The Tekes Bureaucracy: Is It Overstated?
Editor's Note: This series of posts is sponsored by Tekes and produced in co-operation with ArcticStartup to share experiences from startups about their funding experiences.
From offhand comments in forum comments, hackathons, and local tech events, I'm sure many first-time Finnish entrepreneurs have some pre-formed negative-leaning opinion about how the Tekes bureaucracy works. Without getting into a discussion on how society should support entrepreneurship, realistically there has to be some sort of balance between bureaucracy and free government money. With too much bureaucracy, the system can kill entrepreneurs time and crush innovation. But if the system is too loose, you then have "entrepreneurs" buying fishing boats for their summer cabin.
Where is Tekes on this scale and how should you mangage it? To get to the bottom of the bureaucracy, we talked to Joonas Pekkanen, who's been part of a few Tekes projects. He's currently the CFO of Flockified, who are gearing up to release a full-fledged version of their group buying service. Their teaser page proudly states, "WE'RE BUILDING THE BEST DAMN GROUP PLANNING AND GROUP DECISION MAKING TOOL EVER," which we'll cover more on later in the post, but first, here's our interview with him:
Oh Private Money, Where Art Thou?
Editorial note: This is a guest post by Jaakko Salminen. More information on him towards the end of the post.
One of the generally accepted wisdoms of the Finnish startup and growth company environment is shortage of private money. Startups run to Tekes for funding supposedly due to lack of available private early investments, and growth companies get sold very early when there is no VC money available. Easily available public funding is often cited as the dragon eating away any lucrative investment opportunities, and the vicious circle is ready.
Or is private money simply being directed elsewhere? In fact some very interesting sources for additional private money could be made available, if we take a forward-looking attitude.
Spending Your Tekes Financing
Before applying for Tekes financing, you need to know how Tekes' money can be used. When you apply for financing, you will meet with your Tekes representative to come up with your own spending plan, which will dictate what you're allowed to spend Tekes' money on. It's been described by the entrepreneurs I've talked to as a flexible enough system as long as you confirm new expenses not included in your plan with your Tekes representative before spending any money. Last month, Elina Arpponen gave an example of not including travel costs in her original plan, but luckily she was able to re-allocate expenses with just an email to her representative.
As mentioned earlier in this series, Tekes doesn't give you money upfront to spend. Tekes reimburses entrepreneurs' receipts that stick to the funding plan laid out with their Tekes representative. But generally speaking, Tekes money can be used for any costs associated to research, development, and innovation activities. These include costs like:
Jarkko Jokirinta From Liilak Talks To Us About Tekes' Payment Model
Our coverage of Liilak about a month ago provides a good picture of the idea crowdsourcing service, but after talking to CEO Jarkko Jokirinta as part of a series of posts on behalf of Tekes, we learned more about the next layer they're placing on top of that service. "We aim to be the de facto link between people and businesses all around the world," says Jokirinta. "When anyone has a praise or an idea about a product they use every day or business they somehow are in connection with, all they need to do is open Liilak and share their thoughts."
In this way, they're moving towards more of a combination of Twitter, Foursquare, and a feedback system. Through each other's praises and by following other people and their suggestions Liilak allows people to learn what is buzzing. "We empower the crowd to think of better ways of doing things and create enough buzz to get the Businesses to listen."
Preparing For A Financing Round
Editors note: “Road To Exit: Start-up’s First Year” is a practical blog series addressing the most common legal questions and problems that a startup company and its management faces during their first year of operation. The series is sponsored by Attorneys at Law Borenius Ltd.
So you have the company up and running and your team is working hard on the service/product. In most cases, you soon start looking for funding beyond the usual friends, family and fools department. Building up an investment ready company affects pretty much everything you do in your company. You build up networks, polish your website and pitch your idea in the social media and various real life events (luckily, plenty of such opportunities are nowadays available). Here are some insights to financing round preparations from the legal perspective.
