The notion of startups has always been very intriguing. The idea that a nimble and very driven team of entrepreneurs can transform a dream into an MVP, raise enough capital to create a working product, and then compete against the “big boys” on a global market is absolutely fascinating. Yet, it is a well-known fact that the ecosystem where the startup attempts to grow roots has a huge impact on its chance of success.
Six months ago, my brother, Michael Doudy, and I embarked on a quest to understand what drives the startup scenes of the cities of St. Petersburg, Helsinki, and Tallinn — three geographically close cities. Coming from the US and from a non-startup yet relevant background (business software consulting, finance, and engineering) gave us a fresh and an unbiased view of the state of affairs of the startup ecosystems in this region.
After spending some time in St. Petersburg’s game dev and VR/AR scene, we’ve started seeing obvious strengths and weaknesses of the local startup ecosystem. This sparked the idea to dig deeper and explore ways which could benefit the region as whole, realizing that there are clear opportunities that exist yet are not being realized when the individual pieces of the ecosystem are not working together.
We decided to travel around the region to meet key people and to see the facilities and entities making up the startup ecosystems, then to conduct small yet concentrated workshops in each of the three cities.
In Tallinn, the initiative was co-led by Liis Narusk of Elevate by Garage48 and in Helsinki — by Vivian Maar of Hooked By North, thanks to whom the ability to connect with and explore the Tallinn and Helsinki ecosystems was made possible.
We did not set out on a comprehensive and exhaustive study of the region’s startup ecosystems, but rather, we decided to take a no-nonsense approach and speak directly with individuals in the region who are well-connected, well-versed, and able to make a difference in their respective region’s startup infrastructure. This gave us the opportunity to concentrate on quality over quantity of feedback and ideas. This also set in motion the interconnection of the region’s’ parties to pursue common interests and ideas by bringing people together in one physical location.
Since the sample size of participants in our workshops was relatively small, the following information gave us a glimpse of what is happening in the region. Nevertheless, the information we gathered can provide a good starting point for interested parties to begin exploring ways to work together with their neighboring regions and to ideate on ways to capitalize on the available resources and ideas presented henceforth. One of our intrinsic goals was to spark action within the communities and to provide a catalyst to people interested in building a better startup ecosystem.
A few of the key participants in the workshops included people from the following structures: NewCo, Vertical accelerator, Maria 01, Helsinki Think Company, Prototron, Garage48, IGDA, Talsinki by Tehnopol, ITMO university, Higher School of Economics university, and Ingria technopark.
The number one feedback we received from the Helsinki ecosystem concerning its strength is trust. This trust results in an atmosphere of openness, both in terms of transparency of creating and doing business in Finland, and in a welcoming environment for entrepreneurs from a global scene. Helsinki’s collaborative community was something that we not only heard about at the workshop but also saw for ourselves when visiting numerous startup entities including Maria 01, of which we had the pleasure of getting an in-depth tour by Reidar Wasenius, the Managing Director of Finnish Business Angels Network (FiBAN). Maria 01 really is an ecosystem of its own, with everything from startups to accelerators to funding agencies all present in the infrastructure of an old hospital complex. Other outstanding strengths are government support, including Tekes and NewCo’s startup-supportive activities. Naturally, Nokia’s legacy was noted many times as a clear strength in Finland.
“The probability of success for the startup ecosystem is greatly enhanced by parties at all levels and all sectors coming together and collaborating. The long, intense ‘coopetion’ between telecomms players is an inspiring example of how everyone can benefit from a strongly growing business ecosystem.” — Reidar Wasenius, the Managing Director of Finnish Business Angels Network (FiBAN) in Helsinki
Helsinki’s strengths did not present any real surprises. On the other hand a few eye-opening roadblocks were discussed. Finnish humbleness was described as a double-edged sword, with its negative aspect resulting in poor marketing and sales skills, best described as a “lack of hunger” in sales and marketing. Another weakness we heard numerous times also stems from a cultural trait: overwhelming risk averseness from the investors’ side. The other negatives worth mentioning are the lack of legislation for an entrepreneurial visa and a lack of a single go-to regional startup organization.
