Finland: The games start-up capital of the world

Finland: The games start-up capital of the world
Craig Chapple

By Craig Chapple

April 28th 2014 at 9:54AM

Develop investigates how this country has become such a hotbed for new companies

Finland is one of gaming’s fastest growing regions, spawning a plethora of successful start-ups in recent years that have gone on to become the biggest names in the industry.

Take recent Develop cover star Supercell, for example: set up back in 2010, the studio’s flagship titles Clash of Clans and Hay Day are consistently atop the App Store and Google Play charts, success that convinced Japanese telecoms firm Softbank and publisher GungHo Entertainment to fork out $1.5bn for a 51 per cent stake in the company.

Getting Serious

But that’s not the only new studio attracting attention. Next Games just netted $6m in investment while PlayRaven, making strategy title Spymaster, secured £2.3m in January. Other well-known start-ups include Grand Cru and Seriously, both tipped for big things.

But the large sums of money raised by these new studios aren’t the only interesting numbers coming out of the Finnish game industry thanks to this rise of new start-ups. In Q1 of 2014, the Finnish games industry consisted of 200 companies, mostly in the mobile scene. Over 50 per cent of these were established during just the last couple of years.

The number of people employed has also risen, and is currently estimated to be at 2,400 and rising, up 600 since 2012. In total , turnover for the Finnish sector in 2013 was said to have reached €900 million. This is nearly four times the industry’s €250 million turnover in 2012.

So why is Finland attracting so many start-ups, and why are people investing now?

“There are three reasons in my mind,” says Seriously CEO Andrew Stalbow. “Firstly Finland has been at the forefront of thinking about mobile services for the last two decades, so it was well positioned once the iPhone and Android came along to start building products that were mobile first.

“It’s a very collaborative culture and there’s a feeling among companies and entrepreneurs that ‘all boats rise’ by sharing knowledge and working together. This is a real advantage.

“Thirdly, the demo scene was a catalyst for all of this – I think you can trace a lot of the foundations for the success the country is having in mobile games back to that."

Next Games’ head of marketing and communications Saara Bergstrom adds: “Finland has an interesting mix of engineering talent and creative innovation, and this combination makes Finland and the Nordics in general quite unique.”

Entrepreneurial culture

While the mix of talent and readiness for the mobile gaming boom may be key catalysts for such a vibrant start-up scene, and lets not forget the talent from giants such as Angry Birds developer Rovio spawning a number of these new start-ups, Finland is also full to the brim with support structures to ensure entrepreneurs have a platform for success.

Seriously, Next Games and PlayRaven have all received funding from the Finnish Funding Agency for Innovation, Tekes. The organisation has an annual budget of €600m, and has brought €65m worth of funding to the games industry specifically. So far, more than 100 games firms have received funding by Tekes.

Government agency Invest in Finland meanwhile promotes foreign investment in the industry and local networks such as IGDA and Neogames help promote collaboration and educate companies on the business side of things. The country also has generous corporate tax rates and is home to a world-renowned education system.

We’ve had tremendous public support from several sources,” states PlayRaven CEO Lasse Seppänen. “The biggest one is the National Technology Agency – Tekes – which gave us an R&D grant of €100,000 for the development of Spymaster. The Nordic Game Program also granted us €40,000. We have also received smaller grants from the Finnish audiovisual culture fund AVEK and the ELY center which is a regional trade and industry support entity.

"Another local entity Forum Virium has also granted us subsidised consultant days for things such as lawyer expenses. Of course it’s important to note that we also had to have a similar amount of private capital to be eligible for these grants.

“All in all these public support instruments were fantastic ‘bridge’ financing for PlayRaven because we were able to create an almost complete game and then pitch to VCs and private investors. Public support definitely had a big impact in negotiating the $2.3m seed round we just closed."

This isn’t to say things are easy, of course. As Bergstrom says, even with the support structures in place, Finland has still struggled to generate a lot of venture capital originating from within.

“In the past this was even a bigger challenge for start-ups than now that we have had success stories like Supercell and Rovio who have done a lot of the pioneering work of putting Finland on the radar for foreign investors,” she says.

If the whole society – media, politicians and common people – becomes more positive about new start-ups, it raises the chances of success greatly.

Lasse Seppänen, PlayRaven

Too many cooks?

The number of people joining games continues to rise in Finland. In 2008 the number of people in the industry stood at 1,147. Today, in part thanks to the likes of Supercell and Rovio, the latter of which employs more than 800 staff, this stands at 2,400, and that number is expected to rise.

But while all are unanimous in their belief that Finland will continue to nurture dozens of start-ups each year, Seriously chief creative office Petri Järvilehto says it will get harder for those new to games looking to break in.

“I think we’ll see a lot more games start-ups for sure. The barriers to create a game are very low,” he says, but warns: “It’s going to get harder for some of the newer start-ups that have talent but limited experience to compete with the marketing resources of more established mobile games companies, so I expect to start seeing more consolidation.”

Lessons from the Nords

So what can the rest of the world learn from Finland? Seppänen says countries need to create an entire ecosystem that supports games and will help drive new studios forward.

“If the whole society – media, politicians and common people – becomes more positive about new start-ups, it raises the chances of success greatly,” he explains.

Järvilehto adds: “It’s important that starting a business is seen as an option for people’s careers that ranks alongside joining a more established company,” he states.

There are few signs that Finland’s start-up boom is set to stop, and clearly the rest of the world could learn a lot, not just on the games development side, but in how to foster that entrepreneurial spirit in the games industry.

“Right now the boom in start-ups is continuing,” states Seppänen. “There are more touch-screen devices than television sets on the planet. Touch-based mobile is the new mass medium that has taken over and on this kind of scale there remain many, many gamer segments that are not served by the current offering in the digital stores.

“That means there are many opportunities for bold new games entrepreneurs. This is just the beginning.”