Originally posted on October 7, 2011 at steveblank.com
By Steve Blank
I spent the month of September lecturing, and interacting with (literally) thousands of entrepreneurs in two emerging startup markets, Finland and Russia. This is the first of two posts about Finland and entrepreneurship.
I was invited to Finland as part of Stanford’s Engineering Technology Venture Programpartnership with Aalto University. (Thanks to Kristo Ovaska and team for the fabulous logistics!) I presented to 1,000’s of entrepreneurs, talked to 17 startups, gave 12 lectures, had 9 interviews, chatted with 8 VC’s, sat on 4 panels, talked policy with 2 government ministers, 2 members of parliament, 1 head of a public pension fund and was in 1 TV-documentary.
- a whole lot of smart, passionate entrepreneurs who want to build a startup hub in Helsinki
- a government that’s trying to help, but gets in the way
- a number of exciting startups, but most with a narrow, too-local view of the world
- and the sense that, before too long, they may well get it right!
While a week is not enough time to understand a country this post – the first of two – looks at the Finnish entrepreneurial ecosystem and its strengths and weaknesses.
The Helsinki Spring
Entrepreneurship and innovation are bubbling around Helsinki and Aalto University. There are thousands of excited students, and Aalto university is working hard to become an outward facing institution. Having a critical mass of people who think startups are cool in the same location is a key indicator of whether a cluster can catch fire. Finnish startup successes on a global stage include MySQL, F-Secure, Rovio,Habbo, Playfish, The Switch, Tectia, Trulia and Linux. While it’s not clear yet whether the numbers of startups in Helsinki are sufficient to ignite, it feels like it’s getting there, (and given the risk-averse and paternal nature of Finland that by itself is a miracle.)
The good news is that for a 5 million person country, there’s an emerging entrepreneurial ecosystem that looks like something this:
- Aalto University: Aalto Center for Entrepreneurship, Aalto Entrepreneurship Society
- Startup Accelerators: Startup Sauna and Vigo which includes Lifeline Ventures,KoppiCatch, and Veturi
- Startup Blog: Arctic Startup
- Business Angels: FiBAn, Sitra
- Venture Capital: FVCA, NextIt Ventures, Primus Ventures, Open Ocean Capital,Connor VC, and Inventure
- Government Funding: Tekes, Sitra, Finnvera, Finnish Investment Industry
9-to-5 Venture Capital
Ironically one of the things that’s holding back the Finnish cluster is Tekes, the government organization for financing research, development and innovation in Finland. It’s hard enough to pick which existing companies with known business models to aid. Yet Tekes does that and is trying to act like a government-run Venture Capital firm. At Tekes, government employees (and their hired consultants) – with no equity, no risk or reward, no startup or venture capital experience – try to pick startup winners and losers.
Tekes has ended up competing with and stifling the nascent VC industry, indiscriminately handing out checks to entrepreneurs like an entitlement. (To be fair this is an extension of the government’s role in almost all parts of Finnish life.)
In addition to Tekes, Vigo, the government’s attempt at funding private business accelerators, started with good intentions and got hijacked by government bureaucrats. The accelerators I met with (the ones the government pointed to as their success stories) said they were leaving the program.
Tekes lacks a long-term plan of what the Finnish government’s role should be in funding startups. I suggested that they might want to consider putting themselves out of the public funding business by using public capital to kick-start private venture capital firms, incubators and accelerators. And they should give themselves a 5-10 year plan to do so. Instead they seem to be stuck in the twilight zone of not having a long-term vision of their role. (There have been tons of reports on what to do, all seemingly ignored by an entrenched bureaucracy.)
Lack of Business Experience
Direct government funding of startups has also delayed the maturation of business experience of local angels and VC’s. Finnish private investors don’t yet have enough time-in-grade to have developed good pattern recognition skills, and most lack operating backgrounds. I have no doubt they’ll get there by themselves, but in wouldn’t take much imagination to attempt to recruit some seasoned overseas investors to add to the mix.
Even a more serious challenge is the lack of global business competence. The number of serial entrepreneurs is very low and until recently most of the talented sales and marketing professionals choose to work for Nokia.
Part 2 with more observations about Finland and the Lessons Learned will follow shortly.