LHV Pension Funds Estonia (LHV) and Swedbank Estonia Pension Funds (SEPF) have invested in Karma Ventures, the €40m European early-stage venture capital firm.
Karma Ventures, based in Estonia and domiciled in Luxembourg, focuses on European Series A investment opportunities.
It will invest in companies using unique technologies to develop IT products and services with a large addressable market, and that have already demonstrated the ability to attract customer interest before a full product rollout.
It is managed by Margus Uudam, Tommi Uhari and Kristjan Laanemaa.
Uudam and Laanemaa previously worked together managing Ambient Sound Investments’s global venture capital portfolio.
Ambient Sound was created to manage the stake in telecoms start-up Skype held by its four founding engineers, and subsequently to invest the proceeds of its sale.
Two of the founding engineers of Skype are exclusive advisers to the new fund.
The key investors in Karma Ventures are Ambient Sound Investments and the Baltic Innovation Fund, an initiative created between the three Baltic republics and the European Investment Fund (EIF).
Several pension funds and family offices are also investors.
LHV – the second-largest pension fund manager in Estonia – has committed €5m to the fund, out of assets under management of €550m.
It has an average 20-30% invested in Baltic countries in its fixed income portfolios and up to 50% of assets in funds with exposure to stock markets and alternative assets.
LHV currently holds multiple positions in private equity funds, invested in the Baltics and Balkans.
Kristo Oidermaa, portfolio manager at LHV Asset Management, told IPE: “The EIF has recently helped to set up new managers in the Baltics, and we have become a key investor in some of those funds.
“Over the past decade, a large number of IT companies and start-ups have emerged from the Baltics and found recognition on the international stage. This has created a knowledgeable community of specialists here.
“Karma Ventures offers a perfect way to invest into this trend, as its team includes people who have helped to establish, manage and also exit some of those success stories.”
Meanwhile, Karma is the first venture capital investment for SEPF.
Kristjan Tamla, chief executive at Swedbank Investment Funds in Estonia, told IPE: “We decided to commit to the fund mainly because of the very coherent and professional investment proposal the team put forward.
“Although it is a first-time team, the key people possess a wide and strong experience in venture capital investments. Each person in the team has their own clear role and a different angle in adding value.”
He said the commitments from experienced private equity/venture capital investors like the EIF and the European Bank for Reconstruction and Development also helped in building SEPF’s confidence.
Tamla said that, in a small country like Estonia, private equity/venture capital investments were not considered to be an asset-allocation decision.
“Because quality investment managers are scarce, it is more an instrument-selection decision,” he said.
“We are always happy to discuss good private equity/venture capital business proposals from the region. Since Karma is our first venture capital investment, it will definitely be a steep learning curve for us throughout the – hopefully successful – lifetime of the fund.”
Karma Ventures expects to close a second funding by the end of 2016.
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