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What our members have to say...
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Funding for Finnish start-ups and growth businesses needs to double or even triple in the next couple of years
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Experts want government to take part in venture capital funds
In the coming years much more money will be needed to support new growth companies get past the start-up phase, says Finnish Venture Capital Association (FVCA) chairman Artturi Tarjanne.
Currently, there is just under a hundred million euros of private investment money available for new growth companies.
This equals only about six per cent of the total investment pot that the Finnish private equity firms have at their disposal.
“In Finland, interest towards growth entrepreneurship is clearly on the up. So, funding is needed, and the money invested in growth companies should be doubled or tripled in the next couple of years”, Tarjanne explains.
Supporting new firms is venture business, for the companies’ ultimate chances of success and the consequent profits for the investors are difficult to estimate.
Because of the uncertain profits, the large pension insurance companies, for one, invest hardly any money in businesses that are only at the initial stages of their expansion.
Hence experts want the state, too, to take part in supporting the trusts for new growth companies.
According to the suggestion by Finnish IT security provider F-Secure chairman Risto Siilasmaa, who himself also acts as a private equity investor, instead of supporting businesses directly the state could focus on helping to add to mutual funds instead.
“In order to muster funding, state-supported asymmetric trusts would be needed. One model is that the government provides some of the money and the private sector the rest. Later the profits would be divided evenly, but the private investors would be the first ones to get their money, which means that in temporal terms the returns would benefit them more”, Siilasmaa explains.
The Ministry of Employment and the Economy likes the idea.
“We should get the private sector excited about investing. In Finland the market is somewhat small, however, and finding foreign investors is difficult. The state taking part in the funds would be the best way to attract private money to come aboard”, says Petri Peltonen, Director General, Innovation Department, Ministry of Employment and the Economy.
Private money is not the only funding model for new businesses.
For example, the National Technology Agency of Finland (TEKES), which is governed by the state, made grants to new and small companies worth in excess of EUR 100 million last year.
Additional funding governed by the state is also available through Finnvera and Finnish Industry Investment Ltd.
“The present system is really complicated, with a countless number of various funding instruments. We want to simplify the situation”; says Finnish Industry Investment Ltd director Juha Ylä-Jääski.
Both Siilasmaa and Ylä-Jääski support the notion of creating a common administration for the state innovation systems, which would coordinate the support and funding for businesses.
At the moment the government bodies are led by different Ministry of Employment and the Economy officials.
“A good example is the Aalto University, in which three separate universities were combined under the same governing body”, Siilasmaa points out.
The Ministry of Employment and the Economy does not reject the idea out of hand. According to the innovation department chief Peltonen, a consensus prevails that the system should be simplified.
What may form a bottleneck for forming a joint administration is the fact that judicially the state funding bodies represent different corporate forms.
“There is no need to hide behind red tape. The coordination of public corporate sponsors has to be simplified. The more precise plans will probably become clear after the election dust has settled”, Peltonen comments.
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