Ten Challenges for the Finnish Startup Ecosystem

I moved to Finland in Summer 2004, and started my company (MySites) in 2006. During that time, I have been able to witness and participate in the development of the nascent Finnish startup ecosystem, as well as get experience from all around the USA, France, Germany and more recently the UK.

While I am upbeat about the developments in the Web industry, I would like to stress the points that I feel are more challenging in Finland and need to address if we wish to succeed, plus share an insight of how things are improving.

1. Lack of entrepreneurs

The most urgent problem is the lack of willingness of Finns to become entrepreneurs. To quote The Economist: “if only 3% of the population want to be entrepreneurs, as in Finland, you will have trouble creating an entrepreneurial economy”.

People have blamed this on several factors: lack of emphasis from schools, the emphasis on becoming a consultant, eased by the amount of public support that pays them, the so-called cultural lack of risk taking. While I will not try to pinpoint a specific reason for this, the country needs to create more entrepreneurs.

Pros: In spite of the lack of efforts from schools or the government, student organizations such as Aaltoes, Hankenes, Hues, Boost Turku and Stream Tampere have done a great deal of efforts to get interest from students during the past year.

2. Lack of role models

There is very little awareness of growth entrepreneurship as a viable career path. This comes as a surprise, considering Finland’s considerable contribution to technology: Nokia, F-Secure, SSH, IRC are all Finnish creations. Yet how many students know Marten Mickos or Taneli Tikka? How many want to create the next Remedy, Sulake or Digital Chocolate? Schools and the media have a large role to play in this. There is no shame in wanting to become the next Bill Gates, Sergei Brin or Mark Zuckerberg.

Pros: Aaltoes has managed to invite several “name” speakers in front of students, including: Risto Siilasmaa, Taneli Tikka, Marten Mickos, speakers from Standford and MIT.

3. Centralization

MySites started in Tampere, which is a city I didn’t know existed before 2003. Most events, VCs, people, startups are located in Helsinki. This is less true for the gaming industry, which has managed to have significant activity in Oulu, Kajaani and Tampere. However, the web is far behind.

Pros: Boost Turku and Stream Tampere have been successful at creating local startup events. Also, Tampere All Stars has made commendable efforts in the city of Tampere.

4. Lack of visibility

To my knowledge, there is a grand total of one blog that regularly covers all the Finnish startups. Getting coverage in mainstream press is practically unheard of. In fact, I have had consistently more success at getting coverage from foreign media than locally. You will not hear from innovative startups in your newspaper. There is very little discussion about growth entrepreneurship. Abroad, Twitter gets invited on Oprah, and even minor startups appear at the Journal de 20 Heures in France.

Pros: At least there’s Arcticstartup.

5. Lack of sweat equity

The value of your startup stems from the robustness of your team. In my experience, many people will expect the same things from a startup job as for a regular one: work normal hours, get paid a regular salary, don’t ask for equity. Without sweat equity, your team is less committed to stay and fight the hard fights. Without working extra hours, your team cannot compete with people who receive more money or have superior technology.

Pros: None that I can think of. Use your Kela money, student loans and credit cards more.

6. Lack of investments

As is the case in most of Europe, Finnish startups are less funded than American or Western-European counterparts. There is a distinct lack of foreign investments in the country, possibly due to the lack of tax incentives, while local risk investors have a consistent track record of getting less involved in local cases than Swedish investors. There’s been enough discussion about the topic. However, one must consider that with less access to funding, Finnish startups are less likely to be competitive with well-funded players.

Pros: While this is still very difficult, there has been an increate in very early stage investments (<50k range) and attempts to make fundraising less complicated by the Vigo program (though it is still early).

7. Lack of feedback

This one is purely personal, but I have found it extremely difficult to receive feedback in Finland. Consumers would simply say the positive things or say nothing. More alarmingly, even industry people (consultants, VCs) have been tight-lipped with their response. In contrast, feedback I received on every important meeting abroad has been extremely invaluable. I am not sure why this is the case. Maybe Finns are trying to be polite? Negative feedback is the basis of change, and the only way we can learn how to meet your needs.

Pros: There is a growing amount of “Open Mic” events organized by the different entrepreneurship societies, where feedback has been very straightforward. I’m looking forward for more of this from others as well.

8. Lack of networking and collaboration

There are plenty of startup and social media related events. Yet, in one year of attending these events, I’ve gathered fewer contacts and business cards than I have in San Francisco or London in less than a week. What gives? It can’t be simply that there’s fewer people or that they’ve all got their hands full with projects. How do you conduct business if you don’t actively hunt for new leads or partnerships?

Pros: There are less than 10 people I would consider “heavy networkers” in the country. Taneli Tikka, Peter Vesterbacka, myself, Janne Saarikko, Sonja Kangas, Ville Vesterinen, Christina Forsgard, Mohamed El Fatatry, and more recently Kai Lemmetty. Talk to them, learn from them!

9. Lack of internationalization

The European market is very fragmented. When you live in one of the smaller nations in Europe, you should start thinking about being international very early (unless you’re aiming for a really, really profitable niche). I often hear that Finland is a good test market. In my experience, it is not: it is more difficult to acquire consumers, get visibility, get feedback. Also, Finns have lower purchasing power than Western Europeans. I think it is quite a stretch to think that this knowledge is relevant abroad. There should be a stronger emphasis on participating in international events, setting up offices abroad, hiring foreigners, getting international visibility. In my experience, and this is quite counter-intuitive, all of these things are easier to do than their local counterparts.

Pros: There’s been an increase of internationalization by Finnish startups, such as Dazzboard, Mysites, Xihalife, Muxlim, Gigswiz. Also, Culminatum has been making efforts with its EIB Clinic to help some.

10. Too tech driven

Since very few people want to become entrepreneurs, most who do are people with a certain technical skill, who want to get it turned into a product. Many very smart engineering students want to create something new instead of working for some big company, and this is even more true of the active ones who contribute to open source projects. Of course, this creates a huge gap in the new companies that are founded. Legal, management, sales knowledge are often seen as secondary.

Pros: The Vigo program’s goal is to fix these gaps. Aaltoes organizes the Talkoot events (one of which I was mentoring) to help gather teams.

Hopefully we can make those points history in a year or two :)

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Published:
5.22.10 / 7pm
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