Venture Capital 2025 Comparisons

Notable transactions related to venture capital (VC) during the past 12 months include the following.

• Flatpay, founded in 2022 by serial founders Sander Janca-Jensen, Rasmus Busk, Rasmus Hellmund Carlsen and Peter Lüth, is a Danish payment solutions provider for SMEs. Flatpay raised EUR45 million in a Series B funding round led by Dawn Capital, with participation from existing investor Seed Capital and other investors.
• Adcendo, a biotech company focused on the development of first-in-class ADCs for the treatment of cancers, closed an oversubscribed EUR128 million Series B financing round led by TCGX.
• Orbis Medicines, a Denmark-based company involved in oral macrocycle drug discovery, announced the close of a EUR90 million Series A funding round led by New Enterprise Associated, bringing the total amount raised by the company to EUR116 million.

Over the past 12 months, the Danish VC market has adapted to global economic uncertainty, leading to several key trends.

Investment selectivity has intensified, with VCs prioritising start-ups that demonstrate clear paths to profitability and proven business models, particularly in sectors such as cleantech, health tech and AI. Downrounds have become more common as valuations adjust, and there is an increased emphasis on profitability and cash flow rather than rapid growth. Due diligence processes have also become more rigorous, extending negotiation timelines.

Deal terms have evolved, in response to the subdued global VC market. Valuations are more conservative, resulting in lower dilution for founders, while convertible notes are being used more frequently to provide flexibility. Investors are also incorporating milestone-based funding structures to ensure that capital is deployed efficiently. Exit provisions, including stronger liquidation preferences, have gained importance, and VCs are securing greater governance rights, such as board seats or observer rights, to maintain oversight.

Additionally, ESG considerations remain a significant factor in investment decisions, with a growing focus on sustainability, particularly in clean energy and the circular economy.

Overall, while the Danish VC market mirrors global trends of increased caution, it remains resilient, emphasising sustainable growth, profitability and clear value propositions in an increasingly selective funding environment.

Between February 2024 and February 2025, Denmark’s VC activity was primarily driven by the technology, life sciences and renewable energy sectors. The technology sector – particularly fintech and enterprise software – attracted substantial investment, reflecting increasing digitalisation and financial innovation.

Life sciences, with a strong focus on biotechnology and health tech, continued to benefit from Denmark’s position as a hub for medical research and innovation. According to the Export and Investment Fund of Denmark, more than 60% of total Danish VC in 2023 was invested in the life sciences sector. Meanwhile, the renewable energy sector – especially wind energy and cleantech – experienced heightened VC interest, aligning with the country’s commitment to sustainability and green transition initiatives.

A distinction can be made between industries that experienced VC-backed exits and those that saw an increase in financing rounds. The technology sector, particularly fintech and software companies, accounted for a higher share of VC-backed exits, predominantly through M&A. In contrast, deep tech and renewable energy start-ups underwent multiple financing rounds, reflecting their capital-intensive nature and extended development timelines. This trend was further reinforced by the European Investment Fund’s commitment to PSV Hafnium, Denmark’s first venture fund dedicated to deep tech, underscoring the sector’s need for sustained funding.

Overall, Denmark’s VC landscape over the past year has followed a clear pattern: technology firms are more likely to achieve VC-backed exits, whereas deep tech and renewable energy companies continue to attract successive funding rounds to support long-term growth and commercialisation.

In Denmark, VC funds are typically structured as limited partnerships (Kommanditselskab – K/S), where the general partner (GP) manages the fund, and limited partners (LPs) provide capital while maintaining limited liability. The GP is usually a private limited company (ApS or A/S) to minimise liability exposure.

Decision-making is governed by the limited partnership agreement (LPA), which defines capital commitments, governance and profit distribution. The GP has discretionary authority over investment decisions, often with oversight from an investment committee, which may include LP representatives.

Market-standard corporate documentation includes:

• an LPA – defines fund structure, governance, investor rights and capital calls;
• subscription agreements – regulate capital commitments and LP obligations;
• an Investment Committee Charter – establishes decision-making authority on investments;
• management agreements – outline roles, fees and responsibilities of fund managers; and
• side letters – address specific investor rights and bespoke terms.

Fund principals typically participate in the economics of the fund through:

• management fees – usually ranging from 1.5% to 2.5% of committed capital, covering operational expenses; and
• carry or carried interest – standard market practice sets this at 20%, contingent on surpassing a predetermined hurdle rate (often 8%).

