It’s been a while since we have written our blog, half a year. However, it has not been due to not having ideas or “nothing happening”—quite the contrary. Since our last post, major economic shifts and a war on European soil have started. Something that no one would have expected a few years back. In this blog, we will not focus on the latest global news as everyone is (should be) familiar with the current events (and we are not experts in the subject). We will focus on the latest news of Trado and what we have been up to during our silent period.
Once the war in Ukraine started, we decided it was best for us to sit and wait for some time. We ended up scaling down investment processes for nearly two months which is a long time to “wait and see.”. Looking back at it, it was the right decision to make as the investor sentiment felt shaky, and it is still shaky but more stable than a few months back. We also heard some concerning news from abroad that term sheets have been pulled off the table in the last moments, indicating that our gut feeling is shared among investors. Spring must have been hellish for startups in the investment phase, and the road ahead does not look rosy – at least in the short term.
While we have heard that term sheets have been pulled off the table, this has only applied to medium-level startups. Unicorn-level startups are still in the position to dictate their values, and private money is still active in search of promising ventures. We suspect that startups cannot dictate values freely anymore due to the correlation between private and public markets. If exit value from private to the public has gone down, then the private market has to adjust in the long term (or is it the other way around?). Then there are, of course, industry exits. However, the same logic applies there. When industry valuations go down, then exit valuations to industry go down. There are undoubtedly singular cases where the logic does not apply, but it should in the large picture.
Why are we discussing such an ‘abstract’ and intangible topic? This is why we decided to sit and wait. Private and public valuation spreads began to increase because private markets are much more illiquid. Our intuition tells us that either market has to budge, and we believe that the private market has to adjust this time. And as said before, we can already see adjustments coming into play.
In the long run, it is good for the economy to wipe off those barely surviving. Such cleanup will free bright minds for future ventures with a new experience of what happens when a crisis hits and money taps are closed (many young entrepreneurs have only seen “good times”). It is also a good sanity check for investors. When growth slows down – or stops – what’s left in the bottom line is essential. Not everything is about sales multiples. PEs have known this for a long time; maybe VCs and startups should start taking notes.
While the big picture of private investing might look grim in the short term, there are indications that some markets are in no short of cash. The UK tech startup scene has raised more funding in the first five months than in the whole of 2020. In Finland, Slush expects a record-breaking 4 200 startups and 2 200 investors in November 2022. That means an increase of 31 % in startups and 47 % in investors. Taken together, both parties are still looking for each other; the question is, will they agree on the terms?
So apart from babbling just thoughts about the market and future economy, we also have some material news. We made two investments in two great companies during the spring and summer.
In March, we invested in Mjuk alongside Alliance Ventures and Lifeline Ventures in a EUR 4 m round. Mjuk specializes in quality second-hand furniture, where they connect both the buyer and the seller. They take care of the whole value chain, where they pick up the furniture, store it, and deliver it. They are currently operating in Finland and Sweden, and the proceeds from the round are used for improving the scalability and business model before tapping into mainland Europe expansion. Our investment is passive; we give guidance in case the founders ask it.
In June, we invested in Hoiwa alongside Nordia Management in a EUR 2 m round. Hoiwa specializes in solving the nursing and caretaker shortage problem. They have created their Hoiwa app for connecting nurses and partners in need of nurses. Hoiwa is well respected among nurses and has gained significant traction in the media for how they treat their employees. Hoiwa’s thesis is to increase the awareness and respect of nurses and caretakers. Hoiwa’s growth journey started in 2020, and the round is their first. Our investment in Hoiwa is active, and we have a role on Hoiwa’s board.
We are delighted to be a part of both companies and look forward to our collaboration.