level, standingat 1.8x, with the majority of the portfolio realized.
o Similar to the mature venture capital funds, the buyout
funds distributed a record amount in absolute terms lastyear, with DPI rising from 1.1x to 1.4x.
o There are still some realizations to be completed within
the portfolios of mature buyout funds. Total unrealized
value is currently valued at 0.4x.

0.7x
0.6x

10%

0.7x
1.0x

0.8x
1.1x
1.4x

0.5x
0.6x

0.8x

1.0x

1.1x

5%

0.4x
0.0x

2017

2018
1.
2.

2019

2020

2021

2022

0%

Market weighted
IRR does not represent returns for the year in question, but instead the group annualized returns from inception to the last day of the corresponding year

3.5.2023

12

Mature Finnish buyout funds’ performance compared to European peer group
TVPI% of funds’ total capital

100%

DPI

IRR

100%

100%
30%

75%

45%

45%

1st quartile

18%
34%

75%

75%

36%

15%
50%
28%
25%

12%
9%
19%

0%

18%

As of 2021

50%

3rd quartile
4th quartile

45%
29%

50%

28%

25%

27%

28%
25%
27%

25%
2022

2nd quartile

0%

9%
2021

2022

0%

16%

12%

21%

25%

2021

2022

o In this comparison, each fund within a group is evaluated against its European counterparts based on its return figures and vintage year, with the results compiled at thegroup level. If the Finnish market's structure perfectly aligned with that of the European reference group, each of the four colors would represent a 25% share.
o The mature Finnish buyout funds exhibit strong performance compared to their European peer group. In terms of TVPI, Finnish buyout funds are over-represented in theupper quartiles, with 45 percent of the capital in the first quartile and almost 75 percent performing above the median. When examining the IRR of these funds, nearly
two-thirds of the capital is in the first and second quartiles, though more concentrated in the second quartile.
o Mature Finnish buyout funds also excel in the DPI benchmark. Over 60 percent of the capital is above the median, and only 9 percent is in the fourth quartile. A
significant shift has occurred from the lower quartiles since the previous year, with over half of the capital represented in the upper quartiles in 2022.

3.5.2023

13

Distribution of mature buyout funds’ returns and comparison with the listed market
DISTRIBUTION OF RETURNS MULTIPLES (TVPI)
Upper quartile limit

Lower quartile limit

COMPARISON TO LISTED MARKET (PME)1
Median

PME

3.0x

2.5x

1.24x
1.17x

2.4x

2.3x

2.0x

1.5x

1.7x

1.6x
1.5x

1.5x

2021

2022

1.0x

0.5x
0.0x

o There were no major changes in the TVPI at the fund level from the previous
year, and the multiples remained great. The upper quartile limit and medianexperienced a slight increase from last year, reaching 2.4x and 1.7x,
respectively.

2021

2022

o In PME calculations, the cash flows of the funds are indexed against the publicstock market. This approach offers a benchmark that illustrates the performance
relative to investing in the listed stock market at the same time. In this case, theOMX Helsinki General Index has been utilized as the benchmark index.
o The PME for mature buyout funds rose from 1.17 to 1.24 during 2022. As
previously mentioned, the modest increase is likely attributable to the rapid
correction in the listed market compared to the more gradual adjustment
observed in the private market.

1. The PME returns presented are market weighted. Calculation method Kaplan-Schoar PME (KS-PME)

3.5.2023

14

Performance of new buyout funds (vintages 2016 – 2020)
RETURN METRICS AND PME
11.2%

1.8x
1.6x

IRR

1.4x
1.2x
1.0x

DPI

RVPI

COMMENTARY
12%
10%

1.3x

8%

0.8x
0.6x
0.4x

1.0x

0.2x
0.0x

0.3x

1.13x
1.00x

6%

o There have already been some distributions in the
new buyout funds, with DPI standing at 0.3 times
the called capital.

4%
2%
0%

2022

Listed market

PERFORMANCE COMPARED TO EUROPEAN PEER GROUP
100%

13%

75%

27%

50%

17%

25%
0%

9%
48%

Buyout PME% of funds’ total capital

13%

27%
17%

14%
44%
TVPI

o The new buyout funds are generating 11 percent
annual returns, with a TVPI of 1.3x. Some funds inthe sample are still in the investment period, and asignificant portion of the portfolio companies arevalued close to their acquisition price, with value
appreciation yet to occur.

