Estonian funds are increasingly confident in investing in innovative fields

Estonian professional investors are expanding their international reach and looking for investment opportunities in innovative fields.

The Estonian Private Equity and Venture Capital Association (EstVCA) CEO Madis Lehtmets says that the private and venture capital funds operating in Estonia are actively seeking new investments locally and abroad. “Last year, funds expanded their teams, opened offices in other countries and attracted international talent so as to boost their presence on foreign markets and grow their expertise, including in order to invest in new sectors,” he explained.

At an event ‘Funds on Stage’ organised by EstVCA, the fund managers noted that there is growing confidence when it comes to investing in innovative fields. For example, opportunities are more actively being sought in sectors like green and deep technologies, defence, energy and medicine.

Speaking about the economic environment, the participants agreed that although investing continues to be influenced by the economy and surrounding environment, people are optimistic about the overall investment climate. Karma Ventures co-founder and partner Margus Uudam says the market is picking up again after a rather more sluggish 2024. “There are clear signs of improvement in what are turning out to be very interesting times,” he said. “Our strategic interest lies in seeing more portfolio companies reaching sales this year.”

Discussing expectations for 2025, the participants remarked that people are hoping to see new exits (i.e. start-ups that have reached the point of sale) bring capital to the market for funds and experienced start-up founders. However, they also sounded a note of caution, adding that there should be no rush to sell portfolio companies if the economic environment is unfavourable.

On the topic of development needs, the fund managers said that very few new start-ups were established in Estonia in 2024, forcing local investors to more actively seek investment opportunities further afield. Veljo Otsason, a partner in Superangel, says that with such a limited number of start-ups having been established of late, the expectation is that new quality players will emerge in 2025. “That said, our fund’s focus this year will be on new investments,” he added.

There were active investments in new start-ups last year, and funds have also made follow-on investments in companies in their portfolios to help them grow. The participants noted that portfolio companies were successful in raising capital from foreign investors as well in 2024. That trend is likely to continue this year, as an increasing number of local start-ups are reaching a more mature stage and will need capital from new and existing investors in Estonia and abroad if they are to expand their operations.

Regarding the focus for 2025, partners from the private and venture capital funds operating in Estonia revealed that they are also actively investing in the next generation of founders and that working with young people has become an important part of what they do, including actively investing in young people in Ida-Viru County.

About EstVCA:

The Estonian Private Equity and Venture Capital Association (EstVCA) is the representative body of private equity and venture capital industry players and related support services providers in Estonia. Today, EstVCA represents the most influential firms and decision-makers across the industry, comprising leading Private Equity & Venture Capital, Mezzanine, Real Estate and Infrastructure funds, Family Offices, and institutional investors as well as various advisors active in the field.