Looking at the strengths and weaknesses of Tallinn, we saw numerous similarities with Helsinki, yet many notable differences as well. Starting with Tallinn’s positives, one aspect that really stands out is the welcoming and very motivating startup environment along with an easily accessible startup community. Estonia’s success stories and the resulting Skype, aka “Estonian Mafia,” seem to really have set a vibrant startup mindset in Estonia. There’s even a startup wall of fame at the Lift99 co-working space in Tallinn’s hip Telliskivi district. Similar to that of the Finnish government, we heard of the Estonian government’s transparency as a huge strength. In particular, the government initiative of the Startup Visa and E-residency program (on which more info can be found via the Startup Estonia organization) really stood out, which creates an attractive environment for entrepreneurs coming from outside of Estonia. Additionally, we were impressed with Estonia’s push for going digital. The country’s small size allows for a very flat structure resulting in easy networking and connectivity to relevant startup players as well as a good testing ground, which gives startups an opportunity to “test” their MVPs in a smaller market before looking to scale and expand to larger markets.
“Garage48, a startup community initiative itself, is always supportive of activities that set out on a journey to strengthen the ecosystem from the inside. The workshops I attended proved that the three cities, Tallinn, Helsinki and St. Petersburg, have much potential for filling each other’s gaps related to talent search, investor-startup matchmaking and effective business processes.” — Kai Isand, COO of Garage48 Foundation in Tallinn
Of course, Estonia’s small size also presents a problem; considering its small market size makes it very difficult for startups to grow and scale without expanding to other markets. Tallinn’s most common weakness that we heard was the lack of investors and investment options and the general difficulty in securing investments compared to Finland and the Nordics. Poor banking options was another weakness that we heard about from international entrepreneurs who were considering setting up shop in Estonia.
St. Petersburg, Russia
Unsurprisingly, the feedback for the strengths and weaknesses of St. Petersburg was quite different compared to the feedback from Helsinki and Tallinn. One strength that was clear from day one of researching St. Petersburg’s startup scene was the abundance of tech talent. A clear validation of this is ITMO’s (St. Petersburg University of IT, Mechanics and Optics) success at the ACM World Programming Contest, an annual programming competition among top universities across the globe. ITMO is currently the only seven-time winner of the world championship. Thus, logically, the most common positive feedback on St. Petersburg’s startup ecosystem was the abundance of young passionate talent with an entrepreneurial spirit coming from the numerous technically-inclined universities of St. Petersburg. There was positive feedback received on the push for embracing rising tech such as AI, IoT, etc. by the universities and governmental support for such initiatives. The other most common strengths we received as feedback are St. Petersburg’s position as a “window to Europe” or an east-west channel and access channel to Russia’s large internal market. The availability of funding also was mentioned, though we can’t speak for the ease of access to the funding for grassroots initiatives or startups.
“Although the ITMO University Business Incubator puts in a lot of effort to scale the university entrepreneurship ecosystem, both on a national and a global level, we still have a lot of local limitations to overcome. That`s why such private initiatives as those of Sergey and Michael Doudy, are paramount for progress — sometimes it’s much easier to do something bottom-up, than vice versa. For example, our incubator was started as a student entrepreneur club and later transformed into an official entity.” — Elena Gavrilova, Director of the ITMO University Business Incubator in St. Petersburg
On the other hand, the main weaknesses of St. Petersburg’s startup ecosystem we heard of are the lack of openness and transparency, the overwhelming amount of bureaucracy, and the outdated legislature which isn’t ideal for the ecosystem. Also was noted is the difficulty in finding industrial partners resulting in a small number of exits, unless foreign partners are involved. In addition, we received feedback on the complexities with the tax system and international monetary transactions. The negative perception of Russia among Western countries further hinders foreign investment and collaboration efforts. In terms of roadblocks related to the general competencies of entrepreneurs, the significant ones stemmed from being “siloed-in”, including the lack of global networking, marketing and sales skills, and, in our opinion, the most critical roadblock: lack of English language abilities (a representative of a St. Petersburg university mentioned that only a third of startups within its accelerator have a conversational-level of English).
