Nordic startups are entering a golden age, say experts

Nordea brought together some of the brightest minds of the Nordic startup scene at the "We Grow Startups" event on 19 November 2020. Despite the current challenges, their message was decidedly optimistic.

The future for entrepreneurship is bright in the Nordics.

That was the message at We Grow Startups, a recent Nordea online event, bringing together some of the movers and shakers in the Nordic startup ecosystem.

Risto Siilasmaa, Founder and Chairman, F-Secure

Risto Siilasmaa, Founder and Chairman, F-Secure

That optimism may seem surprising, given the current coronavirus pandemic, which has plunged economies into historic recessions and turned business models upside down. But it is precisely that change that’s creating the potential, according to panellist Risto Siilasmaa, founder and chair of Finnish cybersecurity company F-Secure and former chair of the board at Nokia.

“Change accelerates during a crisis. During an accelerated period of change, one can change the world as well. New problems are created and can be solved by startups. That’s why I believe we’re heading towards a new golden age of entrepreneurship,” Siilasmaa said.

Another member of the all-star panel, Elsa Bernadotte, a serial entrepreneur in Sweden and co-founder of the anti-food-waste startup Karma, agreed:

“The startup community has a lot of things going for it: tech savviness, digitalisation, a lot of access to capital,” she said. “We do have a really strong system.”

The event brought together Nordic startups & scaleups, local & global investors, other public and private players in the ecosystem and anyone else interested in understanding the significance of the Nordic startup and growth community. Other speakers included Pekka Koskinen, Founder and CEO of Leadfeeder; Pär-Jörgen Pärson, a general partner at venture capital fund Northzone; Nordea’s Head of Business Banking Nina Arkilahti as well as Miika Huttunen, CEO of Slush, as the moderator.

Photo from "We Grow Startups" event showing host and panellists

Do Nordic startups have an advantage?

There are certain benefits to being a startup based in the Nordics, according to the panellists. Known for innovation, the Nordics are a great brand in the startup world, attracting investment and providing instant credibility, said Siilasmaa. The Nordics are also known for having a customer base of early adopters, according to Northzone’s Pärson.

Nina Arkilahti, Head of Business Banking, Nordea

Nina Arkilahti, Head of Business Banking, Nordea

“When (products) work in the Nordics, they typically work elsewhere,” he said.

Leadfeeder’s Koskinen said that he often hears from investors that they like working with Nordic companies, which tend to be stable, transparent and free of big egos.

Nordea’s Arkilahti noted that the government funding initiatives in the Nordics, as well as the EU and European Investment Bank frameworks, have worked very well. She also highlighted the role of Nordea, which has built up its Startup & Growth unit over the past seven years and supported around 3,500 startup and growing companies on their path.

“By now, we have reached the stage of creating value for all the stakeholders – startups, investors and society at large,” Arkilahti said.

The talent bottleneck

One common refrain among the speakers was the difficulty recruiting the best talent for their ventures.

Tech talent, for example, is in such high demand, and those employees may not have the courage to jump from an established company to a small, risky venture, according to Koskinen.

Pekka Koskinen, Founder and CEO, Leadfeeder

Pekka Koskinen, Founder and CEO, Leadfeeder

“That has been a challenge for many smaller companies. It has been easier to get the business people on board than the technical leads,” he said.

An approach Leadfeeder has taken is to move to a fully remote workforce, a change the company made five years ago even before Covid-19 triggered the shift to working from home. The result has been a much bigger recruiting pool.

“Currently, we get 10 to 50 times more applications, compared to only hiring from Helsinki,” Koskinen said. “As long as the time zones are good, with three hours or more of joint working time, it really doesn’t matter where you’re sitting.”

Siilasmaa noted that the work-where-you-live approach may not be good for the countries where the business is located, which benefit from the taxes their residents pay. He encouraged startups to advertise the appeal of the Nordics as a place to live when recruiting:

“We’re not known well enough for the things that are really good in the Nordics. Your kids can walk to school, take public transport. You don’t need to drive them. These are things that fundamentally change the family’s life. People feel safe, with free healthcare, free education,” he said.

Yet other panellists also stressed the unfavourable tax schemes in the Nordics and heavy taxation of stock options, which can interfere with recruiting the best talent from abroad.

