Cold, dark winters inspire Nordic start-ups

January 2, 2014 12:10 pm

Cold, dark winters inspire Nordic start-ups

By Richard Milne, Nordic Correspondent

Daylight is an increasingly precious commodity in the Nordic region just after midwinter. But the lack of sun and biting cold are just two of the reasons advanced for the success of start-ups, particularly from Sweden and Finland.Names such as Skype, Spotify, Supercell and Rovio have become some of the biggest recent successes in European technology, meaning that Nordic start-ups are far more visible now compared with the 1990s dotcom boom. Plenty of companies such as Klarna and King also stand on the brink of entering the premier league.

“Certainly, there are the dark nights where there is nothing else to do other than work,” says Sebastian Siemiatkowski, chief executive of online payments group Klarna. The main start-up gathering in Finland is called Slush with a slogan of “Welcome the dark. Embrace the cold”.

But it is not just the weather. The two main centres for Nordic start-ups – Helsinki and Stockholm – share many other characteristics. Good education systems, excellent English, small domestic markets, a lot of tech-savvy youngsters: all create a backdrop that has allowed the Finnish and Swedish capitals to thrive.

“There have been very forward-looking governments, building up broadband, supplying everybody with PCs at home. It has created a generation that is comfortable with technology,” says Mr Siemiatkowski, who also points to the success of Skype as a big inspiration.

Both Stockholm and Helsinki have a good system of angel investors, but a problem remains with funding when companies get to a certain stage. Many of the biggest have moved away such as King, the maker of theCandy Crush Saga game that recently moved from Sweden to the UK to pursue a stock listing.

Supercell’s recent sale of half the company to Japan’sSoftBank for $1.5bn, however, sends out a signal that Nordic start-ups can see profitable exits without leaving the area. “It has been immensely powerful to have these companies as a great example such as Spotify and Skype. But they’ve left the region to some extent. So Supercell is a great sign that you can stay here and still make money,” says a Nordic dealmaker.

Start-ups: one established and one to watch

Spotify

Year founded: 2006

Spotify has shaken up the way people listen to music allowing them to stream songs, such as those by Rihanna (pictured), without owning them. But controversy surrounds just how much the Swedish company pays artists.

Fingersoft

Year founded: 2004

Fingersoft demonstrated how, in the mobile app world, it is possible for one man to beat established companies. Hill Climb Racing, developed in Finland by Toni Fingerroos, topped the overall Android charts in three countries and the game charts in 13. The group employs 12 people.

Being small markets in themselves means that Swedish and Finnish start-ups naturally have to look abroad. But Velli-Pekka Marin, founder of Uplause, a Finnish company that designs games for sports events, says financing is an issue. “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.”

The two main Nordic scenes are subtly different.Stockholm’s appears broader with a mix of app makers such as Wrapp, a social gifts company, but also more low-tech companies such as Peepoople, which makes portable toilets. Helsinki’s is more centred around mobile gaming through global successes such as Supercell’s Clash of Clans and Rovio’s Angry Birds.

But there is a desire for it to be not just about gaming as the country tries to fill the gap left by Nokia. “I for one don’t think the games industry is the new Nokia. I just don’t . . . But I do think start-ups as a whole could be the new Nokia,” says Ilkka Paananen, Supercell’s chief executive.

He points to companies such as Zen Robotics, which makes robotic recycling systems, and Moves, an app that tracks how much you move in a day. One of the companies – Valkee – even helps Finns (and others) combat the long winters by using light-emitting headphones to counter the effects of seasonal affective disorder.