Magnifier Introduces A New Startup Pre-Seed Fund
Magnifier is a new Finnish startup accelerator fund investing money and effort at a pre-seed phase into new promising startups with world-class opportunity. The purpose of Magnifier is to prepare and scale the firms for the next stage where angels and early VCs can and want to invest into them.
The fund was founded by a group of ten young but experienced entrepreneurs. The founders are driven by the urge to share their experiences and learnings to other Finnish startups. Also foreign entrepreneurs are welcomed, though, as long as the firm is located in Finland. The leading idea is to help accelerate their growth and avoid the pitfalls the founders may have experienced in the past, and thus cultivate the Finnish startup culture.
The track record of the founders is quite impressive. They state having founded over 30 firms, raised over 35 million euros of venture capital, and been involved in over 25 mergers and acquisitions altogether.
According to Mika Tammenkoski, Founding Partner, Magnifier intends to identify the missing links in the startup's team, and then use their own partners to fill in the gaps, and act in the needed roles while suitable permanent recruits are found. The effort Magnifier will put in can be anything from consultancy to part-time or full time work depending on the need. This period of intensive development to reach the next investment phase is said to last typically from around six months to over a year. Mika indicates there would be 3-5 such firms at a time in their portfolio. Magnifier takes only equity share in the companies, no fees or salary. After the firm secures more funding, Magnifier stops active hands-on working, but remains as a long-term owner. They will exit only when the entrepreneur will get the reward as well.
Mika states the founding members of Magnifier share the entrepreneurial mindset in that they want to allow the entrepreneur to execute her own vision. He continues that Magnifier does not want dictate what or how to do, but will support the needed sides of the business. ´
Inevitably Y Combinator in Silicon Valley comes into mind when listening to Magnifier's plans, and Mika admits they studied the Y Combinator model closely. Y Combinator also coaches the startups and makes small investments around $20,000 in return for 2-10% stake in the companies. Magnifier or Mika do not yet want to specify the size of investments they are willing to make, but one can suspect it to be in the same range or higher as Y Combinator. In Magnifier's case the equity stake they request will probably somewhat bigger, though, as they also put in more effort and over a longer term.
Magnifier is not government supported at the moment, though Mika admits there are some discussions going on. It is interesting to see how entrepreneurs welcome the new fund. It may not be easy to give up equity early on against a small investment, considered you can get goverment money relatively easily without such commitments. Magnifier do their best, though, to try to convince they are capable of adding substantial added value with their experience and network.
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Miikka I think you nailed an important problem in the Finnish startup scene these days when you said "It may not be easy to give up equity early on against a small investment, considered you can get goverment money relatively easily without such commitments."
Young companies spend a lot of time and effort to run after the government money in order to avoid taking investments. Instead of thinking big and aiming high, I see a lot of companies doing relatively small Tekes funded projects year after year. These companies focus on setting their project plans in a way that they get funded and often nothing much comes out of them.
Not only is this bad for the companies, but it also is one of the main reasons why there are so few entry level investors in Finland. In fact, it's probably a reason why there are so few investors overall in Finland. When there's nothing feeding the growth companies from the early level, there's not that many companies going for global success either, which means there are simply not enough potential for large international investors to set base.
Hopefully Magnifier will launch an important change in the Finnish startup culture which over time leads to more companies who are willing to go for their full potential and stop wasting time at the government welfare coffers...
Jani, I must respectfully disagree. :)
I think that more companies are founded because of the government money, among them also more potential success stories. I also think that some "slack" is needed in order to create good innovations and success stories - even if that means that sometimes also a few not that great companies get some government money.
The companies that "spend a lot of time and effort running after government money" and let that dictate their focus do, in almost all cases, not have the potential to become much anything anyway.
Hopefully Magnifier, and other accelerators, will be able to help many young Finnish companies. I really do not see them competing with government money for early stage companies. If they are, they perhaps do not have enough value to give to the startups?
Michael,
I agree that they do not compete with the government money, quite the opposite. They will hopefully be able to instruct the young companies to easy ways of accessing the available funding while keeping the focus on the actual business.
I'm not saying the public money is bad - not at all - but the process of applying for it is full of bureaucracy and the "advice" you get from the government officials on where to focus your company in order to qualify is often quite questionable.
This is why we need companies like Magnifier, who can step in early on and guide the young companies with their experience and expertise, without actually stepping on the way of actual innovation or vision.
Is Magnifier still active ? There website has only single page ?
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