Investors are setting their sights on Helsinki - here are 3 good reasons

At Slush
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Startups attract more venture capital than ever. What are the reasons behind it?

When Israeli-Finnish startup entrepreneur Aviv Junno met Oskari Kettunen, CEO of Reaktor Ventures, he noticed how much Finland and Helsinki in particular had changed in just over three years.

Reaktor Ventures is the venture capital subsidiary of renowned software company Reaktor. It invests in promising seed companies and takes them under its wing.

Junno had arranged the meeting for a different reason altogether, but towards the end of their meeting he asked Kettunen’s opinion about a project he had been working on. Junno showed Kettunen a website he had created together with a friend that broadcasts internet content on a channel that can be watched like traditional cable TV.

Kettunen didn’t waste a minute offering a six-figure sum and asking if Junno was ready to start up a company with the money. A few months later his company, Neverthink, was launched. It now has 15 employees.

So what are the reasons behind the development in the startup scene in Helsinki? 

1. Slush attracts venture capital to Finland

Slush, an international seminar with cult status and the biggest startup event in Europe, has been a big deal in terms of funding. With its theatrical staging, neon lights and evening parties, Slush is more like a rock festival than a technology seminar.

“It has had a huge impact on attracting foreign investments to Finland and the companies who operate here,” says Jonne Kuittinen, Operations Manager at Finnish Venture Capital Association.

One of the big changes has been the introduction of the risk investment model that Reaktor Ventures has taken from Silicon Valley. As a result, more and more investors are keen to invest in startups at their earliest stages of development.

Indeed, Finnish growth companies received more venture capital in 2016 than ever before – a total of EUR 383 million, or 42 percent more than in the previous year. Foreign investments doubled to EUR 216 million, including investments by venture capitalists, big corporations, fund management companies and business angels.

This in turn is due to several factors that feed on each other: Slush, the lively startup ecosystem, and enthusiastic serial entrepreneurs.

English

The breathtaking increase reflects how the quality of Finnish startups has reached a level that is interesting to foreign investors.

Jonne Kuittinen
Operations Manager at Finnish Venture Capital Association
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2. Serial entrepreneurs accumulate experience

One of the reasons behind the growth is simply the time that has been put into it. The scene has had time to mature to the degree that Helsinki now also has serial entrepreneurs who are on their second or third businesses. This adds to the level of experience.

“These entrepreneurs know all about the bottlenecks to growth, how to avoid the rocks and how to get their businesses off the ground faster,” Jonne Kuittinen explains.

These days the Finnish Business Angels Network FiBAN is one of the biggest and most active organisations of its kind in Europe. When it was established at the beginning of 2011 it had only around a dozen business angels. Now it has 566 members.

Over the past four years the amount of investments made by these business angels in Finnish startups has increased by almost EUR 30 million. Last year they invested EUR 53 million in 324 Finnish companies.

According to Torsti Tenhunen, Chairman of FiBAN, Finland can be considered to be a “Startup Nation” based on last year’s impressive figures.

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3. Government begins to understand growth companies

According to Aviv Junno, the government too has changed its stance and now understands what growth companies are all about and how they should be supported. Junno offers one very concrete example: After his own startup company Neverthink received its first funding, it took just a week for Tekes, the Finnish Funding Agency for Technology and Innovation, to come up with additional funding worth EUR 50,000.

Funding for startups in general has become much easier. If a growth company manages to gather at least EUR 30,000 of financing by itself, it can apply for EUR 50,000 of additional funding from Tekes without having to give up any shares in return. This so-called TEMPO funding is government support that does not have to be repaid. Companies can then obtain hundreds of thousands of euros in additional loans from Tekes at low interest rates.

“This is quite exceptional,” Aviv Junno admits.

The change in the funding culture has been the decisive factor for many new businesses, who are now more likely than ever to remain in Finland.

Text: Tiiamari Pennanen

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Startups attract more venture capital than ever. What are the reasons behind it?