Think of Finland, and a few things readily spring to mind: pristine lakes, deep woods and hot saunas. The Nordic nation sure has all these and many other charms, but what is less well-known, at least in some parts of the world, is the fact that it has emerged as a hotbed for new technology firms.
The sparsely populated country, whose claim to fame in the past in corporate circles has been for being the home of mobile phone titan Nokia, is now an acknowledged leader in being a springboard for a variety of cool start-ups and red-hot innovations in Europe.
Recognizing its strengths as well as bearing in mind the new realities of the global business environment, which saw the collapse of the once-mighty Nokia, Finland is currently focusing on boosting its tiny start-ups, many of which have sprung out of local technology universities.
A key part of the strategy in making the ventures bloom is roping in overseas investors, hedge funds and other private players into financial and other partnerships, including mergers and acquisitions (M&A) deals, with the capital-hungry firms.
“We have a lot of start-up companies — one man, two men [outfits] with unique ideas,” Annikki Arponen, the Finnish Consul General in Hong Kong, told EJ Insight in an interview recently.
Finnish start-ups have scored many successes, she noted, citing the example of Rovio Entertainment, the company behind the wildly popular Angry Birds video game franchise.
Starting out as a three-person entity in the last decade, Rovio has become a multi-million dollar international games company, providing inspiration to a bevy of entrepreneurs. Another notable Finnish success story is Supercell, a tablet gaming firm that has drawn investment from Japan’s Softbank Corp.
Fields such as clean-tech, health IT and enterprise software have also seen huge breakthroughs in the northern European nation, which has a population of less than five-and-a-half million.
The collapse of Nokia has, in fact, helped unleash a wave of new start-ups as former executives of the Finnish firm or those that were laid off started building their own businesses. Nokia, after failing to seize the smartphone trend, sold its struggling handset and services business to Microsoft last year.
Collaboration with Chinese investors and enterprises is an important element in Finland’s plan to boost the prospects of its ‘young innovative companies’.
“What we can offer is unique products and solutions… in industries like high-tech, environment and energy,” Arponen said. “There are also collaboration opportunities in the gaming and education sectors.”
Finland reaped 91 million euro of direct investment from China in 2013, a small amount compared to the 1.38 billion euro it secured from Japan in the same year, according to Bank of Finland data.
Finland may not be able to provide oil and gas and raw materials to China, but it has “solutions like clean energy that every country is talking about,” Arponen said.
“We are not looking for Chinese manufacturers to come and set up factories in Finland, but those that are interested in buying into or merging with our IT companies,” she said. Investing in Finnish firms can help Chinese firms grab a share in the Europe market and get good technology, the official said.
She pointed out that investing in Finland wouldn’t necessitate moving a lot of people on overseas postings, as her nation has a good reputation for quality control.
As the world is talking about aging and related problems, “we hope to see more investments in medical care solutions, as well as in information technology and software companies,” Arponen said. “Hedge funds and private investors like angel funds who want unique products are our targets.”
Some Chinese entities have already struck deals with Finnish firms in recent months.
In a transaction in late March, Chinese construction software company Glodon Software (002410.CN) acquired Finnish design software firm Progman for 18 million euro (US$24.88 million). Progman’s product MagiCAD is widely used in the European construction industry.
Glodon’s president Jia Xiaoping has said his firm will boost its investment in Finland and turn Progman into the company’s research and development center in Europe.
Meanwhile in Hong Kong, media reports said last November that Cheung Kong Infrastructure (01038.HK), an entity controlled by tycoon Li Ka-shing, was eyeing Nordic company Fortum’s electricity distribution business in Finland, an asset that could be worth more than US$2 billion.
Jari Gustafsson, the Finnish ambassador to China, has said in remarks posted on the embassy website earlier that China had more than 10 billion euro of Finnish investment in 2012.
Arponen, however, noted that investment in China is not easy for Finnish firms due to various factors, including differences in culture, language and business practices. That is why some companies have moved their factories or investment out of China and went to European countries instead, she said.
“The biggest thing that is holding Finnish companies back is quality control,” Arponen said. “Having a business in China costs firms a lot to ensure good quality control,” she said, pointing to difficulties in getting the right people in sectors like information technology.
That said, she acknowledged that the situation has been improving in the mainland.
That is why Finland needs to the pave the way for its companies to get into China, which is expected to become the major market for clean technology business within the next ten years.
In the spring of 2013, China’s Ministry of Environmental Protection and some Finnish government agencies signed a preliminary agreement for ‘Beautiful Beijing’ — a project aimed at improving the capital city’s environmental protection, energy efficiency, clean industrial process and renewable energy sectors.
“Projects in Hong Kong or China sometimes can be big for us,” Arponen said, citing Finland’s small population.
“We usually partner with Finnish companies when taking the projects, or even cooperate with some European countries like Germany and France. We are a small nation; we don’t have a lot of choices.”
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