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					Biotech company’s
enters new phase
Seed investments
in over 60 companies

Business angel
Elmar Paananen’s
experience put to good use

  F I N N I S H I N D U S T R Y I N V E S T M E N T LT D ’ S S T A K E H O L D E R M A G A Z I N E 1 / 2 0 0 6

                    Industry Investment
                    Finland’s leading
                    seed capital investor
                    Finnish Industry Investment Ltd’s mission is to promote the growth of
                    Finnish businesses. As a government-owned investor FII plays a supple-
                    mentary role in financial markets. Investments are focused especially on
                    projects or fields in which business growth can be achieved and in which
                    private investors do not provide adequate risk capital.

                    Seed financing volumes have started to increase in Finland. The govern-
                    ment’s contribution to this growth has been significant because investments
                    have already been made in more than 60 seed-stage companies through
                    FII’s EUR 50 million Seed Financing Programme. The driving force for
                    each project is a private investor, who invests at least half of the capital and
                    is responsible for developing the business.

                    FII expands the supply of risk capital also to growth-stage companies.
                    We further aim to enhance the venture capital market by boosting our
                    investments in new Venture Capital funds.

                    Here we highlight some recipient companies, such as Rotatek – which
                    makes wind power generators – and the pharmaceuticals development
                    company Ipsat Therapies. Take a look also at the ideas that Managing
                    Director Elmar Paananen, our co-investor, presents about the chal-
                    lenges of acting as a business angel.

                    One of our main aims is to improve our communications. In our new
                    stakeholder magazine we tell you even more about our business. We
                    hope you enjoy reading it.

                                                                                                                                     Photo: Kari Ylitalo

                       Juha Marjosola
                       Managing Director

                                        PUBLISHED BY FINNISH INDUSTRY INVESTMENT LTD, KALEVANKATU 9 A, P.O. BOX 685, FI-00101

2                                                                                                       Industry Investment 1/2006
                                                                          Contents 1/2006


                                                          2       EDITORIAL

                                                          4–5     INVESTORS STIMULATE GROWTH
                                                                  Rotatek supplies large orders
                                                                  by networking

                                                          6–7     A BUSINESS ANGEL PROVIDES
                                                                  MONEY AND EXPERTISE
                                                                  Managing Director Elmar Paananen

                                                          8–11    SEED INVESTMENTS
                                                                  IN OVER 60 COMPANIES

                                                          12–13   BIOTECH COMPANY’S PROMISES
                                                                  REACH FULFILMENT
                                                                  Ipsat Therapies is testing
                                                                  its first pharmaceutical this summer
                                                          14      ORE RESERVES ATTRACT
                                                                  FOREIGN COMPANIES
                                                                  Senior Advisor Tuomo Mäkelä
                                                                  analyses the mining boom

                                                          15      WORLDWIDE DEMAND FOR
                                                                  REMOTE IDENTIFICATION
                                  Nordic Koivu

                                                                  Intune Circuits opened a plant in Finland

                                                          16      USA AND FINLAND
                                                      8           PLAY DIFFERENT GAMES
                                                                  Professor William Paulin knows with tactics

                                                          17      FRESH IMPETUS FOR EARLY-STAGE
                                                                  CORPORATE DEVELOPMENT
                                                                  Director Anu Nokso-Koivisto

                                                                  Kari Ståhlberg
                                                                  Investment Manager, FII

                                                          18–19   NEWS


                Industry Investment 1/2006                                                                      3
     Text: Hannu Virtanen | Photos: Juha Salminen and Rotatek

                                                                                           Hollming Works, an expert in machine construction services,
                                                                                                assembles Rotatek’s wind power generators in Loviisa.

    Equity investors
    stimulate growth

    Rotatek Finland Ltd – producer                                          Rotatek aims to generate   ScanWind AS, one of the leading sup-
                                                                            EUR 8 million turnover     pliers of direct-driven wind turbines.”
    of wind power generators, special                                       this year, compared to         Wind power plants are rapidly
    electric motors and high-speed                                          EUR 2.8 million in 2005    spreading throughout the world. The
                                                                            and 1.2 million in 2004.   European Wind Energy Association
    motors – strongly believes the                              CEO Jukka-Pekka Mäkinen expects        (EWEA) forecasts that wind-generated
    company will grow.                                          the company to break even. Next year   electricity will grow by at least 80,000
                                                                the company should start posting       megawatts during 2007–2012. This
    So do investors.                                            a profit.                               could mean from 3,300 to 6,600 new
                                                                   “Growth in turnover is derived      3 MW wind power turbines each year.
                                                                mainly from wind power generators,     The EWEA calculates that 1,500 new
                                                                which account for about 80-85%         1-3 MW wind power plants will be
                                                                of our current business. We have       installed in Norway and Sweden alone
                                                                collaborated closely with Norwegian    by 2010.

