Butterfly Venture Fund III starts investing, two new American partners join in

Butterfly Ventures starts investing today from the new Butterfly Venture Fund III. The target size of the fund is 24 million euro. The fund focuses on hardware and deep tech companies whose business is built around unique, often protected and hard to reproduce technology. Butterfly Ventures is joining forces with US and Sweden based Capital A Partners (CAP A) for the new fund.

One of the focus areas of the fund is research based innovation and co-operation with universities that Butterfly Ventures has established relationships with. The fund is particularly interested in seed stage companies with high growth potential. While most of the target companies will be from Finland, the fund will also invest elsewhere in the Nordics and the Baltics.

The expansion of operations brings into the new fund two American partners from CAP A, Tanya Marvin-Horowitz, based in Stockholm, and David Mendez, based in the United States. One of portfolio companies in CAP A’s Fund I, Svenska Aerogel, listed in December 2016 to the Stockholm First North. CAP A is also a co-investor alongside Butterfly Ventures in portfolio company, Conexbird.

“We are so excited to be working with such a successful and experienced Butterfly team as we embark on our first Nordic-based fund. CAP A has made investments in the Nordics since 2013; however, our partnership with Butterfly establishes a more substantial presence here and provides more resources to help build our portfolio companies into successful global enterprises.” states Tanya Marvin-Horowitz, Managing Partner at CAP A.

With the new fund, the Butterfly Ventures team will have nearly 40 million euro under management. To date, Butterfly Ventures has invested in 40 portfolio companies and in the light of Finnish Venture Capital Association (FVCA) statistics it has had roughly 15% – 20% market share of all the early stage first time investment rounds invested by venture capital funds in Finland. In addition, CAP A has invested in 18 portfolio companies, 7 of which are Nordic based.

“Butterfly Ventures was the first VC we spoke with. The co-operation started a year and half before the seed investment round. When we needed the funding, everything worked out really fast. It was particularly important for us, that in addition to funding, we got on board a VC who we trusted and with whom the co-operation was working really well.”, noted Toni Linden, the CEO of KNL Networks.

“The help we’ve gotten, particularly immediately after the first investment round has been invaluable. The co-operation with Butterfly Ventures has always been fruitful, constructive and such that it supports the entrepreneur. Whenever I have asked, they have helped us. Therefore, it’s very easy to recommend Butterfly Ventures to my fellow entrepreneurs.”, says Aki Soudunsaari, the CEO of Naava.

A significant portion of Butterfly Ventures’ current portfolio companies deal with deep tech and hardware, such as KNL Networks, Optiwatti, Naava, Valossa, Sarokal Test Systems, Conexbird, Sapotech and Asmo Solutions.

”Of our existing portfolio, those companies who have had a hardware component have developed faster than others. This can be seen both in their revenues as well as valuation. Furthermore, many of our most interesting companies, for instance KNL Networks and Valossa, have research based roots. It’s natural that the focus of the new fund is steered towards this direction.”, states Juho Risku, Partner of Butterfly Ventures.

”The fact that Finland has very good hardware knowledge explains part of it. During the last few years, hardware development has become easier and more cost efficient. We also believe that one of our key success factors has been the very conscious, open and constructive co-operation with our portfolio companies. We have a good reputation and we get plenty of leads through the entrepreneurs of our existing portfolio companies.”, adds Ville Heikkinen, Partner of Butterfly Ventures.

Initial investors of Butterfly Venture Fund III include Tekes Venture Capital Ltd, Elo Mutual Pension Insurance Company, Fennia Mutual Insurance Company, Tradeka-invest Ltd, AI-Partners Ltd, LocalTapiola Pohjoinen Mutual Insurance Company and Gerako Ltd. The fund may accept additional investors until the final closing.

”We haven’t invested in such an early stage venture funds before, but the focus area of the new Butterfly Ventures’ fund along with the versatility of the team and the success of their earlier investments convinced us. We have researched several funds and this was suitable for Fennia’s investment portfolio.”, says Eero Eriksson, Deputy Managing Director of Fennia.

This first closing of the fund is nearly 13 million euro. The final closing of the fund will be done during 2017 and the size will be capped at 24 million euro.

