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Happy new year!
And same procedure as last year, it's time for the annual special edition of this newsletter: A review of what's happened during the past twelve months (noteworthy stories from the past few weeks will be included in the next regular edition). Through a handful of graphs; I'll try to shed some light on how the Norwegian funding landscape has evolved over the past years (with an extra emphasis on the last 12 months).
Generally, 2021 has been another record year both in terms of the number of companies funded and how much money they've raised accumulated. Delving into this, there are several developments that are interesting to highlight. But before I do that, some details about this analysis:
- This analysis only looks at companies with a Norwegian HQ (newsletter sometimes also includes Norwegian founders abroad, they are excluded here).
- I look at "tech companies", which I broadly define as "a company using software and/or electronics to build a scaleable product or service".
- The analysis only looks at minority investments in privately held companies, but includes IPO financings.
- Startups and investors are labeled with different tags and locations using my own judgment and google-skills.
- All data has been gathered by me from different news sites and blogs, primarily Shifter, DN, and Finansavisen. Historical data (pre-June '18) has been collected from Neil Murray’s old funding analyses and newsletters. This is a big and obvious bias in this analysis; different data collectors for different periods. Also, the fact that startups continue to receive more media attention lately also skews the data set.
- Obviously, my data set does not include every startup investment in the past year - only what I have managed to find. Compared to other sources I've seen, it should be quite comprehensive though (eg; Atomico's annual report on Europe had about 50% of the total funding amount compared to my data set).
- Use this information at your own risk. The sample size is small, so beware of faulty generalizations. As the saying goes; "all models are wrong, but some are useful". That is applicable here.
I've split this brief review into two parts; first I'll look at how much money has been invested into Norwegian tech companies in 2021, then I'll look at what kind of companies received it. Here we go :)
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Part 1: How much money has been invested?
Let's get right to it and start with the headline, which I already gave away in the introduction: More money has been invested in Norwegian tech companies in 2021 than ever before - and by a wide margin:
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We saw a significant increase in number of private rounds, up almost 40% from last year to a record high 301 funding rounds. The accumulated funding amount increased even more, up 260% to a record high 17.5BNOK.
As you can see in the grey parts of the 2021-columns above; the IPO-mania from 2020 did not continue with the same speed in 2021 (14 in '20 vs 6 in '21), but Autostore almost raised as much in their IPO (2.7BNOK) as all IPOs of 2020 (3.7BNOK).
Apart from Autostore, the 10 largest financing rounds of 2021 were:
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The record-high numbers of 2021 were not only caused by the mega-rounds at the top of the list above. Compared to the previous two years, we've seen an increase in the number of rounds across just about every stage, as the chart below shows (number of rounds sorted by size).
It's only rounds of 0-5MNOK that were more frequent in 2020. Looking at this one could reach the conclusion that fewer companies were started in 2021, but I rather believe this reduction is caused not by early rounds getting larger, meaning they rather fall into the 5-20MNOK bracket instead.
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The next question then is what kind of investors were the most active. I've looked at both where the investors are based geographically, and what type of investors were most active.
Let's start with geography, by adding investor geography to the previous chart. The three added lines below show (in percentages) how many rounds had participation from at least one investor not located in Norway:
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It's evident that international investor participation has been fairly consistent relative to total investment activity the past few years. As more companies raise money, more international investors enter the scene as well.
Furthermore, international investors' presence increases with company maturity, also consistent with previous years. This development underlines one of my beliefs, which is that the best way to get more great Norwegian tech companies is to provide more world-class local capital in the earliest stages: capital that can connect companies to larger pools of later-stage capital, and capital which ensures founders do what's necessary to be compatible with such investors. Once companies enter the growth stage the need for local investors declines, as more investors abroad become relevant.
The columns on the next chart show the number of rounds at least one investor from different geographies participated in, while the lines show in percentages how many of all rounds they participated in. One of the topics covered in the newsletter this previous year has been the increased presence of US investors in Europe, and as the chart shows their presence has steadily increased over the past few years (although their relative presence is fairly stable).
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Another way to segment those investing into Norwegian tech startups is by investor type. The next chart show how many rounds different kinds of investor types participated in:
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There are a few developments worth highlighting from the chart above. First and foremost, more professional investors are entering the space. VC firms have significantly increased their activity level the past few years, and family offices are following suit. I take this as a positive sign, as it suggests Norwegian early-stage is becoming more accepted as both somewhere to work and invest.
Most other investor types increase their activity more incrementally, except for angels. I don't think angels have reduced their investment activity, rather the "activity-dip" is caused by the fact that other investor types normally get the headlines (and the data is built on media announcements).
I'd also note the purple line all the way at the bottom of the chart: "hedge funds". This is in line with another topic covered in the newsletter this past year; hedge funds entering the private markets and competing with venture funds. Hedge funds were part of 6 investment rounds in 2021, up from 2 in 2020. You can both downplay these numbers ("it's only 6"), and you can exaggerate them ("300% increase from last year"). The truth is most likely somewhere in between, and no matter what, one to watch going forward.
Moving on to the 10 most active investors last year, ranked by the number of rounds they participated in:
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This list is exclusively filled with Norway-based investors, which shouldn't surprise anyone no matter how much there's talk about international investors. Six of the investors were also on the list last year (Investinor, SL, TRK, Idekapital, Skyfall, and Schibsted), while the remaining four are new.
Again, this list is based on media announcements I've picked up, meaning this list is in no way complete or all-inclusive. The best example of this is probably startup creation program Antler, who are not on the list but which I know have invested in enough companies to make the list in 2021 - but I haven't found them announced anywhere. This probably applies to a few other investors as well.
