Why is Finland the Rising Startup Hub of Europe?

This just in – Finnish startups broke all previous fundraising records in 2020. The amount of capital raised not only increased from the previous year but almost doubled – we jumped from half a billion to nearly a billion euros in just one year. But what makes Finland the rising startup hub of Europe? Why is our startup ecosystem the one to watch? Here are some insights.

There are plenty of quality startups being developed in Finland. In the years before 2016, we saw only a handful of investments topping €20 million. And now? There were ten such rounds in 2020 alone. Some of the largest investment rounds in 2020 were raised by, for example, HMD (€195m), ICEYE (€74m), Varjo (€46m), Supermetrics (€40m), IQM (€39m) and Swappie (€36m).

International interest in Finnish companies is mounting, too – foreign VCs backed Finnish startups with a whopping €272 million last year. The amount invested by international VCs in Finnish startups has increased fivefold in five years. Since 2013, a total of 272 foreign venture capital investors from 42 countries have invested in Finnish startups.

And it’s not like things are settling down, either: Finnish startups have attracted the most venture capital investments in Europe (as % of GDP) for two years in a row in 2018-2019. We are expecting a hat-trick in 2020. This year doesn’t look any different. With Wolt (€440m) and M-Files (€67m) announcing their funding rounds early in the year, we passed the half-billion mark already in January.

Finland has a very vibrant local venture capital scene. Despite being a small country, and yet sixteen completely new VC teams have raised their first institutional funds since 2017. In addition to generalist investors, we see more and more theme-specific funds, like the edutech-focused Sparkmind.vc and the foodtech-focused Nordic FoodTech VC. Last year, we saw a significant increase in Finnish VCs’ investments in domestic startups, as the amount invested by domestic VCs’ doubled.

The last two years were the highest fundraising years in the history of Finnish venture capital. A total of €700 million was raised for future investments to boost the growth of the most promising startups in Finland and the new Nordics (and even further). The fundraising figures indicate growing LP interest towards the Finnish venture capital asset class. We see more and more LPs dipping their toes in the VC asset class for the first time.

What has been driving this growth? Slush has played a major role in the development of the Finnish startup ecosystem in countless ways. Additionally, the success stories of Supercell and others have given extra motivation for entrepreneurs. We also have a history of forward-looking VCs and policymakers.

What’s next? The “first” wave of entrepreneurs came when Nokia’s glory days started fading, and plenty of tech talent begun looking for new challenges. At the same time, the Finnish demo scene was developing gifted gaming entrepreneurs. Slush’s youthful energy and fearless global attitude gave birth to a new generation of young founders. The big wave is still coming. When all the above is put together with the serial entrepreneurs that will come out of all this recent development, we’ll see many faster, bigger and stronger companies built in Finland!

Jonne Kuittinen, Operations Manager of FVCA