Investment news

At its general meeting, the Estonian private equity and venture capital association, EstVCA, chose Kristjan Kalda from BaltCap as the Chairman of the Management Board. Other members chosen for the management board were Margus Uudam from Ambient Sound Investment, Heidi Kakko from the Estonian Development Fund, Hanno Riismaa from Askembla, Kalmer Kikas from Hanseatic Capital, Allan Martinson from MTVP and Peeter Piho from Swedbank.

According to the elected head of the private equity and venture capital association, Kristjan Kalda, the convergence of Estonian venture capitalists is a logical step in establishing a financial services field that is accountable and to be competitive compared to other countries legislation.

“Through their investments private equity and venture capital firms are important employers in firms that focus on growth and innovation. Our association members make new investments today to be an important force in activating the economy.

With the association's common force we are ensuring that in tough competition Estonia would remain an attractive investment area, we bring in industrial standards to Estonia and we participate in cooperation with venture capitalists across Europe,” explained Kristjan Kalda about the EstVCA challenges ahead.

The EstVCA is an umbrella organisation connecting Estonian venture capital, private equity, business angels and suppliers of supporting services in the field. The main objective of the EstVCA is to actively develop the Estonian private equity and venture capital industry and raise a culture of ambitious entrepreneurship in Estonia.

EstVCA members are: Ambient Sound Investments OÜ, Askembla Asset Management OÜ, Astrec Invest OÜ, OÜ BaltCap, AS Cresco, Eesti Arengufond, AS Gild Fund Management, Hanseatic Capital Estonia OÜ, IPC Investment Group OÜ, AS MTVP, OÜ Pioneer Engineering Group, 

OÜ Redgate Capital, Swedbank Investeerimisfondid AS, OÜ Unitree Group, WNB Project OÜ. 

EstVCA supporting member chosen: OÜ Sentio, Solon Partners OÜ, AS Deloitte Advisory, Advokaadibüroo Glimstedt Straus & Partnerid OÜ, Advokaadibüroo Sorainen OÜ, OÜ Primos Invest, NASDAQ OMX Tallinn AS, OÜ Art 4 Design, OÜ Advokaadibüroo Luiga Mody Hääl Borenius, Krediidi ja Ekspordi Garanteerimise Sihtasutus KredEx, Tallinna Tehnoloogiapargi Arendamise SA, MTÜ Connect Eesti, Advisio OÜ, OÜ Curonia Research, Scandic Investments OÜ.

Further information:

Kristjan Kalda, BaltCap OÜ, tel: +372 665 0284, mob: +372 508 7967

Heidi Kakko, Estonian Development Fund, tel: +372 616 1085, mob: +372 5624 9959, heidi.kakko[A]arengufond.ee

Makers of Uniteddogs and Unitedcats, the Estonia-based United Dogs and Cats Ltd (UDC), received an investment of €480,000.

The investment was made jointly by 3 parties - the state-owned Estonian Development Fund, Ambient Sound Investments - an investment group led by co-founders of Skype, and a private entrepreneur with a web background in the Baltic region, Mr Raivo Hein.

"We have shown a steady growth of both revenues and the user base," CEO of United Dogs and Cats, Mr Ragnar Sass says, "we've got over 200,000 users and we are the market leader in Italy, France, Spain, Lithuania and Estonia. This is something we are really excited about."

Available in more than 10 languages, Uniteddogs and Unitedcats are fun and useful web communities where pet-owners can communicate, find new friends and learn to take better care of their pets.

"The investment will be used to further perfect the core services and to grow the user base," Mr Andrus Oks, a spokesman from the Estonian Development Fund commented.

Currently, the main sources of income for United Dogs and Cats are advertising of pet-related products and paid services for its members, like the Champion membership which enables access to additional features. "Currently, the Estonian economy is in a recession. But in a situation like today, we are glad to have managed to grow our revenues over the last quarters," mr Sass stated. Currently, about three quarters of UDC's revenues come from outside Estonia.

UDC focuses on how to enable great conversations between pet-owners, as well as to help people take better care of their pets. "We will introduce some revolutionary services later this year that will bring veterinarians and pet-owners much closer," Mr Ragnar Sass also added.

Previously, UDC has received €170,000 of funding from Ambient Sound Investments (ASI) in April 2008. "The early stage investment United Dogs and Cats Ltd received from us was successful - the product has been well received by the users. We now look forward to the expansion of the service," Kristjan Laanemaa, an investment manager at ASI, commented.