The next chart shouldn't be too surprising either, showing the cities where most investors are based, including the largest cities in Norway and a few international capitals:
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As we move on to the final chart of the first part, it makes sense to first mention that since I started writing this newsletter, I've registered 687 startups with a Norwegian HQ, but also 27 startups with Norwegian founders HQ'ed elsewhere.
Looking back to 2014, the single largest private financing round each year has usually been raised by one of the 27 companies HQ'ed elsewhere. There's been this argument that you need to relocate from Norway if you have really big ambitions, and this situation might serve as supporting evidence. Forgerock, Medallia, and Nurx spearheaded this group, all with Norwegian co-founders who successfully left for the US to set up their companies.
Looking at the data this year (chart below), it's evident that the gap between those two groups has been narrowing over the years, and this year, it was actually a Norway HQ'ed company that raised the largest round (Gelato). Companies HQ'ed outside of Norway continued to raise large amounts, but interestingly only one of the top three rounds was raised by a company with a CEO located in the US (Vic.ai, with Nansen.ai in Singapore and Sky Mavis in Vietnam). If you're like me and believe large companies can be built from anywhere including Norway, the development here can definitely be used as supporting evidence for such a position.
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Part two: What kinds of companies were funded?
The second part of this review looks at what kinds of companies that have received funding during 2021. Every company in the dataset has been labeled with the applicable “horizontal” and “vertical” tags. Horizontal tags are technology-centric characteristics; eg. machine learning, hardware, or mobile. Vertical tags are market-centric; eg. health, consumer, and HR. Any company can have multiple tags or none at all.
Let's start by looking at the most frequent horizontal tags of 2021:
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There are very few changes in the chart above compared to previous years, with SaaS and hardware still being the two most popular categories. Globally, there's been a lot of investment activity related to blockchain (now "web3"), but it's in no way a dominant category yet. I guess this is partially because it's still early, but also because many of these teams are distributed - and with founders in many different countries they choose to incorporate in countries with better regulatory/funding environments than Norway.
The chart below takes a closer look at the most found horizontal category, hardware, showing both the total number of investment rounds in hardware companies, as well as what percentage of all funding rounds they make up:
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As the chart shows, Norwegian hardware companies continued to attract funding also in 2021, both in absolute numbers and relative to the total. This has happened despite the electric component shortages we've seen across the globe the past year. While I know of several startups that have struggled to get their products to market on time due to this, it doesn't seem like investor appetite cooled off completely.
Next up - the most frequent vertical categories of 2021:
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For me, the most noteworthy thing with the list above is that climate is amongst the most popular vertical categories, and something I'm very glad to see. The climate crisis is more pressing than ever, and while technology isn't the solution alone it's definitely a part of it.
Diving deeper into the climate category in the chart below (showing number of companies funded and total funding amount for climate companies), we're seeing that it's not only the companies started some years ago that have matured enough to now raise larger amounts, there are also new companies popping up. Definitely hope to see this development continue in the coming years:
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Furthermore, Norway-based founders continue to prefer building companies within the B2B space. The chart below shows number of B2C companies, and B2C companies as a percentage of all companies funded. While we've seen more B2C companies being funded in 2021 than ever before, funding to B2B companies has grown proportionally.
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The last question I'll answer in this review is where the companies funded in 2021 were headquartered. Below you'll see the distribution across the four largest cities in Norway and "rest of the country". Oslo is leading the way with roughly 2/3s of all companies funded in 2021 located there, a number that's been almost unchanged the past few years (2020: 68,7%, 2019: 66,9%). Still, as mentioned in previous reports, the numbers are probably somewhat skewed in Oslos favor given that most journalists covering Norwegian startups also are based in Oslo.
Relative to population, there's been roughly twice as many funding rounds in Bergen and Trondheim than we've seen in Stavanger. Purely speculation on my end (as most of the commentary here), but I'd suspect this is because more startups in Stavanger are within other sectors than what I define as "tech" (eg. oil & gas).
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That was it. Another year has passed, and while few of the charts should be very surprising to regular readers, it's always reassuring to see that the data matches the biweekly anecdotal evidence presented in this newsletter
There are several reasons to suggest there will be even more activity in the coming year. The first wave of local startups have fully flourished the past few years (with companies like Kahoot, Oda, Gelato, and Cognite leading the pack), and this obviously attracts more capital to similar opportunities.
The very same first wave of companies also serves as the best possible training ground for the next wave of entrepreneurs. It's very hard if not impossible to study how to become a good entrepreneur, but you can learn very much through working at another startup. It's good both for learning specific skills related to company building, but also to raise one's own ambition level. If you're building a successful startup, you are also indirectly "rising the tide" for all other company builders. And that makes me very optimistic abut the future.
Changes in the macro environment can obviously completely shift the future outlook. It could be interest rates, pandemic developments, war outbreaks, or a number of other black swan events, but if I knew what would happen related to this, I should probably work with something else than startups. And given my cluelessness around the macro environment, I continue to be hopeful for what's ahead!
With regards to the general analysis, I'll end here. There is an endless number of other charts I can extract from the dataset, and if there's anything particular you'd like to see, feel free to send me an email and ask. Hope you enjoyed this special edition, I'll be back with a regular edition in 14 days.
/Kjetil
Climate crisis tracker: The atmosphere is filling up with CO2. We must avoid a level of 450 parts per million. Current level: 417.7ppm (12 months ago: 414.9ppm, likely to exceed the target in 8-13 years).
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