This week, I have returned to Finland and, more specifically, the city of Turku where I am a visiting professor at the university. The occasion is the 35th European conference in entrepreneurship research which, as I was at the fourth event in Durham back in 1990, makes me feel extremely old.
Of course, after having to avoid such gatherings for so long, it’s been wonderful to finally catch up with colleagues and friends to discuss, face to face, some of the latest studies in my chosen field.
It’s also given me an opportunity to find out what has been happening to the Finnish economy - one of the most competitive in the World - after the Covid-19 pandemic and especially the future prospects for entrepreneurship in this fantastic country.
The good news for Finland is that according to its latest SME Barometer (which provides a comprehensive picture of Finnish small and medium sized firms’ perceptions of the economy - the predictions are optimistic after the downturn of last year. This is not unexpected given that the overall economic decline in Finland was only half that of the rest of the European Union in 2020.
As a result, expectations amongst SMEs have increased sharply and there are strong indications that the economy will grow substantially over the next couple of years with companies predicting that profitability will return to pre-pandemic levels.
More importantly, many firms believe they can continue to adapt to the changes in the business environment as the economy opens up once more, albeit in a different way to the situation prior to March 2020 as they look to build back better.
As with smaller firms here in the UK, there remain concerns over the retention of staff and the rapid rise in costs especially with the increased price of raw materials which could lead to higher prices for products and services. And whilst the pandemic has not dampened the enthusiasm of entrepreneurs to grow their companies, there may be fewer high growing firms developing over the longer term although Finnish businesses are still adopting new technologies, investing in training their staff and looking to international trade to expand their operations.
Despite the desire for growth, it is worth noting that less than half of Finnish SMEs have a loan from a bank or other financial institution with the use of external financing decreasing substantially during 2020 with one in ten firms having decided not to apply for funding despite having urgent financial requirements.
Another positive indicator for the future of the Finnish economy is the growth in the number of new firms over the last year. The latest data from Statistics Finland showed that over 10,000 enterprises were opened between April to June 2021, a 23% increase on the corresponding period in 2020.
What is of interest is that the industry with the highest number of new businesses was the high value professional, scientific and technical activities sector demonstrating, yet again, the innovative potential of the Finnish economy.
Indeed, the reputation of Finland as a global hotspot for high growth entrepreneurial businesses is also reflected in the record breaking amount of venture capital investments generated in the first half of 2021.
According to the latest data, whilst venture capital firms invested £424m of funding during the whole of 2020, over £470m of investments had been made into Finnish firms during the first half of this year with three quarters of this coming from foreign investors.
This means that Finnish startups have received the most venture capital funding in Europe when the invested amount is examined in relation to economic performance with this being even higher than the UK where London is now seen as the capital of venture capital globally.
This ranking has been largely driven by major later stage investment rounds into successful firms such as Wolt, a food delivery business that operates in more than 120 cities across 23 countries and which raised £370m this year.
However, there has also been a massive increase in supporting new high potential businesses with sixteen new venture capital funds being established in the last five years, with many focusing on early-stage startups.
This is not surprising given that at the beginning of December, the World’s biggest startup event will take place not in Silicon Valley but in the Helsinki. Slush - which was originally set up as a student-driven, not-for-profit movement to change attitudes toward entrepreneurship - will bring together 1,500 investors with some of the most exciting new businesses in the World and confirm Finland’s place as a location where innovation and enterprise flourishes.
As the old Finnish saying goes, “the one who is afraid won’t play” although it seems clear to me that there are increasingly more entrepreneurs in this small country that are playing and are not afraid to take the risks to start a new business.
And when I visit again next summer to attend my doctoral student’s defence of her dissertation, I’m looking forward to finding out how this entrepreneurial trend has continued into 2022.