Backing the entrepreneurs

of tomorrow

First Fellow in 2023

2023 was a unique year for an investor compared to any of the last 20 years. On one hand, the exit market was almost dead, there were practically no IPOs and startup valuations were way below what we had gotten used to during the previous five years. On the other hand, inflation started to stabilize, the US major stock indices broke new records at the end of the year — mostly because of the famous seven large tech companies — and optimism started to recover.

First Fellow is a pretty strange investor when compared to most VCs. We only invest our own money; therefore, our only external stakeholders are the founders. We put 100% of our attention on them and don’t care about LPs as we do not have them. We are also not very exit driven, we would actually rather remain shareholders in a great company for 15 years or more — as we have in a few.

Even a great exit is the end of something and as such a bittersweet experience. We do not just exit the cap table, we may also have to exit a partnership with the founders and the camaraderie with the team. We exchange values of the heart and brain to financial values. This often feels like a loss when thinking about what really matters.

This happened to us in 2023 with ePassi, a successful digital employment benefit company. ePassi was acquired by TA Associates and Warburg Pincus. We were very happy to see the founder of ePassi, Risto Virkkala, stay as a shareholder in the company instead of fully exiting ePassi. Risto has done a magnificent job with ePassi together with the CEO Pekka Rantala. So, with bittersweet feelings we say sayonara to ePassi and wish the team all the best.

On the exit front, in addition to ePassi, we also received escrowed funds and shares from earlier exits of two other exemplary Finnish tech companies: Wolt and Picosun.

Despite the challenging fundraising environment, our portfolio companies raised close to €300M in funding during 2023. Alphasense, the AI-driven market intelligence platform, secured $150M led by Bond Capital at a $2,5Bn valuation. This was less than six months after the company having raised $100M at a $1,8Bn valuation from CapitalG - Alphabet’s (Google’s) independent growth fund.

We also made seven early-stage investments. Four of these were made into existing portfolio companies in support of further growth.

Quanscient is disrupting the multi-physics simulation market with its Allsolve and has invested heavily into building a bridge to a quantum future. Allsolve will enable automatic execution of those parts of simulations that enjoy a quantum advantage on quantum hardware, the rest will be processed by classical cloud resources. Quanscient enables companies to solve simulation problems at a scale and at a speed that is unprecedented. A good example is a fusion energy customer that redid a simulation with Allsolve they had already done with the market leading solution. The original simulation took three weeks and had an error margin of +/- 10% when compared to a later physical experiment. With Quanscient Allsolve the same simulation took eight hours and had an error margin of +/- 3%. We expect a great future for Quanscient.

Louhe is a new company in our portfolio as we first invested in Louhe in late 2022, and made second investment in 2023. Louhe has a solution that immediately spots anomalies from physical access control data. In addition to the real time anomaly identification, the AI based solution can identify weaknesses in security by analyzing historical logs. Louhe’s analytics can also help in improving logistics and decreasing the cost of capital by highlighting inefficiencies in material flows. In effect, Louhe is bringing the data analytics machinery used in cyber security to the world of access control, guards, gates, security cameras etc. The company has an opportunity to disrupt the slow moving conservative industry and generate significant value.

Cybexer provides digital twin solutions to organizations that need a high level of security against cyber threats. The company’s solutions enable financial services organizations, national defense forces, governments and large corporations to practice defending their information assets in a simulated environment identical to the real one. Cybexer not only provides the environment, but also has the expertise to orchestrate the exercises. This is an exciting growth market and Cybexer is well positioned to lead it. We made our initial investment in 2021 and a follow-on investment in 2023.

Yaak with HQ’s in Berlin, is building a generative SafetyAI for driving and is becoming the first company that can help accelerate autonomous safety validation and help certify level 3 & 4 autonomous vehicles, on a global scale. To solve this, Yaak is building a global network of +10 000 experts, by partnering with driving instructors around the world, to help teach their proprietary Safety AI to score safety, detect driving mistakes and explain why it was a driving mistake with unprecedented accuracy. We made our initial investment in 2022 and a follow-on investment in 2023.

Financekey is driving the transformation towards real-time, data-driven and AI-powered treasury and payment operations in large enterprises. The founding team came together in early 2022 when we made our initial investment, and in 2023 we made a follow-on investment. The company is helping supercharge treasury & financial teams of large global enterprises by modernizing the fragmented legacy landscape and bringing control to payment workflows with real-time cash visibility and management of banking data through banking APIs and ERP’s via a single platform. One of their early customers is working with +300 bank accounts spread over several banks. Before gaining access to Financekey’s solution, they had to manually log into each bank account to obtain an overview of their cash position. Financekey makes life more meaningful for CFO's by limiting time-consuming and compliance related manual tasks while accumulating significant financial benefits to customers by optimizing cash operations.

The most pleasurable part of our daily lives is interacting with founders and entrepreneurial management teams in our portfolio of +35 active companies, incl Alphasense, Doordash, Efecte, Aiven, Detectify, Upright Project, HoxHunt, Heltti, Futurice, Inclus, Hamina Wireless, Pixieray, Paebbl, NFT Port, Kilo Health, Brandbastion, Talentadore, to name a few — thank you all for the continued partnership!

During 2023 we have also syndicated with a number of great venture capital teams and continue working on boards with some of them. These include Maki, Lifeline, Specialist, Karma, PreSeed, Icebreaker, Cocoa and Tiny VC.

We also partnered up with new founder teams. Having screened literally hundreds of ventures, it is a distinct pleasure to get to the goal line and make a commitment. The commitment is, of course, also an investment, but more fundamentally it is a commitment to support the founders’ journey towards their goals, while hopefully making the world a little bit better every step of the way.

Intergrid specializes in electrifying industrial heating, leveraging machine learning to optimize heat production schedules and minimize costs. They provide software for power trading and operational needs, collaborate with hardware manufacturers for efficient unit delivery, and offer comprehensive support from investment analysis to operational maintenance. The company is still in early stages but has already validated its technology and is rapidly winning new customers. Olli, Pasi and Mikko form a great founder team. Looking forward to working with them over the next several years.

Sprint AI is an athletic training platform for professional athletes and their coaches. Powered by state-of-the-art machine learning algorithms, Sprint AI brings an unprecedented level of intelligence and precision to training. Combined with biophysical and lifestyle insights, Sprint AI accelerates athlete development and optimizes performance when it matters the most. We are very excited to learn more about the world of competitive sports while supporting the company in its aim to bring the tools used by world’s top athletes and teams to regular gym goers, golfers, wellbeing enthusiasts etc. The former CEO of one of our most successful investments introduced Sprint AI and its founder to us. Thanks, Timo, for the intro and looking forward to working with you Juha.

LumiDB is still flying under the radar, but we are very excited about the opportunity in the world of 3D point cloud data management. We expect great things from Sampo and Jasin!

2024 will hopefully see a continued recovery for the entire ecosystem around tech startups, lowered interest rates first in the US, but hopefully later on in Europe as well, reawakening of the IPO market and more trading as well. Historically some of the best companies have been founded during a recessionary period. I think there is a good chance for history to repeat itself!

Wishing everyone an exciting year of personal and business growth in 2024!

Risto & Kim