The Finnish startup ecosystem experienced a significant contraction in funding throughout 2023, aligning with global trends. According to recent data from the Finnish Venture Capital Association (FVCA), total funding for Finnish startups fell by 50% compared to 2022, a record-breaking year. Angel investments, as reported by FiBAN in March, dipped by 30% in 2023. The absence of large-scale funding rounds, such as those previously seen for Wolt, RELEX, and Aiven, was a notable factor in the decline. Nonetheless, early-stage startup investments held up relatively well, driven by domestic VCs maintaining investment levels consistent with 2022.

The international perspective

Global startup funding trends in 2023 mirrored Finland’s decline, with a 36% year-over-year drop in venture capital investments worldwide, according to statistics. Early-stage investments in the EU remained stable compared to 2022, while markets like Denmark and Estonia faced declines of 3% and 22%, respectively. The US saw a 2,5% reduction in early-stage investments, and the UK experienced a sharper 15% drop. Meanwhile, China recorded significant growth in early-stage funding, reflecting regional differences in investor sentiment. Sweden’s early-stage investments rebounded above 2021 levels after a 14% drop already in 2022.

Some industries fared better than others

In late 2023, reported that deep tech investments globally showed resilience as they remained at similar levels as in 2022 whereas most other sectors, such as fintech, gaming and education, faced a significant decline. This sector, characterized by long-term investment horizons in radical technological advancements, benefits from a degree of insulation against short-term market volatility.  Moreover, governments and VCs alike are placing increased focus on deep tech innovation, with new VC funds as well as government initiatives emerging in the US and in Europe. 

Meanwhile, according to FiBAN’s recent investment data, in 2023 angel investors in Finland increased their investments to foodtech and AI. Conversely, gaming and transportation sectors faced pronounced declines. Software and healthcare remained dominant industries among Finnish angel investors, consistent with recent years. PitchBook’s recent VC report on gaming highlighted the significant decline the industry faced in 2023, and forecasted that investors will focus on familiar business models like software platforms and developer tools, and steer away from traditional gaming studios, which attracted vast amounts of funding especially during the pandemic.

Decline in valuations – better deals for investors?

2023 saw a decline in valuations across all investment stages. The proportion of down rounds surged to 19% globally, the highest level since 2018, while bridge rounds gained popularity. Convertible notes witnessed a global uptick of 23% compared to 2022, per data. However, FiBAN data reveals a decreased preference for convertible notes among Finnish angel investors in 2023 versus the prior year. 

Forecasting trends: What does 2024 look like for startup funding and angel investing?’s recently published Q1 2024 global data shows that startup funding activity has stabilized, mirroring levels from 2019 and 2020. Compared to 2023, several key startup markets such as the US, China, India, Germany, Canada, Switzerland, and the Netherlands have reported increased investment levels in Q1 2024. Early-stage investments remained steady, while late-stage investments continued to grow. In Europe, startups secured a combined $13.7 billion in Q1 2024, with deep tech ventures accounting for 27% of that total. The most well-funded sectors include energy, health, and fintech.

From the perspective of angel investing, FiBAN’s member survey from late 2023 found that nearly 9 out of 10 angel investors remain actively engaged in seeking new opportunities despite economic uncertainty. The potential decline in interest rates may, however, impact the market in the latter half of this year. The market expects that the ECB may lower interest rates in June 2024, while the US Federal Reserve maintains its stance against immediate rate cuts due to strong economic performance and persistent inflation above target levels. As a result, some investors are holding off on new investments, anticipating rate cuts.

New emerging industries and instruments may change the course

Despite the drops in investments, new instruments and industries offer new opportunities for startups and angels alike. Innovestor angel co-fund will allow early-stage startups to raise more funding, and it will help angels complete a round quicker. The effects of the angel co-fund will be seen by next year, when we have a chance to review this year’s investment statistics. 

The current geopolitical events have shifted interest towards new industries, such as defence and dual-use. If you know good startups in these sectors on the lookout for funding, FiBAN is organizing Pitch Finland DefSec, offering a chance to win a 100 000 euro investment from international angels and VCs. The event is a part of the EU Funded Connect2Scale program and startup applications are accepted until May 10th. 

Find the full FiBAN data and reports.

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Ivan Helin, Data Engineer