Playmysong Getting Traction In US With Tekes
For the first of a series of posts we're doing in cooperation with Tekes Tempo, I had the opportunity to talk with Rami Korhonen of Playmysong about his financing through Tekes. If you're unfamiliar with Tekes Tempo, you may find a past article we did helpful as some background. In general, Tempo's goal is to quickly test products out on the market by providing financing as quickly as possible-- their aim is to provide financing within one month of a startup's application. The program's goal not necessarily to develop a finished product, but rather to gain more knowledge of markets and users.
But back to Rami and Playmysong. We've covered PlaymySong in the past, but if you haven't heard about them, Playmysong is a social jukebox app that lets you control the background music you hear when you're out at a bar, diner, or similar location. The new version of their iPhone app released last week shows your Facebook photo in the upcoming playlist, and allows you also host your own social stereo on your iPhone.
Tekes Launches Tempo - Puts Feedback Into Practice
Tekes, the Finnish Funding Agency for Technology and Innovation, has launched a new financing program to support growth companies developing mobile services and applications - Tempo. Having followed Tekes for quite some time and knowing how they operate, one could easily argue that Tempo is a sign of the organisation changing tracks fundamentally and putting most of its feedback into practice. I'll go through a few examples below.
First and foremost, "as agility and customer development are essential in mobile service development, companies must be able to launch a minimum viable product to find out whether there is a customer need for it". This comes in fact from the Tempo pitch itself. They're promoting MVPs as a way to find out if there is demand for services the companies are offering.
Interview With Steve Blank
Editor's note: This is a cross-post from the Steve Blank visits Finland -website. His visit and the awesome agenda for the week is made possible with the help of AaltoES, Tekes, Sitra, Teknologiateollisuus and others. Original text by Kalpana Shah.
Steve Blank is that rare combination of successful entrepreneur and inspiring teacher who’s also an insightful writer. His writings define, explain and predict trends that are sweeping the entrepreneurial world. Customer Development, Agile Development, the Lean Startup, The Four Steps to the Epiphany, Business Model Generation are all terms for methodologies that can actually help startups get on in life.
Vigo Accelerators To Start Building Funds
Vigo accelerators in Finland are planning to start building funds to further improve their possibilities in helping with startups. This has been approved by a Tekes news release (in Finnish) and in a panel discussion last week regarding Vigo accelerators. Vigo accelerators are a new form of government effort to enable growth and development of startups into the right direction with the help of serial entrepreneurs (running the accelerators).
Sofanatics Charging Strong, Targets Being The Largest Sports Related Chat Service
I might sound a bit too judgmental and far fetched when it comes to putting Sofanatics as being one of the most interesting startups from Finland. Primarily because it brings all football fanatics onto one platform that has the potential to be the buzzing stadium within a browser. Do I make sense?
The Move Towards Supporting The Markets
Last week we covered how Finnish tax payers were forced to give publicly listed companies more than 40 million euros through Tekes. The argument from Tekes' side is that these larger companies are important drivers of innovation and projects. The President of Tekes Veli-Pekka Saarnivaara has stated that this year, growth companies were the focus of their financing. In 2010 Tekes approved more than 100 million euros in funding for younger companies, less than 6 years old. This is exactly the direction we should see the financing go - or even better, tie it completely to private funding.
Applifier Signs $2M In Funding, Sees Huge Opportunities In Web Based Games
The news broke out today that Applifier has closed $2M in seed funding. The investors include MHS Capital, PROfounders Capital, Tekes, Lifeline Ventures, and angel investors Jyri Engeström, David Gardner and Lars Stenfeldt Hansen. The terms of the investment were not disclosed. Applifier is also announcing today that they have expanded their ad network into the web gaming space - where pain points are similar to that of Facebook; the market is fragmented, user acquisition costs are high and its becoming expensive to get users. We talked to Jussi Laakkonen about the expansion and they see huge opportunities in the space.
