Fruugo Shutting Down Helsinki Office, Cites Bad Entrepreneurial Environment

Fruugo, the hugely ambitious but later financially troubled startup, is shutting down its office in Helsinki. We had a discussion with Fruugo's CEO Dominic Allonby (interview in full below) about the transition from Finland to England. While the reasons are financially backed, he also cites the bad entrepreneurial attitude towards his company as one of the reasons behind the move.

During the height of the company, before Allonby was the CEO, Fruugo employed some 150 people. Today, as the company is shutting down its Helsinki office, the move affects less than 10 people.

We covered the company's financial data in detail mid April as it had burned through some €37 million euros in entirety during its existence.

One of the reasons Fruugo has become larger than life in Finland is due to the high profile people affiliated with the company. The company had some of the public figures of Finnish business scene on the board of the company including Jorma Ollila (former CEO & Chairman of Nokia) and Risto Siilasmaa (current Chairman of Nokia, Founder of F-Secure).

Fruugo has been an ambitious attempt at building something novel, despite the failure to a certain degree in executing that vision. Fruugo's financial troubles are evident, but it does not help in having the CEO of such company publically cite a bad entrepreneurial attitude from the press as one of the main reasons for leaving Finland.

Below is the interview with Dominic Allonby, the CEO of Fruugo, in full.

ArcticStartup (AS): We have learned that the Helsinki office to going to be shut down - what were the reasons leading up to this decision?

Dominic Allonby (DA): The Helsinki office is not yet shut down, but the process is underway. During this process it is “business as usual”. The office will remain open for some months as we complete the migration of the operations to our UK office. Employees in Helsinki will be working their notice periods and have pledged their support for our ongoing efforts to ultimately make Fruugo a success.

The reasons for this decision are production and economic ones – it makes more economic sense to run the operations of what is now a small company from one, low cost office. Since most key operations are now managed from the UK and the executives of the Company are based in the UK, together with the fact that the cost base of the UK office is considerably lower than that of the Helsinki office, the Board of the Company concluded that streamlining the operations in this manner was in the interest of the company and its shareholders.

AS: How many people were affected by this decision?

DA: At its peak staffing level, several years ago (before the UK management came in), Fruugo employed circa 150 people either directly or as Contractors. At the time of the merger with the UK company in August 2010 this total had fallen to circa 25 people. And in the last 18 months under the new management this been brought down in Helsinki to just eight employees plus one on-site contractor.

AS: How does this affect Fruugo's ability to run its business?

DA: The Board believes it significantly strengthens the prospects for the business in the long term, since the net cost reduction across the organisation will be circa 60% from current levels, and the increased operational efficiencies and focus through being based in one office will help the business greatly as it moves forward

AS: We've also learned that the company is in difficult financial situation, how do you look to improve this?

DA: It is fair to say that for several years the company has faced difficult financial circumstances. This is not news. Indeed Arctic Startup and others have always assiduously reported on this – sometimes to the point of dull repetition. We have been greatly supported by certain shareholders in recent years, especially at key moments, and we are working towards that remaining the case.

We believe the business has a strong future; with a newly defined business plan and a planned move to an open source technology platform, we believe Fruugo’s best days are yet to come. Ultimately this will still be a Finnish success story (if only because “Fruugo” sounds far more Finnish than English), despite the fact that we feel that certain elements in Finland would prefer it not to be a success – you know who you are!

AS: Any other issues you would want to mention to our readers?

DA: Myself and other members of the Board feel strongly that one reason for pulling out of Finland is the overtly negative entrepreneurial attitude locally, and particularly in the press. While Fruugo has been truly persistent in executing its strategy and has remained determined, resolute and focussed through very difficult times, the Finnish media has apparently rarely seen anything positive in our tenacity or vision. Fruugo has employed many great people over several years, helping many of them gain excellent skills and knowledge that they will take with them through the rest of their working lives – to the benefit of Finland.

Fruugo has poured €millions in to the economy through such employment, and has also welcomed the support of certain forward-thinking Finnish financial institutions. Thus Fruugo has contributed well to Finland in recent years. Certain Finnish entrepreneurs have supported Fruugo even in the face of all this negativity, and they should be applauded not denigrated for doing so.

Other countries would celebrate such efforts, and would openly support them. However, in the final analysis, the seemingly deliberate negativity in the local press is detrimental to employee motivation, and also it unduly negatively affects customer and supplier confidence.

As such we conclude that it is better to operate in a more encouraging environment, namely the UK. We believe that there are important lessons to be learned from this for Finland if it truly wishes to compete on a global stage. As the country is beginning to realise, it needs more than just Nokia (and a few wonderfully angry birds who may eventually fly away or die). Whether these lessons are taken on board remains to be seen.

Criticism and bad news may sell papers, but good news and support creates jobs, wealth and sustainability. Finland cannot have it both ways.

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