Yesterday we revealed how Rovio’s $42 million investment last year actually went to one or more of its founders, by the look of their financial statement that was filed with the Finnish authorities. We received a lot of feedback regarding that article through e-mail, but also in comments through other channels. The overall attitude seems to one of caution, that we should be careful for digging up information and discussing it in public.

This publication is all for growth entrepreneurship and we feel that the more discussion around these topics we have, with the right attitude and manner of course, the better off the Northern European startup and entrepreneurial ecosystem will be.

Rovio is not a taboo that should not be discussed. It’s one of the best things that has happened to the Finnish startup ecosystem in a long time. The execution of its vision will become a case study for future MBAs on how to go about global growth. Believing that if we gave successful companies peace and quiet as media, and thus avoiding studying them in detail, in the fear of damaging the company’s future potential is at best superstition.

Why not study the issue in much detail as possible, so others looking to replicate the success can better understand how such high growth can be created and managed? All this at worst results is a culture of more discussion, sharing of best practices and in the end an ecosystem that promotes transparency, growth and success.

Some of the people who reached out to us offered alternative reasons why the figures are not present in the filings. A few suggested an offshore company to avoid Finnish taxes on a potential exit in the future, while others said that investors rarely pay the money at once to the company.

In our analysis, Rovio is very proud to be a Finnish company as all the figures it reported a couple of weeks ago in their financials match those reported in the official filing. If the company indeed wanted to avoid paying taxes in Finland, why not start with minimising the €12.6M it paid in income taxes for last year’s profit?

Transparency is mostly good in corporate financing. Surely the tax laws and others that promote transparency are disadvantageous compared to those registered in financial safe havens, but if one’s competitive advantage is built on hiding your finances – where is the real value to clients and consumers coming from?

While we discussed the issue of Rovio’s founders selling their ownership in the company to Accel Partners and Atomico Ventures, we never criticised them for doing this. We also believe there is a need for more liquidity here, in the form of second markets or anything else that would create such events for founders, employees and early investors to cash in.

Having the opportunity to exit your ownership only in the case of an initial public offering or an M&A -deal is simply unrealistic and demotivating.

The Economist last week had a detailed analysis into the “endangered corporate form” known as the public company. They revealed that IPOs have been on the decline since the mid 90s in the US and there seems to be no correction in sight. The newspaper cited increased regulation as one of the key factors in putting off IPOs in comparison to M&A deals where all the risk is with the buyer of the new company, depending on the type of deal naturally.

What if we had more transparency instead of regulation? People and organisations studying these companies would be able to look at the companies in detail and through crowdsourced analysis and media coverage, companies would need to abide by publicly supported ways of doing business. Transparency in itself isn’t bad, it’s how it’s used that puts an emotional label on it.

But regardless of what happened with Rovio and its equity in the $42 million investment round, we need to discuss more about these issues and accept that some founders cash in before a major liquidity event. There shouldn’t be any reason to feel bad about it nor should there be any reason to hide it.

What if we don’t really suffer from the lack of venture capital, but the lack of exit opportunities for those venture capital investments that would justify them in the first place?

Image by bfishadow.

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