Swedish Tech Funding

Report 2016

2

The year in review

2016 ended on a high note, with a record number ofinvestment rounds and amount of capital raised. Thestrong increase in number of deals – twice the number of2015’s – primarily stemmed from a record-breakingamount of seed stage investments. This also explainsthe more than doubled increase in number of activeinvestors, as a very high number of new angel investorsdipped their toes for the first time in 2016.

This was also matched with a record year for Swedishtech IPOs. The companies going public ranged fromolder, venture-backed companies seeking an exit forinvestors to startups that had a hard time attractingventure capital or sought a more attractive valuation. Thepublic markets treated tech IPOs favorably for the mostpart of the year, but the positive sentiment came to a haltin Q4 with several stocks flatlining or decreasingcompared to the IPO price. While the data in this reportdoes not include investments in publicly tradedcompanies as that constitutes a different kind of fundingcompared to venture investments in private companies,the development is still highly noteworthy.

Apart from angel investors and the public markets, theclear trend for 2016 was the return of profitability as a

key value driver. Following the market correction in theUS, several Swedish companies accelerated the focuson finding paths to profitability. 2016 saw a number ofventure-backed companies shutting down or raisingdown-rounds, but the market for later stage funding didnot dry up completely as domestic and international VCspicked up the pace again in the last quarter of the year,following moderate activity in the first half of 2016.

Just like in 2015, the most popular sector for venturefunding was FinTech. More interesting to note howeverwas this year’s runner-ups. E-commerce climbed to asecond place and while Enterprise SaaS had anotherstrong year, MediaTech fell sharply while Digital Health

and Gaming instead gained significant

momentum.

OVERVIEW

400Funding rounds (2015: 175)

$1.6B(SEK 13.6B) raised (2015: $1.1B)

KEY FIGURES

575Active investors during 2016 (2015: 250)

Björn Bergström

Investment Manager

Industrifonden

3

2x increase in number of rounds –slower growth in invested capital

INVESTMENT ACTIVITY

Note: The outlier adjusted graph excludes Spotify’s funding rounds in Q2 2015 and Q1 2016 to provide a more comparable trend line than the total investment graph

$M $M$M Deal count

1,51,4

0,80,7 0,7 0,7

1,2

0,8

0

25

50

75

100

125

0

1

2

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Median deal size Deal count

0

200

400

600

800

1000

1200

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Total investment*

0

50

100

150

200

250

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016

Total investment, outlier adjusted*

4

INVESTMENT ACTIVITY

Increase in number of rounds remain driven by early stage – flatline in growth stage

811

2 1

19

15

6

2

26

10

4 3

32

20

2

41

29

41

62

27

4

44

39

8

64

43

8

1

0

10

20

30

40

50

60

70

≤$1M $1.1 - 5M $5.1 - 25M >$25M

2015 - Q1 2015 - Q2 2015 - Q3 2015 - Q4 2016 - Q1 2016 - Q2 2016 - Q3 2016 - Q4

Deal count

Deal size

5

INVESTOR ACTIVITY

129%Increase in active investors 2016 compared to 2015

23%Of the active investors participated in at least two

funding rounds during the year

105

146

310

264

0

50

100

150

200

250

300

350

Q1-Q2 2015 Q3-Q4 2015 Q1-Q2 2016 Q3-Q4 2016

Active investors

6

Angel investors and VCs remain most active backers of tech startups

Investor type by % of deals

INVESTOR ACTIVITY

56%

23%

11%

5%2% 2%

Angel

VC

Investment firm, other

Corporation

Accelerator

Corporate VC37%

47%51%

29%

60%

20%

56%

23%

0%

25%

50%

75%

100%

Angel investors VC

Share of deal count by investor type

Q1-Q2 2015 Q3-Q4 2015 Q1-Q2 2016 Q3-Q4 2016

7

FOREIGN INVESTMENT ACTIVITY

Foreign investors broke the downwards trend – picked up the pace in Q3-Q4

42%

25%

18%21%

0%

25%

50%

75%

100%

Q1-Q2 2015 Q3-Q4 2015 Q1-Q2 2016 Q3-Q4 2016

Funding rounds with foreign participation (%)

