Why Will Finland Fail?

“To understand your customers, get out of the building says Steve Blank. Mika Marjalaakso says that to find a big problem and understand customers, get out of Finland.wink

A week ago or so I had a really good discussion thread on my personal Facebook page about why Helsinki and Finland as a whole suck as a location for most startups, and what should be done to increase our chances for success. Don’t get me wrong. I LOVE startups but I “HATE” the hype. I do get it that to drive things forward and inspire people hype is a vital element.

I personally think – may be I am old or something – that it is better to say MY AIM IS to become the King of Norway instead of saying I AM the King of Norway. So, whenever anyone says (i.e. claims) that Finland or Helsinki is something that it clearly is not – that doesn’t inspire me because it is not a fact but a reality distortion of grand scale.

This is my list of three reasons why I believe Helsinki will never become the #1 startup hub in the world.

There are A,B, and C startups. A will be successful without any accelerators. They are the best of the best. B are good guys that some coaching in some cases might help a bit. C will fail anyway no matter what you do.

1. A good place to set up a business is a place where you have lot of customers who can buy your products, and you can be close to them to make sure that you are solving THEIR problems.

2. A good place for a startup is place where you are close to an epicenter of an existing or emerging ecosystem and its dominant players … and the cutting-edge, close to guys who will buy your company unless it becomes a really big.

3. A good place for a startup is a place with enthusiastic consumers and companies that are more looking at the positive side what a new product can bring to their lives and businesses and less worried about what can go wrong.

Abundance of capital is not that harmful either.

The above three reasons are not that important if your product can fully be distributed digitally, i.e. games. Many big problems, however, are far away and it is difficult to fully grasp them from Finland – you got to be there, not here.

So, I do believe that Finland can become one of the leading locations for startups in Europe for the B class, but it is extremely difficult to find reasoning why the A class would come here. We are still only five million people, far from big markets and the whole EU is a declining continent. Finland always do well in all kinds of nonsense competitions – and politicians just love that – but still nobody does direct investments here – if it would make sense, they probably would.

Is there anything we could and should do?

To summarize the three big ideas from my Facebook post comments:

  1. Finland can’t copy the Israeli model which is working due to very unique history and close ties.
  2. There are hundreds of wannabe Silicon Valleys, but there is only one Silicon Valley.
  3. Our neighborhood is pretty amazing, three neighboring countries, Finland, Russia and China.

So, instead of west we should look into east. Politicians should take immediate and drastic measures to build strong ties with China and Russia, and make it ridiculously easy for the best minds in Russia and China to relocate to Finland, enjoy our excellent infrastructure and thousands of lakes. For Finland’s future, this is more important than investing in those unemployed people that don’t like to work.

Finns are traditionally at their best when put against the wall. The world is at war. Nations are fighting over scarce natural resources and control over various ecosystems that control value creation, and most importantly value capture for a nation. Our Welfare State in its current form is unsustainable. I have coined up a new term – the Entrepreneurial State – which means a dream state where majority of citizens understands how value at the national level is created, and the underlying legal and moral framework that offers strong incentives for each citizen to create value. This doesn’t mean there wouldn’t be social security at all but too much social security seems to kill motivation for a way too many.

To summarize the primary ways how value at the national level is created:

  1. You sell your unique resources (e.g. oil, salmon) to other nations.
  2. You steal from other nations or borrow money but never pay back.
  3. You have competitive companies that export products to other nations.

Clearly Finns can’t create value through the first two options. So, our only and last hope is to build companies that are globally competitive. That’s our only option. We have a great infrastucture, skilled and educated workforce, beautiful nature etc. – these, however, itself don’t create any f***ing value. But, they can be leveraged to build great companies, to lure tens of thousands of Chinese and Russian people to move over here, and perhaps with the value arising from these companies we can better support our aging people.

Let’s open our borders for skilled Chinese, Russian, Brasilian immigrants to help us understand what are the big problems out there and build great companies here to address these problems, and win rather in direct investments and lose on these plethora of non-meaningful statistic competitions.

I believe Finland could prevail but there are too few smart politicians who could quickly drive through the required unpopular changes, many of which go against the social democratic agenda. Why not to start right away from simple, concrete things.  Things like making it easier for skilled foreigners to come over, get a working visa and set up a business. Things like making it easy for our expats to move back and get a citizenship for their spouses. Little things, every day, right now.

17 thoughts on “Why Will Finland Fail?

  1. mikamarjalaakso Post author

    Sami, thanks for sharing this relevant presentation – very good! I disagreed only on one major point that Swedish would have edge in mobile over the Valley – clearly not. It would be quite interesting to see similar comparison between Finland and Sweden. I have personally zero experience in dealing with Swedish consumers and companies but at least few friends tell that they are much more eager to try out new technologies and products as compared to Finland, and of course the whole industry structure is more breadth in Sweden, and the number of domestic buyers way bigger than in Finland.

    iPhone penetration is rather descriptive. I recently heard that in Finland we have some 200k iPhones while in Sweden they have 1,3m or something. So, even as a test market for a mobile app … Sweden beats us 6-0.

    Reply
  2. Petri Lehmuskoski

    The one thing missing from Finland that keeps the ecosystem rolling – recycled money.

    Without recycled money (ie. exits) the startup scene will run out of fuel – and goverment “sponsored” fuelling will make engine run lazyly.