Finnish Taxpayers Gave Over 40M Euro To Publicly Traded Companies Through TEKES In 2010
Tekes, the Finnish Funding Agency for Technology and Innovation, published its figures for 2010 a few days ago. In the figures are listed all the companies who received government funding, aka tax payer money, to grow their businesses. All in all, there were over 2200 companies who received funding of more than 380 million euros.
The sad part of the equation is that Finnish tax payers funded publicly listed companies with more than 40 million euros last year. This is money, the companies should budget from their own assets or turn to the markets for more financing. For comparison, the Vigo accelerator programme received 42 million euros of funding for its full tenure of three years.
The Ineffective Finnish Innovation System Needs Redesign
While Finland has been one of the countries publicly to be noted for its gracious innovation support systems, many have wondered how all these investments and expenditures can be afforded. The simple truth is - we can't. The private Research Institute Of The Finnish Economy, Etla, has published a set of essays from the sharpest economists Finland has, that demand drastic changes to the way innovation is currently financed. While it is the lifeline of startups and growth companies, I'd argue many if not almost all would agree.
Futureful - A Predictive Discovery Engine
Futureful is a Finnish, research based startup that is developing a predictive discovery engine. In essence, they want to help you discover more interesting content on the internet, based on your behaviour and liking. The company was founded by Marko Anderson and Jarno Koponen and they pitch themselves as "imagine if Hunch and Flipboard bootstrapped a lovechild."
New Player In The Taxi Market: Cabforce
A Finnish company by the name of Cabforce is looking to enter the taxi business, which has been spurring up quite a bit of discussion and a few C&D-letters in the US lately. Cabforce is planning to build an end to end IT solution for taxi entrepreneurs covering multichannel booking tools for passengers, web based dispatch & fleet management tools as well as software for taxi drivers to interact with clients and the dispatcher.
The Unsung Hero
In the stories, the hero fights for the people, faces failure and great uncertainty, and ultimately wins.
In Finland, we think he’s a fool who thinks he’s better than everyone else, disrespects the rules and is probably Finnish-Swedish.
Entrepreneurs are the same. They are opportunists and idealists. In its original French, the word means: somebody who will attempt to create something.
On one hand it’s a risky, lonely and difficult endeavor. But on the other hand, it’s thrilling, challenging and potentially offers great returns (value, jobs). I believe we Europeans, and especially in Finland, spend too much time focusing on the former and not enough on the latter.
Finland Gets its Startup School this Summer
Nordic media, take note. Finland is notorious for its lack of entrepreneurs. A collaboration between student-run associations from the top 3 schools in Helsinki (Aaltoes, Hankenes and Hues) has raised 50,000 euros in public funding, to encourage students to create startups during the Summer.
Summer of Startups will take place during July and August and will provide 750 euros per month in funding to each team member, regardless of their school or country of origin. This is the first time such a program does not take any equity, unlike programs such as Y-Combinator, Techstars, or Startup Bootcamp Denmark. The goal is purely educational, in order for students to try entrepreneurship without having to fear from failure. Stanford started a similar initiative called SSE Labs, which will run from June 15th-Sept 15th.
Disclaimer: I am the main coach of this program.
Nervogrid Lands A 700 000 Euro Investment
Nervogrid, a Finnish cloud computing company, announced yesterday (in Finnish) that they have landed a 700 000 euro investment from a variety of Finnish investors. The company has been founded in 2004, but in the last two years its sales have exploded dramatically. In 2008 its revenue was 240k euros and last year they managed a 1.2 million euro revenue - showing clear traction and demand for their services. With the investment, Antti Vihavainen, has been named the country manager of Nervogrid to further speed up the sales.
12 New Startups And 120 Positions Created With Nokia Technopolis Innovation Mill
Almost a year ago we reported on a Nokia, Tekes and Technopolis backed venture where startups would be able to reap the ideas and R&D results from Nokia's patent portfolio. Not all patents, but specific ones that Nokia has put aside for the program. At this stage of the program, 12 startups have been formed, with 120 employees together with over 5 million euros in venture financing and angel funding. Tekes is the Finnish development fund for technology and Technopolis is a public company working with growth companies in many different ways.
