Finland’s startup scene has stirred in recent years, with growing amount of capital and interest flowing into a scene strong on mobile, energy and gaming. Just last week, Rovio announced its forthcoming public listing at unicorn value. Boosted by interest garnered by startup event Slush, the country’s tech sector seems to be key in the country’s future growth.
However, looking at the return on venture capital investments in Finland in the past five years, success is expensive: Finnish business daily Kauppalehti tracked the financial health of 82 startups that received more than €5 million euros in funding between 2010 and 2016: "Out of the 1,1 billion invested, 885 million euros have turned into losses," it notes.
Here are further key findings from the 82 companies included in the investigation.
Eight companies are breaking even today
Eight companies have gone bankrupt, having received €120 million in VC money
The sum total EBITDA: minus €138 million
Average revenue per year: €1 million euros
Kauppalehti, which used data from fellow business publication Talouselämä's database, didn’t say what proportion of money came from domestic vs. foreign investors; nor did it compare the Finnish statistics to those of other countries. It notes that the investigation is not exhaustive, but gives an indication of the realities of the venture capital world, where it's commonplace to assume it takes up to five years before a portfolio company starts breaking even.
The business daily highlights Nokia-spinoff company Jolla as a cautionary tale. The mobile operative system provider and smart device maker had less than one million revenues in a lossmaking 2016, against €43 million in venture capital investments to date.
Read More: Once-promising Finnish mobile upstart Jolla is having some hard times
Although the study makes for grim reading from an investor perspective, it's worth remembering that one jackpot can make up for dozens of lossmaking businesses. A good example is Finnish gaming company Supercell (not included in the study), which was acquired for $8,6 billion by Tencent.
Counterintuitively, one of the best-performing businesses is anything but a tech company: SuperPark, a chain of indoor activity parks, will have an estimated revenue of €14 million this year, and hopes to double that amount by next year on the back of an expansion to Asia.