4                                                                                                                     Industry Investment 1/2006
                                         high-speed motor is a component of          global markets. In my opinion at least,
                                         a larger delivery.                          public money invested in businesses is
                                             “The close cooperation in our net-      money well spent.”
                                         work has also pleased our customers.            Rotatek was born in Lappeenranta
                                         Our products are designed, dimen-           University of Technology ten years ago.
                                         sioned and tailored for specific sites.      The University had gained experience
                                         Solutions are analysed in collaboration     and won a reputation as a developer
                                         with the customer and we have a solid       of the properties and efficiency of
                                         pool of talent to offer.”                    high-speed electric motors. Rotatek
                                                                                     was established to commercialise and
                                         BUSINESS BACKGROUND                         industrialise these innovations. The
                                         IMPORTANT                                   company has maintained a strong
                                         Finnish Industry Investment (FII) is        relationship with the university.
                                         sharing Rotatek’s success through the           “Capital has been used mainly
                                         Seed Financing Programme. Rotatek           for R&D, because that helps create
                                         raised EUR 2 million of new capital         opportunities for the company to
                                         in 2004. FII invested EUR 600,000,          succeed and it must have sufficient
                                         and Power Fund I, a specialised fund        capital.”
                                         for private investors of venture capital        Rotatek’s advanced high-speed
                                         and now the biggest owner of Rotatek,       motors have proven to be efficient and
                                         supplied the remainder.                     reliable. The company has received
                                             In Mäkinen’s opinion, FII’s role        several technology awards, including
                                         as a co-investor not only strengthens       the InnoFinland award in 1997 and
                                         Rotatek’s financial position but also        the New Technology Award in 1999.
                                         boosts the company’s business credi-
                                         bility among partners and customers.
                                             “Good technical inventions do not
                                         themselves win sales. The commercial
                                         business must be run professionally
                                         and the business background must be
                                         sound. Apart from financial solidity,
                                         the bottlenecks for a rapidly growing
                                         small company are often credibility
                                         and adopting a long-term approach.”
                                             Mäkinen considers FII’s role as an
    Last year a consortium formed by     investor important, especially for early-
Rotatek Finland Ltd, Verteco Ltd and     stage companies. FII offers ideas and
Vaasa Engineering Ltd agreed on the      know-how for business development,                    Wind power plants
supply of electrical systems to Norway   as well as capital.
for ScanWind AS’s four 3.5 MW wind           “In Finland there are very few inves-
                                                                                               are rapidly spreading
turbines. The volume of orders this      tors willing to take a risk and contrib-              throughout the world
year enables the start of actual mass    ute enough to early-stage companies.
production. Big follow-on orders were    Many investors want proof of business
received after the consortium earlier    success before investing venture capital
supplied two similar systems.            in a company.”
    Rotatek has around 10 employees,         “This can be turned around. Rotatek
mainly in R&D and logistics, while       is a hi-tech company that has started to
subcontractors manufacture the prod-     grow rapidly and could well generate
ucts. Usually Rotatek’s generator or     tens of millions of euros turnover in

Industry Investment 1/2006                                                                                                     5
          Text: Jorma T. Mattila | Photos: Juha Salminen

In Elmar Paananen’s opinion, an entrepreneur acting as a business angel must first ensure
that his/her own company is performing well, because it normally yields the best returns.

        A business angel
        provides money and expertise

        Many companies obtain financing                                              lmar Paananen, Managing      leader or ownership team with a human
                                                                                    Director of Troll Capital    face, to which the angel investor offers
        and other aid from business angels in                                       Ltd, who since the 1980s     not only money but also personal expe-
                                                                                    has represented the second   rience and practical expertise.”
        their early stages or when facing new                                       generation of a family-run       Paananen does not believe that a
        challenges. Who are these angels, why                           business that acts as a business angel   purely monetary investment without
                                                                        while also managing his own busi-        the input of expertise meets these crite-
        do they invest in companies and what                            ness and investments, has given much     ria. The many thousands of people who
                                                                        thought to how to define business         have invested money in a company
        kind of sums are we talking about?                              angel investment.                        they know, but without participating
                                                                           “It’s a minority investment in a      in the company’s activities at all, thus
                                                                        business or project that has an owner,   fall outside the definition.

6                                                                                                                               Industry Investment 1/2006
                                                                                                  Purely monetary
    Similarly, professional investors,          The size of angel investments
who invest money in developing com-          varies greatly, ranging from EUR                     investment without the
panies for a living – generally in minor-
ity interests – cannot contribute their
                                             10,000 to several millions in extreme
                                             cases. Many business angels make
                                                                                                  input of expertise is not
own expertise in addition to money,          multiple investments, none of which                  business angel investment
especially if the recipient company is       exceeds EUR 100,000.
small.                                          “Angel investments of over 1 million
    “If they gave 3 months of their time     euros are rare, because then it is usually
to a EUR 100,000 investment, the             a majority investment and a business
salary costs would quickly eat up all the    enterprise.”
return on their investment.”
    A business angel’s prime motive          INITIATIVES
                                             FROM COMPANIES
                                                                                              Industry Investment
is not necessarily maximising the
return. In Paananen’s view it is more that   In theory, business angels can invest in         as a co-investor
acting as a business angel is an inter-      companies at any stage of their devel-
esting, exciting and rewarding way of
doing business.
    “When you meet entrepreneurs
                                             opment, but Paananen says the target
                                             is typically a company in the starting
                                             or founding stage.
                                                                                              F  II co-invests with private investors. These include
                                                                                                 venture capital companies, institutional investors
                                                                                              such as pension insurance companies, and business
or investment teams you always learn             “It might, however, be a company             angels – ie, experienced entrepreneurs and other
something new, and that very much            that is growing, internationalising or           private individuals who want to invest in growth
enhances your own expertise.”                entering a new market, or a company              companies.
                                             in any situation where both capital and
When selecting investment targets
                                             some expertise that the company lacks
                                             is needed.”
                                                 Often the initiative for angel
                                                                                              I n addition to financial support, private
                                                                                                co-investors are expected to be interested and
                                                                                              willing to actively participate in the recipient
a business angel considers several           investment comes from the company                company’s business development.
aspects: whether he/she genuinely            or project that needs financing. There
finds it an interesting business, has
the expertise that it needs, can give
it sufficient time, and gets along well
                                             are also angels who actively seek
                                             investment targets through various
                                                                                              C  o-investing raises more capital for the target
                                                                                                 company, integrates private equity investors’
                                                                                              knowledge and spreads the risks.
with the entrepreneur.                           Almost all the Paananen family’s
    Naturally the expected return on
the investment is important, and in
the best cases investments can be very
                                             angel investments have focused on
                                             the projects of an acquaintance or the
                                             friend of an acquaintance. Paananen
                                                                                              F   II invests no more than half of the capital
                                                                                                  and ownership.

