ETLA publication no 835, 2002

Raine Hermans and
Antti-Jussi Tahvanainen


The aim of this study is to depict the ownership and financial structure of Finnish small and medium-sized biotechnology enterprises. Most of the firms are owned by several groups of owners. In small companies the largest share of equity is held by individuals active in the business. Private venture capitalist companies own the largest stakes in both large and infant companies, while the same holds for public venture capitalists in adolescent companies and other non-financial firms in middle-aged companies. The low profits in the Finnish biotechnology company, and hence the low level of equity was offset by raising high amounts of capital loans. The governmental institutions Tekes and Sitra are the largest capital loan suppliers. The debt ratio was 25% out of the total assets of the Finnish biotechnology firms. Trade credit, domestic banks and Tekes were the main sources of the debt finance.

Principal component analysis shows that equity investments from private venture capital (VC) companies were related to the loans from domestic, both private and public, financial institutions. This raises questions on monitoring aspects of investors. The high equity share of principal owners with significant influence in the board and the high equity share of individuals active in the business seems to keep public investments out of the company. The high equity shares of private and public VCs are partially connected to high growth prospects of companies. In order to explain these relations it would be necessary to investigate any systematical features behind the anticipations.

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