”The rapid start with professional investors who have plenty of experience of investing into venture capital funds tells that we’re trusted. Naturally, the significant commitments of large institutional investors and Tekes Venture Capital are a good sign.”, explains the CEO of Butterfly Ventures, Matti Kanninen, “The success of our portfolio companies has helped also; for example, KNL Networks’ 9 million Series A round, which was one of the largest A rounds in 2016 in Scandinavia, and crowd funding of Asmo Solutions, which was closed just in two days, faster than any other over million crowd funding campaign in Finland. The fresh triple victory of Optiwatti at the nationwide Kasvu Open could also be mentioned.”

Enquiries and additional information

Matti Kanninen, managing partner
Phone: +358 (40) 5455877
Email: matti@butterfly.vc

Resources

Download PDF: EN, FI

Case: Sapotech

Sapotech logoMonitoring super-hot processes, like casting steel, has traditionally been problematic. Due the extreme heat and constant motion one cannot actually see what’s happening inside the processes and traditional camera-systems just can’t take it either. Yet whenever there’s a problem undetected it may cost hundreds of thousands or even millions to a steel mill. Sapotech has invented a laser based imaging solution that allows one to see with unprecedented detail into hot processes. More importantly, due their novel hardware, industrial internet software platform and SAAS -based business model, they’re able to install the system as well as prove the value for the steel mill within days. The approach makes sales cycles extremely short. It’s revolutionary concept in traditionally slow moving industrial automation industry.

Reveal Cast screen capture

The SAAS based software platform provides excellent ease of use for operator. It makes it easy to identify the defects and react early on when ever needed.

Prior to Butterfly’s investment Sapotech had launched their first product, secured multiple pilot customers in the Nordics and several hundred thousands of revenue, as well as filed patent applications for the key technologies.

“For some reason industrial automation and modern service based business models generally haven’t yet met. We’ve been able to marry a few things, unique hardware, our own industrial internet software platform and steel industry expertise into a world class service offering. These ingredients allow us to execute a rapid scale-up into a market that’s worth of billions. Butterfly brings in not just money now and networks needed for follow-on financing later, but also business model expertise, knowledge of IPRs and experience on scaling up businesses internationally. Their support while facing the challenges of ramping up global service business is truly valuable.” (Saku Kaukonen, CEO of Sapotech)

Butterfly invested into Sapotech because of proven customer traction and industry disruptive business model with market potential of billions. The product is mature, fast to deploy and provides instant value to the customer. Furthermore the founder team has very deep knowledge and networks within steel industry as well as rare combination of expertise required; industrial internet, machine vision and user experience. Butterfly’s investment will be used to further confirm the business model, ramping up the customer acquisition as well as developing follow-on products that leverage the existing software platform.

Case: Realsource

Realsource logoRealsource is a commercial real estate marketplace. It is an online service for investors to find commercial real estate and a very efficient way of selling commercial real estates for sellers. For the investor Realsource gives all the information the investor needs to decide to commit to a bidding process. On the other hand it helps the seller find as many potential investors as possible thus helping to get better selling price. The total annual transaction volume in commercial real estate sector was between 30-35 billion USD in the Nordics and appr. 200 billion USD in 2013 in the EMEA, the trend being rising. Based on current agreements Realsource will get 0.2% of transaction volume. This results 70M revenue potential in Nordics alone and 400M in Europe.

Realsource scenario calculator

For buyer Realsource provides advanced tools for comparing the commercial properties and making smart purchase decisions.

Prior to Butterfly’s investment Realsource had developed fully functional beta site and secured a major Finish property owner as a customer for the first year.

“Internet has transformed almost every line of business, including most of real estate sector. For some reason, however, commercial real estate sector is still mostly relying on traditional ways of doing business. We’re going to disrupt that. One of Butterfly’s strengths is their knowledge of online businesses, that’s exactly what we need. We also liked their agile approach to business development as well as international networks.” (Markku Aho, Founder of Realsource)

Butterfly invested into Realsource because of balanced team with both excellent technological skills and experience as well as extraordinarily deep understanding of commercial property market. The product has very mature feel with unique set of features not seen yet in online commercial property trade. Furthermore Realsource had first significant customer signed in and there’s market opportunity worth at least hundreds of millions. Butterfly’s investment will be used to further develop the product, attract property inventory as well as validate the business model and value proposition.