Danish VC funds are subject to the Alternative Investment Fund Managers Directive (AIFMD) and must comply with licensing, reporting and investor protection requirements. However, VC funds operating exclusively for professional investors may benefit from lighter regulatory obligations.

Funds structured as limited partnerships are not subject to direct corporate taxation, as profits and losses pass through to investors. Additionally, certain government-backed VC initiatives may have extra reporting obligations.

Denmark’s VC ecosystem comprises a diverse mix of impact funds, fund-of-funds and government-backed VC initiatives. The Export and Investment Fund of Denmark (EIFO) and the European Investment Fund (EIF) play significant roles in supporting early-stage investments, often co-investing alongside private funds.

Given the extended holding periods in VC, fund strategies have adapted to accommodate this trend, including through:

• secondary market transactions – enabling LPs to exit positions before fund maturity;
• continuation funds – providing extended capital support to late-stage portfolio companies; and
• hybrid fund structures – combining VC with growth equity strategies.

VC fund investors in Denmark generally adopt a risk-weighted approach to due diligence, focusing their in-depth analysis on business-critical areas while addressing other customary topics through management discussions and targeted confirmatory inquiries. The level of scrutiny varies based on factors such as the company’s industry, growth stage and regulatory exposure, ensuring a due diligence process that is proportionate to the associated risks.

Key areas of focus typically include ownership structure, intellectual property (IP) rights, key commercial contracts, and employment terms for key personnel. Investors assess the company’s shareholding and capital structure, including any warrants, stock options or convertible instruments that could impact dilution and governance.

IP ownership and protections are particularly crucial for tech-driven companies, ensuring that patents, trade marks and proprietary technology are properly assigned to the company and are free from third-party claims. Likewise, a review of material commercial agreements helps evaluate long-term revenue stability, dependencies on key customers or suppliers, and contractual risks. On the employment side, investors typically scrutinise non-compete, non-solicitation, confidentiality and IP assignment clauses to ensure that founders, key employees and technical talent remain committed and aligned with the company’s growth.

The timeline for a new financing round in a growth-stage company with new anchor investors can vary significantly based on transaction complexity, the number of stakeholders involved, and due diligence requirements. Generally, the process takes between two and six months, covering key phases such as preparatory work, investor negotiations, due diligence, legal documentation and closing. The introduction of a new anchor investor often adds complexity, as they may require extensive due diligence, negotiate key terms and influence the investment round’s structure.

A single financing round involves multiple parties with differing interests, including existing investors, new investors, the company, and sometimes key management. Existing investors typically aim to protect their pro rata rights, maintain governance influence and secure exit pathways, while new investors – particularly anchor investors – often push for preferred terms, board representation or enhanced protections. Balancing these interests requires careful structuring of the investment agreements.

The choice of legal counsel depends on transaction dynamics. In some cases, all investors engage joint counsel to streamline negotiations, particularly when their interests align. However, in more complex rounds – especially those involving significant governance changes or investor protections – existing and new investors may retain separate counsel to negotiate terms independently. The company typically appoints its own legal advisers to safeguard its interests.

Decision-making mechanisms in a financing round depend on shareholder agreements and company by-laws. Majority requirements are often sufficient to approve new financings, particularly when structured within an agreed framework. However, financings rarely proceed strictly in line with the mechanics contemplated in the shareholders’ agreement, requiring amendments to complete the round. Shareholders’ agreements often specify that amendments require a certain approval threshold, such as shareholders representing 90% of the equity.

In Denmark, early-stage financings often involve alternative equity instruments beyond common stock, particularly when investors seek downside protection, preferential returns or greater influence over corporate governance. The most commonly used instruments include preferred shares and convertible notes, each offering distinct rights and features that align with market standards.

Preferred Shares

Preferred shares are the most common alternative to common stock in VC financings, typically offering liquidation preferences, ensuring that investors recover their investment – often at 1x their original contribution – before common shareholders receive any proceeds in an exit or liquidation. These shares frequently include anti-dilution protections, usually structured as a broad-based weighted average adjustment, though full ratchet provisions may be negotiated in investor-favourable deals.

Voting rights attached to preferred shares are often equivalent to those of common stock, but investors typically negotiate veto rights over key corporate decisions, such as the issuance of new shares, amendments to governing documents, and significant M&A transactions. Additionally, preferred shareholders often secure board representation or, at a minimum, observer rights to maintain influence over strategic decisions.