About United Dogs and Cats Ltd (UDC)

Founded in 2007, United Dogs and Cats Limited is the maker of social networking sites Uniteddogs.com and Unitedcats.com. Company's blog: http://blog.uniteddogs.com

About Estonian Development Fund

The Estonian Development Fund was launched in April 2007. It was created by the Estonian Parliament to initiate and support changes in the Estonian economy and society that would accelerate modernization of the economic structure, lead to growth of export and contribute to creating new jobs with high qualifications. www.arengufond.ee

About Ambient Sound Investments

Ambient Sound Investments (ASI) was established by the four founding engineers of Skype. ASI is a investing shareholders' equity primarily in Eastern European start-ups offering innovative technology and services. Since March 2006 the company has invested 8,2 millon EUR in 13 companies in several sectors including telematics, biotechnology and power electronics. For more information, please visit: www.asi.ee

Contacts for more information

Andrus Oks, Investment expert at the Estonian Development Fund, phone +372 5087 123, e-mail: andrus.oks[A]arengufond.ee

Ragnar Sass, CEO of United Dogs and Cats Ltd, phone +372 5714 666, e-mail: ragnar[A]uniteddogs.com

The Development Fund is investing 9.6 million kroons into Massi Miliano OÜ, the developer of a robot model designed for online apparel retailers. The investment made on equal terms with co-investors will pave the way for a test solution to be launched with a leading international online retailer already this summer.

The company set the project in motion two years ago and this summer a test solution will be launched with the first customer, a major international online retailer. The idea to harness the robotic mannequin in the online fashion industry originated from Heikki Haldre, the head of Massi Miliano and the founder of  Netikuller.ee. The robot itself was developed by Alvo Aabloo, Professor of Polymer Materials Technology at the Institute of Technology, University of Tartu, and Maarja Kruusmaa, Professor at the Centre for Biorobotics, Tallinn University of Technology. The patent protection is sought for the technical solution of the robot in the United States and other developed countries.

According to the Development Fund investment expert, Andrus Oks, the computer controlled shape-changing mannequin has the potential to be the key to efficiency and driver of growth in the online apparel retailing industry.

"Customers currently return up to 40% of the garments they have bought online. If from now on the customer can see a shirt or a coat worn by the robotic mannequin in his or her measurements, the return rate will certainly decline and people will be encouraged to buy clothes online more frequently and possibly also more expensive items. The ambition behind the robot application is that customers would be able to say  "it fits me." And it is under the trademark Fits.me that Massi Miliano is going to market the service shape changing mannequin to online retailers," Andrus Oks explained Massi Miliano's plans for the near future.

The robotic mannequin and Massi Miliano won the first place in the competition for start-up companies organised by the International Technology Law Association.

"Our development team includes excellent researchers, the venture capitalist Development Fund has faith in our business plan and we secured equal backing from private investors. All this enables us to export the good idea and turn it into a big global business," Heikki Haldre, the head of Massi Miliano, said to express his confidence in the commercial success of the robotic mannequin.

“The Fits.me service has already been compared to Skype, and considering the vital solution we are offering to the 26 billion dollar online fashion market, there are grounds for drawing these parallels."

The Development Fund's co-investors are angel investors and Webmedia AS. The transaction will give them a minority holding in Massi Miliano OÜ.

Legal counsel was provided by law offices Sorainen and Luiga Mody Hääl Borenius.

The Estonian Development Fund was initiated by the Riigikogu with the purpose of carrying out foresight and making investments into innovatively thinking and ambitiously operating Estonian technology companies. The Development Fund always engages one or several co-investors and makes an investment on equal terms with them in order to activate the local venture capital market.

Further information: Andrus Oks, Estonian Development Fund investment expert, tel: +372 5087 123

Heikki Haldre, Massi Miliano Chairman of the Board, tel: +372 56 611 119

The Development Fund's "world conqueror prize" and start-up money worth 50 000 EEK was given to the Digikäru team whose business plan was to combine the existing information systems of stores, radio frequency identification (RFID) technology and ID-card to make it more personal for the user and more effective for the stores.

Digikäru is lead by Aivar Roogsoo, Andrus Valma, Aigar Koov ja Margo Nõlvak, who are all connected by the University of Tartu Entrepreneurship and Technology Master's programme.

