Editor's Note: This is a guest post by Timo Ahopelto, a serial entrepreneur and Founding Partner at Lifeline Ventures, where he is currently a board member, investor and contributor in ZenRobotics, Oncos Therapeutics, Valkee, Enevo and Arctic Diagnostics, among others.
Finnish startups have recently raised significant funding rounds in relatively early stages. These include Supercell's $12 million by Accel Partners and the most recent €13 million grabbed by ZenRobotics from Invus. What is the secret sauce?
Well, I don’t think there are any secrets. There are just talented entrepreneurs going after large opportunities with credible plans.
What we are seeing at Lifeline Ventures is an increasing number of Finnish teams who, from the very beginning, design their startup for the largest possible opportunity. This starts from finding a large, actionable and disruptive opportunity, building a company that can execute on it, continuously asking how it can be bigger, and not giving up on the large plan.
Finland has, for the first time in its history, a generation of serial entrepreneurs who have skills and experience to do this. When myself and Petteri Koponen were first time entrepreneurs in 1990s, we were all new in the game – entrepreneurs, investors and employees were all building their first companies with zero experience. It has taken these years for Finland to build the current competence pool.
So, what is a large opportunity like? Let's turn this into numbers and do the investor's math. In order to get significant funding early, the company needs to represent a very large value building opportunity. For someone to invest over €10 million early means that - based on the typical 10x investor return expectations and valuations - the company needs to represent a €500 million to €1 billion exit potential. This means typically a minimum of €100+ million in annual revenues or €35+ million in profits in few years' time.
In order to represent a credible €100+ million revenue plan, the market preferably needs to be in the range of €5-10 billion. Just as a reference, Supercell attacks the $ 7-10 billion mobile games market, and if ZenRobotics adds $100 per ton in value to Europe’s 200 million tons of construction and demolition waste produced every year, it attacks a $20 billion market in Europe alone.
At Lifeline Ventures, we are seeing a lot of companies and always ask ourselves how the already large opportunity could be built into something even bigger, and what is the maximum outcome of any company if it can be designed correctly: with best people, best investors, best partners and best in everything.
We try to challenge the entrepreneurs beyond the "think big" -cliché. Big thoughts need to be turned into actionable opportunities. It is a great exercise for any entrepreneur to sit down for 60 minutes per quarter, and try to re-design the existing business plan for the largest possible opportunity.