The topic of responsible investment has been on the agenda a lot recently. Responsible investment is an approach to investment that explicitly incorporates environmental, social and governance (ESG) factors into investment decisions. An investor may prioritise one or more of these factors in the selection of their own investments.
Woodly’s venture capitalist Hanna Liiri has invested in Spinnova, Paptic and Woodly in their very early stages through the family investment company Besodos Investors Oy. She also sits on the board of all these companies. Although each of the above-mentioned companies is centered around their own, unique, innovation in the wood processing sector, their business models share a connection to the megatrend of climate change and biodiversity loss. The products produced by all three companies have the potential to be broadly scalable and the leadership teams are capable and competent. According to Hanna Liiri, who made the investment decision, this is not a coincidence, but an important criterion in the decision to become a business owner. “A company must have the potential for success,” says Hanna Liiri.
“In the past, responsible investing was exclusionary. For example, there was no desire to invest in the armaments industry, etc. Today it is proactive. In the Nordic countries, social, administrative and personnel policy issues are, in my view, already in order. In such cases the circular economy and environmental issues will then play a decisive role. When making my own investment decisions, it is the product and its scalability that counts. The product must be environmentally friendly and solve carbon neutrality problems,” she continues.
The investor’s role in a start-up?
The role of the investor in the start-up company is diverse, as the journey from a good business idea to a commercialized product is long. A long-term investor creates peace of mind for the start-up team and enables them to focus on product development and commercialization. In Hanna Liiri’s case, she also brings her own network of contacts to the common table and the process of making the investment sends a strong positive signal to other investors. Related to this are Hanna’s fondest memories of the investment journey: “We can pat ourselves on the back that we have often taken on the role of first investor, and that we have been involved in all of these from a very early stage. That sends a strong message to other investors that we have had the courage to make a reasonable investment. I can be proud of this and be pleased that we have led the way.”
According to Liiri, the investor is not required to have business or technology knowledge of the industry. Lack of this knowledge should not scare investors. The biggest support an investor can give is usually financial support. It is often much easier to find know-how for a company. Liiri would like more investors to be able to allocate at least a small slice of their portfolio to startups, as by working together, both would grow stronger.
“Expanding the investor base would improve the likelihood of getting more and more startups on the path to growth.”
In today’s climate it is often left to private angel investors and family investment companies to finance start-up companies. It is gratifying, however, that there are already a number of private equity funds on the market, for example focusing on these very early-stage investments.
In addition to the potential economic benefit, Liiri also sees investing as a social act, an investment in the development of Finland’s knowledge capital.
“As long as your own risk-taking remains at a suitable level, investing is fascinating. It provides an amazing window through which to see great inventions, meet skilled people and contribute to the prevention of climate change at least at some level, through your own personal efforts,” says Hanna Liiri.
In the picture Hanna Liiri with her father Esko Liiri, Chairman of the Board, Besodos Investors Oy.