29%
DPI

o When compared to the returns of the listed
market, new buyout funds have been able togenerate 1.13 times their return.
COMMENTARYo Currently, the upper quartiles are underrepresented in the new Finnish buyout funds,
while the bottom quartile is heavily overrepresentedo In terms of DPI, new Finnish buyout funds havereturned capital somewhat faster than their
European counterparts.

44%IRR
3.5.2023

15

Buyout: Key findingso The Finnish buyout market is performing strongly and has delivered steady returns for investors in
the past years. Mature buyout funds have maintained a steady IRR and TVPI. The majority of thefunds’ returns have been returned to investors. Also, these funds distributed a record amount in
absolute terms last year, raising the DPI by 0.3x

o Compared to their European peer group, mature Finnish buyout funds show strong performance,with almost half of the capital in the first quartile and nearly two thirds in the first and second
quartiles for TVPI and IRR, respectively. Mature Finnish buyout funds have also been able to
distribute the capital faster to the investors than European peers. Also, the PME for mature buyout
funds increased slightly in 2022, attributed to the rapid correction in the listed market.
o Younger buyout funds have had a good start, and these funds have already distributed capital backto investors. The overall returns are not yet as good as the mature funds but some of these newfunds are still in the investment period and the value of their portfolio companies is expected toappreciate in the future. By now, these funds have performed better than the listed market.
o Overall, the Finnish buyout funds have demonstrated consistent performance and strong returns,
even outperforming their European counterparts in some metrics.

PME analysis

PME-analysis – whole fund population raised between 2009 – 2020
AVERAGE PME’S
BuyoutVC

COMMENTARY
Market return
2.57x

2.6x
2.4x

o For buyout funds, the average PME for above-median funds exceeds 1x,
indicating that half of the Finnish buyout funds have generated higher returns
compared to the listed market. Notably, the average PME for third-quartile funds
stands at 0.99x, nearly on par with the returns of the listed market.

2.2x
2.0x
1.8x
1.60x

1.6x

1.4x

1.32x
1.19x

1.2x
1.0x
0.8x

o The figure on the left illustrates the average PMEs for each TVPI quartile,
encompassing both buyout and venture capital funds raised in Finland over the
past 12 years. The sample comprises a total of 44 funds, evenly distributed
between buyout and venture capital, with 22 funds in each category.

0.99x

0.88x

o The average PME for top-quartile venture capital funds is an impressive 2.57x.
Intriguingly, from the third quartile onwards, Finnish venture capital funds haveoutperformed the listed market, with an average PME of 1.06x for third-quartile
funds.
o In conclusion, Finnish private equity funds in the upper quartiles haveconsistently delivered PMEs above one for investors, including third-quartile
venture capital funds. Only fourth-quartile funds have yielded returns below thelisted market over the past 12 years.

1.06x

0.70x

0.6x
0.4x
0.2x
0.0x

4th quartile

3rd quartile

2nd quartile

1st quartile

TVPI quartile
3.5.2023

18

Investor base

Investor base of Finnish funds: Funds raised between 2009-2020
INVESTORS
Venture

5%

3%

3%
2%

PRIVATE & PUBLICINTERNATIONAL & DOMESTIC

VentureVenture

27%

31%

9%

1.7 B€

12%

14%
9%

1.7 B€

1.7 B€
69%

15%

77%

11%
13%

Buyout &Growth7%

Buyout &Growth4%
1%17%

Buyout &Growth

12%

5%
20%

20%

3.6 B€

3.6 B€

3.6 B€

36%

5%

75%

6%

88%

5%
Finnish private investor

International investor

Finnish pension fundFinnish financial institution

KRR

BFVC

Private

EIF

Tesi

GP

PublicOther international

EIF

Other public institution (i.e. Sitra)
Source: Finnish Trade Register

Domestic

3.5.2023

20

Methodology

Methodology
o The return data is calculated based on cash flows at the fund level, with individual portfolio company investment returns not included in thepresentation.

DATA TYPEo All figures displayed represent net return figures for fund investors (LP; limited partner), meaning that management fees, performance fees(carried interest), and other expenses payable to fund investors have been deducted from the returns on individual portfolio company
investments.

o The return survey is based on data obtained from Tesi's fund investments. Additionally, information has been accessible in some instances forfunds in which Tesi has not invested.
o The survey includes funds managed by Finnish management companies that operate with national or international investment strategies.
DATA SOURCESo Only funds primarily investing in equity have been incorporated into the survey. Debt and mezzanine funds, for example, are not part of thesample.
o The survey's sample comprises 44 funds, with an average size of around EUR 100 million (ranging from less than MEUR 10 to about MEUR
350).

o The survey sample is categorized into venture capital funds and growth/buyout funds.
PRESENTATIONOF RESULTS

o Additionally, the funds are grouped based on their inception year, with mature funds being those established between 2009 and 2015, and new
funds from 2016 to 2020.
o It is important to note that the returns of individual funds cannot be discerned from the aggregated returns presented in the survey.