Convertible Notes

Convertible notes are widely used in early-stage financings, particularly when valuation uncertainty makes equity pricing challenging. These instruments typically include:

• a discount (10%–25%) to the next financing round;
• a valuation cap to protect investors from excessive dilution if the start-up raises capital at a high valuation; and
• an interest rate (typically 3%–8%), though interest is often accrued and converted into equity rather than paid in cash.

The maturity date usually triggers automatic conversion at the next qualifying round, though some notes grant investors the option to request repayment if conversion does not occur within the agreed timeframe. Additionally, most favoured nation (MFN) clauses are often included to ensure that investors receive the most favourable terms granted to any subsequent investors.

A financing round in a Danish growth company typically involves a structured set of key legal documents to ensure clarity on investment terms, governance rights and post-closing obligations. The core documentation generally includes:

• an investment agreement;
• a shareholders’ agreement;
• updated corporate governance documents; and
• ancillary documents related to share issuance and regulatory compliance.

While Denmark does not have a fully standardised set of VC investment templates similar to the NVCA (USA) or BVCA (UK) models, market practice often aligns with internationally recognised VC standards, particularly in deals involving institutional investors.

Investment Agreement

The investment agreement is the central document that sets out the terms of the investment, purchase price, conditions precedent, and representations and warranties given by the company – and, in some cases, by founders. It also includes closing mechanics, specifying the process for share issuance and fund transfers. The agreement typically outlines investor protections, such as warranties on financials, IP ownership, and compliance, often subject to liability limitations and disclosure carve-outs.

Shareholders’ Agreement

The shareholders’ agreement governs the post-investment relationship among shareholders, defining corporate governance rights, share transfer restrictions, exit provisions and investor protections. Standard provisions include:

• tag-along and drag-along rights;
• rights of first refusal;
• anti-dilution protection; and
• consent requirements for key business decisions.

Institutional investors often negotiate for board representation and veto rights over certain strategic decisions.

Articles of Association

A financing round also requires corporate documentation, including amended articles of association (in Danish: vedtægter) to reflect new share classes or investor rights. If new preferred shares are issued, the articles will specify liquidation preferences, voting rights and dividend structures. Additionally, cap table updates and shareholder resolutions formalising the issuance of new shares are required.

Ancillary Documents and Regulatory Compliance

Additional documents typically include:

• investor rights agreements;
• regulatory filings to ensure compliance with Danish corporate law; and
• know-your-customer/anti-money laundering (KYC/AML) documentation, particularly for institutional investors subject to regulatory oversight.

Market Practice and Standardisation

While Denmark does not have a set of mandatory VC templates, market practice frequently draws inspiration from Nordic model documents and internationally recognised frameworks, particularly in deals involving cross-border investors. Legal counsel typically tailors agreements to align with Danish corporate law, local investor expectations and company-specific considerations.

In Denmark, VC investors secure various protections in downside scenarios, such as liquidation, to prioritise their returns over founders, employees and other stakeholders. Liquidation preferences ensure that investors recover their capital – often with a predefined return – before distributions to common shareholders.

While non-participating preferences remain the market standard, recent conditions have led to a growing prevalence of participating preferences, which allow investors to reclaim their initial investment and then participate in the remaining proceeds.

Anti-dilution provisions are also common, with broad-based weighted average adjustments being the preferred mechanism to prevent ownership dilution in downrounds, typically excluding shares issued under employee incentive plans.

Additionally, investors usually secure pre-emption rights, allowing them to maintain their stake by subscribing to new equity issuances before external investors. Depending on the deal dynamics, investors may also receive “super pre-emption” and right-of-first-refusal rights, ensuring that only the investor and holders of preferential shares can exercise these rights.

In addition to exercising influence through their ownership rights by voting at the general meeting, a VC investor would typically secure additional rights in a shareholders’ agreement to influence the management and affairs of the venture.

Board Representation and Decision-Making

VC investors often secure seats on the company’s board of directors, allowing them to participate directly in strategic decision-making. Board representation ensures that investors can oversee management actions and contribute to the company’s long-term direction.

Approval Rights (Reserved Matters)

Investors may require approval rights over certain major corporate decisions, ensuring that their interests are protected. These reserved matters typically include:

• amendments to the company’s governing documents;
• issuing new shares or financial instruments;
• changes to the capital structure;
• modifications to business operations;
• taking on debt;
• mergers or demergers;
• acquisitions or disposals of assets;
• dividend distributions;
• signing significant contracts;
• making substantial investments; and
• appointing or removing key executives.