    Reply
  3. Mikael

    Well done Mika! Yes you are right by saying you have a great infrastucture, skilled and well educated workforce, beautiful nature, etc, but still your biggest problem is the non existing need/pressure to market (sell) it or yourself/your companies products! Your engineers and programmers can create products and solutions lightyear ahead, but nobody in the rest of world knows about it. Your biggest thing to do right now is MARKETING! This includes a total understanding what are the market needs of today and to shout out to the rest of the world what you (Finnish companies) have today available to solve a problem, need etc to address the right markets! You need to be able to tell the story, the tale and why you have this solution, service, product already ready for customers abroad. Some of your national institutions are wasting millions of tax money (throwing out of the windows) to create ultra innovative products, but nearly nobody know about it or they are so unique and years ahead that the product itself can not address a single market or customer segment. Only my thoughts and experiences with Finland!

    Reply
    1. mikamarjalaakso Post author

      Mikael – yeah, I agree. Our startups are solving non-existing ore small problems as we are too disconnected from big problems, and it is also true that few of us are good at marketing. This marketing thing, however, is changing.

      Our national institutions surely are wasting money, and the Vigo model is a joke too as it does not address the root causes why we fail, and also creates a sort of yet another oligopoly. I am most likely going to address these issues later as part of my recent hobby: creating an alternative way forward for Finland. 🙂

      Thx for your comments! Keep them coming also in the future.

      Reply
      1. Mikael

        I hope you address these issues soon and I really like the way to are talking about the REAL problems. It would be time that also young and young minded politicians wake up especially when start ups have to pay taxes on the same level as established companies do. Am I´m wrong here? Another important point is that your venture capital market landscape should be built up very soon as of today I have not seen any of the Tier1 or 2 VCs having an office there. Why? This is another good and liong story to discuss. 🙂

      2. mikamarjalaakso Post author

        Mikael, I don’t think the quality of current dealflow justifies VCs setting up an office here – perhaps a well-connected startup guy to pick the cherries. We have a few excellent teams here and there but overall quality and ambition level is unsatisfactory. Foreign VCs are keeping their eyes open for games, no doubt.

  4. Randall "texrat" Arnold

    Good points, but I think some concerns are a bit overblown. I’m really impressed with the energy, innovation and collaboration I see in Tampere, particularly. In fact I’m trying to educate the frustratingly-conservative people here in north Texas to emulate those progressive examples!

    So don’t be too hard on your home country– you have some amazing talent and spirit there. Just get behind it when you see it! And remember, things could be worse: you could live in Texas. 😉

    Reply
    1. mikamarjalaakso Post author

      Arnold, thx for your comments.

      We do have amazing talent and spirit here in the dark and faraway land. They just don’t matter if we are unable to transform those into value created and charged. I don’t know the exact numbers but I do believe that Texas has produced a number of success stories and is amongst the best areas in US to commercialize innovation, good connections to east and west and VC money plenty, a huge concentration of hardware, semiconductor and telecom experience.

      And today a money buys a good quality of living in Texas.

      I have never blamed the attitude. We don’t have really an engineering talent problem here.

      Reply
      1. mikamarjalaakso Post author

        Randall, didn’t say really that. Not frustrated at all. I just happen to like facts and thorough analysis and straight talk. I think Finland has great opportunities ahead but to capitalize on our unique strengths necessitates difficult and quite unlikely policy decisions.

        If I am frustrated on something, that has to do with how political systems work ….

      2. Randall "texrat" Arnold

        Ok, maybe I was just projecting. *I* get pretty frustrated with the intellectual laziness and allergy to collaboration I constantly encounter around Dallas. I’m not saying it’s absolute– just much more pervasive than I would prefer. I am refreshed every time I visit your country, especially Tampere. I see people unafraid to share ideas there; here we “lawyer up” at the mere thought. But I am working to help the locals overcome that.

        It’s only natural that we tend to discover the missing aspects of our preferred local experience inside the borders of other areas. 😉

        And my first name is Randall (or Randy).

  5. AniOko (@anioko1)

    Are they no Chinese, Russians living in Finland? I guess they are more than 10000 of them. Find out why they are not coming out or they are not taken advantage of as you suggest. I think they can be used to advance a company’s cause to the east.

    Reply
  6. Georg

    Mika I absolutely agree with you. Author is absolutely correct and demonstrate a deep knowledge of the situation. I’m those expat and result of brain drain from Russia working in Joensuu. I work with Russian gifted scientists and engineers willing to establish tech-based companies in Finland. I see the situation a bit out of the building and from different angle. Unfortunately Finland yet is not ready to offer comprehensive support to foreigners (or things go soooo difficult even with companies cases between A and B) and compete with similar places in EU and North America. Despite on proximity and general attractiveness to foreign brains. Also obvious even some commentators here are living with pink glasses. Nothing personal.

    Reply
  7. goodwind89

    I disagree with your main point:

    To summarize the primary ways how value at the national level is created:
    You sell your unique resources (e.g. oil, salmon) to other nations.
    You steal from other nations or borrow money but never pay back.
    You have competitive companies that export products to other nations.

    You have automatically assume an export centric economy. Replace “national” by “earth”, and you’ll get the conclusion that no value at the earth value is created.

    I get your point about attracting talents… but it’ll lead to social problems down the road. Singapore has been following exactly what you outlined, and now local people are feeling threaten by foreigners, and voicing concerns more angrily. And Chinese is not the kind of people that mix well with other ethnics. Be careful what you ask for.

    Reply
  8. huvidea (@huvidea)

    Must read(maybe you already have) what Paul Graham said http://paulgraham.com/maybe.html

    Hey btw you forgot the Indians(that’s me :p) They are the most successful immigrant community in Silicon valley. http://www.inc.com/vivek-wadhwa/how-the-indians-succeeded-in-silicon-valley.html

    I think we focus too strongly on Finland’s population. We should leverage all of scandinavia and mainland europe for all customer research and other activities.

    the biggest problem as I see is that there is just a few great engineering institutions in Finland, nothing much besides TKK or TUT come to mind. That has got to change.

    Reply

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