An alternative and definitively unpopular take on
Doing a Consumer Internet Startup in Finland
www.toughloveangel.com
a bl...
Disclaimer!
There is absolutely no data or science behind any of
the numbers used in this presentation
They are based on t...
Finnish Serial Entrepreneur Archetypes
A: 750
B: 200
C:50
rich and famous self-made
wife or inherited wealth
providing dec...
Tekes Grants & Risk Loans
levelofacombinedmarketandtechnologyrisk
Increasing risk of total investment failure
LOW HIGH
HIG...
2013 © The Tough Love Angel
level of risk
LOW
HIGH
Likelyhoodofextremescalabilityandsuccess
HIGHLOW
High risk, high gain
D...
Finnish Business Angel Archetypes
60 %
10 %
5 %
20 %
5 %
By Background
Non-IT family business
background
Professional Mana...
Consumer Internet Startup Outcomes
Success
Acquihire
Fail
US Finland
2% 1%
10% 0%
88% 99%
ProbabilitiesKey assumption: see...
Opportunity Cost of Doing a Consumer
Internet Startup in Finland
Key assumption: Highly experienced and seasoned team; i.e...
Doing a Consumer Internet Startup
in Finland
Success
1%
Fail
99%
It’s typically a fly or die – nothing in between. Most di...
The share of Finnish consumer
internet startups with Tekes risk loan
2013 © The Tough Love Angel
95 %
5 %
Tekes risk loan
...
Winding Down A Consumer Internet
Startup in Finland
Pay back
Tekes loan
99%
Fail
File for
bankruptcy
Create a
zombie
Excep...
Winding Down A Consumer Internet
Startup in USA
Orderly
wind down
88%
Fail
File for
bankruptcy
95%
5%
No need for exceptio...
Expected Exit Values in Success Cases
Success
Acquihire
Finland USA
Expected value: 1b€ Expected value: 1b€
Range: 100m€ -...
Investing in 100 consumer startups …
Average seed investment (m€): 0,5 1,5
Government share in funding (%) 60% 0%
Total in...
Should I do a Consumer Internet
Startup in/from Finland?
Key assumption: A seasoned serial entrepreneur with a real opport...
What are ways to reduce risk?
• Young first-time entrepreneurs have greatly
reduced opportunity cost – start young
• Short...
Final word (games excluded)
• Do consumer internet startups only if you are
young
• If you really want to go for it; incre...
Upcoming SlideShare
Loading in …5
×

Doing a Consumer Internet Startup in Finland

1,786 views

Published on

A typical wind down scenario of a failed startup looks pretty different in Finland as compared to US.

Published in: Business, Travel
  • Tekes startup funding represents 60-70 % of startups available cashflows (ie. equity, customer income, loans). They are the absolutely largest player in startup financing in fraction to 50:1 to next biggest player.
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • I think the overall quality of both startups and entrepreneurial teams would increase in a post-Tekes world, in the long term.

    You have a few excellent questions; let my try to address them in a blog post soonish, as they require a longer writing.
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Nice slides! I had no idea Tekes dominated the scene that much. I wonder what would happen should they have to cut down the funding.

    What sort of startups should people start in Finland? Are there domains where we are strong in comparison to the US? How is our situation compared to something like Sweden? As far as I understand they have more capital (likely less govt. funded).
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here

