The Dealflow team (l-r, Håkon Leinan, Stine Sofie Grindheim, Ole Bernhard Larsen, Jens-Petter Tonning) (Photo courtesy of Siv-Elin Skoglund, Opplett)
Norway is a hotbed for innovative start-ups in various fields and industries. Despite the potential for innovation, start-ups are not risk-free endeavours, meaning funding for them is often not easy to come by. Thanks to Dealflow, a Bergen-based firm, Norwegian start-ups and scale-ups can now get their chance.
“Dealflow is a platform for equity crowdfunding,” said Stine Sofie Grindheim, Dealflow’s General Manager. “It’s a marketplace where companies can raise funds, and an opportunity for investors to invest in early-stage start-ups and scale-ups,”.
Stine Sofie Grindheim, Dealflow General Manager
(Photo courtesy of Siv-Elin Skoglund, Opplett)
Capital Challenges for Start-ups
Norway, like the rest of Scandinavia, has been a spring of activity when it comes to local start-up and scale-up firms for some time now. Its well-educated workforce and high digital penetration make it an ideal start-up haven. Despite these strengths, banks and lending organisations are often reluctant to finance start-up firms. This is due to the level of risk involved since most new companies are unlikely to survive after their first three years in business.
To finance themselves, start-ups have taken to equity crowdfunding. This is a fund-raising method involving broad groups of investors who finance a start-up, in exchange for limited ownership of the firm. Essentially, it allows for easier access to capital and potentially lucrative returns. According to Grindheim, it’s a “source of capital that hasn’t been available to companies before”.
Dealing with Dealflow
At its core, Dealflow is a digital marketplace, allowing for start-ups to launch equity crowdfunding campaigns to raise capital, as well as enabling them to reach out to potential investors. Last year, Dealflow experienced an 80 % success rate when 28 of the 34 start-ups they worked with had successful fund-raising campaigns. According to Grindheim, Dealflow isn’t limited to specific products, services, or industries, stating that “we can see that both consumer products and industry solutions can, and have successful campaigns on our platform”.
For start-ups and scale-ups preparing for equity crowdfunding campaigns, communication and valuation are vital. Grindheim commented that start-ups and scale-ups need to be able to communicate precisely what problem they are addressing and solving for customers through their product or service. Then, their current worth is assessed through a process called valuation, which is often “one of the hardest tasks”, according to Grindheim. This is because, at any given time, a company’s value can lie in its management, patents, achieved growth and revenue streams, among others. “Valuating a start-up or scale-up is unfortunately not an exact science,” she said.
Dealflow also offers opportunities for potential investors to invest in start-ups and scale-ups at their early stage. According to Grindheim, “it’s an opportunity to invest in companies that you believe in, at an early stage, and be a part of their journey and growth”. However, she added that Dealflow’s role is to serve as a middleman between investors and start-ups. Therefore, they provide no consulting or advisory services for investors. “We are focused on presenting investment opportunities and risk factors. It’s up to the investor to decide,” said Grindheim. However, she suggested that potential investors should allocate a small portion of their portfolio as “high-risk capital” if they are to consider investing in up-and-coming start-ups. She also suggested that investors “not put all their eggs in one basket”, instead advocating that they invest said capital in several firms, thereby diversifying their portfolio and limiting the risk.
The Norwegian equity crowdfunding market has grown significantly. Dealflow has been no exception, despite being at an early stage in the market. In the last three years, the Dealflow-platform has raised more than 250 million NOK, with indications that this growth will continue. “We are very excited to see how this market will develop in the coming years,” said Grindheim. She added that the Norwegian equity crowdfunding market will become more attractive to larger investment groups once it is validated through start-up successes and investment returns.
With the success that Dealflow has had thus far, equity crowdfunding is likely to gain more popularity in Norway, with more and more Norwegians “becoming better and better at investing”. While acknowledging that it’s not for everyone, Grindheim believes that “for the companies who have a deliberate strategy of having many investors, and who want an efficient way of raising capital, this is a great opportunity”.
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