Medix Biochemica is a mid-sized Finnish biotech company in the diagnostics sector.

Mittelstand: Sparring partners for SME’s

From the Finnish economy’s point of view, it is central that more and more medium-sized companies will find a fast track to growth and become international leaders in their fields. Tesi works with growth-oriented SMEs by offering them financing and expertise together with its partners.  

Medium-sized companies in Finland account for only three per cent of businesses registered as employers, but they are in a crucial position in terms of employment and the national economy. Medium-sized companies employing 50-249 people generate over 20% of Finnish companies’ net sales, jobs and exports. (Source: EK Pk-Pulssi 2019).

Everything starts from the owners wanting to grow.


These companies occupy a key position in Finland’s economic growth. According to a survey by EK, the Confederation of Finnish Industries, roughly two out of three medium-sized companies seek annual growth of over 10%, but only 9% seek strong growth of over 30% a year. Most medium-sized companies are not set on a growth track at all. Katriina Juntunen, CEO of Kasvuryhmä (Growth Collective Finland) that brings together a community of mid-sized companies pursuing growth, knows what is amiss.

“Everything starts from the owners wanting to grow. We challenge our new members to raise the level of their ambitions, because only that forces them to think differently to their competitors. The desire to grow must be formalised into concrete growth targets that are pursued in earnest,” she says.

EXPERTISE MOST IN NEED. Juntunen suggests that, at a practical level, an obstacle to growth for most medium-sized companies is a shortage of relevant skills.

“Technological advances, for instance, open up opportunities for new types of growth strategy, but this sets a challenge for companies to develop and identify the expertise needed to implement them quickly enough,” she explains.

Juntunen says Kasvuryhmä’s members are fully aware that growth must be responsible and sustainable. For many companies, this means shifting to circular economy business models that concentrate on maximising customer value while minimising waste. Such a change requires not only expertise and courage, but also a new way of collaborating with finance providers and, indeed, the whole value chain.

ATTITUDES AS AN OBSTACLE. Samuli Sipilä, founding partner of private equity company Juuri Partners, does not believe that companies lack ambition. He thinks that many would like to grow, but that there is a shortage of good advice, risk sharers and capital.

Samuli Sipilä

Many companies would like to grow, but there is a shortage of good advice, risk sharers and capital.


“I know that entrepreneurs work long days and have their hands full. If they were asked whether they want to grow their companies, if they had long-term financing as well as support and help to develop their business, there would be double the number wanting to grow,” he claims.

Sipilä points out that it is only in recent years that entrepreneurs have been encouraged to grow, and some people are still dubious of the merits of entrepreneurship. Traditionally, only solo entrepreneurship has been appreciated. Sipilä regards these sorts of attitudes as an obstacle to growth.

“The small size of Finland’s markets is another impediment. Growth quite quickly reaches its limits, and not all companies have experience of international expansion. Most medium-sized companies lack international networks, and we suffer from a dire shortage of talent capable of building up international sales,” he points out.

A GROWING BUSINESS NEEDS MORE THAN JUST MONEY. The staff at Juuri answer entrepreneurs’ questions and use Juuri’s networks to help them. They rarely put money first, because doing so can even be detrimental if it results in unmanaged growth. The success of the company becomes the common interest of both the entrepreneur and the investor through joint dialogue.

“When growing, a company needs the structures and resources for growth, corporate governance, improved transparency and a board of directors that is competent for its development stage. These should be built with a truly long horizon in view. Entrepreneurs often neglect to develop their governance, growth structures and customer processes because they find fine-tuning a service or a device more interesting,” says Sipilä.

Investors receive their rewards when the company succeeds. “We Finns have a lot to learn about ownership culture also in the sense that a company might need different owners at different development stages. True, there’s nothing to prevent a company having the same owner for a hundred years, but it doesn’t actually need to,” he comments.

The Juuri Rahasto II fund started operating with €110 million in 2019. Tesi, and the fund-of-fund KRR III it manages, are investors in the fund together with other fund investors. Juuri Partners selects portfolio companies from among well-established and profitable Finnish SMEs that have a good business idea and growth ambitions.

LONG-TERM WORK TO GROW WORLD-CLASS COMPANIES. The founding partners of development company DevCo partners, Teemu Alahuhta, Lauri Stadigh and Otto Kukkonen, worked in conventional investment companies before establishing DevCo in 2014. They decided to do things differently and create their own operating model dedicated to active development and a long-term ownership horizon. They focus on growing a handful of medium-sized companies into international leaders. They have brought together a bunch of experienced advisors and anchor investors to support them.

Otto Kukkonen

We want to build world-leading companies in selected niche markets.


“Our objective is to build, and develop over a longer time span, world-leading companies in selected niche markets. The sector should be international and at least €500 million in size, allowing growth to a sufficient size. Strong drivers of long-term growth must exist in the sector, typically evident from average profitability. A company must have a clearly identifiable competitive edge. It must be based on sustainable operation, encompassing responsibility and corporate culture as core values,” lists Otto Kukkonen.

DevCo believes that even the most promising medium-sized companies need sparring when they pursue global growth. Support might be needed, for instance, in clarifying the vision, establishing the strategy process, executing an acquisition, or more particularly in integration after an acquisition. DevCo is fully prepared to adopt an operationally active role in developing its companies.

RANKED AMONG EUROPE’S 10 LARGEST. Testimony to a hands-on approach Otto Kukkonen stepped in for one year as interim CEO in DevCo’s first portfolio company, industrial valve manufacturer Vexve (now Vexve Armatury Group).

Vexve concluded its first acquisition in August 2019 when it bought the Czech valve manufacturer Armatury Group, a company larger than itself. With net sales exceeding €100 million, Vexve Armatury Group now ranks among the ten largest valve manufacturers in Europe – but Kukkonen emphasises that this is just the start.

DevCo is a major shareholder in Medix Biochemica, a biotech company in the diagnostics sector. In 2019 DevCo raised €180 million of long-term capital for its next investment platform. Tesi is one of the investors.

“There aren’t really any other investment companies in the same size range in Europe that focus on individual companies and that can support portfolio companies at the operational level needed for strong global growth,” says Kukkonen.


Read more about DevCo on Tesi’s Dare to Grow website.