Nokia’s diaspora starts again; The group’s decline has generated a new wave of entrepreneurship in its native Finland

October 21, 2013 3:38 pm

Nokia’s diaspora starts again

By Richard Milne in Helsinki

Harri Wallenius pulls out a meticulous dossier of newspaper clippings from a local Finnish newspaper. All document the €5.4bn sale of Nokia’s mobile phone business toMicrosoft. “My first reaction was shock,” he says. But the 53-year-old no longer works at Nokia. After “26 years and eight months”, in his precise engineer’s formulation, he stopped at the end of 2011 and took a redundancy package.Then, like hundreds of former Nokia workers in Finland in recent years, he set up a new company. Pebble Audio, founded with two other former Nokia workers in Salo in western Finland, makes wireless audio equipment to help rid music listeners of their cables.

The decline of Nokia – which once contributed 4 per cent of Finland’s annual economic growth – has causedgreat soul-searching in the Nordic country, especially coming after the struggles of its other big industry, paper and pulp. But one side-effect of the thousands of job losses at the once world-leading mobile phone manufacturer has been a flurry of start-ups from ex-employees.

There are plenty of high-profile examples: Angry Birdsdeveloper Rovio Entertainment is populated with ex-Nokians, as is Jolla, a new maker of mobile phones. Helsinki has become one of Europe’s leading start-up capitals, partly thanks to financial support from Nokia and the Finnish government.

Big questions, however, remain: will these start-ups be enough to provide a bright future for Finland? And has Nokia proved a help or hindrance in terms of the skills needed in a start-up?

Tiina Zilliacus and Veli-Pekka Marin are two more ex-Nokians who have set up their own companies – new niche gaming businesses that are in the middle of their latest funding rounds.

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Ms Zilliacus’ Gajatri Studios is set to launch Yoga Retreat, in which players practise and teach yoga poses, next month after testing in Finland and Canada. Mr Marin’s Uplause specialises in games played by thousands of spectators at sports events, such as crowd noise contests.

“Nokia was a great business school for me,” says Mr Marin, who left Nokia in 2009 after a decade working there. The company also indirectly helped with funding. “What helps is you have contacts in the business angel community who are ex-Nokia,” he adds. Uplause, which was founded in 2009, received €2m of seed funding in 2010 and now has 10 employees.

Ms Zilliacus, a yoga enthusiast who worked at Nokia for six years before quitting in 2007, believes Nokia was crucial in putting Finland on the business map. “We have been very proud of it,” she says. “It’s been important for our identity and how we build businesses.”

But both she and Mr Marin are ambivalent about how much help the skills they learnt at Nokia have been for start-ups. “You need to accept it takes time in a start-up because you never have the resources you need,” Ms Zilliacus says. “The practical reality of a start-up company is something totally different.”

Candidates to be Finland’s next tech star

Now that Supercell has been valued at $3bn and the Angry Birds empire at Rovio continues to grow, there is a lot of interest in what will be the next big Finnish start-up phenomenon.

One that Ilkka Paananen, Supercell’s chief executive, himself points to is Fingersoft. Its Hill Climb Racing topped the games charts for Google’s Android operating system in more than 10 countries and has been downloaded more than 100m times. Not bad for what was essentially a one-man company set up by founder Toni Fingerroos.

“All of a sudden it is possible to reach a billion consumers by just submitting your game to the app store,” Mr Paananen says.

Others in the spotlight include Grand Cru, a games group that recently raised $11m in funding, as well as ventures from several former executives at Rovio such as Teemu Huuhtanen’s Next Games and Andrew Stalbow’s Seriously.

For Mr Marin, an initial problem was more embarrassing. “When I left I noticed my written and spoken Finnish sucked,” he says.

English may have been the lingua franca at Nokia but so was compromise. “There were always 10 people weighing in on every decision. It was built for compromises.”

Mr Wallenius agrees. He and co-founder Esa Harma, who handles research and development, have a daily 6am meeting. “You don’t need any committees or long meetings,” he says. Their two main products were developed and marketed in just six months, with manufacturing outsourced to local suppliers.

Two areas in which Nokia definitely helped were financing and the development of new skills. The company’s Bridge programme – set up to ease the pain of lay-offs – offered seed finance to the likes of Jolla while it helped Mr Wallenius secure a bank loan. Overall, Nokia says it has helped set up 1,000 new companies and aided more than 14,000 former employees.

Mr Wallenius says it also helped fill in some of the gaps in terms of his skills: “We are two engineers so there was something to learn in business planning and those financial things.”

Markus Suomi, a 14-year Nokia veteran who is now chief executive of WOT, a website security checker, is another who reflects on the mixed usefulness of his Nokia experience. “It was clearly a university in global high-tech for many Finns,” he says.

But he adds: “The way Nokia was organised, the actual business responsibility – the hard P&L [profit and loss] responsibility – was only with a very few people. There was very little first-hand experience in who was paying the bill.”

Nokia also helped, again indirectly, when current chairman and acting chief executive Risto Siilasmaa took part in WOT’s latest funding round of more than €1bn last year.

Another big question posed by the start-ups is whether Finland is the best place to be a technology company as their businesses grow. Mr Marin, whose Uplause made €250,000 in sales last year, says: “One of our challenges is that we are still based in Finland but the location isn’t ideal.”

He adds: “For our R&D phase it has been a great location, and it is good for seed funding. But afterwards we will maybe relocate to attract international investors. The US or Berlin are better for later-stage funding.”

Mr Suomi is equally reflective about being based in Finland. “If you are into something aimed at changing the world you need to go elsewhere.”

But he says being outside the US is advantageous following the debate over online surveillance launched by the revelations of Edward Snowden. “There is a lot of reputational trust for Nordic countries.”

A further advantage is that Finland’s size – it has 5.4m inhabitants – means companies can never afford to be inward-looking. “We have to think not only what do we want but what do people in China, the UK, the US want too,” Mr Suomi adds.

One thing has changed with Nokia’s decline. Instead of looking up to Nokia, Finnish start-ups are now more likely to refer to Rovio or Supercell, recent gaming start-ups that have conquered the world. “Gaming start-ups and huge growth successes such as Supercell set a great example,” Ms Zilliacus says.

Yet for those inclined to see start-ups as an engine for Finland’s economy, one big stumbling block is employment. Supercell may be worth $3bn but it employs just 100 people, whereas Nokia had 100,000 at the end of last year. Nokia’s diaspora faces a challenge plugging the gap.