2927

32

47

Q1-Q2 2015 Q3-Q4 2015 Q1-Q2 2016 Q3-Q4 2016

Funding rounds with foreign participation (count)

8

FOREIGN INVESTMENT ACTIVITY

…but remain active mostly in growth rounds

14%

20%

79%

100%

0

50

100

150

200

250

0%

25%

50%

75%

100%

≤$1M $1.1 - 5M $5.1 - 25M >$25M

Foreign participation % Total deal count

Deal countDeals with foreign

participation (%)

Deal size

9

Decreased US and UK dominance – greater regional spread

FOREIGN INVESTMENT ACTIVITY

33%

25%

19%

10%

7%

6%

Foreign participation by country 2015

USA

UK

RoW

Germany

Finland

Denmark

US and UK investors together

accounted for close to 60% of

foreign activity in 2015

In 2016, US and UK investors’

share of foreign participation

dropped by a fifth to 47%

29%

18%

18%

10%

9%

7%

6%4%

Foreign participation by country 2016

USA

UK

Rest of World

Denmark

Germany

Norway

Finland

China

10

VERTICALS

Top 2 verticals by deal count

FinTech

12%

E-commerce

10%

FinTech remained hottest sector, while E-commerce, Digital Health and Gaming rapidly gained momentum

11

The Fundraising Journey – Seed Stage

FUNDRAISING TRENDS

Most active seed stage investors in 2016

Founded Raised ’FFF’-round* &

innovation loan

Beta launch & first hiresRaised seed round

Public launch &

additional hires

• Founded in 2014 by 2-3 founders

• Raised a small initial funding roundtopped up with a soft loan before makingits first hires, moving into its own officeand launching its first product

• Went on to raise a $500K seed round in2016 from a syndicate of angel investorsand one early-stage institutional investor

* ”Family, Friends and Fools”

2017

2014

A data-driven look at the average seed stage company’s path to 2016

12

The Fundraising Journey – Series A

FUNDRAISING TRENDS

Most active Series A investors in 2016

Founded Raised ’FFF’-round &

innovation loan

2012

Beta launch & first hires

Raised seed round

The average Series A stage company’s path to 2016

2017

Public launch &

additional hires

Moved to bigger offices

Achieved full product-

market fit

Raised Series A round Prepared for

international expansionRaised bridge round

from existing investors

to extend runway

13

The Fundraising Journey – Series B & Beyond

FUNDRAISING TRENDS

Most active Series B & Growth investors in 2016

Founded Raised ’FFF’-round &

innovation loan

2010

Beta launch & first hires

The average growth stage company’s path to 2016

Raised seed round

2017

Public launch &

additional hires

Moved to bigger officesPrepared for

international expansion

Launched in selected

European markets

Raised Series B round

Achieved full product-

market fitRaised Series A round

Prepared for US

expansionRaised bridge round

from existing investors

to extend runway

14

METHODOLOGY

What’s included• This report covers disclosed venture investments in

Swedish private tech companies

• Analysis primarily based on proprietary database with 600+

funding rounds

• Both first-time and follow-on investments are included

• Deals are tracked in SEK but reported here in USD. If

originally reported in other currencies, conversion is based

upon exchange rate per date of disclosure. Aggregate

figures are subject to change due to currency fluctuation

What’s not included• Investments in life science, med tech, bio tech, retail,

and consulting

• Secondary transactions, investments in subsidiaries and

M&A transactions

• Equity crowdfunding and investments in public

companies of any kind

• Grants, bonds, bank loans and any other types of

funding that is not intended to result in ownership

An end-note to keep our lawyers happy: The information contained in this report has not been independently verified as to its accuracy. No representation or warranty, express or implied, is given by Industrifonden or any of its

directors, partners, officers, affiliates, employees, advisers or agents as to the accuracy or completeness of the contents of this report or any other document or information supplied or any opinions or projections expressed

herein or therein, nor is any such party under any obligation to update the report or correct any inaccuracies or omissions in it which may exist or become apparent.

Industrifonden is a Nordic venture capital investor with $500M in assets,

focusing on early-stage tech and life science companies with international

potential. Industrifonden is an active partner to innovative companies poised

for growth.

#swedishtechreport

@industrifonden