    In Paananen’s opinion, business
angels are typically active players
                                             explains they have often responded
                                             when first asked to just discuss and see
                                             how an acquaintance’s company can be
                                                                                              F   II is a patient investor.

in their own field of business, and
have often left their full-time jobs.
They have generally created their
                                             helped. This is how involvement with
                                             Eimo-Muovi Ltd’s business started.
                                                 Eimo became wholly owned by
                                                                                              I nvestment activities are business-oriented:
                                                                                                an investment is of definite duration and has an exit
                                                                                              plan for within a few years when the company’s value
investment capital by running a              Paananen, and during his ownership               has increased.
successful business or by selling their      turnover grew from the original EUR
own company. Some, however, invest
inherited capital or capital obtained
by exercising job-related share
                                             6 million to EUR 250 million before
                                             it was sold in 2003 to the Taiwanese
                                             company Foxconn.
                                                                                              T  arget companies for investment are identified
                                                                                                 through FII’s extensive network of contacts.
                                                                                              Also FII’s high profile attracts companies directly.
options.                                         Troll Capital’s main industrial busi-
    The number of business angels in         ness is Peikko Group, which manu-
Finland depends on the definition. If         factures fastening products for the
the criterion is at least one investment     construction industry, but the Paananen
of EUR 50,000 or more, to which              family holds a majority share in many        its activities. Currently Troll Capital is
the investor adds his/her expertise,         other companies. Troll Capital is also       an angel investor in Market Media Ltd
Paananen estimates the figure to be           an active investor, and business angel       Finland, in which Industry Investment
between 300 and 1,000.                       investments form only a small part of        is a co-investor.

Industry Investment 1/2006                                                                                                                             7
          Photos: from companies and Jyrki Komulainen

        Seed investments
        in over 60 companies
        Finnish Industry Investment Ltd is Finland’s leading
        seed capital investor in terms of both euros and
        number of investments. In two years, investments
        have been made in over 60 seed-stage companies
        through the company’s EUR 50 million Seed
        Financing Programme.

              n the Seed Financing Pro-        50,000 to EUR 1 million.
              gramme Finnish Industry In-         Investee companies need capital
              vestment co-invests in Finnish   especially to complete product
              early-stage growth companies     development, enter a market and build
              together with capital invest-    distribution channels. FII´s invest-
        ment funds and business angels – ie,   ments are divided among numerous
        experienced entrepreneurs and busi-    sectors and regions all over Finland:
        ness managers.                         some 30% in the Helsinki metro-
           FII’s first-round investment in a    politan area and the remainder spread                      Iqua Ltd’s combined Bluetooth
        recipient company ranges from EUR      widely across the country.                         handsfree and corporate badge holder.

Linseed Protein                                                            Upstream Engineering

8                                                                                                              Industry Investment 1/2006
AIDON LTD (Jyväskylä) develops open energy-metering and Automatic Meter            ELLIBS LTD (Turku) specialises in selling and lending e-books. The system
Reading systems for energy companies and service providers.            enables publishers, libraries and companies to efficiently arrange the
                                                                                   purchasing, selling, and borrowing of e-books and the management of
AJAT LTD (Espoo) manufactures radiation imaging devices for medical and            electronic distribution rights.
industrial applications.
                                                                                   EMILLION LTD‘s (Espoo) identity management products allow network users to
ASAN SECURITY TECHNOLOGIES LTD (Espoo) develops web-operated visual                log in securely without separate usernames and passwords.
surveillance solutions for parking facilities, ports, airports, cruise ships and
industrial facilities.
                                                                                   EPICRYSTALS INC. (Tampere) produces optoelectronic devices and silicon
ASPENSEC LTD (Oulunsalo) develops smart spark detection and extinguishing          wafers for industrial, telecommunications and medical applications. The
systems for premises where dust poses an explosion risk, such as in the wood       company specialises in laser diodes.
processing, food, textile and paper industries.                                                                   EXESSION GROUP LTD ’s (Espoo) main product is a solution integrating
                                                                                   investor communications and investment analysis processes for the
AXEL TECHNOLOGIES LTD (Turku) is a software company that specialises               international equities markets.
in digital TV technologies. Tickets for events can be booked and paid for
via digital TV, and infoscreens are updated on buses with real-time traffic         EXIFORMAT LTD (Espoo) produces interactive digital exhibition systems that
information and news.                                                   combine a large display screen with visitors’ mobile terminals. Viewers can
                                                                                   move around in the virtual exhibition and leave a personal message there.
BOOKIT LTD (Espoo) offers intelligent SMS technology and easy-to-use two-
way mobile services that can be used globally in GSM phones.                                                                       FRWD TECHNOLOGIES LTD (Oulu) develops and markets sports computers that
                                                                                   save sporting performance parameters such as speed, distance, pulse rate,
BUILDERCOM LTD (Jyväskylä) provides information management ASP services            route and height.
for the construction and real estate maintenance industries.                                                                   GENESTIA GROUP INC’s (Turku) document management systems link in-depth
                                                                                   external information sources with a user’s file.
CHIP-MAN TECHNOLOGIES LTD (Tampere) is a life science technology company
producing solutions to automate and quantify living cell biology.                  GREENVIRONMET LTD (Lahti) specialises in bio-energy and demanding energy                                                                  applications.

DELSITECH LTD (Turku) specialises in silica-based transplant technology            INNOSONIC LTD (Jyväskylä) produces video ringtones that allow record
as well as in the subcutaneous and intra-muscular release of drugs and             companies, film studios and other content owners to make more money by
biopharmaceuticals.                                              using their content as video ringtones.

DIRECT GRANULATION TECHNOLOGY LTD (Mustasaari) produces units for                  IQUA LTD (Espoo) specialises in exclusively designed accessories for mobile
processing effluent from wastewater processing, and from the pulp & paper           phones.
industry, food industry and agriculture. The end product, grains, is re-used as
fertilizer, nutrient, fodder or as a renewable energy source.                      JRT PIPE MACHINERY LTD (Vaasa) specialises in solutions for the plastic pipe                                                                     manufacturing industry.

ECOLANE FINLAND LTD‘s (Helsinki) software for demand-responsive public             KENNO TECH LTD (Espoo) manufactures laser-welded, all-metal, sandwich
transport makes it easier to travel even in the rush hour.                         panels for the construction industry.                                                            

WinWind                                                                                Taipale Telematics

Industry Investment 1/2006                                                                                                                                            9
     FRWD sports computers for sports enthusiasts, athletes                  Ltd’s new product KitWRX is an information tool
     and professionals are sold in over 20 countries. FRWD                            for professionals. KitWRX offers competitive advantages
     saves and displays sports performance parameters such                            to the retail, healthcare and logistics sectors in automated
     as speed, distance, pulse rate, route and height. FRWD                           identification and data utilisation tasks.
     displays real-time data on a mobile phone.

