Public Financing of Young Innovative Companies in Finland
Maula, Markku; Murray, Gordon; Jääskeläinen, Mikko
Date: 1 January 2007
Publisher
Ministry of Trade and Industry, Finland
Related links
Abstract
The access of young innovative companies in Finland to professionally delivered sources of start up and early
growth finance has improved significantly over the last decade. Despite this long-term positive trend, there are major
challenges that still remain. Finland’s world class innovation reputation is not yet matched by equivalent ...
The access of young innovative companies in Finland to professionally delivered sources of start up and early
growth finance has improved significantly over the last decade. Despite this long-term positive trend, there are major
challenges that still remain. Finland’s world class innovation reputation is not yet matched by equivalent commercial
success for its innovative products and services despite many recent successes. At the start of the present
century, the international decline of the financial markets following the bursting of the dot.com bubble caused serious
damage to technology investors in Finland given the immature venture capital infrastructure at the time. Promising
but early stage enterprises were particularly vulnerable to negative market sentiments. At this crucial time,
Tekes, Finnish Industry Investment Ltd., Finnvera, and Sitra all directly addressed elements of the financing problem
for entrepreneurs. Each agency helped to fill the ‘financing gap’ experienced by young but high potential Finnish
firms with a range of targeted financing instruments. Public policy enacted through these agencies has been extremely
valuable, and probably essential, in helping many new young innovative companies to emerge and in supporting
existing young enterprises to survive the hostile first years of the twenty-first century.
However, over the next five to seven years, Finland needs to further develop the financing of young innovative
companies to reflect current and new challenges, and to ensure the continuing effectiveness of the Finnish financing
system across different stages of the economic cycle. A number of recommendations are made in this report. First,
Finland should set an ambitious goal to make Finland one of the most vibrant investment markets in the world for
investing in and creating and capturing value from young innovative companies. This market should be privately
led and provide clear incentives for professional investors as well as for the entrepreneurial owner-managers to invest
in and create and capture value from young innovative companies. Second, the government should give clear
signals of commitment of making high growth entrepreneurship and private risk taking valued and rewarded in
Finland. Tax incentives could be used to catalyze entrepreneurial activity and private investment and to reinforce
this signal. Third, Finland should take an open and global approach and leverage all available financial and human
resources to the nation’s long term advantage regardless of their origin. Fourth, Finland should be determined in
implementing this market-centered strategy. Accordingly, the government should remove unnecessary duplication,
fragmentation and unwarranted growth of public services. The improvement of inter-agency coordination and a
greater customer orientation in the provision of public finance should be a priority. The state’s primary responsibility
is to create the long-run conditions for the optimal working of competitive and efficient markets. Actions by the
state that replace or substitute for the private and fully commercial actions of professional investors should be taken
with great caution and should, at best, be viewed as temporary.
Management
Faculty of Environment, Science and Economy
Item views 0
Full item downloads 0