In the first phase of the program, Nokia and Technopolis have gone through thousands of ideas from which about a hundred made it into the program itself. All three parties have commited quite a bit, to make all this happen. Tekes for example has been able to make financing decisions in a week for the companies involved in a program - something regular entrepreneurs can only dream in their wettest day dreams.
Advant Games Successfully In The Money Gaming Business
I talked to Sami Kuivasaari, one of the people behind a Finnish spin-off startup Advant Games, a little while back about their company and the way they see the money gaming market. Advant Games is a young spin-off company from a joint research project between the Tampere University of Technology, Tekes (the Finnish Funding Agency for Technology and Innovation) as well as Veikkaus (the money gaming monopoly of Finland). I titled this post explicitly as successfully, because in 2008 just 2 years after their founding Advant Games turned over close to 400k€ with a 20% profit margin.
Kicking Off B2B Software Sales - Lessons From The Field
I attended Software Sales Camp seminar organized by Tekes (the Finnish Funding Agency for Technology) earlier this week. The event was a two-day "bootcamp" aimed for improving Finnish software firms' business-to-business sales and marketing skills. Going forward, I will summarize a few interesting tips and experiences shared by the seasoned speakers at the event. One main theme throughout the event was also the U.S. market entry and issues related - I will get back to that later.
Here’s how to get funding from Tekes
Jerri Laine is the CEO at Innavation Manager where he helps companies with their Tekes and T&E-Centre funding proposals.
Tekes, shorthand for the Finnish Funding Agency for Technology and Innovation, is publicly funded expert organisation for financing research, development and innovation in Finland.
I have been asked this question dozens of times - as in the past I have been working in Tekes for seven years in evaluating all kinds of project proposals.
Since the year 2000 Tekes has grown to an icon of Finland’s innovation success story and it has had its implications. Tekes’ budget has grown remarkably, it’s staff has been grown and changing and it has got a lot of new norms, instructions and directives from it’s owner Ministry, from internal inspections and of course from EU. In short Tekes has got bureaucratic.
Government Backed Accelerators Chosen - March On Finland!
Vigo, a Finnish government run program to strengthen the currently rather dismal foundation of Finnish risk capital ecosystem and to create international venture accelerators and investors in Finland (see our previous story here), has come to an end and now it's time to see what we got. And it does not look that bad at all.
In total, three venture accelerators where chosen by the steering board, which was lead by Mr. Risto Siilasmaa, Chairman, founder and former Chief Executive Officer of F-Secure Corporation, Member of the Board at Nokia and a prominent business angel among other things. It seems that the Vigo steering board was looking into finding teams to cover various different industries and compliment each other instead of creating competition into the Finnish venture capital scene. They seems to have found three such 'mutually exclusive' teams to fit the bill, namely Lifeline Ventures, Lots and Veturi Venture Accelerator. Here's a short description of each in turn.
Fruugo Burned Through 14,5M€ In 2008
Fruugo has burned through 14,5 million euros in 2008, according to an article in Kauppalehti. Last year's books show (in Finland these are public for all limited liability corporations) that Fruugo's net loss for the year is 14,5 million euros and with no income, this is the investment Fruugo used in 2008.
Fruugo is the much debated startup from Finland that has gathered a lot of media attention in the recent year. One of the reasons they have done so is their attractive and well known board members that include Risto Siilasmaa (Founder, F-Secure), Jorma Ollila (former CEO and Chairman of Nokia) and many others. Fruugo's main product is a webshop that would aggregate all the different webshops into one.