According to Heidi Kakko, the Development Fund's investment division development expert, the choice was made because the people at Digikäru have been thinking outside the box from the beginning and they have good preconditions to achieve their goal.  In addition, Digikäru faces an enormous technological opportunity because it is just a matter of time when RFID technology replaces the existent barcode standard.

The nominee of the special prize was chosen from among the best 25 out of 259 business plans submitted to the Brain Hunt competition. The Development Fund's special prize was delivered at the Ajujaht prize gala, which is a competition for developing entrepreneurship and innovation amongst youth.

In addition, the Development Fund proposed that the Digikäru team participate in SeedBooster, the Development Fund's international business incubator.

The Estonian Development Fund is a brain trust and investment fund, created by the Riigikogu that searches for sources of Estonia's new growth and is investing into innovative Estonian technology companies. Development Fund is the creator of EstVCA, Estonian Venture Capital Association and developer of ambitious growth business culture. 

Further information: Heidi Kakko Estonian Development Fund, tel: +372 616 1100, +372 5624 9959

an analytic tool for gauging software writing, Programeter, run by Mark Kofman, and  the developer of a wireless sensor network for the security and energy sector and border protection, Smartdust Solution, run by Jaanus Tamm.

The Estonian Development Fund is a think-tank and an investment fund initiated by the Riigikogu whose objective is to look for new growth opportunities for Estonia and invest into Estonian technology companies thinking on an international scale. The Development Fund is the promoter of the ambitious growth companies culture in Estonia and the instigator of the Estonian Venture Capital Association (EstVCA).

For further information about SeedBooster and participation opportunities, please contact the investment expert of the Development Fund (the former developer and exporter of Myoton), Andrus Oks, at andrus.oks[A]arengufond.ee.

•  For more detailed information, please read here

BBN: Ambient Sound Investments (ASI), a company which was established by the founders of Skype, is investing more money to new companies abroad and hasn't invested to a single new Estonian project in past year, Äripäev reports.

"The numbers speak their language," Toivo Annus, holder in ASI said. For instance, Estonian Development Fund has invested nearly EEK 30 mln to Estonian companies, although ASI's assets exceed Development Fund's tens of times.

"Actually Development Fund is hotshot in the Estonian market. Yes, you might say that the volumes are small compared to Sweden or Singapore, but they've invested a lot, compared to us. We haven't invested to a single new Estonian company in past 12 months," Annus said.

ASI gets couple of applications from Estonia each week. Altogether the company gets 5-10 applications, ¾ come from foreign countries.

"The risk isn't greater than in the good times," Margus Uudam, the investment manager of ASI said.

He said that even if a project has scientific potential, also the management must have right business perspective.

"We don't have long experience of entrepreneurship. Parents suggested their children to be lawyers, doctors or go to work to the bank. There are few those parents who told their children to become entrepreneurs and take risks," Uudam said.

ASI's investment focus is starting technology companies. Besides 30 technology companies in their portfolio there is also failed real estate company, which has got bankruptcy warning from ASI.

In the middle of March trustees in bankruptcy put Tark Kodu's 82 unsold apartments on sale with EEK 124 mln. Tark Kodu has EEK 117.3 mln and EEK 35 mln for Hansapank (Swedbank) and ASI.

ASI has assets slightly less than EEK 1.5 mln, which makes it likely the only company which has so much free money. The owners aren't interested in putting the money to grow fast.

"ASI is owned by four private persons. That means we have so much assets that it's enough for generations," Annus said.

They don't have a pressure to take too big risks. They also don't have quantitative goals, such as growing assets.

"Actually we live on just the same," Annus said.

On the 26th of  March, 25 venture capital companies and people from the field decided to establish Estonian Venture Capital Association EstVCA. The main purpose of the association is to develop the Estonian venture and private capital industry of and to increase the ambitious entrepreneurial culture in Estonia.

According to Allan Martinson, executive partner of MTVP, all operators in the capital market share a common interest that Estonia would have more and better businesses in which to invest."Venture capital produces successful enterprises, which primary products are business plans and teams, "said Martinson. "Estonia has the potential to be this type of country in the region from where growing enterprises enter the world," confirmed Ott Pärna, CEO of the Estonian Development Fund.

Killu Tõugu Sanborn who has a long-term experience with USA venture capital and is a member of the international expert committee evaluating the Development Fund´s projects, points out that it is essential to develop the Estonian venture capital market. "This is a culture of ambition that is being shaped by the models of success and normality of failure. In addition, it is necessary that supporting services like lawyers, auditors and advisors would understand the production of growing companies and speak the same language with venture capitalists," emphasised Killu Tõugu Sanborn.

