The opportunities for Danish entrepreneurs to attract capital have been affected in recent years by the war in Ukraine, supply chain uncertainties, inflation, and high interest rates. However, brighter days seem to be on the horizon.
Inflation is down and stabilizing, interest rates are on the decline, and growth is on the rise. This is good news for Danes in general, but especially for Danish entrepreneurs and growth companies, who in recent years have faced challenges with the cost of capital when seeking loans for their growth journey or bringing investors on board.
Denmark's Export and Investment Fund, EIFO, notes in the analysis "From Startup to Scaleup" that the prospects for Danish entrepreneurs and growth companies to raise capital appear to be improving.
The analysis examines the development of the Danish capital markets for entrepreneurs and growth companies over the past 18 months. It is structured around the financing options typically relevant for growth companies at different stages of their growth journey – from financing opportunities for early-stage startups to loan financing and export financing for more established SMEs looking to conquer new markets abroad, and ultimately, to be listed publicly.
... it appears that access to capital for Danish entrepreneurs is easing. In 2024, both inflation and interest rates are expected to stabilize, with interest rate cuts and, consequently, cheaper financing on the horizon.
Access to capital is easing
"There are still areas where progress is needed, but it appears that access to capital for Danish entrepreneurs is easing. In 2024, both inflation and interest rates are expected to stabilize, with interest rate cuts and, consequently, cheaper financing on the horizon. Along with better growth prospects, this will boost investors' willingness to invest and generally provide Danish SMEs with better access to financing for their growth," says Erik Balck Sørensen, Chief Investment Officer at EIFO.
He highlights four key developments in the analysis:
"The first is that equity crowdfunding, with the new Danish entrepreneur reform, could become a relevant financing option for early-stage companies. The second is that the Danish venture market in 2023 – contrary to the rest of the world – grew by 24% in terms of value and 9% more transactions. If the trend from the first half continues into the second half, 2024 will be even better. The third is that green investments are expected to set a record in 2024, and the fourth is that foreign investors in both venture and buyout are beginning to return after a brief absence in 2023."
This is good news, especially for founders. It means they don't have to sell too much equity too early.
Founders can hold on to their businesses
"This is good news, especially for founders. It means they don't have to sell too much equity too early. This ensures the drive and energy for continued innovation and growth. Additionally, it gives us a chance to keep successful companies in the country," says Erik Balck Sørensen.
However, he also expresses concern about developments in the buyout segment, where there are fewer deals globally, and regarding Danish IPOs, which saw only three listings in 2023 and none so far this year.
The analysis is being published today at Tech BBQ - the annual event in the Nordic tech startup community. Tech BBQ takes place at Lokomotivværkstedet in Copenhagen September 11th and 12th.
Download the analysis:
