I’ve just returned from a trip to Helsinki on a media tour of its tech scene (disclosure: Finnfacts paid for my trip) and there is an interesting idea that I’ve heard from multiple people: Nokia’s success has actually been damaging to the country’s startup scene. When you think about Finland and mobile technology, you probably think of Nokia first, Angry Birds-creator Rovio second and then struggle to come up with a third company.
You wouldn’t be off by much to think that but things are starting to change and this change is focused around mobile software.
Finland’s largest industries are the mechanical and electronics fields and Nokia has been the largest company by far. Nokia has about 130,000 employees while the second-largest IT company, Tieto, has about 17,000 employees. To be clear, those employees aren’t all in Finland (I believe it’s about 30,000 or so in the country) but it’s difficult to understate how important the company has been to the country.
Nokia casts a long shadow that covers all of Finland.
Nokia was started in a small Finnish town – named “Nokia,” of course – in 1865 making various paper products. It eventually made tires, toilet paper, fishing equipment before making a big bet on telecommunications. The success of Nokia in the handset market showed the small country of about five million that it can truly be a global leader in technology. The sense of pride that Finnish people feel for Nokia is pretty much unmatched in other countries. There is no equivalent in America.
But that strong connection isn’t just for when things are going well, as the company’s struggles in recent years have been a drag on the nation’s psyche. That’s why there has been so much concern about the upcoming strategy shift to Windows Phone, which is leading to more than 7,000 layoffs (technically, 4,000 being laid off and 3,000 being transferred to Accenture).
One member of the Nokia board compared the slumping of Nokia over the last few years to the collapse of Enron – this global thought and revenue leader crashed but Americans still soldiered on. I don’t think an apt comparison because many Americans were shocked by the Enron crash but it didn’t lead to a damaging of the nation’s psyche like Nokia’s struggles have impacted Finland. Maybe it’s just because America is too big to be impacted by a single company, the nation’s “we’re the best no matter what” mindset, or the plethora of other companies in different sectors that could come in to take its place.
There aren’t a variety of companies in Finland to shoulder that burden, particularly in the tech sector. Many argue that Nokia’s success has led to a culture where it is encouraged to work for a large corporation instead of trying to strike out on your own, particularly with consumer-facing software.
Some would say Nokia’s success has led to its downfall.
“Nokia has been the steam train of this economy for the past 15-20 years and I think the whole education system has formed in the way where it’s teaching people to be a manager there and you’ll live happily ever after,” said Ville Simola, of Aalto Venture Garage.
There are other cultural factors at play too, as many told me that Finnish culture strongly discourages failure. No culture likes to fail, that’s clear, but this may go so deep as to discourage taking those huge risks that startups like Google or Amazon have to tackle in order to become giants. There’s also the strong need to be modest, so marketing is not seen as important as just having a good product. The country’s traditional media also doesn’t generally cover the startup scene much.
Multiple people told me that until very recently, if you were an entrepreneur in Finland, many saw you as someone who couldn’t get a real job. Coupled with the nearly non-existent IPO market, the lack of seed capital when compared to the United States and other markets, it’s not surprising that tech startups rarely called Finland their home. These are broad generalizations of course, but these are ones that are echoed by Finnish investors, startup founders and industry watchers.
Maybe by necessity, this is starting to change and we’re seeing a vibrant startup culture emerging. The tip of that spear is probably best personified by an angry bird, so it’s no surprise that the new breed of companies are focused on mobile software.
Rovio had been toiling in relative obscurity making more than 50 mobile games before Angry Birds hit in 2009 but this physics-based game has quickly become a global phenomenon and it has turned its creator into a force in gaming and more. With a $42 million funding round and plans for an IPO, Rovio is shining a light on what is possible. It’s nearly impossible to go to any tech startup in Finland without seeing Angry Birds’ influence.
It’s clear that Rovio is not content with just being a mobile game company, as it likes to picture itself as an entertainment company with Angry Birds being its strongest brand. The company has made some intelligent decisions on expanding to other platforms – it went with ad-based gaming for its Android version – and to other media with the inclusion of its characters in the feature film Rio and the upcoming release of a cookbook.
Rovio’s Peter Vesterbacka is seen as a rock star in the Finnish tech scene, as he’s the brash public face of a company that has global ambitions and is producing results so far. It’s too early to tell if Rovio can keep up its growth but the company has already inspired a generation of companies which may surpass it one day.
Over at the Aalto Venture Garage, I met a ton of young, hungry developers and companies who were trying to make its mark on the world, one app at a time. This public-private hybrid organization is trying to give entrepreneurs the tools they need to at least take up the challenge of starting up your own company. Some of the occupants may even wind up being quite successful, as the WildChords app has the making of a huge hit franchise for music gaming on tablets and I wouldn’t be surprised if you see it climbing to the heights of a Rovio-level company if things broke correctly.
Aalto Venture Garage said that Finalnd and all of Scandinavia needs to change its view on entrepreneurship in order to be more competitive in the global economy. That doesn’t mean it’s going to be easy though, as this will entail a broad cultural shift that could take a generation. Luckily, people like Vesterbacka and F-Secure founder Risto Siilasmaa are helping to coach startups and Siilasmaa is even investing in many fledgling companies. Another interesting factor is that the Nokia layoffs may have a tremendous positive effect on the startup market in Finland, as this will put thousands of talented people on the market place with significant experience in mobile who may not be so eager to rejoin a large corporation.
I guess it’s still quite fair to say that the mobile tech scene in Finland is just Nokia and Rovio but the seeds are being planted for something greater. Let’s check back in five years and I would be shocked if there weren’t multiple companies focused on mobile software which are well-known internationally.
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