     KITWORKS.FI LTD (Kuhmo) produces advanced information tools for the retail        NORDIC KOIVU LTD (Tohmajärvi) applies leading technology to producing
     trade.                                                             birch sap that is free of additives and preservatives, and conducts R&D into
                                                                                       using birch sap as raw material for the food, drink and cosmetics industries.
     KUUSAMA DESIGN LTD (Tampere) designs for the entertainments electronics 
     industry, focusing especially on home theatres and audio-visual equipment.                                                                   ODOROFF LTD (Turku) eliminates unwanted odours from wastewater pumping
                                                                                       and treatment plants, effluent processing plants, slaughterhouses, food
     LANNOX LTD (Helsinki) refines ash produced by the metal industry, and              production facilities, biowaste handling containers and transport vehicles in
     heating and power plants to produce soil enrichment and road construction         an environmentally friendly way.
                                                                                       OPENBIT LTD (Tampere) produces on-device payment, digital rights
     LEMEON MEDIA PRODUCTS LTD (Vaasa) produces content for DVD marketing              management and distribution solutions and services for content providers.

     LIEKKI CORPORATION (Lohja) designs, manufactures and markets optical              OPTOGAN LTD (Helsinki) develops high-brightness light-emitting diodes for
     fibres and optical engines.                                         the background lighting of mobile terminals, computer LCD displays, the
                                                                                       automotive industry, traffic lights and for general lighting.
     LINSEED PROTEIN FINLAND LTD (Kauhajoki) produces raw materials for the
     food industry that are used in functional foods and products with health          OPTOMED LTD (Oulu) produces digital imaging systems for eye and ear
     benefits.                                                   endoscopy and for microscopic skin analysis.
     MAGNASENSE LTD (Jyväskylä) manufactures rapid testing equipment based on
     the use of magnetic particles as labels. The methods and sensors the company      ORGENIUM LABORATORIES LTD (Helsinki) designs and develops innovative
     has developed can be used in, for instance, healthcare and environmental          virus diagnostics methods for the healthcare sector.

     MANDREL LTD (Tampere) manufactures tools for the metal industry.                  PANCOMP ELECTRONICS LTD (Oulu) is a specialised applications provider for                                                                     wireless and network technologies.

     MARKET MEDIA LTD FINLAND (Helsinki) builds electronic advertising channels        PLUGI LTD (Kuopio) maintains an online photobank and offers photographic
     in cooperation with industry and the retail trade. Display screens are already    services.
     deployed in pharmacies, medical clinics and cosmetics stores, and will soon be
     placed in restaurants.                                         PLUSDIAL LTD (Espoo) is a provider of mobile ticketing services for public
     MESHCOM TECHNOLOGIES INC. (Helsinki) produces wireless mesh technology
     for network equipment vendors.                                                    PRIMET LTD (Heinola) provides solutions for the final treatment of municipal                                                                   and industrial effluents.

10                                                                                                                                         Industry Investment 1/2006
Nordic Koivu Ltd is the world’s leading producer of birch sap                    Market Media Ltd has built a national display system for the
and exports 99% of its produce. The company has developed                        pharmacy distribution network in Finland in just over one
its own automated sap collection and bottling process, which                     year. The company is building a national restaurant display
enables industrial-scale production. Equity investors provide                    system and has displays on trial in medical clinics
opportunities for expanding the business.                                        and cosmetics stores.

PROFIMILL LTD (Kotka) is a provider of software solutions for production         TARGETOR LTD (Oulu) develops software for strategic planning and
management that enable industrial companies to enhance production                implementation. The products save time spent on reporting, give a clearer
efficiency, quality assurance and production control.                             overall view and collect feedback.                                                         

ROCKET SCIENCE LTD (Tampere) creates multimedia production tools,                UPSTREAM ENGINEERING INC. (Oulu) develops micro-projectors, especially for
entertainment content and games for smartphones.                                 mobile devices.
                                                                                 VALIMO WIRELESS LTD (Helsinki) produces software systems enabling user
ROTATEK FINLAND LTD (Lappeenranta) develops, manufactures and markets            authentication, mobile-based payment and digital signatures.
wind power generators, special electric motors and high-speed motors.  
                                                                                 VICONSYS LTD (Jyväskylä) produces process control and quality monitoring
SONECO LTD’s (Oulu) devices enable children, the elderly, people with poor       solutions for paper, printing, plastics, non-woven and metal production lines.
memory and people working alone to communicate easily, and quickly send
an alarm.
                                                                                 VIOPE SOLUTIONS LTD (Lappeenranta) provides e-learning packages and
STOCKWAY LTD’s (Espoo) RFID-based solutions remotely identify and verify         solutions for computer programming, which the teacher can tailor for specific
products, and transmit data about products, packaging and shipments in           needs.
real-time to the product manufacturer, subcontractors, distribution stages and
retail chains.                                                    VIRTUAL ADVERTISING SYSTEMS VAS LTD (Ristiina) produces Virtual
                                                                                 Billboard Technology (VBR) to replace physical ads with virtual ones in live TV
SUOMEN PUHEENTUNNISTUS LTD’s (Lahti) Finnish-language speech                     broadcasts. This allows an ad site at, for instance, a sports event to be sold
recognition application replaces the human interface in managing routine         several times and enables regional focusing of the message.
customer service calls such as orders and address changes.             
                                                                                 VOXPOINT TECHNOLOGIES LTD (Vantaa) develops systems for wireless satellite
SUOMEN TEOLLISUUSOSA LTD (Tampere) produces logistics services and               location services and data transfer.
warehousing management systems for industrial customers.                                                                       WINWIND LTD (Oulu) develops and manufactures wind power plants designed
                                                                                 for overall economy.
SUVISOFT LTD (Tampere) provides online services for conference and event
management, and for creating contacts.
                                                                                 ZIPIC LTD (Tampere) designs and manufactures SIP (System in Package)
TAIPALE TELEMATICS LTD (Pirkkala) produces technology innovations for            modules and commercial manufacturing methods that drastically reduce
enhancing vehicle safety, economy and ride comfort, such as sensors that         the size and weight of a product.
monitor driver attention.                    

