NB: This is a guest post by the Deep Tomato. You can learn more about me by looking at my profile.
Entrepreneur 1 claims getting seed funding in Finland is a piece of cake.
Entrepreneur 2 claims getting seed funding in Finland is bloody impossible.
Which one is right?
If you have a good team and are looking for seed funding for a high-quality tech start-up (preferably in gaming, Internet, or clean tech), your chances are pretty decent. There is a fast-developing angel scene, the VCs are interested, and the Tekes-driven Vigo accelerators can give you a hand (the flaws in the Vigo system notwithstanding). Lately, mainly thanks to some very high-profile gaming successes, it has even been possible to raise substantial seed rounds from international players.
I am not saying every start-up gets funded — far from it. But viable ones certainly have a very good chance.
This is all fine and dandy, but if you have a company that is hatching a great plan outside of the typical areas, life gets considerably tougher.
If your offering is a service, something design-driven, or a non-tech B2C product, most of the funding sources disappear. All of a sudden you are outside of the scope of the VCs, Vigos are not interested (with one possible exception, but even Royal Majestics hasn’t established a track record yet), and most angels walk away in trepidation.
Believe me, I know — I founded one such weird company. We have raised our seed funding from what I would call atypical angels (mostly the kind you don’t see in FIBAN pitch events) and Tekes (to their credit, they have been very supportive). We have managed to raise sufficient funding — barely — but it has been harder than in any tech company that I have seen.
When we needed a larger funding round, we found out very fast that we did not have a snowball’s chance in hell to raise it in Finland.
So we went to London. They loved us over there. They really loved us, but… “Hey, guys, what you are doing is fantastic. When you hit about £3-5 million in revenue, come back to us. We’d love to participate at that time.”
We went to Stockholm. They loved us. They really loved us, but… “Ja ja mensan, vad ni gör är jättekul. Om ni hittar några Finska led på runden, ska vi gärna delta. Kom tillbaka då.”
OK, we went to Teollisuussijoitus. The manager we spoke with loved us. But they wanted an institutional lead investor, not a ragtag bunch of angels. We went to Finnvera, they did not get us. We went back to the VCs. They really liked us but we weren’t tech enough.
There were rumours of two or even even three new funds being raised 12 to 18 months ago that would target these atypical companies. So far, nothing concrete has come out of the rumours.
So, what are we doing? We are raising some more angel money in small chunks, scaling down our growth, and working our butts off to grow enough in a semi-bootstrap mode to reach a point in which we can break out of this Catch 22.
And the lesson of the story (from my perspective, at least): the Finnish start-up and funding ecosystem is not well-balanced, at least yet. Funding ends to go for a few hot areas and many promising sectors and companies go under funded and cannot fulfill their real potential.
What is your take and experiences on this angle?