Finnish startup ecosystem growing robustly despite sluggish economy overall

“Total revenues are actually even higher because some of the companies that have transferred to foreign ownership no longer report their revenues in Finland. The growth in total revenues proves that Finnish startups can grow into large-scale global players in their sectors," says Youssef Zad, Chief Economist of the Finnish Startup Community.

Finnish startups now employ some 50,000 people worldwide. The number of jobs they generate has increased significantly over three years as just over 30,000 people worked in startups in 2020. Above all, growth is driven by those companies that have moved from the early stage to the next phase of growth, becoming scaleups.

Scaleups as engines of growth

The number of scaleups (startups that have already grown further and are still developing rapidly) has almost tripled in just a few years. In 2020, there were some 20 scaleups while now there are about 60. Their combined revenue also doubled from one billion to about two billion euros between 2020 and 2023.

"Scaleups are not only excellent growth stories, but also the engines of the entire ecosystem. An emerging growth cluster captures the interest of foreign investors and experts, which in turn benefits other new companies, improving their chances to succeed,” says Henri Hakamo, Tesi's Chief Strategy and Research Officer.

"The study shows that the amount of needed growth capital on average doubles or triples in each funding round, and even faster for the best performing startups. This year, for instance, smart ring company Oura raised Finland's largest funding round ever, EUR 777 million, while quantum computer company IQM raised EUR 275 million,” says Jonne Kuittinen, Deputy Chief Executive of the Finnish Venture Capital Association.

A typical Finnish startup is a young IT company that employs just a few people in its early stage. The Finnish startup field is dominated by tech and software companies, which comprise around one-half of all the companies surveyed. Traditional sectors such as manufacturing are less common. New emerging sectors, such as artificial intelligence and health technology, are growing rapidly, especially among the newest generations of companies.

Cornerstones of growth: diverse talent and new companies

Startups are international by nature. Over one-quarter of employees have a foreign background, with the proportion in scale-ups already reaching some 40 percent.

"The actual proportion is even higher, because our data covers those employees who are in Finland and who permanently reside in Finland. The importance of international talent is also recognised in startups. English is often used as the working language right from the start,” Zad points out.

Although the tech sector is still generally male-dominated, the gender balance is gradually improving: women now account for one-third of the workforce in startups, with scale-ups having the highest proportion.

The number of new startups established was highest in 2020, when 584 new companies were founded. However, since 2021, the number of new startups has declined to about 270 companies a year. Startup activities in Finland are still strongly concentrated in the Helsinki metropolitan area, but Tampere, Oulu and Turku form significant regional growth clusters.

"The declining number of startups is a European trend that we are closely monitoring. Typically, however, the best scaleups create new founders, which means that many of Finland’s startup entrepreneurs of the future are perhaps currently gaining experience in the global market leaders of today," explains Hakamo.

Read the full study here.

Background information: Finland's startup ecosystem comprises more than 4,000 startup-based companies, of which about 2,000 are active early-stage startups. The review covers some sixty scaleup companies in Finland that show rapid growth and generate net sales exceeding EUR 10 million.

In the report, startup companies or companies of startup origin refer to those companies that are seeking strong growth, are innovative and have scalable business operations.

Definition of an early-stage startup according to the report: Less than EUR 10 million in net sales, less than 10 years old, and also one of the following:

• A funding round (from VC investors, angel investors or business accelerators) in the last three years
• Compound annual growth rate (CAGR) of net sales exceeding 50% over three years or growth data is not available

Definition of a scaleup according to the report: At least EUR 10 million in net sales, and also one of the following:

• Funding round (from VC investors, angel investors or business accelerators) in the last three years
• Compound annual growth rate (CAGR) of net sales exceeding 50% over three years

Methodology: The study uses a dynamic annual review that analyses companies according to their stage of development. All the companies included in the review are of startup origin – i.e. innovative, scalable and/or strongly growth-oriented in their establishment phase. The annual perspective enables comparison of the development paths of companies with each other in terms of time, while still taking into account their stage of development. Thus, for example, deep tech companies that require long-term, early-stage development and companies in a later growth phase that are already established in the market are examined as separate groups. This prevents companies at different stages of development from being mixed into the same analytical framework, thereby preserving comparability. The most recent confirmed data have been used in the report: The financial figures used in the report are based on the financial statement figures at the end of 2023 and on Statistics Finland's data at the end of 2022.