(also posted at www.ben.vc)
One area where we are committed to enhance our proposition to entrepreneurs and invest more time and money is the Nordic and Baltic area. Index Ventures has already invested a disproportionately high share of funds and time here relative to the size of the markets. Here we reflect on what Index has been up to in the region, and just why it creates so many innovative and successful tech companies.
Excluding some unannounced seed investments we have made more than 13 investments in companies which were either founded in, or have a substantial presence in the region. From these, we have already completed 6 successful exits.This vibrant entrepreneurial ecosystem has created successful companies across many sectors. From software and enterprise successes such as MySQL, Milestone and Trolltech, through to next generation telecom leaders like Rebtel and Skype, and pioneering consumer services like Stardoll, Just Eat, and our most recent investment iZettle. Also, outside the Index Ventures portfolio there have been other successes like Spotify and Rovio.
So why does this region create so many successful startups? A recent survey from Businessweek identifying the most creative countries in the world placed Sweden at the top of the list with Finland, Denmark and Norway all featuring in the Top 10. The survey highlighted tolerant societies, an excellent talent base and educational system and high adoption rates for technology as being the key contributing factors. To these I would add the following observations about what lies behind the success of tech startups in the region.
- Tightly integrated teams where business skills and technical awareness are pervasive. Often in startups from continental Europe and the US there can be a substantial divide in culture and skill-sets between the technologists/developers and commercial/marketing teams. What I have observed particularly in the Nordics is that a solid grasp of both commercial and technical issues runs throughout the workforce, rather than having these skills and experiences constrained to organizational silos. This makes forming a tight culture and effective working practices much easier for leaders and founders of startups.
- A long standing export culture. For companies in these markets, building a big business by focusing on local opportunities is rarely an option. Right from the outset, startups need to look beyond their own borders and identify the routes to market and viral product characteristics which can make them successful globally.
- Home markets act as hi-tech test beds. Most of the countries in the Arctic region have high levels of broadband and mobile penetration and a population which is engaged with technology and eager to try new services. This makes them perfect test beds for new digital products and services. In addition getting early traction and validation with customers or partners, whether it be companies or government is typically easier and faster in smaller markets.
Beyond the Nordic and Baltic countries lies Russia and Ukraine which although being very different ecosystems are very attractive areas for investment. In Russia Index has invested in Ozon and Babyboom. Each of these investments benefit from Russia being one of the largest and fasted growing domestic markets for internet products and services. It is also along with Ukraine one of the deepest pools of technical talent.
We are convinced that not just Europe as whole, but specific innovation clusters such as Talinn, Helsinki, Stockholm, Copenhagen, Oslo and Moscow can continue to produce world-beating tech companies. You should therefore expect to see a lot more of me and my colleagues (in our warm clothes…) helping our existing companies, participating in events such as Seedcamp and Slush and trying to find great entrepreneurs and talent from the frozen North.