Change accelerates during a crisis. During an accelerated period of change, one can change the world as well. New problems are created and can be solved by startups. That’s why I believe we’re heading towards a new golden age of entrepreneurship.

Risto Siilasmaa, Founder and Chairman, F-Secure

Reaching the big leagues

Discussing other obstacles, the speakers also noted that promising companies – even unicorns – have had difficulty breaking into the big leagues in the Nordics and Europe. Nordic successes, such as Spotify, have found most of their financing and growth trajectory by going to a US stock market.

“I think this is a weakness in the European context,” said Pärson.

Siilasmaa also noted that Europe has not been able to create a single global technology giant in the last 50 years.

“The EU Commission has chosen a policy of not allowing the creation of European champions. Instead, it has actively worked to prevent that. I’d like to see that policy change and a much faster push for a digital single market,” he said.

Profile picture of PJ Parson

Pär-Jörgen Pärson, General Partner, Northzone

Siilasmaa also described a big need for global investors in the Nordics for the scaleups that require significant funding.

“While there is a lot of competition among Nordic investors seeking to invest in smaller funding rounds, the same isn’t true for large C-rounds, where there is a need for tickets in many tens of millions or low hundreds of millions. We still need US investors for this. Hopefully that will also change in the future,” he added.

Pärson noted that since people started working remotely during the pandemic, more global investors are actively scouting in Europe and prepared to make the investments without meeting in person.

“That bodes very well for the scaleups,” he said. He also noted that most of the big pension funds across Europe are very poorly exposed to the venture capital and growth sector, which also represents a tremendous opportunity when it comes to financing.

5 tips for Nordic startups

The panel had several concrete tips for startups in the audience:

1. Go global fast

To really compete in the global market, Nordic startups need to go international really quickly, says Koskinen. Embrace all the tools related to digital marketing, go-to-market strategies and managing an internationally-distributed, remote team.

2. Hire remotely

Consider whether you can hire people remotely, Koskinen says. They can be in the same country, but they can also be in other countries. The closer employees are to the customers, the better they understand those customers, which leads to better decisions.

Elsa Bernadotte, Co-founder, President and COO, Karma

Elsa Bernadotte, Co-founder, President and COO, Karma

3. Be cost efficient

Be very cost efficient, says Bernadotte. In this uncertain environment, there will be many opportunities opening up, and you want to be in a situation with sufficient capital and financial runway to jump on those opportunities.

4. Think slow and act fast

In the current uncertain environment, change is happening very fast, and there may be a tendency to rush into things without thinking things through, says Siilasmaa. Rather, you should take a deep breath to reflect so that you see the forest from the trees before acting fast. That’s how you identify the new growth markets and opportunities, and that’s where small companies can really differentiate. Their ability to take risks, be focused, act fast to experiment and pivot when necessary is something large companies cannot match, he says.

5. Map out different strategies

When Covid-19 hit, the advice was to cut costs and make sure you have capital runway, says Koskinen. Now, there’s a ton of money available, and the advice is to take it and try to grow.

“My advice for a founder is to have different strategies already thought out,” he said. Have strategic degrees of freedom to be able to move and change your path.

Dreams for the Nordic startup scene in 10 years

Pekka Koskinen: Already now, many people that study economics or technology dream of becoming an entrepreneur. That’s a great thing. But my dream would be to make it even easier to get started. Then for the later-stage, it would be to be able to fund the successful companies further to become really big.

Risto Siilasmaa: We’re on such a good trajectory already, if we continue on a linear trajectory, we will be in a good place in 10 years. The one thing I would hope to see is that more of our best companies would remain independent. They would do IPOs, and they would stay independent companies rather than being sold. I’m not against selling as such, but it’s should be more attractive to continue on their own.

Nina Arkilahti: Maintaining high quality of entrepreneurs is important. That would mean mentoring even more, sharing of practices and experiences as well as education. We are on a good path, but there could be more to do there as well.

Elsa Bernadotte: My dream would be that Karma becomes the first Nordic impact unicorn.

Pär-Jörgen Pärson: My dream is that the Nordics will lead the transition to a sustainable environment and make a number of decacorns out of that transition. We should truly make a run for that. That would be awesome not only for the planet but also for us financially here in the Nordics.

Watch the full video recording from the event here.

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