Who should be responsible of developing the Finnish startup ecosystem?
Nordic countries in general seem to do well on the startup scene. There is good buzz around startups, some financing from local and international investors and surprisingly big number of Unicorns. None of these happen by itself but requires a functioning startup ecosystem.
Best startup ecosystems exist in the areas where legal infrastructure, economic foundation, and government policies are in place. In addition to above mentioned macro-level factors, startup ecosystems require entrepreneur minded people, theoretical and practical knowhow in entrepreneurship, innovations and funding and finally successful entrepreneurs willing to pay it forward. These create a self-perpetuating cycle that gets more speed through each success, provided, that the success is shared and hopefully also cheered. Only money will not keep the cycle running but without big enough amount of venture capital investments the cycle will stop.
There is an ongoing debate whether startup ecosystems are solely based on innovations and entrepreneurship or is there also a role for public sector. In addition to all above mentioned requirements and ingredients of a startup ecosystem, there is a need for sincere advocate focused on developing the ecosystem itself. Usually and especially in Nordic countries the advocate role is laid for public sector, orfinanced by public sector in one way or another, while market players take care of most of the activities.
Like in ice hockey, rinks may be built and maintained by public sector but the game is played by private entities and individuals. This is how it should be, at least.
Regarding one ingredient of the startup ecosystem, venture capital financing, the role of public sector should be supportive while investments should be made by private parties who has monetary incentive to success. Decision by Finnish politicians to build new fund of funds and discontinue direct investments made by semi-government officials is the right step in creating working venture capital market to Finland. And as long as the amount of venture capital investments in Finland is less than one-tenth compared to Israel, there is no need to worry that this initiative will disturb functioning market.
In Finland, plunge of Nokia released mass of talented – though NDA-minded – people for the startup ecosystem and simultaneous success in the mobile gaming sector, such as for example Supercell, encouraged many to jump into the startup game.
In addition, universities started to emphasis entrepreneurship instead of only producing raw material for big companies and great startup events like Slush, Arctic15 and Polar Bear Pitching increased the appreciation of entrepreneurship. We have also seen an avalanche of different kind of incubators and accelerators and even some new venture capital funds have been established and some international venture capital firms have found Finland.
All in all, we have all the ingredients to have a successful startup ecosystem or two in Finland once we get more venture capital money and replace the NDA-culture with free-sharing.
This post is written by Ville Heikkinen. As a partner at Butterfly Ventures, an early stage focused start-up development and venture fund management company, Heikkinen works in the frontline of Finland’s startup ecosystem.