- Govt-entity TEKES was major catalyst to Scandinavian nation’s success story
- Malaysia on right track, won’t take as long as Finland did to reach maturity
Twenty years ago, I started my entrepreneurship journey in Helsinki, the capital of Finland when my British university professor gifted me a copy of “The Google Story”. I was so captivated by it that I finished it in a single sitting. I also wanted to build such a company myself. But everyone kept telling me: “You are not in Silicon Valley.”
They were right, at the time, after the dot com bubble burst a few years earlier, Finland hardly had any private capital interested to pursue high risk innovative startups. Furthermore, the Finnish market was so small (only 5 million people) that there was the added challenge of needing to pursue global markets from day one.
Fast forward 20 years later, Finland now leads Europe in terms of private funding relative to GDP. We have seen unicorns such as Supercell, and Wolt, as well as a healthy pipeline of Soonicorns such as Iceye, Swappie. I’m happy to see Finland doing well, but, since I am now building my company in Malaysia, I can’t help but notice major similarities between the still developing startup ecosystem here and the one I saw in Finland 20 years ago.
Looking back, if I was to point out a major catalyst to Finland’s success story of the last 20 years, I would not find any better example than a government-entity called TEKES (now rebranded to Business Finland) which would be akin to a modern day Khazanah, although not exactly a sovereign wealth fund.
TEKES (which was funded by Finnish taxpayer money annually) has historically played a pivotal role in developing Finland’s startup ecosystem, creating numerous positive effects that may not have materialized without its existence.
Here are some key contributions and impacts:
1. Kickstarting the Finnish startup ecosystem
Initial funding gaps filled: In the early 2000s, Finland lacked sufficient private venture capital and angel investment for early-stage startups. TEKES provided crucial grants, loans, and investments, enabling startups to survive and grow.
Encouraging risk taking: By de-risking early-stage innovation through funding, TEKES encouraged entrepreneurs to pursue ambitious projects, fostering a culture of innovation and risk taking. Moreover, since 2010, Finland held the “National Day of Failure” on October 13th every year, to celebrate the lessons learnt from failed ventures and eliminate the taboo surrounding entrepreneurs who have previously failed. On this day, you will often see some of the most successful people and recently failed teams share the stage and given equal respect.
2. Enabling global success stories
Startups like Rovio and Supercell: Companies such as Rovio (Angry Birds) and Supercell (Clash of Clans) received support from TEKES during their formative years. Without this funding and guidance, their global success stories might not have been possible.
Wider impact on industries: TEKES-supported startups helped position Finland as a hub for gaming and mobile technology innovation.
3. Developing human capital and entrepreneurial culture
Support for education: By funding programs that combined entrepreneurship with academic learning (like Aalto Entrepreneurship Society which later founded Slush), TEKES cultivated a new generation of tech-savvy entrepreneurs.
Entrepreneurial mindset: It encouraged Finnish citizens to see entrepreneurship as a viable and prestigious career path where previously, working for a large multinational was the preferred career choice.
4. Creation of supporting structures
Incubators and accelerators: TEKES provided funding to launch accelerators and incubators such as Startup Sauna, which later became vital in connecting Finnish startups to global networks.
Ecosystem Growth: Initiatives like Slush (one of the largest startup events globally) benefited directly and indirectly from TEKES’ investments in local innovation ecosystems.
5. Attracting foreign investment
Global attention: By nurturing startups with high-growth potential, TEKES made Finland attractive to foreign investors, bringing much-needed venture capital into the ecosystem.
Scaling internationally: TEKES’ programs like the Young Innovative Companies (NIY) helped Finnish startups expand globally, making Finland a recognized innovation hub.
Fun fact: my first startup Muxlim (which later received the President of Finland’s Internationalization award by reaching 190 countries globally) was part of the TEKES Young Innovative Companies programme. It enabled us to think global from early on and raise our ambition to the max.
6. Sustainability and social impact
Green tech leadership: TEKES invested significantly in sustainable technologies, making Finland a leader in areas like bioeconomy and renewable energy solutions. Malaysia needs to find the niches that play to its strengths and continue to support them till they become globally successful.
Social impact innovations: By supporting health tech and education tech, TEKES facilitated innovations that improved the quality of life in Finland and abroad. Akin to Khazanah’s Dana Impak.
There were so many positive effects that might not have happened without TEKES.
Let me list four of them.
Avoidance of Brain Drain: Without funding and ecosystem support, Finnish talent might have moved abroad in search of better opportunities. In a recent trip to Singapore with fellow Malaysian startups, our guest speaker there started his talk with: “I’m assuming you are all looking to relocate to Singapore eventually?”
Gaming Industry Boom: TEKES’ funding provided a foundation for Finland’s thriving gaming sector.
Technology Transfer: Collaborations between academia and industry might not have flourished without TEKES’ support.
Innovation Culture: Finland’s transformation into an innovation-driven economy owes much to TEKES’ ability to fund high-risk, high-reward projects.
TEKES’ strategic investments laid the groundwork for Finland’s emergence as a global innovation leader, proving its value as a cornerstone of the nation’s entrepreneurial ecosystem.
Meanwhile, in Malaysia…
Looking back at the past few weeks in Malaysia, I think there is a missing narrative in the national discourse. No one is talking about why every nation needs to prepare itself for an innovation-driven future. With the advent of AI, automation and robotics, the job market is about to be disrupted in a big way. Together with the bloated public sector in many countries around the world, and the threats of climate change, there will be unprecedented challenges faced by people around the world, not least of which, the shrinking job market.
Entrepreneurship is key to creating jobs and sustaining in the face of job insecurity, climate displacement, geopolitical tensions, and technological disruption.
Of course, private capital is the ideal driver for innovation. But, based on Securities Comission Malaysia data, early-stage investing has retreated in Malaysia between 2011-2021, while in Finland it grew from US$112 million in 2011 to US$1.2 billion by 2021.
Sometimes, private capital is too risk-averse, so the government or government linked investment funds need to fill the gap until the ecosystem is stabilized. Nascent ecosystems don’t play by the same rules as developed ecosystems, hence initiatives like Khazanah Dana Impak, Khazanah’s Jelawang Capital venture capital fund of funds initiatives as well as Kumpulan Wang Persaraan (Diperbadankan) (KWAP)’s Dana Perintis (RM500 million for venture capital funds and direct investments) and Dana Pemacu (RM6 billion for private equity) are critical to provide badly needed growth funds for startups across various stages.
Yes, early-stage investing is risky, and there will be some failures. But the risk of not investing at all is even bigger in the face of the changes facing our world and the international community. So in times like this, we need to be armed with strong ambition, infectious positivity and resourceful execution. All I can say is, I believe Malaysia is on the right track and it won’t take as long as Finland did to reach maturity.
Mohamed “Mo” Tarek El-Fatatry is the Founder of ERTH, a member of the Soonicorn Collective and host of the Soonicorn Nation Podcast.
Dr. V Sivapalan contributed to the article. He has a Ph.D in Venture Capital from University of Edinburgh, Scotland, is Co-Chairman of Soonicorn Collective and Adjunct Professor in the School of Science and Technology, Sunway University. He is the author of the book ‘Supercharge Your Startup Valuation’. Visit his website for more of his writings.
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