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Taneli Heikka: Helsinki Spring – a revolution of enterprise support

Steve Blank, a professor at Stanford University, and a retired serial entrepreneur, visited Finland in early September. Thousands of people attended Blank's talks, boosting the civic movement of growth entrepreneurship that has been gaining momentum in the decision-making process for a couple of years now.


Steve Blank, a professor at Stanford University, and a retired serial entrepreneur, visited Finland in early September. Thousands of people attended Blank’s talks, boosting the civic movement of growth entrepreneurship that has been gaining momentum in the decision-making process for a couple of years now.

Perhaps the comparison where Blank’s tent lecture evening (which concluded with fireworks) was described as the Woodstock of the entrepreneur generation was slightly overblown, but there was something significant in the air in addition to the big words and the smell of gunpowder. The concept of the Helsinki Spring emerged on Twitter – a sweeping change that, in the spirit of the Arab Spring, may make our young people become capitalists.

Blank’s visit had a revolutionary message related to the financing of enterprises. Civil servants who use taxpayer money for enterprise support will have to decide whether they support the Blank entrepreneur movement or whether they are against it.  

Blank considers the world from the perspective of growth enterprises. All of a sudden, they have become significant because old enterprises do not grow and provide jobs like they used to.

To address this issue, ecosystems – clusters of entrepreneurship with the aim of rapid growth – have emerged in Silicon Valley and then in Israel and Singapore, among other areas. In them, capital, education, the job market and values encourage the rapid creation of startups.

In Finland, values, education and competence are taking the right turn with regard to growth entrepreneurship. The Aalto Entrepreneurship Society, which brought Blank to Finland, is an example of this. The establishment of the job market would require more diversity tolerance and an extensive increase in immigration. Most of the startups in Silicon Valley have been founded by immigrants.

However, the financing system is the worst bottleneck. Blank finds traces of socialism therein. In Finland, the government intends to control where growth is created and to make investment decisions without the personal risk of the investor. According to Blank, these are the appropriate principles of funding growth entrepreneurship:  

  1. The investment decision must always involve a personal risk and reward. This is the only way the investor will take a risk that is correctly proportioned to the operating sector of growth enterprises.
  2. In addition to money, the investor must provide their competence, time and passion to the enterprise.

What kind of public funding system would be established for growth enterprises on the basis of Blank’s views? And, is such a system needed? Growth entrepreneurship is a very special form of entrepreneurship that questions many usual Finnish values and ideas of entrepreneurship and fairness. Why does something like that require public support?

About 90% of startups fail. The successful one provides a nice profit to risk investors. The existence of this system is justified by entrepreneurship being the best way of finding new business models and creating new jobs. The task is so difficult that it needs a high-risk system that has been optimised to the maximum and that provides large rewards.

Will not a system like this create a new Facebook and Rovio without public funding? Yes, it probably would. But capitalism does have its flaws. And they are related to Finland.

Enterprises at the very early startup stage are not funded if the ecosystem of growth enterprises is underdeveloped, which is the case for Finland. This is a stage where the ideas of enterprises are vague and difficult to identify. In Silicon Valley, such ideas may receive private funding. But there are only a few hundred angel investors in Finland, and there is not enough money for all. Finland does not have a funding practice where wealthy private people, joint funds of angels and professionally managed venture capital funds would invest in startups.

This means that the practice needs to be established, and this is where the Finnish government can help. This does not mean that the government would create a new, permanent form of enterprise support. The ecosystems in Silicon Valley and Israel – the leading startup clusters in the world – were established so that the government supported the venture capital funds of the startups for years and then exited.

Taxpayer money can be channelled into asymmetrical funds where private capital and public capital go hand in hand. Funding decisions are always market-based. This means that taxpayer money is always invested in a company where a private investor is also willing to invest their own money.

Another way of channelling the support could be to establish a group of enterprise incubators. While Blank was visiting, Peter Vesterbacka of Rovio said that the EUR 600 million budget of Tekes would provide Finland with ten incubators, each having a budget of EUR 60 million. It is an interesting thought experiment to consider whether this would result in more innovation than the way money is currently used. Except that it is not a thought experiment. This is the way Israel operates. Incubators can be privatised when they operate on their own.

What will the Finnish model be like? Blank pointed out many times that the approach used in Israel, which they found after 30 years of failure, is excellent but Finland cannot copy it. Finland must find its own way of making Helsinki the world’s leading startup cluster.

Blank said that after having met with a large number of politicians, business sector opinion leaders and executive civil servants from the Ministry of Employment and the Economy, he had not met one person with a vision of what kind of funding system the Helsinki Startup Hub would have in ten years, and who would show the way there.

Taneli Heikka

The writer is the founder of AvajaOpen Oy and works as a communications expert in Sitra’s Synergise Finland development programme.