Doing a Consumer Internet Startup in Finland

  1. 1. An alternative and definitively unpopular take on Doing a Consumer Internet Startup in Finland www.toughloveangel.com a blog about the *&#% mistakes entrepreneurs make 2013 © The Tough Love Angel
  2. 2. Disclaimer! There is absolutely no data or science behind any of the numbers used in this presentation They are based on the writer’s expert opinion and used only for illustrative purposes in this presentation If you have more accurate data, pls. send it to mika@marjalaakso.com © All rights reserved. If you want to use the material, please contact the author for permission.
  3. 3. Finnish Serial Entrepreneur Archetypes A: 750 B: 200 C:50 rich and famous self-made wife or inherited wealth providing decent Income stream large mortgage, kids, limited ability to take risk 2013 © The Tough Love Angel
  4. 4. Tekes Grants & Risk Loans levelofacombinedmarketandtechnologyrisk Increasing risk of total investment failure LOW HIGH HIGH Finnish VCs LOW Large Majority of Finnish Business Angels A Select Few Business Angels Lifeline Ventures Friends & Family 2013 © The Tough Love Angel big money is here, risk taking not, how come?
  5. 5. 2013 © The Tough Love Angel level of risk LOW HIGH Likelyhoodofextremescalabilityandsuccess HIGHLOW High risk, high gain Digital marketing and distribution Disruptive Low risk, high gain (rare …) High risk, low/mid scalability, may be capital intensive; requires a physical world component IT service business, something incremental that is far from disruptive
  6. 6. Finnish Business Angel Archetypes 60 % 10 % 5 % 20 % 5 % By Background Non-IT family business background Professional Managers Financial industry background IT angels w/o consumer internet understanding IT angels with consumer internet understanding understands digital distribution accepts high risk against unlikely high reward typically quite risk adverse is more interested in not loosing money vs. scalability 2013 © The Tough Love Angel
  7. 7. Consumer Internet Startup Outcomes Success Acquihire Fail US Finland 2% 1% 10% 0% 88% 99% ProbabilitiesKey assumption: seed-funded startups 2013 © The Tough Love Angel
  8. 8. Opportunity Cost of Doing a Consumer Internet Startup in Finland Key assumption: Highly experienced and seasoned team; i.e. serial entreprenerus Team size: 5 Market salary / month: 10,000€ Pre-seed salary: 0€ Post-seed salary: 5,000€ Pre-seed duration: 6 months Seed I+II duration: 18 months Time-to-fail: 2 years Founding team investment 1,2m€ Received as salaries 0,45m€ Realized opportunity cost 0,75m€ Other assumptions: 2013 © The Tough Love Angel
  9. 9. Doing a Consumer Internet Startup in Finland Success 1% Fail 99% It’s typically a fly or die – nothing in between. Most die. 2013 © The Tough Love Angel
  10. 10. The share of Finnish consumer internet startups with Tekes risk loan 2013 © The Tough Love Angel 95 % 5 % Tekes risk loan leverage No Tekes risk loan Finnish business angels and VCs, by large, are risk averse and don’t invest in consumer internet startups. Tekes thus has a de facto monopoly in this area.
  11. 11. Winding Down A Consumer Internet Startup in Finland Pay back Tekes loan 99% Fail File for bankruptcy Create a zombie Exception 10% 60% 29% 0% - 1% There are no exceptions or they are few. 2013 © The Tough Love Angel
  12. 12. Winding Down A Consumer Internet Startup in USA Orderly wind down 88% Fail File for bankruptcy 95% 5% No need for exceptions. The cash that remains in the bank is paid back to seed investors. The most common funding vehicle is convertible debt. 2013 © The Tough Love Angel
  13. 13. Expected Exit Values in Success Cases Success Acquihire Finland USA Expected value: 1b€ Expected value: 1b€ Range: 100m€ - 5b€ Expected value: 20m€ Range: 5m€ - 60m€ Expected value: 0,5m€ Range: 0,1m€ - 10m€ 2013 © The Tough Love Angel
  14. 14. Investing in 100 consumer startups … Average seed investment (m€): 0,5 1,5 Government share in funding (%) 60% 0% Total investment (m€) 50m€ 150m€ # of successes 1 2 # of acquihires 0 10 # of fails 99 88 # of bankruptcies 60 5 # of zombies 29 0 Total exit value created (m€) 1000m€ 2200m€ Finland USA One word: madness! 2013 © The Tough Love Angel
  15. 15. Should I do a Consumer Internet Startup in/from Finland? Key assumption: A seasoned serial entrepreneur with a real opportunity cost No! In 99% likelihood, you will fail, and the cost of failure is  150,000€ lost opportunity cost  Lost time with family & friends  Bankruptcy stigma You can get rid of the stigma if you choose to create a zombie 2013 © The Tough Love Angel
  16. 16. What are ways to reduce risk? • Young first-time entrepreneurs have greatly reduced opportunity cost – start young • Shorten time-to-failure – be lean • Do only consumer internet startups that have – working revenue model from the start (oxymoron) – core technology that can be pivoted – minimum viable product that is minimal enough – no need for physical world business development – can be acquired by a Finnish media company • Avoid Tekes risk loans like plague 2013 © The Tough Love Angel
  17. 17. Final word (games excluded) • Do consumer internet startups only if you are young • If you really want to go for it; increase your chances for success and don’t do them from Finland, buy a ticket to San Francisco • If you are not able to buy a ticket; avoid Tekes risk loans; take only grants • If you are serious; you will not try to build these creatures from Finland unless you really know what you are doing … • And: remember to avoid Tekes risk loans …. 2013 © The Tough Love Angel

×