Impact - 12.6.2020
Tesi invests in innovative Finnish companies looking for international growth. The Venture Bridge program is meant for companies that have previously raised at least seed financing from professional venture capital investors and have had to postpone their next external financing round due to the COVID-19 situation. Tesi makes investments from the program together with private venture capital investors, on equal terms and with the same expectations for returns.
Tesi’s Venture Bridge investments are 0.25 -2 M€ in size. The investments are made as convertible loans, which will be converted to equity in the next qualified investment round. During the investment process lasting approximately 2 - 4 weeks, Tesi will evaluate the investment round and conduct a light business analysis of the company in question. Tesi’s share of the investment round is primarily equivalent to the private lead-investors share and at maximum 50 % of the total round. The lead investor must be identified when applying for Venture Bridge funding.
In deal selection, priority is given to investment rounds where a professional venture capital investor managing external funds (GP) agrees to manage the investment on Tesi’s behalf by entering into a standardized co-investment agreement. In the co-investment model, Tesi relies on the GP to conduct due diligence on the company. No fees are payable in the co-investment model.
In addition to these, Tesi pays attention to the fast, international scaling potential of the company in the future, expected impact on employment and positive value development before the crisis, e.g. in terms of sales. Typically, the companies have started planning for a significant international financing round prior to COVID-19.
How to apply (starting June 17, 2020)
Please take some time to read the investment criteria above. If your company fulfils the criteria, please fill in the application form that will be published on this site on June 17, 2020.
By asking thorough background questions, we try to make the investment process as quick as possible. For Tesi to evaluate the company’s suitability for the program, we will carefully examine the following:
We will be in contact within a week from receiving the application.
Why does Tesi only invest in companies that have raised earlier venture capital funding?
The Venture Bridge program is meant to provide bridge financing for companies who have previously raised a smaller financing round and now, due to COVID-19, need more time to raise more capital. The funding is not targeted at the earliest seed phase, where the estimated market need is smaller and Business Finland’s funding has a more significant role. The prerequisite for earlier funding also helps target Tesi’s resources to the most viable companies. Co-investors are expected to possess dedicated long-term resources and capabilities for portfolio management.
Who are eligible co-investors?
The Venture Bridge program is targeted at companies having raised capital already before from professional venture capital investors. Lead-investors are expected to possess dedicated long-term resources for portfolio management and a typical venture capital investment strategy. The follow-on funding capabilities of co-investors will be evaluated in the investment process.
Will Tesi exit after the loan period?
Our aim is to convert as many of the loans as possible into equity in the next qualified investment round. Tesi seeks exits at the same time as other owners. In early stage venture capital holding periods are typically 5 -12 years.
Why convertible loans?
The Venture Bridge program is meant to provide bridge financing for companies to get over the funding gap in the market. Convertible loans are well-suited for bridge financing since the company valuation will be determined when the loan is converted in the next financing round. Equity investments require negotiations regarding valuations and shareholder’s agreements, which would take a longer time.
Will Tesi publish the names of the companies in the program?
Tesi will publish the names of the companies and their respective investment amounts. As opposed to Tesi’s stabilisation program for more mature companies, publishing this information is not considered to harm the business of the portfolio company. Startups raise new financing continuously and new funding rounds are regarded as positive news.
Is Tesi prepared to make follow-on investments in these companies?
Tesi will make one investment per company in the Venture Bridge program. Tesi is prepared to make follow-on investments into some of the companies succeeding in raising the next funding round per its normal investment process. Due to the program being temporary and the nature of early stage venture capital, follow-on investments will be likely in only a fraction of the companies.
Is this an automatic matching program?
No, Tesi continues to be selective in its investments. In addition to the company in question, Tesi pays particular attention to the lead investor in this program.
Will the Venture Bridge -program become a part of Tesi’s permanent investment focus?
The Venture Bridge program is a temporary solution for the funding gap in the venture capital market resulting from the COVID-19 situation. The program is set to last for two years and Tesi will make investments from the program based on market need.
Tesi (Finnish Industry Investment Ltd) is a state-owned investment company that wants to raise Finland to the front ranks of renewing economic growth by investing in funds and directly in companies. We invest profitably and responsibly, hand-in-hand with co-investors, to create the world’s new success stories. Our investments under management total 1.3 billion euros. Ambition for ownership and success www.tesi.fi | www.dtg.tesi.fi | @TesiFII