Editor's note: This interview has been recorded and published as part of a content project in collaboration with the Japan External Trade Organization (JETRO).
Inka Mero is a Finnish investor and entrepreneur with plenty of experience on both sides of the table and strong corporate background.
“For the last 10 years, I've been a full-time angel investor,” Mero said. “I founded two very early-stage seed investment companies, which were essentially an evergreen-fund type of vehicles, where we've been investing from the balance sheet in early movers in big data and analytics and e-commerce technologies. Prior to that, I had worked in various operational and financial investor roles for some 12 years. I started my career in the mid-90s working for the largest carrier in the Nordics, Sonera. I was part of the corporate venture arm of the company and established our unit in Tel Aviv and worked in Israel for a few years. I also worked heading global sales of a mobile company, later at Nokia, and was the CEO of a gaming company.
“Currently, I'm an investor in 22 companies and co-founder and investor in seven. Many companies that we created have been coming from universities or research organisations. I've always been very passionate about technology and innovation, in both large and small companies. […] Probably my strength is that I can jump from the global scale of strategy to operational scale and execution if needed.”
In early 2019, Mero together with Mikko Kumpulainen co-founded Voima Ventures, a €50 million deep tech fund that will invest in startups across the Nordics and Baltics. We sat down with Mero to dig deeper into the fund's unique features, investment focus, and the venture landscape of the region it operates in. The interview has been edited for clarity.
Q: “What's Voima Ventures, and how are you different from everyone else?”
A: “We're trying to solve the big global problems humankind is facing through combining science, entrepreneurship, and capital. Voima is not an impact fund but, in reality, many of the companies we work with have a strong purpose and meaningful impact on the society, through innovating in the fields related to food, or protein production, or water, or a cleaner environment. We also have the second big mission, which is to build bridges between the tech and scientific communities in the Nordics.
“What's different is our science-driven focus: we invest in growth companies with strong scientific roots. Our full-time focus is in working with teams that originate either from laboratories, or research units at universities, or research institutions — or any teams that are dynamically and innovatively solving big problems out there through scientific means.
“What's also different is that we don’t invest in pure-play digital companies; classic software or digital services wouldn’t be in our scope, but if there is anything related to deep AI, hardware, or biotech, or medtech, that'd be absolutely in our scope. This deep-tech focus also means that as an investor we have more patience in terms of taking these teams and startups to global markets and growing the value.”
Q: “What's your investment strategy like?”
A: “From the investment strategy point of view, we're diversifying our risks in two ways. The first aspect is the startup stage. We are aiming to invest in 25-30 companies from the first fund, starting from the spin-off stage to seed to Series A/B. We're a multi-ticket fund.
“The other way to diversify the risk is, of course, through [looking at different] industries. If you look at the industries where we are involved, it's biotech and new materials (where the Nordics are extremely strong), medtech and life sciences (extremely strong in Finland in particular), robotics, optics and electronics and hardware. Where we don't invest is pre-clinical pharma: development there requires a lot of time and much higher amounts of funding.
“We are looking to build a competitive portfolio of companies. But at some point many of these domains start to overlap: there's hardware element in medtech, there are AI elements in most innovative products, and so on. So, in our view, the traditional way of looking for companies from the industry standpoint is a bit old-fashioned.”
Q: “What's your geographic focus?”
A: “Our anchor investor is VTT, the national research centre of Finland, which is an organisation with over 2.5 thousand PhDs and researchers working on core and applied research, and that anchors us strongly to Finland and the Nordics. Our other anchor investor is the EIF, which is a typical investor in European funds. Based on that mandate, 80 percent of our focus is in the Nordics, but 20 percent can go to any Horizon 2020 regions within the EU, including Israel.
“It's not only the startups born in the Nordics that we invest in but companies that have a big part of the operations here and aim for global markets. We're very focused on investing in Finland first, together with other Nordic partners and community. But the ambition level is global.”
Q: “What are the main challenges that you're experiencing along the way?”
A: “We see many extremely promising and interesting tech companies and teams, as well as technology ideas and concepts in universities or research organisations' labs. The challenge typically is that these teams lack serial entrepreneurship and commercial experience.
“Another challenge for us is to help the Nordic tech talent find its way to science-driven initiatives, and we hope that it's becoming more of a trend that people who work in digital, or gaming, or any other industry would be looking for a more purpose-driven company where there's a strong science element but also a need for strong commercial, product, and go-to-market, and globalisation skills. Just building the teams and sourcing the right kind of talent is really the big puzzle in this work.”
Q: “And how do you solve these challenges? ”
A: “We're actively trying to support all the startups we see. Not necessarily based on the assumption that we'd invest in them, but just to help the founders by giving honest feedback, supporting them in prioritisation on their roadmap, and being an active member of this community and sharing our view of what kind of things have to be there.
“The second thing, we do actively look for talent for the companies we invest in; we put a lot of time in it, we work with HR partners, use our own network, and we’re building our own community of serial entrepreneurs whom we're trying to matchmake with right portfolio companies.
“And the third area is working with international investors and partners from the very start, bringing that international and global context on board of those companies through our partners.”
Q: “Are you co-investing with other VCs in the region?”
A: “We're the first player with a pure science focus, but we have a few fellow VCs in the Nordics with whom we can co-invest, like LifeLline Ventures, which is very active in the space, InVenture, and others. About 30 percent or the Nordic VCs funds may have a deep-tech angle but they also have other interest areas. Then you have a few speciality funds, let's say hardware-focused ones like Butterfly Ventures.
“The term ‘deep tech’ is probably overused in the community but I think it just reflects the time we're living in — the time of exponential technology development where many of the new solutions are not only software-based. There are huge developments in other fields, and I think VCs are starting to see this as well.”
Q: “What do you think of the funding landscape in the Nordics?”
A: “I think the early stage is fine, we have really good incubators, business angel community networks, a network of serial entrepreneurs, and also seed-stage stage VCs.
“However, in the deep tech space, you might be very dependent as a startup on your access to laboratories or pilot-level production facilities of a research institute or a university, and your capital requirements may be higher. Many startups are getting their start through ‘soft money,’ like university funding, or research funding, or EU funding — and then they spin out. The requirements for funding are higher than in a small, bootstrapped team that's building a purely digital solution for global markets.
“At the Series B and C stages, funding rounds tend to become bigger than at the seed stage — especially in deep tech. For example, one of our portfolio companies Paptic, which has a mission to replace plastic with a new kind of paper, is only capable of producing this paper by acquiring a paper machine. This means that they need to raise a fairly substantial amount, tens of millions, in funding in order to get to production, even though they would have a huge amount of commercial traction. So the dynamics are different.”