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22

Methodology: Q&A
WHY ARE RETURNS PRESENTED IN GROUPS THAT INCLUDE FUNDS ESTABLISHED IN SEVERAL DIFFERENT YEARS?
o The Finnish market is small, so funds are not established regularly. Most years, only individual funds are established so it would not make sense to examine returns
based on individual years. If individual years were examined, the returns of individual funds would be revealed but no conclusions on the performance of the market asa whole could be drawn from the returns of individual players. By grouping funds, we try to provide the most realistic and balanced picture possible, despite the small
size of the market.

WHY ARE NO NEWER FUNDS INCLUDED?
o VC & PE funds typically have a five-year investment period during which the funds invest in new companies. After the initial investments, portfolio companies will be
developed, follow-on investments will be made (especially in venture capital), and funds will eventually make their exit. The target period from the establishment of thefund to the exit from the last portfolio company is 10–12 years, but it can often be longer. Concrete development of funds’ performance based on the development of
portfolio companies can typically be seen in about five years, when the funds' first investments have been active for some time, and the funds no longer invest in newcompanies (which are typically valued at acquisition cost for the first 1–2 years). Consequently, we have decided to limit the sample to funds set up in 2020.

WHY ARE UNREALISED GAINS SHOWN?
o Due to the operational logic described above, it takes a long time to obtain figures for the final realised returns of the funds, so showing only realised returns does notgive a true picture of the current market. Obtaining an up-to-date market snapshot thus necessitates monitoring partially unrealised returns. The funds report inaccordance with international IPEV Valuation Guidelines1 that specify the fair value criteria for valuing investments. Therefore, there is relatively good comparability ofreported valuations.

1.

http://www.privateequityvaluation.com/Valuation-Guidelines & https://www.investeurope.eu/industry-standards/professional-standards/investor-reporting/

3.5.2023

23

Concepts used in this presentationo Venture capital and private equity funds buy shares in unlisted companies and actively participate in the development of their portfolio
companies. The fund is managed by a general partner (GP) and the fund's investors are usually limited partners (LP).

o The fund is operated by an administrator / a management company. One management company can have several different funds, but usually
only one of the funds makes new investments at a time, while older funds are in the value development / exit phase.
FUNDS’OPERATINGMODEL

THE CONCEPTOF RETUNRSo Fund investors pay a management fee to the administrator / management company for investing in their funds and, if the return exceeds acertain pre-defined minimum level, also a share of the fund's return as a performance fee.
o Typically, the fund has a term that lasts for 10-12 years. The first five years of the term form the investment term during which the fund makes
initial investments, i.e., investments in new portfolio companies. Investors do not transfer their funds to the fund all at once, but rather capitalcalls are made to transfer them gradually as investments are made. At the end of the investment term, follow-on investments can still be made,in companies in which the fund has already invested. Venture capital funds in particular often make follow-on investments. As the portfolio
companies develop, they (or shares in them) are sold and the proceeds are returned to investors. The aim is to sell the last investments in 10–12
years, but if that is not possible, the term will be extended.
TVPI

DPI+RVPI = Total Value to Paid-In = (Distributions + Net Asset Value) / Paid-In capital

DPI

Distribution to Paid-In = Capital distributed to investors / Paid-In capital

RVPI

Residual Value to Paid-In = Current market value of unrealized investments / Paid-In capital = TVPI - DPIIRR

The annual return of the fund from its inception until the time of review; internal rate of return. The calculation addresses all cash flows(capital calls and distributions) from the fund’s inception to the last date of the review period, and the fair value of the fund unit on thelast date

PME

Returns compared to the public market; corresponds TVPI, but deducts returns from the public stock market during the same time
period = (Index-adjusted Distributions + Current market value of unrealized investments) / Index-adjusted Paid-In capital 1

Quartile

In fund comparisons, the observation set is usually divided into quartiles. The 1st quartile consists of the best 25%, the 2nd quartile
consists of the second best 25%, the 3rd quartile the next best 25% and the 4th quartile consists of the lowest 25%.

1. Kaplan-Schoar PME (KS-PME)

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