Ravensoft Green Snapper Rides The Wave Of Green IT
During this economic cycle, energy efficiency is the name of the game. 2009 Green IT Report released last week by Symantec shows that even 45 % of firms globally are adopting green budgets. The companies, which can offer energy efficiency solutions with quick paybacks in terms of cost-savings attract customers (and investors) right now. Last Friday, only 18 month energy and environmental management software startup Hara raised USD 6 million from Kleiner Perkins. Energy efficiency technologies can reduce both costs and carbon emissions and also, these technologies are less capital intensive and can be brought to market quite rapidly. ICT and internet industry like Intel, IBM, Cisco and Google has seized the energy as a significant revenue opportunity for some time. For instance, Google's three step approach to being carbon neutral includes in-house efficiency programs, the actions for producing electricity (cheaper than coal) through renewable energy ( RE<C ) and finally, investments in Carbon Offset projects. As a part of efficient computing, Google introduces CO2 emissions of some everyday activities and compared them to Google searches (a link).
Finland Puts €45 Million Into High Growth Incubation Fund
Finland's Minister of employment and the economy, Mauri Pekkarinen, has announced last week that Finland will be adding more capability to commercialise innovations with a €45 million fund. The fund is put together from governmental organisations such as Tekes and Finnvera's seed financier Vera.
The aim of the new fund is to attract more international talent from overseas to help the companies grow and also enable more targeted investments. One of the ways international talent is attracted is the financial upside. The goverment is willing to invest into these companies, if a private sector individual (person or organisation) invests. Thus the financial upside is the invested amount in the company.
Tweehouse Scores 350 000 Euro From Tekes
Tweehouse, a 6 months old Finnish MMO gaming startup that was spun from Valve, has received 3500 000 euro from who else than Tekes, Finnish Funding Agency for Technology and Innovation.
Tweehouse got the grant to assist in the ongoing development of TrunkTech, an end-to-end technology platform designed to develope games in co-operation with a U.S. based games publisher. With the grant Tweehouse team will be able to grow its current size of nine developers and designers in Finland and additional marketers and producers in Los Angeles, CA. They just got their first game out, Eco-Rangers. A good start, even though according to the team it's only a mere poke at the market compared to what's in the plans: The Eco-Rangers was mainly a marketing campaign for Taco Bell in the US, whereas TrunkTech will be published as SaaS (’Software as a Service’) later in 2009 and used as the core engine in buiding of many more massively multi-player applications or even in virtual worlds.
The startup has a rather unusual business model. I quote myself here from the previous post on the company:
Tweehouse will target purely US market in the beginning. For this Snap TV is an ideal partner [for Tweehouse] to handle the Sales and PR and leave the game development and pipeline management to the Helsinki office. Snap TV prides itself for having a dedicated sales force that calls on all classes of retail and ships products to over 20,000 storefronts across the United States and Canada, thus enabling quick access to market when the product is ready....
The business model will build on the end-to-end solution. The service covers everything from design, development and marketing all the way to running the platform and moderation of the games themselves. In essence Tweehouse is aiming to build and sell solid gaming platforms to their customers. In addition to a fixed price element, the company also aims to always build an upside to the products they sell. This could mean for example a revenue share model that will be a percentage of each game sold.
As Paavo Perttula of Tweehouse notes, Finnish success in gaming is partly due to the long tradition stemming from the very active demo scene of the 80's. Along with the demo scene, the Finnish goverment has had an active role contributing to the success as well. In 2007, the Finnish technology fund (Tekes) gave in excess of 6M euros in government grants to gaming initiatives, whereas the combined figure for the whole of the EU was 21M euros. This time it was Tweehouse's turn to give the international expansion a try, and based on the progress so far they are on schedule. Congratulations to the team and good luck!
Sauma Secures EUR 500,000 Funding For A Browser MMOG
Sauma Technologies, the developer and publisher of browser-based Massively Multiplayer Online Games (MMOG), secures EUR 500,000 (USD 685,000) funding from Finnish state agencies Tekes and Finnvera, as well as the Nordic Game Program.
Sauma CEO Andreas von Koskull says “We are very proud of having secured seed funding for our game platform and our first self-published game “Hours of War”, a war simulation strategy MMO game, despite the global finance crisis [...]"
