Let’s learn from Finland How to Create a Startup Ecosystem Done by Abdullah Alshalabi Date: 30/8/2012 firstname.lastname@example.org
FinlandA brief about Finland Finland is ranked no. 21 in terms of GDP per capita higher than UK, France and Japan Finland is considered one of the most active countries in terms technology and innovation. Regardless of it’s small population, Finland is the home of Nokia and some other successful companies such as MySQL, Linux and Rovio (the famous game maker of Angry Birds) Finland have one of the best education systems in the world Finland entrepreneurship scene is fairly active and consists many organizations and companies supported by a mix of public and private entities. The main drivers of the startup eco-system are shown below: Government Funding Venture Capital Universities Startup Acceleratorsstartupq8@gmail.com 2
Finland – Government OrganizationsEstablished: Established: Established:1983 1999 1967Annual Budget: Annual Budget: Annual Budget:Around EU500M More than EU500M More than EU500MTeam: Team: Team:7 board members 11 board members Undisclosed400 employees Undisclosed no. of employees Goal:Regions: Goal: We are forward thinking and anticipateFinland, Beijing, Silicon Valley, Tokyo Finnvera strengthens the operating potential social change and its effect on people. Ourand Brussels and competitiveness of Finnish enterprises activities promote new operating modelsGoal: Program description: and stimulate business that aims atTekes works with the top innovative Offering loans, domestic guarantees, venture sustainable well-being.companies and research units in capital investments, export credit guarantees Program description:Finland. Every year, Tekes finances and other services associated with the financing Invests in Venture Capital funds locally andsome 1,500 business research and of exports. globally. Currently invested in more than 40development projects, and almost 600 Results: VC funds, mostly to help Finnish startups topublic research projects at Domestic Financing € 3.0 billion grow and expand globally.universities, research institutes and Export Financing € 10,4 billion Results:polytechnics. Sitra is the oldest organization in FinlandProgram description: that was established to boost innovationTekes offers businesses a low-interest and entrepreneurship. Its investments andloan or a grant, depending on the activities through the last 40 years aredistance to the market and on the enormous and is spread into many othernature of the proposed project. sub-organizations. The organizationResults: currently reports directly to the FinnishIn 2011 Tekes made funding decisions parliament.regarding 1,928 projects, which resulted www.tekes.fiin total investment of 610 million euros www.finnvera.fi email@example.com 3
Finland – IncubatorsEstablished: Established:2005 2009 Established:Goal: Goal: 2010Seeking opportunities from Finland has many promising start-ups with lots of Goal:discontinuities in the way we use potential. Yet very few of them ever reach We push the selected startups develop tonatural resources. international scale. We want to change that. a stage where they’re ready to take overBenefits of the program: Benefits of the program: the international markets.Creating success stories by combining Helps entrepreneurs realize their dreams by Benefits of the program:capital, technology & sector know-how making seed investments and participating in the Incubation, coaching and hopefullyand access to key players in the operational running of the company – whether fundingcleantech sector, globally strategy and customer development, go-to- Funding:Project Funding: market execution or globalization. They help startups to secure funding after1-2 Million Euros Project Funding: the program. They only provide 1,500Program duration: Depends on project Euros during the programNo specific duration 50K-750K Euros Program duration:Requirements: Program duration: 6 weeksProviding capital and support for None Requirements:ventures with significant global Requirements: Startups should be from Northern Europe,potential. We look for entrepreneurs An idea with potential to disrupt existing Baltics or Russiawith the ability and will to build a global businesses Results:success story. Target market is big and growing 70 startups benefited from the progrmaResults: Studied the customer’s needs really well Team:Invested in 9 companies working in the Results: 5 full-time employeescleantech industry Investment in 16 companies 20 coachesTeam: Team:3 employees 4 executive employees www.cleaninvest.com www. gorillaventures.fi firstname.lastname@example.org 4
Finland – Aalto University EcosystemStartup Sauna is an incubator funded by Aalto university and takes Aalto Venture Garage as its base.Startup Sauna serves as the main incubator of Aalto students, however teams and startups are notrestricted to be from Aalto university neither are supposed to be from Finland. Aalto Entrepreneurship Society gathers the most Startup Sauna talented students and (Incubator) researchers to create more startups and build international Aalto Aalto Center for connections in and around Aalto University in Helsinki, Finland. University Entrepreneurship Aaltoes organizes lots of events Aalto and gathers every week. The Entrepreneurship main two programs are the 10 Society weeks Summer of Startups (Students society) program and the international exchange programsAalto Center for Entrepreneurship (ACE) offers innovation, commercialization, and start-up services for AaltoUniversity researchers, students and other stakeholders. The center serves as a bridge between the academic and reallife entrepreneurship scene. The main goal of the center is to push graduate students to become email@example.com 5
Finland’s analysisWhat can we learn from Finland’s experience?The Finnish government realized that they failed to build a first class startup ecosystem becausethey realized that even after more than 20 years of government support for innovation andstartups, they failed to produce not even one successful global company.Below are some of the major reason of Finland’s failure:- Public direct funding: The government tracked it’s performance by measuring the number of companies funded every year. But, it’s not about quantity, it’s about quality. The government gave money like crazy, most companies created are lifestyle companies that don’t become large companies at the end and don’t actually create any jobs. Its nice to give everyone a chance, but that wasn’t what the whole system was built for- Risk aversion: Risk aversion attitude lead to accepting businesses that have a high possibility to survive, but that doesn’t have high potential to become large companies that change the world. Lack of international skills: Lack of global business competence and serial entrepreneurs. Talented people only work in big companies.- No viable VC industry: Lack of real venture capital activity. Most of the activity is derived by public funding.- Lack of business competences: Lack of business competence that help companies to grow globally and attract global investors and international talent.- Finland didn’t consider the globally existing systems to learn from their firstname.lastname@example.org 6
Finland’s analysisSuggested solutions for Finland’s situation (by Steve Blank 2011 and VICTA 2007)- Indirect funding: The government should stop funding startups directly and should instead fund global incubators and VC’s that can then start funding Finnish startups based on commercial and market driven criterias.- Remove lifestyle companies from the equation: Lifestyle companies are not growth companies, they will not create jobs or add value to the society. This type of companies should be removed or separated from the startup ecosystem. These companies are sucking resources (time and money) and distracting the government performance measurement indicators.- Attract global talents: Transform the Finnish early-stage startup ecosystem to support the infusion of talent from the leading global talent. Laws, regulations and tax incentives should all be fixed to support this goal.- Fix government strategy: The government should shift it’s strategy from just helping Finnish people to start their own business to supporting startups that have the capability to generate a multi-million business. The vision should be driven to: generate more jobs, attract foreign investments, create global successful companies and attract international talents.- Fix culture and attitude challenges: The government should have a plan for a campaign to change the anti entrepreneurial culture. Challenges such as “Money takes care of problems”, Risk vs Reward and Failure vs Success, this mentality should be changed through educating the young generation and through some awareness campaigns.- Fix incubators structure: Currently most incubators are owned by the government. Incubators should optimally be owned by 4 shareholders: a local VC, a global VC, the government and a local university. Also the manager of the incubator should be either a serial entrepreneur or from a VC background. The incubator manager should also have direct or indirect share in the companies being accepted in the program. Moreover, the incubator should not accept more than 20 companies per email@example.com 7
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