features 2.5 million euros in capital and 13 private investors
The fund will focus on companies that aim for expansion and international growth by supporting their first-stage funding rounds – the fund will provide significant leverage to the service concept of Business Joensuu
The official name of the new fund is Start Up -rahasto Joensuu Ky. The fund is managed by Joensuun Startup Kehitys Oy, a subsidiary of Business Joensuu. The capital of the fund is 2.5 million euros. Of this amount, 1.75 million euros have been provided by the City of Joensuu, and the remaining 750,000 euros by private investors. The fund is a concrete tool that will help start-up companies expand their operations, provide employment opportunities and focus on international growth. The City of Joensuu committed itself to establishment of the fund already in 2017. The fund was approved by the Financial Supervisory Authority this year in June. The final agreements with the private investors were signed on 19 September.
– The goal is to provide support to the start-ups in the Joensuu region and promote their growth and internationalisation. The fund will allow private investors to invest in the participating companies, and it also aims to accelerate the realisation of second-stage funding rounds, explains Business Coach Kari Pulkkinen from Business Joensuu.
The Start Up Fund plans to provide financing to 15–30 companies. While the fund is not subject to any field-specific restrictions, its main focus is on companies that specialise in digitalisation, the forest bioeconomy, and materials and technology.
The decision-making process
The fund’s investment decisions are made by the board of Joensuun Startup Kehitys Oy. The chairman of the board is CEO Harri Palviainen. The other two members of the board are Matti Turtiainen and Heikki Immonen. Turtiainen serves as Vice Dean at the University of Eastern Finland. He has written books on the regulation of investment funds and services, participated in the preparation of legislation concerning funds, and he has also served, for example, in the Finnish Mutual Fund Association, the Investment Complaints Board, and the European Securities and Markets Authority ESMA. Heikki Immonen is a Principal Lecturer of Entrepreneurship at Karelia University of Applied Sciences and has worked for over 10 years in the development of start-up companies.
The fund includes an investment council that is comprised of a group of five investors. The investment council is supported by the Business Accelerator of Business Joensuu, and its purpose is to investigate potential investment targets and advise the fund’s board in its investment decisions. The investment council will also supervise the board’s compliance with the investment policy of the fund.
– During the first years of the fund, we will focus on finding good investment targets, assembling financial packages, and, in particular, developing our investment targets. We expect to make our first exits at 4–7 years post-investment, says Kari Pulkkinen.
The distribution of the fund’s profits will follow an asymmetric model in which the City of Joensuu’s expected returns will be lower than that of private investors. The City’s objectives for the fund emphasise the creation of new growth-oriented companies with international aspirations in the region.
According to Harri Palviainen, CEO of Business Joensuu, there has always been active collaboration between the business angel networks and other funding channels in the Joensuu region. However, the region needed an equity financing instrument that was geared specifically towards start-ups. Palviainen sees the Start Up Fund as a key part of the services provided by Business Joensuu.
– The fund’s investment decisions emphasise growth and internationality. The pursuit of these objectives brings with it an increased amount of risk from the perspectives of both start-up entrepreneurs and investors. However, this risk can be mitigated with the development of expertise and the operating methods used, as well as with collaborative efforts. These efforts will allow us to combine Business Joensuu’s expertise and funding with the skills and expertise of the fund’s investors, notes Palviainen.
The importance of generating more knowledge capital is also emphasised by Satu Koskinen, who is one of the investors involved in the Joensuu Start Up Fund.
– Business Joensuu, which will be responsible for analysing every start-up case at the initial stage, is in a unique position to support this type of activity. I believe that this ecosystem has a lot to offer when it comes to creating new opportunities for business.
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