Securing funding is not a minor task in anysituation, but it's good to remember that the liquidity crisis hardly affects Tekes or Finnvera, which are both government run institutions with annual budgets that do not follow the market sentiments. If anything they would've probably been designed to act as counter cyclical stabilizers if the sructure would've allowed it. When you find a private investor for yourself it is relatively easy to get VeraVenture funding, which is operating under Finnvera. And once you get that deal sealed, you're good to go talk to Tekes who will normally double your money with their support. And it seems that Nordic Ministers for Culture, representing Denmark, Finland, Iceland, Norway and Sweden, are financially behind the Nordic Game Platform.
Having said that, securing funding is always a major feat for a startup and we want to congratulate the great people at Sauma for pulling this off. The game that the funding was granted for, Hours of War, MMO, a social network and a rich-media gaming experience, played through the Web browser, will be introduced in early Q1. During 2009 the Sauma team plans to expand the mass-niche war strategy franchise “Hours of War” to other platforms, as well as to develop other game franchises with a focus on a more casual audience.
The business models for the games vary but include free-to-play, monthly subscription, pay per play, micro-transactions as well as advertising revenue models, depending on the game and game audience. The browser-based MMO game industry is growing rapidly, combining a rich gaming experience with social networks. According to Sauma the massively multiplayer online games market in large is currently standing at EUR 1.6 billion.
Nordic Venture Forum: M-Brain
Here's the third startup in a run down of startups that I saw at the Nordic Venture Forum last week in the beautiful city of Copenhagen, Denmark. All the startups present at the forum were seeking either financing from the investors or partners for their business.
M-Brain (FI) - M-Brain is a value-added business intelligence firm operating in the media environment.
M-Brain focuses on media monitoring by delivering filtered, summarized and translated content from the Internet, both editorial and social media. They offer specific aggregated reports from more than 60 countries in 25 languages.
The company claims that it's success factor is its 'unique symbiotic combination of technology and human capital'. This stems at least partly from an in-house tech development that is funded by the Finnish Funding Agency for Technology and Innovation. Also, members of the R&D team continue to work part-time in the academic EU research projects bringing a wide range of knowledge to the table. M-Brain is also involved in many other EU project which are likely to bring in again new research, and many times also added funding from EU's budget. Along with a few private individual the company has investments from Veraventure.
M-Brain employs 56 in-house trained staff of which 34 work part-time. M-Brain differentiates itself from its competitors by a 'business model that is based both on human expertise and state-of-the-art search technology', where most of their competitors emphasize only one of the two.
The company does not say much about the search technology except that the quality 'results from scalability of human effort, achieved by replacing the mechanical part by technological means, themselves scalable. Query enrichment tools and interactive means of reorganizing the filtered material transform raw data into normalized information. The process and the representation are optimized with regard to human cognition and customer needs, enabling also broader survey of discourses related to an industry domain, resulting in products such as alerts, ananlyses and recognition of emergent relationships and trends' . The only bit I could find out the above I can really say I understood was that the company also employs refined data stream offered by Whitevector and Leiki's semantic filtering tools. That said, the company states that their R&D investments add up to 15% of turnover, which is a very healthy number.
How M-Brain aims to differ from the Google and other aggregators is by rewriting the content instead of only cutting and pasting or taking a bit of the article and pushing it forward in a feed. In the Nordics M-Brain needs to compete with the likes of Meltwater and Cision, but as soon as you enter for example the UK you can find bigger players such as Libraryhouse among others.
M-Brain might have a killer technology and I hope they do, since their editorial does not seem to offer terribly much value based on their blog (in Finnish) where they claim to 'observe the social media and offer perspective, opinions and experiences from the web'. The quality of the analysis throws a dark shadow of their claimed 'human expertise' which accounts for half of their product offering. For pure information aggregation this might not pose such a problem, but for those looking for in depth analysis I'd look long and hard how much bang I get for my buck.
Currently the company is looking for acquisitions from the old media that work in the media monitoring industry. This would allow M-Brain to integrate their technology to these players' organizations which are stuck in the old way of doing things, and thus pushing the efficiency and margins way up. This would also offer the company a way acquire new customers in a quick and efficient manner.