All venture capital funds, property management companies, investment funds, business angels, law offices, financial advisers and all development institutions that are interested in promoting Estonian start-up and growing enterprises are invited to join EstVCA.

The founding body comprised the Estonian Development Fund, Ambient Sound Investments, Askembla Asset Management, Baltcap Management, Baltic Mezzanine, Curonia Research, ESTVIK Partners, Hanseatic Capital, MTVP, Primos Invest, Unitree Group, Sorainen, Swedbank Investeerimisfondid, Connect Estonia, Ernst&Young, KPMG, Kredex, Nasdaq OMX Baltic, PwC, Sentio, Tallinn Univerity of Technology Technology and Innovation Centre, Wellman and Priit Martinson, Urmas Peiker and Ville Jehe.

For participation in EstVCA activities and for further information:

Heidi Kakko, Estonian Development Fund; tel +372 616 1085, heidi.kakko[A]arengufond.ee

Kristjan Kalda, Baltcap Management AS; tel +372 665 0284, kristjan.kalda[A]baltcap.com 

HEI 8(17): A new and optimised electromagnetic solution allows the construction of simpler and lighter wind turbines which will be able to generate electricity at prices some 15-20 per cent lower than the wind turbines used today.

As a result of the investment of 3.9 million kroons, made by the Estonian Development Fund, an international business project has been implemented under the guidance of Lars Mach in Estonia. The idea of a new generator, developed by Ed Spooner, a professor of Durham University, will be implemented by Goliath Wind OÜ - a company which was established a year ago.

The goal of Goliath Wind is to develop a wind turbine generator which will be cheaper to run when compared to the solutions which are currently available while remaining reliable and efficient, and enabling a decrease of up to 20% on the price of wind-generated electricity.

"Most conventional wind turbines contain gearings which is sadly the weakest link of their construction. However, wind generators with live transmissions would be extremely massive and high in the consumption of materials," explains Margus Dintšenko, a member of the management board of Goliath Wind OÜ.

According to Lars Mach, another member of the company's management board, the capacity of wind generators has increased over the course of the last few years, which in turn has brought about larger and heavier generator builds. At the same time, the generator's gearbox remains a bottleneck, as its maintenance costs increase the overall price of wind energy. "I believe that the future is dominated by gearbox-free wind power generators," says Mach.

Problems relating to the construction and transportation of the new generator should be solved during the installation stage. For example, the generator of a six-megawatt gearbox-free wind turbine manufactured by a competitor constitutes a massive wheel with a diameter of twelve metres. The weight of the head of the wind generator alone, complete with hull and rotor, amounts to some 508 tons. The transportation and installation of such a turbine onto its final site of operation in one piece would definitely raise some serious problems. For this reason the generator which Goliath Wind OÜ plans to build is approximately two and-a-half times lighter and it can be transported and installed in several stages.

Indrek Kelder, an investment expert for the Estonian Development Fund, says that Goliath Wind has a high chance of achieving its goals. "We decided to invest in Goliath Wind for the reason that the authors of this idea of a new wind powered generator are involved in the company, and the technological audit considers the invention to be feasible and economically profitable. In addition, the company has an international background, as its key personnel have worked on the development of projects for Rolls-Royce Marine and the British Ministry of Defence, for example. If the prototype proves to be operational, producers from China as well as several European countries are already interested in the new solution," he says, describes the project's investment background.

Kelder admits that the Goliath Wind holding by the Estonian Development Fund to the amount of 3.9 million kroons is relatively small. The fund's maximum investment may be up to two to three million euros. The greatest investment made so far has been into Smartpost OÜ, where the Development Fund has a share of approximately 13.4 million kroons in a project amounting to a total of two million euros. The Development Fund makes investments for three to five years and provides assistance in the process of finding co-investors.

This project is co-financed by a company called PowerDrive OÜ which is investing 3.9 million kroons into Goliath Wind on the same grounds as the Development Fund. "We have a previous cooperation experience with this investor, which is why we were already in contact with them. Once we made our offer, they accepted it. Brief negotiations with other investors were conducted by the company itself as well as by the Development Fund, but at the end of the day our shared vision received the warmest welcome from this particular investor," Kelder says. 

