Finnish early-stage VC Lifeline Ventures is today announcing the closing of its fifth fund, at €150m — its biggest fund to date.
While many other VCs in the Nordics are going beyond their national borders, Lifeline continues to invest primarily in Finnish startups.
Lifeline was founded in 2009 by the entrepreneurs-turned-investors Timo Ahopelto and Petteri Koponen. Since then, the generalist VC has added one more investment partner — Juha Lindfors — and is investing in approximately 10 new startups a year.
According to data from Dealroom, Lifeline Ventures is the top-ranked early-stage VC in the Nordics. It counts microsatellite startup Iceye among its portfolio, has made a name for itself by being an early investor in six unicorns including Wolt, Aiven and Oura and has had several exits, like Smartly.io and Supercell.
So far it's invested in 120 startups, and has typically been a startup’s first institutional investor in angel or seed rounds. It invests between €500k-2m, and over time it can invest up to €15m in a company.
“Typically, we put in 80% of the first round, and we are often the first and last Finnish [institutional] investor,” says Ahopelto.
Lifeline is similar to other Nordic VCs, in that it's largely backed by pension funds, and in the case of Lifeline, Finnish ones in particular. For the latest fund, its LPs are largely the same as earlier funds, including family offices and entrepreneurs, with the addition of another couple of pension funds.
"Part of our secret sauce has been to make LP relations as smooth as possible, which means keeping them as few as possible," Ahopelto says. "With the early-stage investments that we do, we need to cut down on all things unnecessary and therefore it has been important to work with LPs that know us."
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The Nordics has the highest amount of VC invested per capita. But while the top-ranked countries, Sweden and Denmark, saw investments drop by at least a third in 2022, Finland and Norway had the same amount invested in both years — about €2bn in each country.
One reason that investments in Finnish startups didn’t drop is that the ecosystem only started to grow 10 years ago, says Lifeline, adding that growth has continued despite the downturn.
“We see that the number of startups founded has been pretty stable the last three to four years, but the quality of them has increased a lot,” Ahopelto says.
He puts that down to three things: the grassroots movement and Slush have created interest among top-performing students to work at startups, the network effect has led to more startup operators founding startups of their own and the interest of international VCs has increased over time.
Attracting international capital
For an early-stage VC like Lifeline, the presence of international VCs has been particularly important, says Koponen.
“First it was an emerging interest from the Swedish ones like Creandum, then it was the UK VCs and for the last five years, the US-based VCs have increasingly co-invested with us.”
Lifeline takes on more of a consultancy role as startups grow, to make the work for later-stage VCs and the founders as smooth as possible. It also helps founders develop the soft skills necessary to run a successful business.
“At later stages, our role changes to helping the founders with soft skills — anything from personal things like problems at home, if they are super tired, issues with the management team. We have a bit of a different approach than most VCs,” says Ahopelto.
And while the drop in startup investments took a toll on much of Europe in 2022, Lifeline’s partners actually believe the effect will hit Finland harder this year.
"So far this year, it has been a more difficult situation from Series A rounds to B and C," Ahopelto says. "It is not that they aren’t able to raise capital, but many startups prefer to cut costs and slow down on growth instead of raising money at the adjusted valuations."