Industry Investment 1/2006                                                                                                                                         11
      Text: Maarit Seeling | Photos: Juha Salminen and Ipsat Therapies

     Biotech company’s
     reach fulfilment
     Helsinki-based company Ipsat Therapies Ltd is testing the effect
     of its first pharmaceutical in hospital conditions this summer.
     This brings it a step closer to commercialising the drug
     it has developed.

                                                                                 psat Therapies Therapies is de-
                                                                                 veloping a drug to mitigate the
                                                                                 harmful side effects of antibio-
                                                                                 tics. The efficacy and safety of
                                                                                 the product has already been
                                                                         proved in tests on healthy people.
                                                                             “The test stage which started in
                                                                         the summer will last 6–9 months. We
                                                                         will test the effects of the pharmaceu-
                                                                         tical by giving one group of patients
                                                                         our enzyme with antibiotics and the
                                                                         antibiotic alone to the other group,
                                                                         and comparing the results,” says CEO
                                                                         Nora Kaarela.
                                                                             A broader, international patient
                                                                         study will be carried out immediately
                                                                         after the results of the present phase
                                                                         have been processed, which Kaarela
                                                                         estimates will be no later than 2008.
                                                                         It is hoped that a sales licence for the
                                                                         product will be obtained by the end
                                                                         of the decade.
                                                                             “This would mean our first product
                                                                         will be on the market ten years after
                                                                         the company was started. This is as
                                                                         fast as drug development gets,” Kaarela
                                                                         points out.

12                                                                                     Industry Investment 1/2006
A pharmaceutical molecule
   begins to make a profit
         10–15 years after
             its discovery

    In addition to time and expertise,      external financ-
it takes considerable sums of money to      ing is essential to
develop new pharmaceuticals. Kaarela        maintain research
estimates the cost of developing a single   and development
new drug at EUR 50–500 million.             in this field.
    There has been public criticism of          “New medi-
biotech companies’ bottomless need          cines must be
for financing. Although their basic          developed despite
research is excellent by international      the financial risks.
standards, Finnish companies have not       For      example,
yet won much success. It is a relatively    our drug will be
young field. Moreover, a considerable        greatly needed if
number of innovative pharmaceuticals        bacterial resist-
never make it to the marketplace. Even      ance to antibio-
a successful pharmaceutical molecule        tics continues to
only begins to make a profit 10–15           increase,” Kaarela                                                                Nora Kaarela started as
years after its discovery.                  explains.                                                                          Ipsat CEO in February.
                                                Ipsat Thera-
EXTERNAL FINANCING                          pies’ future is se-
IS ESSENTIAL                                cure for the next few years. In a financ-   look at whether public investors have
It is therefore hardly surprising that      ing round last winter, it collected nine   taken part in the business’s seed stage.
some private equity investors have          million euros. Industry Investment         It’s a guarantee that the company has
lost faith. Early-stage investors have      committed itself to an investment of       passed through at least one screen. FII’s
begun to trim their deployment in           two million euros.                         presence also wins the trust of foreign
biotech companies. Similarly, there             “This work cannot be done with-        investors.”
are relatively few growth-stage private     out external financing. International
equity investors in Finland. However,       growth-stage investors take a keen

Industry Investment 1/2006                                                                                                                              13
       Text: Jukka-Pekka Järventaus | Photo: Lehtikuva

                                                      Oreforeign companies
     The ore reserves in Finnish bedrock are attracting foreign mining companies.
     According to Tuomo Mäkelä, FII’s Senior Advisor for Mining, open competition
     will continue well into the future.

                     fter some thirty years     Sweden there is a great deal of financ-
                     of working as a mining     ing of mining operations. There, back-
                     specialist in six coun-
                     tries in three conti-
                                                ers who understand the business get in
                                                on mining projects. Active investors
                                                                                              FII responds to
                     nents, Tuomo Mäkelä
     sees many background factors to the
                                                are attracted by the sector. They know
                                                that you have to study the market
                                                                                              the mining boom
     mining boom.                               situation for minerals and metals and          International interest in Finland’s ore reserves per-
         “Raw-material prices are at a his-     understand the project development             suaded Industry Investment to start up a special mine
     torical high. Demand for raw materials     chain. People who know their stuff              financing programme. The company has earmarked
     in China and many other markets is         can make a return on investment that           EUR 20 million for investment in exploration and min-
     growing sharply and supply is unable       clearly outperforms what is normally           ing companies operating in Finland. FII operates as
     to keep up. Demand and production          considered good by both private equity         co-investor with Finnish and foreign investors.
     are out of balance because the develop-    investors and players operating on the             In May, FII invested EUR 1.5 million in the Australian
     ment of mining has been neglected in       listed market.”                                mining company Vulcan Resources Limited. All of its
     the past ten years and there hasn’t been       “Financing for mining companies            projects are in Finland, the most important of these
     enough exploration. The background         and projects can be broken up into             being the Kylylahti multiple ore deposits in North
     to foreign companies’ interest in Fin-     parts. In the initial stage – exploration      Karelia. The main metal of the Kylylahti deposits is
     land is that we have first-class research   and research – the financial backers are        copper, but the greatest hopes are for cobalt.
     data on the bedrock and because of the     usually different parties to those in the           Parties interested in co-investment may con-
     low number of players earlier, ore re-     actual mining start-up phase. Financ-          tact FII’s Senior Advisor for Mining Tuomo
     serves are believed to be underused.”      ing takes places in steps, starting from       Mäkelä:
         Investing in mining is a risky and     project development, typically for             or tel. +358 40 540 0620.
     long-term business. Finnish financing       periods of one or two years. Companies
     institutions have not so far been in-      in the sector are increasingly frequently
     terested in participation in financing      on the stock exchange even in the re-
     for projects.                              search stage. As the projects progress,     portant minerals have increased mani-
         Tuomo Mäkelä sees it as a clear        both project- and company-specific           fold recently. This in turn has boosted
     shortcoming that Finland has no tra-       sales are typical, as are reorganisations   mining companies’ share prices and
     ditions of financing this sector.           permitting the exit of other investors.     opened up opportunities for returns
         “In Canada, Australia, the London          “Returns from mining are looking        on investment in both the short and
     Stock Exchange and to some extent in       competitive as prices for the most im-      the long term.”

