Scaleup Norway: Now or Never.
Despite being one of the most mature European scaleup ecosystem, the Norwegian tech-scene is still quite small and seems not to fulfill its potential yet. However, preliminary data suggests 2018 as being a positive year. This is the main evidence of the last SEP Report “Tech Scaleup Norway” just issued by Mind the Bridge with the support on Innovation Norway.
“Norway has a huge potential to be exploited. We don’t lack neither of creativity nor companies. The results we produced in terms of scaleups are good, but they could be better. More capital is needed to close the gap with the other top ecosystems” – commented Pål T. Næss Director of Entrepreneurs and Startups, Innovation Norway.
The Report outlines that the 38% of the scaleups have been established before 2010, the 44% between 2010 and 2014 and the remaining 18% after the 2015. Though the performance of the Norwegian ecosystem in 2017 has been less than exciting, the local startup scene surely has propelled a number of high-potential companies, as suggests the peculiar growth in terms of new scaleups recorded in 2018. As a matter of fact, as of September 2018, the Report identified 30 new scaleups to be added to the count, this is 3 times the total number of scaleups newly established in 2017 (10), definitely an encouraging bounce back since a less-than-enthusiastic previous year (even if in the 2016 they were 34). The total funding raised by Norwegian scaleups in the same period of time – Q3 2018 – is equal to about $300M, twice the capital raised in 2017, recording a significant growth in the scaleup economy.
“Norway has fallen short in the recent decade, and our message stressed last year in our annual Report that Norway could soon become a player in the scaleup scene at par with their neighboring countries is something it hasn’t reached yet. Still, more investments are needed”, added Alberto Onetti, Chairman Mind the Bridge and SEP Coordinator.
New scaleups and new capital raised in Q1-Q3 2018
In the first 9 months of 2018 Norway ranks 8th either in terms scaleups establishment and new capital raised, closing the gap with Denmark and Finland. However, the gap with the most comparable economies, particularly Switzerland, Sweden and Spain, is still very wide. The top 3 countries namely the UK (450 new scaleups raising $8.7B, 15x more scaleups and 29x more capital), France (180, $2.4B) and Germany (125, $3.1B) are still too far to be reached.
Download the Tech Scaleup Europe 2018 Report for further data on country comparison
As concerning the last funding event, 2016 has been registered as an exceptional year: 39% of scaleups secured their most recent round of financing that year, while only 19% had their last funding event in 2017. But data about the first nine months of 2018 suggests that year has been a growing year, too, similar to 2016.
“The most exciting part of the news is that Norway is showing a better performance in 2018 than many countries that are ranked ahead in the ‘Scaleup Europe Country Index’. Specifically it is now running at the same speed of Denmark and Finland” added Alberto Onetti.
In this matrix, that gives a perspective of where a country stands in relationship to the European average, Norway is located in the top left quadrant, with other countries that have a higher than average scaleup density ratio but lower and than average GDP invested ratio. All the other Nordic countries, however, are better positioned than Norway.
Funding channels: VC takes (almost) all
In Norway and likewise in all European countries, scaleups rely on VC funds for their growth needs. In particular, 72.5% ($890M) of all capital raised by Norwegian scaleups comes from the venture capital market, while 27% ($330M) comes from the IPO channel. Despite the satisfactory amount of capital raised through IPO, this channel seems to have lost momentum, actually, 4 out of 5 IPOs counted occurred in 2014 and the other one happened in 2010. ICO – Initial Coin Offering – represents the 0.5%. Last year, the Norwegian Hubii Network did an ICO for $6.6M, is the first (and the only, up to now) scaleup that got ICO.
Geography of funding: 64% is domestic
As concerned to the investors’ nationality, the 64% of rounds were led by Norway-based investors, that poured into scaleups more than $420M (47% of total VC capital) with an average round value of $4M. US-based investors account for only 15% of total rounds, although they invested almost $300M (33%), with an average round value of $13M. Other 7% of the funding rounds were led by UK-based investors that financed Norwegian scaleups with about (excluding Norwegians), which poured into $50M (6%) and another 7% by other Nordics scaleups slightly less than $100M (11%).
Dual companies double traditional in funding
Norway registers 19 dual companies, able to raise $376M altogether, the 31% of the total capital raised by Norwegian scaleups. 13 of them preferred US (10 to the Silicon Valley, 2 to New York and 1 to Pennsylvania). 5 moved to London and 1 to Berlin. The reason? Seeking new funding opportunities: Norwegian scaleups following the domestic path raised $10.6M; the duals almost double it with $19.8M.
Quite 50% of funding to the Big ones (5%)
The Norwegian scaleup ecosystem is mainly made up of many small scaleups: the 76% raised between $1 and $10M and secured just the 21% of total capital made available; the 19% raised between $10 and $50M and secured the 36% of the total capital; the 5% raised more than $50M securing about $530M (43%).
Main hubs: Oslo rules
Oslo being the major city for startups establishment with about the 70% of scaleups (67) located there, ranking 12th in the Scaleup Europe City Hub Index. However, according to the “StartupCity Future Growth” indicator – aiming at visualizing the divergence between the existing economy and new innovation economy – also Trondheim presents positive value (1.4), indicating the possibility of increasing its role in the Norwegian scaleups economy over time. For cities like Bergen, Trondheim and Stavanger, it is key to develop startup strategies to regain centrality.
Industries: no specializations, by now
The Report shows that there is not a prevalent industrial specialization in Norway. The top three verticals that attract more scaleups are enterprise software (with 12% of total scaleup), cleantech (11%) and fintech (9%).
In terms of capital raised, numbers show IoT leading with $250M (21% to total capital secured) but this value is highly affected by the presence of Thin Film, that alone raised over $226M. Hardware and Medtech industries follow.
M&A: Norway a good acquirer
Norway seems to be better an acquirer than a seller of startups: it ranks 13th among the European countries per number of startups sold, with 136 exits occurred since 1999, while it ranks 9th re: the acquisition of startups performed by domestic companies, with 160 deals concluded.
Oslo confirms its centrality also in terms of M&A activity (with 61 exits and 111 acquisitions), ranking 15th among the Top European hubs.
Only 27% of startup M&As are performed by domestic companies. US companies account for the 27% of all the deals.