Startup situation in Finland: the state of the ecosystem
Startups are sorely needed for growth in Finland’s economy. The traditional engines of Finnish industry, large corporations, are downscaling and outsourcing jobs away from Finland. Medium-sized enterprises are few in number compared to other countries and lack international linkages and product development prowess. Most small companies in Finland, meanwhile, can be considered tradesmen – individual operators with perhaps one or a handful of helpers, but without any real ambition for growth. What we need are startups intent on growth and on conquering the world.
What is the fuel for the creation of startups? We need four things:
Ideas: Of these there is no lack. A highly educated, internationally connected population is constantly coming up with new ideas or finding ones elsewhere that are worth stealing.
Attitude, willingness to take risks: This is improving, but still weak. We are a risk-averse nation. Best bet for job safety is to go work for the government or for a large corporation. Our society does not reward risk-takers and frowns upon those who choose non-traditional paths. Luckily, some highly visible successes are slowly turning the tide, especially Rovio of Angry Birds, Aalto Entrepreneurship Society, and a few members of Parliament that act as boosters for the startup scene. We are, in fact, living in the “Helsinki Spring” of enthusiasm about startups. But the major shifts in general attitudes are still missing and the Helsinki Spring is not inclusive: startups remain a young techie’s game.
Funding: Finland has insufficient funding available for startups. We have too few players, especially private ones. Organisations such as FiBAN, the Finnish Business Angels Network, are trying to change this, but there is still a lot of work to be done. The “pipeline” for companies to progress from startups to growth companies to stock listed enterprises is not working well. Though it has stalled in many other countries as well since 2008, Finland has some specific problems in getting the pipeline to both push and pull companies through.
Admittedly, there are areas that are hot, such as gaming, that are bringing in foreign investors. But other, perhaps slightly less sexy but still potentially highly profitable areas need investment as well. Gaming alone will not create enough revenue or jobs for the Finnish economy.
Skills, abilities: Startups have problems not only in getting a well-rounded founding team, but also in borrowing know-how later on in their lives to overcome specific challenges. One wishes the old legend about Finns being strong in technology but no so in business in general or in marketing would be untrue. But from what I have seen, this still holds. Accelerators such as Startup Sauna and those belonging to the Vigo program help, of course, and many of the coaches they are able to engage are awe-inspiring. But the field remains too small to support a large number of startups. Furthermore, an industry-sector bias is also in evidence, with ICT clearly being the strongest area because of the influence of Nokia. It is good to play to one's strengths, but startups in other industries need experienced backers as well.
How do you think the startup ecosystem can be improved?
These topics (human and environmental well-being and resilience) are already incorporated in the goals of many, though of course not all, startups. Perhaps as markets evolve or are created and, consequently, more funding becomes available, even more startups will see this as an interesting business area. And perhaps that will also bring "non-traditional" founders into the startup arena.
Your recommendation also dovetails well with the direction Sitra is taking as an organization: a focus on wellbeing through ecological and cultural sustainability.
Finland is a small nation, with limited resources. This would naturally suggest that focusing our efforts is a smart move. After all, critical mass in developing understanding and knowledge can be crucial to building winning global concepts.
However, we run into some problems when we try to choose WHERE to focus. Dan's suggestion about human and environmental well-being and resilience, above, is a good one. That is very broad, though, if we are talking about industrial policies. Should we pick specific industries (healthcare?) or types of innovations (city-based social innovations?)? Or particular technologies, perhaps, as I hear the South Koreans do? The risk of making the wrong bets is high, and Finland has not been very successful in directing these kinds of choices top-down, though there are of course a few examples to the contrary.
Looking for ways to add value by solving problems at the level of individuals and customer companies will create more viable businesses and bring about the business diversification you call for. A general policy of encouraging ideation and the rapid testing and development of ideas, regardless of the source, format, and domain of those ideas, should be more beneficial than desperately seeking focus from the get-go. Let all the flowers bloom! That does not necessarily preclude putting some extra resources later on into those areas where we see flowers starting to bloom especially well.