And by Angry Birds I mean Finland.
So our next destination on learning how to establish a Startup Ecosystem is Finland. Why Finland? Well, I believe that Kuwait and Finland have some similarities in terms of demographics yet they are very different:
- Finland is ranked no. 21 in terms of GDP per capita higher than UK, France and Japan (Kuwait ranked 11th)
- Finland is considered one of the most active countries in terms technology and innovation. Regardless of it’s small population (only 5.3M people) , Finland is the home of Nokia and some other successful companies such as MySQL, Linux and Rovio (game maker of Angry Birds)
- Finland have one of the best education systems in the world (Ranked no 1)
- Finally, Finland have a long track record in supporting their Startup Ecosystem and we can learn a lot from their experience.
As you know by now Angry Birds is a Finnish startup (Finnish not Finish, Finnish refers to something or someone from, or related to, Finland) and I’m so grateful for this game, and Conan as well, watch this video:
The Finnish government created many agencies to boost entrepreneurship and innovation such as Tekes, Sitra and FINNVERA, yet they realized that they failed to build a first class startup ecosystem because they realized that even after more than 20 years of government support for innovation and startups, they failed to produce a fair number of successful global companies.
- Public direct funding: The government tracked it’s performance by measuring the number of companies funded every year. But, it’s not about quantity, it’s about quality. The government gave money like crazy, most companies created are lifestyle companies that don’t become large companies at the end and they don’t create any jobs. Its nice to give everyone a chance, but that wasn’t what the whole system was built for
- Risk aversion: Risk aversion attitude lead to accepting businesses that have a high possibility to survive, but that doesn’t have high potential to become large companies that change the world.
- Lack of international skills: Lack of global business competence and serial entrepreneurs. Talented people only work in big companies.
- No viable VC industry: Lack of real venture capital activity. Most of the activity is derived by public funding.
- Lack of business competences: Lack of business competence that help companies to grow globally and attract global investors and international talent.
- Finland didn’t consider the globally existing systems to learn from their experiences
And these are the suggested solutions (also based on Steve Blank visit and VICTA report):
- Indirect funding: The government should stop funding startups directly and should instead fund global incubators and VC’s that can then start funding Finnish startups based on commercial and market driven criteria’s.
- Remove lifestyle companies from the equation: Lifestyle companies are not growth companies, they will not create jobs or add value to the society. This type of companies should be removed or separated from the startup ecosystem. These companies are sucking resources (time and money) and distracting the government performance measurement indicators.
- Attract global talents: Transform the Finnish early-stage startup ecosystem to support the infusion of talent from the leading global talent. Laws, regulations and tax incentives should all be fixed to support this goal.
- Fix government strategy: The government should shift it’s strategy from just helping Finnish people to start their own business to supporting startups that have the capability to generate a multi-million business. The vision should be driven to: generate more jobs, attract foreign investments, create global successful companies and attract international talents.
- Fix culture and attitude challenges: The government should have a plan for a campaign to change the anti entrepreneurial culture. Challenges such as “Money takes care of problems”, Risk vs Reward and Failure vs Success, this mentality should be changed through educating the young generation and through some awareness campaigns.
- Fix incubators structure: Currently most incubators are owned by the government. Incubators should optimally be owned by 4 shareholders: a local VC, a global VC, the government and a local university. Also the manager of the incubator should be either a serial entrepreneur or from a VC background. The incubator manager should also have direct or indirect share in the companies being accepted in the program. Moreover, the incubator should not accept more than 20 companies per year.
In short, pouring money into startups will not help in creating successful companies. Many things must be done and many things must be changed, it will take a lot of time and effort. It might take more than 15 years to have a good startup ecosystem, but we might need less if we learnt from other countries experiences such as Finland.
I apologize for the long post and I apologize for ignoring to talk about the GREAT side of the Startup scene in Finland such as what happening in Aalto University, the healthy increase in number of incubators and the creation of a smart startup community. If you are interested to learn more about Finland Startup Ecosystem please read the full analysis I uploaded in slideshare.