Finland: the Land of Gaming

Mind the Bridge presents a new SEP Country Focus on scaleups and exits in Finland.

The new economy specialization on gaming is confirmed.

• The research tracked 126 scaleups (representing 29% of the total in the Nordics) that were able to raise cumulatively $1B total in financing. This is about the 15% of the total capital raised by scaleups in the Nordic countries.
• The venture capital industry seems to be very efficient in fueling the growth of scaleups in Finland. Only 5% of the total capital raised comes through IPOs.
• In Finland there are 2.3 scaleups every 100 thousand people, among the highest rates in Europe.
• Finland ecosystem is characterized by small scaleups. 90% of Finnish scaleups raised less than $20M in funding.
• Scaleups show a geographical concentration: 80% are headquartered in Helsinki and Espoo.
• The gaming vertical accounts for 18% of the Finnish scaleups and for one third of the overall capital raised.
• 48 startups have been exiting via acquisitions since 2010. As usual in Europe, US companies are the most frequent buyers (40% of the total).
• The research is part of the Startup Europe Partnership initiative that is the main source for data in Europe for scaleups and exits.

Oslo, November 30th 2016 – Finland is a relevant scaleup ecosystem in the Nordics with a strong industry specialization in Gaming. This is what emerges from the last SEP Monitor presented today in Helsinki by Mind the Bridge in occasion of the opening day of Slush.

“After Iceland, Denmark and Norway, we focused our research on Finnish scaleups. The European Innovation Scoreboard (EIS) says this is the best place for companies to find risk capital. Our recent research confirms that evidence. – commented Alberto Onetti, Chairman Mind the Bridge and SEP Coordinator – Still to be improved is the access to later-stage funding (above $20M) as well as the contribution of stock markets to support the growth process.”

ECOSYSTEM – The research tracked 126 scaleups (29% of a 430-total identified in the Nordics), 65% of which have been founded after 2010 – thus means it is a very young ecosystem. In Finland there are 2.3 scaleups every 100 thousand people. This figure is higher than the average value in the Nordics (1.6), 1.5 times higher than Sweden (which is the Nordic country with the highest number of scaleups) and 4 times higher than the UK.

“The Finnish scaleup ecosystem is relatively young but has shown its strength especially in gaming and mobile – added Artturi Tarjanne, General Partner Nexit Ventures – The funding activity is largely dominated by smaller rounds to fairly early stages companies, potentially indicating limited availability of later stage funding. Unlike most other Nordic countries there are no +€100M VC funds in Finland”.

FUNDING – Collectively, the 126 scaleups raised $1B total in financing*, about the 15% of the total capital raised by scaleups in the Nordic countries. This is 0.46% of the Finnish GDP, in line with the average in the Nordic region (0.5%), slightly higher than the UK (0.42%), 3 times higher than in Continental Europe and 8 times higher than in Southern Europe. The average amount of funding for scaleup is $8M. For the vast majority, Finnish scaleups mainly collected capital from venture capital funds (95%). Only 5% of total capital was raised through IPOs. The main IPO ($55M) we identified is Ferratum, an international provider of mobile consumer loans that has been listed in Germany on the Frankfurt Stock Exchange in February 2015.

Another relevant funding channel, which is recently becoming more and more used and appreciated by ICT entrepreneurs all over Europe, is the one provided by the European Investment Bank, offering growth funding opportunities to promising startups under very reasonable terms. One notable example of a top startup making use of this funding channel is Rovio.

SIZE –  90% of all scaleups is represented by small-size scaleups that raised less than 20 million in funding, 6% are mid-size companies able to raise from $20 to $50 million, while larger scaleups (able to raise more than $50 million) only represent 4%. These figures show the ”polarization” of the Finnish scaleup ecosystem: on the one hand, a wide group of fast growing small scaleups (slightly north of 110 companies), on the other hand, a smaller group of 12 companies – led by Supercell – that have already crossed the chasm and are well-known new economy leaders. 

VERTICALS – SEP Monitor confirms the fact that Finland shows a focus on Gaming, especially on game development tailored for mobile platforms. This accounts for 18% of scaleups (21 out of 126) and one third of the total capital raised ($280M+). Network/Hosting, Software Solutions and Mobile companies each account for around 10-11% of the whole capital raised while fintech scaleups collected approximatively 8% of total financing.

GEOGRAPHY – 66% of all scaleups identified by the SEP Monitor are headquartered in Helsinki, collectively raising almost 80% of the total capital made available to Finnish scaleups. This percentage raises to 80% if we also include Espoo (that is part of the Greater Helsinki area). 

DUAL MODEL – 3 Finnish companies moved their headquarters to the US to pursue their global growth strategies.

M&A – SEP Monitor identified 48 M&As in Finland in the last six-year period (2010-2015) with a peak in 2013 (12 M&As) and 2014 (16 M&As). However, M&As seemed to slow down in 2015. 35% of acquisitions were performed by Finnish companies, 40% by US companies. Other European countries account for 23% (9% are other Nordic companies) of the total and only a residual 2% have been completed by non- European and non-US firms. If we sum up Nordic companies and Finnish acquirers, 44% of the Finnish acquired companies stay in the Nordics.

The most attractive sectors for acquirers are Software Solutions (19% of all M&As), Gaming (15%) and Mobile (12.5%). US companies’ acquisition appetite seems to focus on software companies (70% of transactions are labelled as “starts and stripes”), while European players are mostly interested in gaming (70% of transactions are performed by Finnish or European companies).

*capital raised since inception