Comparison of countries - Finland, Sweden and Denmark
As I was looking at through the companies presenting tonight at the ArcticEvening Copenhagen (it's going to be a very good event by the way!), I noticed that almost, if not all of them are business-to-business companies. This is an interesting trend in my opinion as Finland and Sweden are in my opinion more oriented towards the consumer market.
Finland, which I know best, is very oriented towards the consumer market in terms of internet oriented startups. We have our share of b2b startups as well and if we go back a bit we can remember that SteelTeam acquired Christoffer Landtman's CompanyCube operating in the steel industry. Then again we need to remember that Jaiku was acquired by Google so there are acquisitions on both fronts. Unfortunately there aren't many more cases that could be given as examples.
Sweden on the other hand is much more b2b oriented in terms of internet startups, or at least this is the perception I have. If we look at Videoplaza for example - one of the more successful Swedish startups in my opinion, is purely B2B oriented and doing very well at it. Sweden itself has a strong consumer internet market as well. This in my opinion is related to the strong usage of the internet and a population with a good purchasing power.
Denmark, being the last country of my light analysis is the one (if we look at the population of startups through the companies pitching at the event) with the most B2B oriented companies. I find this highly interesting as I personally believe that there is a lot more easier money to be made on the B2B market at the moment compared to the consumer market. Why is this? There are a few reasons.
First of all, the environment you are working in between the two markets is totally different. While in the b2b-market, you work with a few clients and the revenues per purchase are high compared to the consumer market where you need at least thousands of consumers before you can make any money as the revenues per consumer are naturally lower.
Secondly, if we look at the exit market in the two markets - businesses are more likely to purchase companies that actually help them create business, just as it was in the case of CompanyCube. This is tough in the consumer market as business models regarding many industries are still in the making with startups resolting to ad generated models.
Naturally there are many more reasons, but these are the few obvious ones. What's your take on this? Is this my percepetion only or are there people out there sharing the same vision and why?
Image by Olemisweb (Creative Commons)
What's also missing in Finland, together with B2B, is P2P
Oh, I think there are loads more b2b startups here in Finland than consumer ones. Sure, there is a small scene of web-based consumer oriented companies, especially maybe around the Helsinki region. Arctic Evenings will attract this audience, but if you go to some of the investor events organised by Technopolis or Spinverse, you'll find that the vast majority are b2b, and many with a very 'high tech' kind of focus. Ie. new robots, materials, business logic and the like.
I guess in some sense that is understandable: it's easier to sell to businesses, especially if you're a country with less background in consumer sales. For a business, if it can be demonstrated to make things more efficient (whether it actually does or not), they will be more willing to put the effort and money into buying. A consumer is much more fickle.
Still, I do think Finland could do with a few more consumer successes. It's not perhaps the easiest environment for that, and the country is small (so one must reach out immediately), but I would still like to believe it is possible.
Kristoffer, that is my experience as well. Any time I've been talking about XIHA somewhere, there's always someone telling me we should forget the consumer business and start offering the technology to other companies.
Consumer business is seen as risky and difficult while especially the older folks believe b2b is the only way to do "real" business. I think the main reason is in Finland's small size. Before the internet it was hard to go after global consumer markets and there simply are not that many people in Finland.
I agree with Kristoffer and Jani. I think Finland has always been big in enterprise software. This can be also seen from the exit market: A lion's share of Finnish exits (and Nordic exits) have come from b2b software. Less sexy, but that much easier to monetize.
It's also a very different skillset that's needed to build a product and harness a sales force to get sales vis-a-vis traction in global consumer market. I have been told that relatively little of a success of enterprise software depends on whether the software is the best one in the market (That said, it needs to be a decent product that solves the problem). It depends much more on whether you have the right contacts and a world class sales team. This is clearly not the case with the consumer Internet market, where traction is all up to your product (and distribution channel ie. reach).
Finland has a strong path dependency in enterprise software and very little experience of building successful consumer internet services. I believe the difficulties of Fruugo and Nokia's Ovi product (and other service products) are good examples of this. We just don't have many people with experience of building successful big scale Internet services.