14                                                                                                                               Industry Investment 1/2006
                                                                      Text: Jukka-Pekka Järventaus | Photos: Juha Salminen and Intune Circuits

Worldwide demand
for remote identification
“There has not been a global player focusing
on manufacturing antennas for remote
identification. We aim to fill this gap,” as Intune
Circuits Ltd’s CEO Matti Karjanlahti explains the
need for the plant opened in Vantaa this April.

              FID (radio frequency        to support its existing production          which opens up new markets glo-
              identification) techno-      of UPM Raflatac remote tags.                 bally.
              logy is used, in addition   Outokumpu had world-class exper-                Heikki Malinen, the chairman of
              to bar codes, for remote    tise in metals. Combining these yields      Intune Circuits‘ Board of Directors,
              identification in indust-    advantages which are harnessed at           is pleased that FII was found as an
rial and commercial delivery chains       Intune’s production plant,” says Matti      investor for the business start-up.
to ensure the product’s authenticity,     Karjanlahti.                                    “In spite of good omens, this is a
to store product information and to           It is unusual today to locate a plant   very early-stage business with many
monitor deliveries.                       in Finland and inside Helsinki Ring         risks. It will be years before success can
    In order to work, a remotely read     Road III when the aim is to keep costs      be judged. So it’s a good thing that
code – usually a label – needs a micro-   down. However, Karjanlahti says there       there are several parties sharing the
chip and an antenna. Microchips are       were good grounds for locating in Fin-      business risk.”
made by big international semicon-        land.
ductor manufacturers like Philips and         “UPM and Outokumpu have their 
Texas Instruments, but before Intune,     know-how in Finland. We also have a
no company concentrated on making         highly automated production process.
RFID antennas.                            The future trend depends largely on
    The history of Intune Circuits,       the customers. We are able to make
which is jointly owned by UPM,            a billion antennas a year in Vantaa to
Outokumpu Technology and Finnish          begin with, but with small
Industry Investment, began in 2002        readjustments we can
when UPM approached Outokumpu             boost annual output
on the development of a new antenna-      to three billion.”
manufacturing technology. It was not          The main mar-
long before Outokumpu’s research          kets for RFID an-
centre was able to demonstrate its        tennas are the US,
groundbreaking idea for a technique       Europe and Asia.
for manufacturing copper conductor        Director Kimmo
patterns.                                 Viertola of FII sees
    “UPM had a need to get high-          Intune as an example
quality, customised antennas for RFID     of high-tech production

Industry Investment 1/2006                                                                                                                       15
      Text: Jorma T. Mattila | Photo: Juha Salminen

                                                                    USA and Finland
                                                                    play different games
                                                                    dozen Finnish companies into the US             Paulin sees the understanding, ac-
                                                                    market, worked with Finnish venture         ceptance and harnessing of the risk
                                                                    investors, Tekes and Sitra, and served      capital curve as the difference explain-
                                                                    as visiting professor at the University     ing the results of seed financing in Fin-
                                                                    of Oulu.                                    land and the US.
                                                                        “Great work has been done in                The risk capital investment cycle
                                                                    Finland on starting high-tech compa-        is like an exaggerated version of the
                                                                    nies, but their financing has not been       normal business cycle. At first you
                                                                    handled equally well,” he notes.            identify the opportunities, then you
                                                                        In particular, there is a shortage in   climb to the peak of overblown ex-
                                                                    Finland of private seed financing in the     pectation, then slide down rapidly
                                                                    early stage, whereas in the US there is     shedding illusions, and then you start
                                                                    considerably greater investment in this.    all over again.
                                                                    Also, the sums in seed financing are             “I’ve been through this cycle
                                                                    smaller in Finland, somewhere around        five times. In Finland it’s been gone
                                                                    half a million euros. In the US, the        through maybe once, so how could it
                                                                    ballpark is 3–6 million dollars.            be recognised here?” Paulin says.
                                                                        As much as 85 per cent of seed              According to him, smart Ameri-
     Doctor William Paulin believes                                 financing in Finland comes from the          can risk investors make placements in
                                                                    state, while in the US its main sources     start-up companies even in the trough
     that profits could be made                                      are private individuals and private eq-     because they know there will be
                                                                    uity companies.                             another upswing. In Finland, by
     with seed financing in Finland                                      “Your early-stage companies may         contrast, the tendency is to wait for
     if the game were played the same way                           not get a big enough share of the mar-      the upswing to get underway before
                                                                    ket to win. It’s therefore logical not to   investments are made in early-stage
     there as in the United States.                                 invest in seed-stage companies, because     companies.
                                                                    you lose money that way. Or is it?”             “You have to have faith in the cycle
                                                                    Paulin says provocatively.                  and invest a little early, in the trough of

                                                illiam Paulin,                                                  the downswing,” Paulin advises.
                                                who has piloted     FORECAST THE RISK                               In the US, the possibility of truly
                                                early-stage Amer-   CAPITAL CYCLE                               large returns are thought of first, larger
                                                ican companies,     Paulin thinks there is no particular        investments are placed and bigger risks
                                                and has served      reason why Finland should lose and          are taken. Efforts are made to avoid
                         as a senior director of some Fortune       America gain money. It’s just a question    losses, but loss is accepted.
                         100 corporations and been professor        of what game you are really playing.            Because of the larger investments,
                         of Business Administration at four US          “As practical people who are able       early-stage companies in America are
                         universities, is also very familiar with   to change, Finns could learn to play        also able to hire seasoned senior-level
                         the Finnish corporate community and        their own version of the American-          management. Also, legislation protects
                         venture investment market.                 style game in which you can make a lot      managers’ homes and personal prop-
                            Since 1993 Paulin has visited Fin-      of money and early-stage companies          erty against losses in case of bankrupt-
                         land roughly 60 times, piloted over a      can thrive.”                                cies, unlike in Finland.