Information Rights

Investors customarily obtain information rights, granting access to financial statements, budgets and strategic plans. Regular reporting obligations and the right to inspect company records allow investors to monitor performance and ensure that management aligns with agreed-upon objectives.

In a Danish start-up or growth company financing round, the representations and warranties typically cover the following areas:

• legal status and corporate power;
• no conflict;
• issued shares/equity instruments;
• financial statements and, in some cases, management accounts;
• position since the accounts date;
• real property and other assets;
• IP rights (IPR) and IT;
• GDPR compliance;
• material agreements;
• related party transactions;
• employees and pension;
• insurance;
• tax matters;
• regulatory compliance;
• no insolvency;
• litigation; and
• disclosed information.

According to Danish market standards, the maturity of the company influences the extent of representations and warranties – the more mature the company, the more extensive the warranties. Notably, similar to M&A transactions, the representation and warranty catalogue in Denmark is generally less extensive and comprehensive than in jurisdictions such as the USA.

Recourse and Founder Liability

In pre-seed and early seed rounds, it is customary for the founder team to bear personal liability, subject to a claim hierarchy where investors must:

• firstly, seek recourse against the company; and
• secondly, seek recourse against the founders’ holding companies.

Additionally, founders’ personal liability is typically capped at one year’s net salary.

In Denmark, several government and quasi-government initiatives are designed to incentivise equity financing in growth companies.

The EIFO provides capital through loans or equity investments to support companies’ development plans. Additionally, the Danish Growth Fund invests in private funds, which in turn invest in companies, and also directly provides equity investments in start-ups with significant growth potential.

In Denmark, the tax treatment of VC investments generally follows standard corporate tax rules but includes key distinctions aimed at encouraging investment.

Participation Exemption for Corporate Investors

Corporate investors benefit from the participation exemption, which makes capital gains and dividends on qualifying shares tax-free.

Tax Incentives for Start-Ups

Start-ups can take advantage of R&D tax deductions and equity incentives under Section 7P, which allow for tax deferral on employee share schemes. These incentives support VC investment, innovation and talent attraction in early-stage companies. The deduction rates for R&D expenses are set at:

• 108% in 2025;
• 114% in 2026;
• 116% in 2027; and
• 120% in 2028.

Tax-Free Dividends on Unlisted Portfolio Shares

Recent regulatory changes have abolished taxation on dividends from unlisted portfolio shares (where a company owns less than 10%). Previously, these dividends were subject to a 15.4% tax (calculated as 22% of 70%).

This change eliminates the disparity between capital gains and dividend taxation on such shares. As a result, companies receiving dividends from unlisted portfolio shares are no longer subject to the 15.4% tax, aligning dividend and capital gains taxation.

The Danish government has launched substantial initiatives to increase equity financing activity. In May 2024, the government introduced 41 new initiatives aimed at improving business framework conditions and fostering talent development. These initiatives are part of a broader strategy to enhance the investment climate and support start-ups and innovative companies.

In Denmark, the long-term commitment of founders and key employees is typically secured through the following.

• Vesting agreements – equity ownership is earned over time, ensuring alignment with the company’s sustained success. If a founder leaves prematurely, vesting provisions may limit their ability to retain their full share allocation, protecting other stakeholders.
• Employee equity incentive plans (ESOPs) – many venture-backed companies implement ESOPs, allowing founders and key employees to acquire a greater stake in the company. These plans may be structured as stock options or share purchase schemes, with vesting tied to time-based schedules or performance milestones (KPIs).

To incentivise founders and employees, Danish companies typically use equity-based instruments such as warrants and stock options, granting rights to acquire shares in the future, contingent on specific conditions or timeframes.

Standard terms include:

• (reverse) vesting – rights are earned over a set period; and
• exercisability – defines when and how options/warrants can be exercised, usually aligning with an exit event.

Implementing these plans early ensures flexibility for future investors.

Denmark offers favourable tax treatment under Section 7P of the Danish Tax Assessment Act. If certain conditions are met (eg, compensation not exceeding 10%–20% of an employee’s annual salary), taxation is deferred until the sale of shares, at which point gains are taxed as capital income (up to 50%). This provides a significant advantage over standard income taxation.

When implementing an investment round, it is common to establish an employee incentive programme concurrently with a new investment round. This ensures that a portion of equity is allocated before new investments, managing dilution effects.

