Estonia’s LHV Varahaldus (LHV) has become a lead investor in a €21m fund backing early-stage information and communication technology (ICT) companies in the Baltics, Finland, and elsewhere in central and northern Europe.
The other two largest investors in Trind Ventures Fund I (TVF) are the European Investment Fund (EIF) under the Juncker Plan, and Trind Ventures’ team itself.
TVF will provide seed capital starting from €100,000 and make follow-on investments of up to €3m per company. The fund can invest alone, but is keen to co-invest alongside local business backers and/or other early stage funds. The fund plans to invest in up to 10 new portfolio companies per year.
LHV will invest in TVF across its entire pension fund range, apart from those funds restricted to fixed income investments.
Kristo Oidemaa, portfolio manager at LHV, told IPE: “LHV pension funds are investing in the local ICT sector because there is a lot of talent, and many innovative companies with high potential in the region.
“The ICT sector has been a stable and strong contributor to Estonian economic growth. Our goal is to develop the local economy, but we also expect good returns for pension fund clients.”
Oidemaa continued: “We chose this particular fund because the team has a strong track record and a lot of experience making ICT investments. We have previously invested in two other venture capital funds with managers based in Estonia or Finland, but which are also targeting investments in neighbouring countries, the CEE [region] and northern Europe.”
TVF, set up by Tallinn-based Trind Ventures, is a limited partnership, created under a recent Estonian law.
The law was intended to introduce a fully tax-transparent and cost-efficient fund structure. Trind Ventures is the second manager – after Baltcap – to use this new structure.
Trind Ventures is an early stage tech investor established by Joel Aasmäe, Ivar Siimar, Kimmo Irpola and Taavi Lepmets. The team has made over 30 investments in northern and central Europe since 1999.
As of 2018, it has returned over 80% of invested capital with an eightfold net return for investors.
Siimar said: “Our new fund can now start investing and our team is already talking to many aspiring entrepreneurs in the region. The quality of investment targets is getting better every year, thanks to the positive feedback loop created by regional success stories.”
He continued: “Having a bit more capital available in the early stage will increase the success rate of local companies, and provide longer runways for entrepreneurs. We will now be able to syndicate larger financing rounds locally.”
Total assets under management in LHV pension funds are around €1.1bn, with about 25% invested in Estonia.
Trind Ventures expects to close the second funding round within the next 12 months. The fund has a hard cap of €40m.