16                                                                                                                             Industry Investment 1/2006
                                                                      Text: Hannu Virtanen and Anu Virnes-Karjalainen | Photos: Juha Salminen

Fresh impetus for corporate development
Business incubators and the corporate       ups has been markedly increased.           because financing was not available.
development companies that operate              For example, a person thinking of          In areas in which there were active
in them are the first growth environ-        starting a business can spend a few        private early-stage risk investors, all
ments for skills-based companies. The       months with a preliminary assessing        incubator companies which needed
aim of the Development Programme            incubator to assess the chances of         it received financing. The problem is
for Business Incubators (Yrke), coor-       building a company on his or her busi-     that private money is not available in
dinated by the Finnish National Fund        ness idea and carrying out the neces-      all areas and this is why some projects
for Research and Development (Sitra),       sary studies of things like markets and    are left without finance in these
is to respond to the challenges of inter-   copyright issues.                          areas.
nationalising companies, to boost the           Another example is the planned             On the Board of Di-
number of start-ups and to improve          Born Global project, in which the          rectors of the fund es-
their finance-worthiness.                    most promising corporate patterns in       tablished for FII’s seed
    The project is carried out in part-     each locality are identified, groomed       financing programme,
nership with the Ministry of Trade and      for the international market and as-       we consciously take a
Industry, Tekes, Regional Labour and        sisted into the target area.               controlled risk because
Business Centres, and regional parties                                                 this is the role of a public
such as cities and local authorities.       WHAT IS THE BIGGEST                        player. FII always works togeth-
    Director Anu Nokso-Koivisto of          CHALLENGE FOR THE PROJECT?                 er with private investors
Sitra chairs the steering group for the     Developing a long-term financing            as a co-investor. This
Yrke project. She also serves on the        model: the incubator business has sur-     fosters     certainty
Board of Directors for Industry Invest-     vived on short-term project financing.      about the project’s
ment’s Start Fund I Ky, which invests                                                  credibility and its
in start-ups.                               HOW WELL DOES SEED                         opportunities for
                                            FINANCING MATCH UP                         success.
THE YRKE PROJECT SO FAR?                    About 10–15 per cent of the companies
Practices have been polished and            in the seed stage were not established
standardised and the number of start-       or there was a delay in the start-up

                                                                 Kari Ståhlberg appointed
                                                                 Investment Manager
                                                                 Kari Ståhlberg, M.Sc., CEFA, started        dent, Mergers & Acquisitions in
                                                                 as FII’s Investment Manager in June.        London. His move to Finland was
                                                                 He works on the team making capital         pleasing.
                                                                 investments in growth companies,                “My new job is more varied.
                                                                 both directly and through funds.            FII’s contacts with the business com-
                                                                    “It’s my job to assess attractive com-   munity in Finland are very broad
                                                                 panies as investments, to prepare pro-      and the field of capital investment is
                                                                 posals for investment decisions and to      interesting.”
                                                                 take part in monitoring and developing          He does not expect to run into
                                                                 the target companies. The preparation       cultural differences. “The processes
                                                                 and administration of investments in        and ground rules are no doubt the
                                                                 funds is also my job.”                      same here as in other parts of Europe.
                                                                    Before coming to FII, Ståhlberg          I see my new job as an interesting op-
                                                                 worked for JP Capital as Vice Presi-        portunity.”

Industry Investment 1/2006                                                                                                                            17

     Growth is a sign of health.
     Growth sparks a positive                                                                Venture capital fund
     cycle with which the company
     maintains its vigour, flexibility
                                                                                             for early-stage
     and attractiveness to stakehold-                                                        technology companies
     ers. Growth is a virtue in itself,
     which every company and                                                                 Conor Venture Partners has set up a venture
     manager should aim for.                                                                 capital fund to invest in early-stage technology
                                                                                             companies. Its size in the foundation stage is
     Frank Korsström                                                                         EUR 16 million.
     President of Accenture                                                                      The fund has been invested in by Finnish
     Talouselämä 9/2006                                                                      Industry Investment, Etera Mutual Pension In-
                                                                                             surance Company and Atine Group and its im-
                                                                                             mediate circle. “By investing half of the capital
     Getting rich or even aiming                                                             for the fund’s first closing, we aimed to ensure
     for it is by no means always the     First-round investment                             the fund’s start-up,” says FII’s Managing Director
     main motivation for an entre-                                                           Juha Marjosola. “The important thing for FII is
     preneur. The majority of en-
                                          in eliminating                                     to increase the supply of risk financing for seed-
     trepreneurs are in the lifestyle
     entrepreneurs group for whom
                                          problem odours                                     stage companies.”
                                                                                                 Conor Technology Fund I Ky will be closed in
     entrepreneurship is all about        Finnish Industry Investment Ltd and a number       2006 and its targeted size is EUR 50 million. The
     independence, freedom, a             of private business angels have made first-         typical size of a first-round investment is EUR
     chance to do meaningful work         round investment totalling EUR 250,000 in          0.5–1 million.
     and to employ themselves.            OdorOff Ltd, a company which has developed
                                          a method for removing problem odours.
     Elina Varamäki,                          There is a global market for odour absorp-
     D.Sc. (Econ. & Bus. Adm.)            tion reactors: the warmer the climate, the more    Henri Grundstén
     Taloussanomat 11.4.2006              active bacteria are and the more bio wastes
                                          smell. Applications include waterworks, the
                                                                                             joins FVCA’s Board
                                          food industry, and retailers with waste storage    Matti Turunen of Eqvitec Partners has been
     The transparency that belongs        facilities.                                        elected chairman of the Board of Direc-
     to good governance, a clear divi-        The idea is based on chemical absorption,      tors for 2006 at the Finnish Venture Capital
     sion of work between different       in which malodorous air is piped through a         Association (FVCA). The other Board members
     institutions and improving the       reactor. The solution in the reactor binds the     elected were Henri Grundstén of Industry
     efficiency of board work are also     odours, removing them from the air.                Investment, Risto Jalonen of Aboa Venture
     important in unlisted companies.         “Eliminating problem odours is an efficient     Management, Annareetta Lumme-Timonen
     Transparency boosts confidence        way to increase amenity value in cities and im-    of 3i Finland, Erkki Pekkarinen of Bio Fund
     in the company’s business.           prove job satisfaction and the public image for    Management, Kari Rytkönen of MB Rahastot
                                          companies,” says OdorOff’s Managing Director       and Heikki Westerlund of CapMan Capital
     Leena Linnainmaa,                    Pentti Tuokko.                       Management.
     Senior Deputy Director of the
     Central Chamber of Commerce
     Arvopaperi 2/2006
                                          Instant test sets for health care
                                          and environmental measurements
     On the basis of GDP per head,
     Finland still places 15th or 16th    Industry Investment and Midinvest Manage-         to carry out immunological testing for heart at-
     worldwide. Investment has            ment have made a seed investment totalling        tacks, inflammations, cancer and infections. The
     been the same since the 1980s.       EUR 150,000 in a company manufacturing instant    company’s customers are health-care diagnostic
     As a society, Finland is clearly     testing equipment for health care and environ-    test manufacturers.
     underperforming in terms of its      mental measurements, Magnasense Ltd.                  “The capital investment makes it possible to
     potential economic opportuni-            Magnasense’s products are based on using      make a fresh prototype,” says CEO Mika Laitinen.
     ties.”                               magnetic properties to measure concentrations     “This will be exploited at least in Europe and maybe
                                          in samples of human tears, blood, saliva and      America. We already have a contract in Finland and
     Leader, Kauppalehti, 12.5.2006       urine. An instant test instrument can be used     more are on the way.”

