Holidays are clearly over: our email is bursting with new investment announcements and expansion roll-out press releases. The latest news among this lot comes from Oulu, where the rather secretive telecommunication startup Kyynel has rounded a major investment from Butterfly Ventures, who also shares with us some statistics from the first half of 2014.
“The investment we made is so far the single largest capital investment made by Butterfly”, said Juho Risku of Butterfly Ventures.
Other participants of the funding round include Inventure, as well as private investors; the share of venture investors in the funding round amounts to €2 million, with more soft money from Tekes added on.
“The concluded funding round was a resounding success for our firm. We are in a good situation since we were able to qualify investors that are able to offer a great deal of added value in terms of developing our company further”, says Toni Lindén, CEO of Kyynel. “The funding round makes it possible for us to recruit new employees in order to speed up the commercialization process and head towards larger markets.”
Kyynel, which has been developing a wireless telecommunication system for the last four years, does a really good job of giving just enough information to keep you hungry for more. The information provided in the company’s website, as well as the in the release, sums up to nothing more than ambiguous conclusions on the technology, which Butterfly tells us will "revolutionize the satcom market."
This much we do know however, as stated in the Kyynel press release: “Even in a global scale, the technology and solutions developed by Kyynel can be deemed unique. The system the company has developed makes it possible to provide telecommunication services with high reliability and exceptional coverage, no matter where in the world the users may reside...Its envisioned uses include data transmission in arctic regions, maritime and official telecommunications.”
“Butterfly decided to invest in Kyynel because of the promising business idea and a very profound level of knowledge of the field,” commented Risku.
We’ll be sure to dig more into Kyynel later on, as the history trivia they provide as the background behind the company’s name is simply too intriguing (definitely worth a read).
Butterfly Triples Cash Output
What’s interesting about Kynnel and Butterfly's other investments is that they’re coming from the first asymmetric fund in Finland. Butterfly manages the Northern Startup Funds, a current €10 million fund put together by City of Oulu and the European Regional Development Fund, whose structure allows Butterfly to benefit from the invested capital and profit share before the public fund, greatly improving their risk/return ratio. Sometime in 2014 it’s expected that the fund will increase to €35 million, we wrote when first covering the Northern Startup Funds back in May of 2012.
Offloading risk onto the state sounds like a classic case of a Moral Hazard, but the justification here is that the state will benefit from taxes after supporting new companies in the technically talented but economically recessed northern part of Finland.
Butterfly Ventures has been putting the fund to work, tripling it’s investment volume in the first half of this year compared to 2013 in total. To throw some actual numbers around, in 2013 Butterfly invested only €1.5 million, and in the first half of the year has moved €6 million total into six new companies, including Realsource, Naturvention, Sapotech, Sarokal Test Systems, Pint Please, Kyynel, and one more company that they’re not sharing at this stage.
“The quality of startups in our dealflow has been a positive surprise. I trust we can further increase our investment volume next year. The progress of our portfolio companies also creates opportunities for follow-on investments including larger rounds. We will make additional 4-5 first time investments as well as several follow-on investments into our portfolio before the end of this year. Our own investment volume thereby increases to some three million euro,” says Risku.
Speaking of Dealflow, Butterfly shares it has analyzed 450 companies in its lifespan, of which roughly 25% were looked into as serious targets. If you’re approaching Butterfly as an investor, it’s good to know that at the time of first investment only 20% of the portfolio companies had revenue. Approximately 6 months after Butterfly’s involvement, roughly 80% were seeing some turnover.
Butterfly dollar bill image by shutterstock