In each of the workshops we held, in addition to asking for strengths and weaknesses of the three cities’ ecosystems, we also asked for specific ideas that could be realized via a collaborative effort. Here are the top 10 ideas that stood out (in no particular order):
- Regional “chambers of commerce” for startups
- Physical and digital catalog of who’s who and what’s what
- Information hubs on activities for startups including consolidation of resources for soft landing for each city
- Startup internship programs and hackathons with innovative companies
- Joint startup fund specifically for cross-regional teams
- Matching platform for startups and investors of the region
- Broadcasting to spotlight the region’s key players and activities
- Startup-oriented social network integrated with a fundraising platform
- Well filtered, catered job listings with stats on the region, communities, perks, etc. along with a consolidated talent database
- Startup “travel agency” to make cross-regional travel easy and affordable
We invite and challenge entrepreneurs, policymakers and startup community leaders to act upon the opportunities we found via our initiative and to work with your local community to improve the startup ecosystem landscape. Naturally, we strongly encourage collaboration with your neighboring cities and their startup infrastructures in tackling these items. We encourage discourse on the root cause of strengths and weaknesses and on factors that are holding back the individual cities and the region.
One of the next concrete projects being realized out of the St. Finest initiative is a collaboration with the Higher School of Economics, a Moscow-based university with a satellite campus in St. Petersburg, on their “Global Startup Initiative” aimed at preparing Russian and neighboring region’s startups to scale West by providing the needed layers of marketability and the resources to properly pitch to Western investors. As part of the initiative, the university plans to collaborate with startup entities from Estonia, Finland, the Nordics and Baltics in the form of knowledge, mentor, and potentially, startup exchange. Are you a startup, a university, or an innovative company representative that is interested in learning more about this project? We’re eager to hear from you! Contact us via stfinest.com
“I believe that in order for university students to increase their global competitiveness, we must stress internationalization in our curriculum and strongly encourage projects such as the Global Startup Initiative that promote cross-regional experience.” — Philip Kazin, Deputy Director of National Research University “Higher School of Economics” in St. Petersburg
A factor which became clear during the course of the exploration of the region’s startup ecosystems is that universities can play a huge role in forming the entrepreneurial spirit in young people. Therefore, looking further into the future, Michael Doudy and I aim to pursue the idea of building bridges between our alma mater, the Georgia Institute of Technology, aka Georgia Tech, with the universities of the St. Finest region who are also pushing for the development of frameworks necessary to help propel students to form successful startups. Such interconnections between parties of very different backgrounds, environments, and mindsets can significantly benefit both sides.
Routinely, conversations revolving around startup ecosystems end up with a discussion of Silicon Valley as the pinnacle of startups, and even though in some aspects that may be true, we believe that there is no reason to strive to duplicate it. Helsinki, Tallinn, and St. Petersburg have a very unique set of characteristics that the region as a whole can capitalize on and make the leap to put itself on the world map of startup powerhouses.
Have ideas on how to increase collaboration between the three cities and beyond? Let us know!
Huge thanks to the people who helped us organize the workshops — Vivian Maar from Hooked by North and Oki Tag from Microsoft Flux in Helsinki, Liis Narusk from Elevate by Garage48 and Kai Isand from Garage48 Foundation in Tallinn, and Ekaterina Erina from SPECIA in St. Petersburg. A special thanks to George P. Burdell for the outreach opportunities.
A big thank you to Olesya Baraniuc and Andrew Karsakov of ITMO university for organizing a showcase of ITMO’s accelerator and incubator initiatives.
An additional thanks to Henrik Keinonen of NewCo Helsinki, Jana Pavlenkova of Prototron, Klaus Hietala and Valtteri Frantsi of Think Company, and Dmitrii Parilov of Devexperts for taking the time to travel to workshops held in away-from-home cities.
Links to further entities mentioned in the article: Maria 01, FiBAN, Vertical, Talsinki by Tehnopol, IGDA, Lift99, Startup Estonia, Ingria Technopark, Higher School of Economics university, Georgia Tech.
Originally published in medium.com on November 22, 2017.