Analysis: VC-backed exits in Q2 2017

As we hinted at yesterday, Q2 2017 was a strong quarter for VC-backed exits, even improving on Q1’s 12, which saw the Nordics equal Germany as the place with the most VC-backed exits in Europe in Q1. Over the last three months, the region provided investors with a further 16 exits totalling a disclosed $848 million.

This was therefore the joint second most VC-backed exits we’ve recorded in a quarter, coming in behind Q2 of 2016. This strong performance in Q2 of last year actually means that H1 2017 actually saw 5 less VC-backed exits than H1 2016. Although the Nordics are still faring well in a European context, it is also fair to say that we are not seeing the growth in exits that we’d perhaps like to be seeing particularly considering investment levels continue to rise each year.

The lure of First North is particularly strong for VC-backed companies, which should be no surprise considering it represents a strong exit opportunity right now as the market for technology companies remains strong on the local exchange. With nearly 1 in 2 VC-backed exits happening on the public markets, it appears that we need these to remain healthy in order to maintain or grow the number of VC-backed exits in the region.

It was actually the lowest quarter since 2015 for the number of acquisitions of VC-backed Nordic companies, proving just how crucial a strong public market is right now, with IPOs seeing a record quarter for VC-backed Nordic technology companies. As Q3 (with the summer months) is typically quiet on the IPO front (last year there were 0) and with a slight lull in acquisitions, it will be worth us keeping a firm eye on what happens over the next couple of months in the exit market.

Sweden provided 56.25% of the VC-backed exits in Q2, which is nearly identical to the total share of investment it receives and although these things can’t be directly aligned in terms of years (due to exits taken a considerable amount of time), it does feel right to have some level of correlation here in terms of where investors are spending their time and money.

Sweden is also steadily increasing in the number of VC-backed exits they are seeing over the last nine months or so, and are the only Nordic country to do so, in fact Denmark, Finland and Iceland are all performing significantly worse in 2017 than they were at the end of 2016, with Norway having a relatively good quarter.

Other companies within the region provided the most likely source of exit opportunities for Nordic VC-backed companies in Q2 (after going public), if you combine these main two opportunities for exits, they actually account for 4 out of 5 exit for Nordic technology companies.

Three verticals saw multiple VC-backed exits in Q2: Enterprise SaaS, Retail and Consumer.

In conclusion, in isolation this was a strong quarter for VC-backed exits, however, when you take a step back and look at the last 18 months as a whole, this quarter represents another three months where the region didn’t kick on in terms of the exits it is seeing. Of course, the effects of capital takes time, and the big increase we’ve seen over the last couple of years will likely not be reflected to its full extent for a couple more, however, it would certainly make investors more comfortable if we were to see VC-backed exits continue to grow, at least Q2 2017 puts us in the right direction.

Neil S W Murray founded The Nordic Web in 2014 in order to provide the Nordics with the quality coverage it deserves. As well as being Founding Editor of The Nordic Web, Neil is also an active community builder in the region, participating in a number of initiatives, and has previously worked for Tech.eu.