What comes after oil and gas? Norway bets €60m it's IT startups

Norway's government has unveiled a seed fund for new tech businesses with international potential.
Written by Stig Øyvann, Contributor

Norway has unveiled a new public-private seed capital fund, aimed at bringing Norwegian IT companies onto the international market.

The fund, created by Innovation Norway, will total NOK 500m (€60.7m), with the country's government putting in 50 percent of the capital and private investors contributing the other half.

Startups with international potential

The fund's goal is to offer early-stage investments to new innovative IT companies with international potential.

The startups' ability to expand beyond Norway is key, Kjetil Bergmann, Innovation Norway's communications manager, told ZDNet: "The international potential is important. The Norwegian market by itself is small, so in order to create significant growth, international growth potential is crucial," he said.

"New, innovative businesses create many new jobs, therefore I'm very pleased we're now establishing new seed capital funds, which will invest in and further develop such companies," Monica Mæland, trade and industry minister, said in a statement.

Active ownership

The fund — which goes by the name of the Nationwide Seed Capital Fund — will be managed by Oslo-based Alliance Venture Spring.

The company will take care of raising the private capital part of the fund, and all of that cash must be in place before it can make its first investments. As a result, the fund is likely to be operational by summer 2014, according to Innovation Norway.

The fund will be managed in the same way as other commercial funds, where managers take an active role in the companies that get investment as well as seats on their boards if required.

"In general, 10 percent of the fund may be invested in a single project, but this may be extended to 15 percent in extraordinary cases," Stein Jodal, investment director in Innovation Norway, told ZDNet. "This will be an amount accumulated over several years — the initial investment will normally be much lower," he added.

The fund is looking to the long term: it expects to invest in startups for a period of four to six years, first at seed stage and then with growth funding.

More seed funds

At the same time as it announced the IT seed fund, Innovation Norway also launched a similar seed capital fund for the oil and gas industry. That fund will also have a NOK 500m budget, and the same 50/50 public-private financing model.

In the long run, the government's ambition is to have six such startup capital investment funds, though it has yet to say over what timeframe they will be established, or what other industries they will focus on.

The funds have been a couple of years in the making. The previous social democrat government started the work on these instruments as part of its revised national budget in the spring of 2012.

After this autumn's election, which saw the social democrats replaced by conservatives, the new government is carrying on the work, now starting to come to fruition. According to Innovation Norway's Bergmann, most of the intervening time has been spent on the tender process to select the fund management companies.

"On the seed capital funds themselves, there's no disagreement between the old and the new government," Bergmann said.

If anything, the new government is even more interested in improving conditions for the development of new private companies than its predecessor. There's also been a political discussion in recent years in Norway about what the country will live off when the oil and gas runs out. These funds can also be seen as an attempt to address that question.

Innovation Norway is a government-owned organisation concerned with business development in Norway. The Ministry of Trade and Industry owns 51 percent of Innovation Norway, while Norway's 19 counties own the other 49 percent.

Domestically, Innovation Norway is most known for helping new businesses to get up and running, both with advice and loans, while abroad Innovation Norway is more recognised for promoting Norwegian companies in general, and Norwegian tourist destinations in particular.

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