Specialists from the Tallinn University of Technology played a major role in the valuation of risks involved with the project of developing the new wind turbine, as they helped to asses the risks of the project and essentially agreed to participate in the process of solving the problems relating to the project after the assessment. The processes of designing the turbine prototype, finding the most suitable electromagnetic solution and testing the turbine, are carried out in cooperation with the team of Jaan Järvik, the head of the Department of Fundamentals of Electrical Engineering and Electrical Machines at Tallinn University of Technology. "By the end of this year, a turbine prototype with smaller dimensions should be ready and will be assembled in England, although most of the tests will be carried out in Tallinn. As long as the tests prove to be successful, construction of a full-scale prototype can begin after that," says Dintšenko.

Kelder notes that the investment activities of the Development Fund serve two purposes - first, to make successful investments and thereby to popularise investment activities among entrepreneurs as future investors.

"At the moment, most such activities in Estonia are held back by a lack of knowledge - entrepreneurs are often unable to take this opportunity into account when they create their business models and as a result they are unable to find investors. On the other hand, possible investors lack the knowledge and contact networks necessary to invest," he explains. The other goal is to promote the activities of a particular company, which may not be noteworthy in the overall macroeconomic landscape, but bears a level of significance for the entrepreneur in question as well as for the other investors involved in the project.

The economic feasibility of the investment which has been made into Goliath Wind is determined by the profitability of the sale of the company's shares. This, according to Kelder, will become known in the years 2012-2013. "Of course, the investment is profitable provided that the development phase ends with a positive result and we succeed in creating a generator which is more reliable and less expensive to install and maintain than the ones used so far. It is also important to be successful in terms of sales," he adds.

One wind turbine can power a computer for 1620 years.

• The theoretical maximum energy that a wind turbine can withdraw from the wind blown at it is approximately 60%.
• Due to the fact that the fuel is free of charge, the efficiency of wind power should be calculated differently. The main concern is not efficiency for the sake of efficiency itself, but the increase in productivity by means of decreasing the price of wind energy.
• One 1.8 MW wind turbine which is installed on a suitable site is capable of producing more than 4.7 million electricity units a year. This is sufficient for the needs of more than a thousand households or for keeping a computer running for more than 1620 years.
• The working principle of a wind turbine is exactly the opposite to that of a ventilator. Instead of using electricity to create wind, turbines use wind to generate electricity.
• Almost all wind turbines used for the production of electricity have rotor blades which rotate around a horizontal axle. This central axle is connected to a gearbox and a generator in the machine room. The machine room is located at the top of a tower and it includes all the electrical components in the system.
• Most wind turbines have three rotor blades facing the direction of the wind which makes the blades rotate. The blades turn the axle which is connected to the generator that produces electricity.
• The generator is a machine which produces electricity from mechanical energy, contrary to a motor which works the other way around.

The Estonian Development Fund will buy a 21.37 percent shareholding in the wind turbine technology developer Goliath Wind for 3.9 million kroons (EUR 0.25 mln). The co-investor in the project is PowerDrive OÜ, which invests another 3.9 million kroons on the same terms and conditions as the Estonian Development Fund.

The aim of Goliath Wind OÜ is to develop a wind turbine generator that is cheaper than the present solutions, at the same time being reliable and effective. Under the leadership of Lars Mach, Goliath Wind is working to implement an idea by English Professor Ed Spooner from Durham University.

"Our objective is to get to wind turbines that are lighter, more durable and have a capacity which would start from 1.5 Megawatts and which would provide electricity at 15-20% lower prices than the current wind turbines," said Margus Dintshenko, member of the management board of Goliath Wind OÜ.

Indrek Kelder, investments expert at the Development Fund, stated that it is very likely that Goliath Wind will execute its objectives. "The authors of the idea of the new type of wind turbine are included into the enterprise, the technological audit finds that the invention is feasible and financially profitable. The enterprise also has an international grasp - for example, the key people in the project have worked for Rolls-Royce Marine and  development projects for the British Ministry of Defence," he explained.

As a result of the investment by the Development Fund, the international business project will be executed in Estonia.

The Estonian Development Fund has been established by the Riigikogu in order to monitor the future and to invest into innovative and ambitious technology enterprises in Estonia. In order to stimulate the local venture capital market, the Development Fund always looks for one or several co-investors into the projects.

Further information:

Indrek Kelder
Investment Expert, Estonian Development Fund,
Tel 616 1083

Margus Dintshenko
Member of the board, Goliath Wind OÜ
Mob: 564 57837 www.goliath.ee