A typical wind down scenario of a failed startup looks pretty different in Finland as compared to US.

1. An alternative and definitively unpopular take on
Doing a Consumer Internet Startup in Finland
www.toughloveangel.com
a blog about the *&#% mistakes entrepreneurs make
2013 © The Tough Love Angel

2. Disclaimer!
There is absolutely no data or science behind any of
the numbers used in this presentation
They are based on the writer’s expert opinion and
used only for illustrative purposes in this
presentation
If you have more accurate data, pls. send it to
mika@marjalaakso.com
© All rights reserved. If you want to use the
material, please contact the author for
permission.

3. Finnish Serial Entrepreneur Archetypes
A: 750
B: 200
C:50
rich and famous self-made
wife or inherited wealth
providing decent Income stream
large mortgage, kids, limited
ability to take risk
2013 © The Tough Love Angel

4. Tekes Grants & Risk Loans
levelofacombinedmarketandtechnologyrisk
Increasing risk of total investment failure
LOW HIGH
HIGH
Finnish VCs
LOW
Large Majority of
Finnish Business Angels
A Select Few Business Angels
Lifeline Ventures
Friends & Family
2013 © The Tough Love Angel
big money is here, risk taking not, how come?

5. 2013 © The Tough Love Angel
level of risk
LOW
HIGH
Likelyhoodofextremescalabilityandsuccess
HIGHLOW
High risk, high gain
Digital marketing and
distribution
Disruptive
Low risk, high gain
(rare …)
High risk, low/mid
scalability, may be capital
intensive; requires a
physical world component
IT service business,
something incremental
that is far from disruptive

6. Finnish Business Angel Archetypes
60 %
10 %
5 %
20 %
5 %
By Background
Non-IT family business
background
Professional Managers
Financial industry
background
IT angels w/o
consumer internet
understanding
IT angels with
consumer internet
understanding
understands digital distribution
accepts high risk against unlikely high reward
typically quite risk adverse
is more interested in not loosing money vs. scalability 2013 © The Tough Love Angel

7. Consumer Internet Startup Outcomes
Success
Acquihire
Fail
US Finland
2% 1%
10% 0%
88% 99%
ProbabilitiesKey assumption: seed-funded startups
2013 © The Tough Love Angel

8. Opportunity Cost of Doing a Consumer
Internet Startup in Finland
Key assumption: Highly experienced and seasoned team; i.e. serial entreprenerus
Team size: 5
Market salary / month: 10,000€
Pre-seed salary: 0€
Post-seed salary: 5,000€
Pre-seed duration: 6 months
Seed I+II duration: 18 months
Time-to-fail: 2 years
Founding team investment 1,2m€
Received as salaries 0,45m€
Realized opportunity cost 0,75m€
Other assumptions:
2013 © The Tough Love Angel

9. Doing a Consumer Internet Startup
in Finland
Success
1%
Fail
99%
It’s typically a fly or die – nothing in between. Most die.
2013 © The Tough Love Angel

10. The share of Finnish consumer
internet startups with Tekes risk loan
2013 © The Tough Love Angel
95 %
5 %
Tekes risk loan
leverage
No Tekes risk loan
Finnish business angels and VCs, by large, are risk averse and don’t invest in
consumer internet startups. Tekes thus has a de facto monopoly in this area.

11. Winding Down A Consumer Internet
Startup in Finland
Pay back
Tekes loan
99%
Fail
File for
bankruptcy
Create a
zombie
Exception
10%
60%
29%
0% - 1%
There are no exceptions or they are few.
2013 © The Tough Love Angel

12. Winding Down A Consumer Internet
Startup in USA
Orderly
wind down
88%
Fail
File for
bankruptcy
95%
5%
No need for exceptions. The cash that remains in the bank is paid back to seed
investors. The most common funding vehicle is convertible debt.
2013 © The Tough Love Angel

13. Expected Exit Values in Success Cases
Success
Acquihire
Finland USA
Expected value: 1b€ Expected value: 1b€
Range: 100m€ - 5b€
Expected value: 20m€
Range: 5m€ - 60m€
Expected value: 0,5m€
Range: 0,1m€ - 10m€
2013 © The Tough Love Angel

14. Investing in 100 consumer startups …
Average seed investment (m€): 0,5 1,5
Government share in funding (%) 60% 0%
Total investment (m€) 50m€ 150m€
# of successes 1 2
# of acquihires 0 10
# of fails 99 88
# of bankruptcies 60 5
# of zombies 29 0
Total exit value created (m€) 1000m€ 2200m€
Finland USA
One word: madness!
2013 © The Tough Love Angel

15. Should I do a Consumer Internet
Startup in/from Finland?
Key assumption: A seasoned serial entrepreneur with a real opportunity cost
No!
In 99% likelihood, you will fail,
and the cost of failure is
 150,000€ lost opportunity cost
 Lost time with family & friends
 Bankruptcy stigma
You can get rid of the stigma if you
choose to create a zombie
2013 © The Tough Love Angel

16. What are ways to reduce risk?
• Young first-time entrepreneurs have greatly
reduced opportunity cost – start young
• Shorten time-to-failure – be lean
• Do only consumer internet startups that have
– working revenue model from the start (oxymoron)
– core technology that can be pivoted
– minimum viable product that is minimal enough
– no need for physical world business development
– can be acquired by a Finnish media company
• Avoid Tekes risk loans like plague
2013 © The Tough Love Angel

17. Final word (games excluded)
• Do consumer internet startups only if you are
young
• If you really want to go for it; increase your
chances for success and don’t do them from
Finland, buy a ticket to San Francisco
• If you are not able to buy a ticket; avoid Tekes risk
loans; take only grants
• If you are serious; you will not try to build these
creatures from Finland unless you really know
what you are doing …
• And: remember to avoid Tekes risk loans ….
2013 © The Tough Love Angel