In our previous Reverse Pitching-event in Helsinki, I had a chat with a gentleman who told me about their business idea – and that he is moving to Northern Finland’s City of Oulu to build up their startup. That got me thinking that there must be something interesting going on from the perspective of startups in the Capital of Northern Scandinavia (as the City of Oulu has branded itself).

Oulu was selected in the list of Fortune’s ‘7 Best New Global Cities for Startups’ in 2012, and believe it or not, the Oulu region creates most innovations per capita in Finland based on statistics of the Foundation for Finnish Inventions. The Executive Director of BusinessOulu Juha Ala-Mursula says that the 25% of risk financing in the Finland is invested in Oulu where only about 5% of the people live.

“In total, there has been about 400 internationally scalable startup-companies founded in Oulu region, and already in the past week 14 companies have been searching for office spaces in Oulu,” says Ala-Mursula.

Still a High-Tech Hotspot?

Oulu has been well-known as a tech-city already since the 80’s, when the first technology park of Scandinavia, Teknologiakylä, was founded close to the University of Oulu. As Oulu’s success in high-tech was notified all around the world in the past three decades, and the city was referred in international publications as ‘the high-tech hotspot’ and ’the most unexpected high-tech city’ – But then something happened that put on brakes for the development. The ICT sector’s success started to decrease and the major flagship company of the area Nokia shut down its mobile operations in Oulu.

As Oulu was so concentrated on the buzz around Nokia in the mid 2000’s, the well-established startup ecosystem of the city got frozen. “With the tunnel vision for Nokia, the focus got too narrow and almost any new startups weren’t born in mid 2000’s”, described Ville Heikkinen from Butterfly Ventures. Heikkinen was living in Oulu around the ICT-boom until he left in 2006 – but what’s most important – he came back at the end of 2011, when the startup-scene in Oulu was starting go through a reawakening.

“There was an startup ecosystem in Oulu during the ICT-era, but it was basically very technically oriented. Back then there were resources for Nokia’s type of massive R&D systems where you could hide your ‘great technical ideas’ for a long time before launching it – successfully or not. After that skills to commercialize got more appreciated – Now the new entrepreneurs have also important entrepreneurial and business skills,” says Heikkinen.

Emphasis on the Ecosystem

It’s not all about great ideas or technicalities, but it’s also about the startup ecosystem of Oulu – which our guest bloggers Tom Laine, CEO of Innopinion, and Teemu Polo, Soljuva Technologies and Starttaamo, covered last spring widely.

Ala-Mursula, Heikkinen and also the Mayor of Oulu, Matti Pennanen emphasize the role of education institutes, both University and University of Applied Sciences, in creating this new wave of entrepreneurship in Oulu. Oulu has the long tradition of co-operation between education and research institutes, companies, public sector as well as enthusiastic individuals. This means that instead of talking about the Public-Private-Partnership (PPP), the term used for it in Oulu is Public-Private-People-Partnership (PPPP).

As most of the startups have been spin-offs from University of Oulu, VTT and Nokia, Heikkinen is stunned about the growing entrepreneurial spirit among the young people of Oulu and especially about how many students in the region are nowadays interested about being entrepreneurs.

“I believe that the young generation wants to create their businesses actively themselves and we as a city want to support creating more jobs to the region,” adds the Mayor of Oulu, Matti Pennanen.

And that’s what brings a lot of people to the region – because the city is supporting projects that push forward local business and also startups from their own development fund. The fund was founded from the sales profits of the city owned shares of a local network-company. This sort of arrangement is certainly unique, and the Mayor of Oulu, Matti Pennanen, admits that there’s nothing like this in any other city in Finland:

“With the funds, we have been able to support opening flight route to Luleå and Tromsø, which has increased the exchange of business and also ideas between these Arctic hubs. We have also been funding local startups with sums from 10 000 to 100 000 euros.”

Unemployment and New Growth

The toughest times at ICT-sector seem to be over and there’s a positive spirit in the region – though Pennanen says that hard times are not over. The Mayor is especially worried about the overall economic situation of Finland, since recently also the metropolitan area unemployment rate has increased to over 10%. In Oulu, the number is 16%.

One tragic example of the situation comes from last summer, when over 1000 people got unemployed from ICT-sector – but Ala-Mursula tells that over 700 of them has been employed already. Twelve companies from Finland and abroad founded their offices in Oulu last autumn to recruit the talent that had been set free. There’s now new growth in ICT, life sciences and creative fields – which Ala-Mursula beliefs are the new power engines for Oulu region. On the other hand, Pennanen says that especially the service sector has suffered from the decreased purchasing power after the rise of unemployment.

In this two-sided situation of blooming new business and high rate of unemployment, government has an important role in supporting the new growth in the region. Heikkinen says that now it’s especially important that the government supports the ecosystem and new businesses, but it should not try to steer too much the operations.

“The hype is gone, and startups are now part of normal business activities – It’s good that there’s more private players in the ecosystem now. Hype can’t mean that people do whatever with government’s support money. Government has to take care of the ecosystem and the game field where the business operates,” Heikkinen says.

It’s not only about High-Tech

Oulu certainly has its assets. With the average age of 37 years, Pennanen says that the city is full of success-hungry people who want to develop the region and the business. With the long roots in high-tech, it seems that the biggest asset for Oulu now is the cooperation between these experienced people alongside with young passionate business people – so that the talent and the knowledge connects with entrepreneurial skills. There’s a huge potential in the region as all our interviewees said – and we’re excited to see what happens next.

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