The size and structure of these programmes are key negotiation points in VC financings, and are typically documented in the investment agreement or shareholders’ agreement. However, implementation is often delegated to the (new) board of directors post-closing, with minimal direct impact on the VC investment process itself.

VC shareholders’ agreements in Denmark typically include exit provisions governing liquidity events such as trade sales or IPOs.

Common clauses include:

• tag-along rights – allow minority shareholders to sell under the same terms as majority shareholders; and
• drag-along rights – enable majority shareholders to force minority shareholders to sell on agreed terms.

Exit triggers are often tied to:

• achieving specific financial milestones;
• reaching a predetermined investment horizon; and
• receiving qualifying acquisition offers.

Transfer restrictions typically include:

• rights of first refusal – existing shareholders have the first option to purchase shares before external investors; and
• lock-in periods – restricting share sales within a set timeframe to ensure stability.

The Danish initial public offering (IPO) market has fluctuated significantly. After a peak in 2021, activity slowed, with only three IPOs in 2023 and none in 2024. This has shifted investor preferences towards trade sales as a more reliable exit strategy.

Recent legislative changes allow companies to opt for realisation-based taxation for up to seven years after an IPO, meaning taxes are paid only upon the actual sale of shares, rather than on unrealised mark-to-market gains, which previously applied to companies holding less than 10% ownership in listed companies. This provides a liquidity advantage for founders and early investors, especially those subject to IPO lock-ups.

The realisation-based taxation option applies to IPOs taking place between 1 January 2015 and 31 December 2024, and is available to “original shareholders” – defined as shareholders who have held shares in the company for at least 30 days prior to the IPO.

For past income years, shareholders may request a reopening of their tax return to claim a refund of previously paid tax, provided the company has an overall capital gain on the shares. Such requests must be submitted no later than 1 July 2025.

Going forward, investors in companies listed within the past seven years, as well as newly listed companies, will have the option to apply realisation-based taxation.

This change provides a significant liquidity advantage, as companies and investors are not required to pay tax on unrealised gains. As stated, it is particularly beneficial for founders and early investors, who are often subject to IPO lock-up periods, restricting their ability to sell shares immediately after listing.

IPOs remain relatively uncommon for start-ups in Denmark, primarily due to stringent regulatory requirements and the high costs associated with public listings. When companies do pursue an IPO, they typically consider Nasdaq Copenhagen or other European exchanges, depending on company size, industry focus and investor interest. The timeline for an IPO is shaped by factors such as the company’s growth trajectory, market conditions and regulatory preparedness.

Pre-IPO Liquidity Considerations

There is a growing recognition of the need for pre-IPO liquidity, enabling early investors and employees to realise returns before a formal exit event. However, creating a structured secondary market presents challenges, including:

• regulatory compliance;
• valuation complexities; and
• potential impacts on company control and confidentiality.

To navigate these challenges, company-facilitated tender offers can serve as a strategic solution. This approach allows the company to repurchase shares or facilitate sales to approved investors, providing liquidity while maintaining oversight and stability in the shareholder base.

VC transactions in Denmark are primarily governed by the Danish Companies Act and the Danish Capital Markets Act, ensuring shareholder protection and market efficiency.

For larger transactions involving multiple investors or employees, compliance with the Danish Alternative Investment Fund Managers Act (the “AIFM Act”) may be required. Unlike some jurisdictions, Denmark does not provide a private placement exemption under AIFM rules, meaning prior regulatory approval is needed to market such funds.

Denmark maintains an open policy for foreign VC investments, though the Danish Investment Screening Act (DISA) requires pre-approval for investments in critical sectors such as:

• defence and IT security;
• critical infrastructure (eg, energy, telecoms); and
• financial agreements with national security implications.

Foreign VC investors generally face few restrictions in Denmark. However, the Danish foreign direct investment (FDI) screening framework has been increasingly enforced over the past year, particularly concerning Chinese and non-EU/EEA investors.

FDI approval is required for investments where non-EU/EEA investors acquire 10% or more of voting rights in companies operating in sensitive sectors. Despite the increased scrutiny, only one investment has ever been prohibited by the Minister for Industry, Business and Financial Affairs.

Sector-Specific Regulations

Certain industries impose additional restrictions on foreign investors:

• financial institutions (eg, banks, payment service providers) require approval from the Danish Financial Supervisory Authority (Finanstilsynet); and
• energy and infrastructure – foreign ownership of critical infrastructure is subject to restrictions.