Nokia’s Fall Means The Rise Of Startups In Finland

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Nokia’s Fall Means The Rise Of Startups In Finland

Until recently Finland’s destiny was largely determined by the quarterly reports of Nokia, once a global leader in mobile phone technology, which in its heyday made up to 4% of the Finnish economy. The global financial crisis in 2008 coupled with the demise of Nokia’s smartphone empire, the country’s crown jewel, took the Finns by surprise.

The Finnish economy, which has contracted for three years in a row, is still reeling, but the country’s rising startup scene is a careful indication that Finland – the land of a thousand lakes and talented engineers – is growing.

Nokia’s Gift To Finnish Startups

Nokia’s eventual downfall now seems inevitable: poor strategic decisions, firesale to Microsoft and the superiority of its competitors ended the company’s surge as the torchbearer and symbol of Finnish innovation. The fall of the beloved giant was a national tragedy, but also gave birth to a plethora of startups founded and enriched by ex-Nokia employees with stellar mobile technology know-how.

Pekka Rantala, once Nokia’s SVP of Marketing is now the CEO of Rovio, the company behind Angry Birds. Tero Ojanperä, former CTO of Nokia is currently the chairman of the board of Kiosked, a Finnish adtech startup, which has raised $33.87m in four rounds and recently launched operations in the US. Helsinki-based mobile games company Supercell today boasts a taxable income nearly 10 times that of Nokia. Unsurprisingly, one of the founders, Niko Derome worked as a software engineer at Nokia.

Since 2009, more than 200 gaming startups have set up shop in Finland. The trend can be attributed to the the successes of Rovio and Nokia’s mobile and tech innovations, now carried on by hundreds of ex-employees. Finnish gaming startups have raised millions and include names such as Boomlagoon, PlayRaven, Next Games, Small Giant Games and Remedy, known for its hit game, Max Payne.

“The Finnish gaming industry is driven by two main factors: The high quality demoscene that existed in the beginning of 90’s and the Nokia driven mobile game (operator-based) development in the early 2000’s. This has created a pool of highly skilled developers,” said Petri Lehmuskoski, the co-founder of Gorilla Ventures, a Helsinki-based VC fund.

Although Rovio recently announced it would cut 213 jobs, the Finnish gaming industry, which went from a turnover of $94 million in 2008 to nearly $2 billion in 2014, is one of the sectors showing strong growth and increasing demand for skilled labor, but according to local news reports the industry suffers from a lack of qualified candidates.

“The game scene has been mainly centralized in the Helsinki area, which has limited the supply of skilled labor. We are now seeing high quality studios being built around the country due to a large number of the original employees from Rovio moving back to their home cities seeking more affordable living,” said Lehmuskoski.

Diversity And culture

Yet another sign of the revival of Finnish innovation is the diversity of startups the country produces. Recently, a team of Finnish engineers unveiled Solu, a small cloud-based portable computer. Finns are doing interesting things in IoT as well. Aptly renamed the Internet of Shit, Enevo provides smart sensors and logistics optimization solutions for waste management to help build smarter cities.

The quiet and introverted Finns have also begun to understand the value of showmanship and networking when fighting for the attention of VC’s. Helsinki is home to Slush, an annual mega conference where thousands of startups showcase their products to investors and media.

Miki Kuusi, one of the original founders of Slush and the CEO and co-founder of Woltapp, a food delivery app, believes Finland is on the path to greatness.

“Finland hasn’t had a strong culture of serial entrepreneurship and the access to risk capital has been very limited. These two aspects have changed tremendously as there is currently an influx of local VC funds and an increase in direct investment from international VC’s,” Kuusi said.

According to Kuusi, the cultural landscape has become more conducive to entrepreneurial pursuits.

“Finnish culture has changed its attitude towards entrepreneurship, especially after the developments surrounding Nokia and the birth of an entrepreneurial movement spurred on by Slush and Aalto University’s Start Up Center,” Kuusi continued.

The fate of Nokia and the decline of Finland’s paper industry have forced the country to rethink its economy and revamp its culture to move towards a more daring approach to challenges presented by a highly competitive global economy.

As a result, the country is slowly moving away from dependency on a handful of Finnish multinational companies such as Stora Enso and UPM-Kymmene and towards a pool of promising startups.

“The more traditional IT industry built around Nokia has gone through a serious disruption and the current political situation with Russia has taken its toll on the more traditional industries,” Kuusi said.

Anssi Partanen, a local angel investor who has invested in several Finnish startups believes that the current startup boom is due to an ongoing cultural change.

“There is something exciting going on with the startup scene in Helsinki. People are skilled and comfortable in trying to establish themselves and scale globally right from the get go. This is different from 20 years ago and not based on hype,” said Partanen.

One of the players helping local startups is Tekes, a funding agency and an arm of the Finnish government. Tekes has provided funding to success stories such as Rovio and Supercell, but some argue that the agency’s impact on the startup ecosystem is minimal or outright harmful.

“There’s little evidence to show a direct link between Tekes funding and success of Finnish startups,” said Pavlos Ylinen, a Finnish investor and entrepreneur.

“Government assistance tends to misconstrue reality on the ground. Funding from the government leads to higher salaries offered companies that receive funding from Tekes, consequently misrepresenting  the actual value of a given profession and salary within the startup ecosystem,” Ylinen said.

Embrace Unbridled Optimism

In Finland, the government often plays an integral role helping startups get off the ground. For this reason it’s difficult to predict the future sustainability of the Finnish startup ecosystem, especially when compared to startups around the world.

Future scenarios aside, Finns, sometimes known for self-deprecating pessimism, would be wise to forgo a gloomy disposition and look to neighboring Sweden, the second-largest producer – per-capita – of unicorns. After all, – as any Finn would tell you – if the Swedes can do it, so can the Finns.

Since global success does not depend on physical location, Finnish companies stand a chance to make it big internationally, but some suggest that Finland needs serious cultural and structural reforms to compete in the international arena.

“We have much of the Silicon Valley ’I can do’ mentality, but are constrained by massive regulations that prohibit people from pursuing their dreams. For example, you are not allowed to fail in Finland. If you do that, your credit, right to sit on boards and conduct business might be gone for years. Another major problem are the strong unions,” said Lars-Michaël (Micke) Paqvalén, the founder and CEO of Kiosked.

Some investors strike a more optimistic note by emphasizing a more pragmatic approach.

“Anything scalable can be adapted globally. If it is sold on app stores, it is global. Same goes for non-app services and products as well,” said Partanen.

Yet, changing attitudes towards entrepreneurship might be the most powerful force driving the country forward.

“When speaking with University students about their dream jobs, there has been a clear shift from big enterprises towards startups during the last 5-10 years. Young smart people don’t dream anymore about a career in big consultancy company and instead try to follow the example many successful entrepreneurs have shown here, such as Supercell and Rovio,” said Pekka Koskinen, an angel investor and the CEO and co-founder of Leadfeeder.

The decline of Nokia and other traditional industries, such as paper, have forced Finns to reevaluate their positioning on the world stage. The booming gaming industry and the changing attitudes among younger generations are slowly moving Finns away from the nostalgia of past glory towards a more entrepreneurial frame of mind.

Featured Image: Seppo Vuolteenaho/Flickr UNDER A CC BY 2.0 LICENSE