18                                                                                                                    Industry Investment 1/2006
Targeted virtual ads on television
Virtual Advertising Systems VAS Ltd’s technology permits the production
of virtual advertisements in a direct TV broadcast. Capital investment from
Conor Venture Partners and Industry Investment is being used to make this
technology commercially viable and to announce this on the international
market before the end of the year.
    The VAS method replaces existing ads in a direct broadcast. This means
that a physical advertising spot – such as a banner at a football field – could
be sold several times over to target the advertising message regionally.

                                                                                                                             Photo: Pekka Ala-Aho / Kaleva

New technology
for health-care imaging                                                          Spark-detector system
Optomed Ltd is developing a new imaging instrument for basic health care
and technology for medical imaging for equipment manufacturers. The aim
                                                                                 improves fire safety
is to go direct to the international market with the instrument, which is for    Aspensec Ltd develops intelligent spark-detector and ex-
digital imaging of eyes and ears. The company already has partners in the        tinguishing systems for facilities with a dust-explosion risk.
USA, continental Europe and China as well as links with the top equipment        Industry Investment and Teknoventure have made a first-
makers in the field.                                                              round investment in the company.
    “Using this instrument, a doctor can more conveniently verify and docu-          “In addition to their technical qualities, Aspensec’s
ment a patient’s symptoms immediately after the preliminary diagnosis.           systems are also highly competitive with foreign ones in
This also improves quality, traceability and patient security,” says Optomed’s   terms of price. This enables also small companies to protect
Managing Director Seppo Kopsala.                                   themselves against fires and explosions,” says Aspensec’s
                                                                                 Managing Director Lasse Ravaska.
                                                                                     EU regulations require every company dealing with
                                                                                 mixtures of air and dust to chart its fire and explosion
                                                                                 risks by June this year and to take adequate precautions.

                                                                                 Networked video surveillance
                                                                                 sells worldwide
                                                                                 ASAN Security Technologies Ltd, which develops digital
                                                                                 integrated visual surveillance systems, concentrates on intel-
                                                                                 ligent security solutions for networked video surveillance.
Top design                                                                       Typical applications include indoor car parks, harbours,

for wireless communication                                                       airports, luxury cruise liners, corporate office buildings and
                                                                                 industrial plants.
Industry Investment and Eqvitec have invested a total of EUR 2.5 million in          FII and Atine Group and its immediate circle have
Iqua Ltd. Iqua creates innovative and expressive design accessories for the      made a combined capital investment of 1.1 million in
mobile phone market.                                                             ASAN.
    The company’s colourful, wireless Bluetooth headsets are designed                “This investment empowers ASAN’s internationalisation.
for people who want the right mixture of technology, user convenience and        The world’s biggest vehicle transporter Wallenius Marine
classy design for their mobile communications. Made for personal use, the        AB made a deal last autumn to install our system on five
home, office and cars, the objects are the work of award-winning design duo       of its cargo ships. In the US, we made our first deals this
Juhani Salovaara and Tapani Hyvönen. The products are sold in many               year, with Miami-based Callenberg Engineering, which has
countries in Europe, Asia and the United States.                                 the world’s largest cruise lines as customers,” says ASAN’s                                                                       President Harri Rautio.

Industry Investment 1/2006                                                                                                                           19
Investing in growth
Finnish Industry Investment Ltd (FII) is a government-owned
investment company. The company invests the proceeds accrued from
the privatisation of state-owned companies in promoting the growth
and internationalisation of Finnish businesses.

Capital investments are needed during the target companies’ seed
and start-up stage, to finance growth, for spin-off projects,
change-of-generation arrangements, major industrial investments
and restructurings.

Industry Investment invests mainly in capital funds and also directly in

                                                                                                        Linseed Protein
companies. The targets are in all sectors. FII acs as a co-investor, investing
at most one-half of the capital and limiting its ownership to 50%.

        Investments and investment commitments roughly
        EUR 350 million

        Via venture capital funds and as a direct investor in some
        420 companies

        Profit for 2005 EUR 33 million
                         BioTie Therapies

                                                       Finnish Industry Investment Ltd

                                                          Kalevankatu 9 A, PO Box 685
                                                               FI-00101 HELSINKI
                         Nordic Koivu

                                                              Tel. +358 9 680 3680
                                                               Fax +358 9 612 1680


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