Ilkka Kivimäki: Finland is a good location for an entrepreneur or a fund

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How does Finland’s VC/PE market appear to an experienced serial entrepreneur, a startup godfather and an investor? fund’s founder Ilkka Kivimäki replies.

“Now is a good time to be an innovative entrepreneur in Finland. Financing structures are in good shape: we have a well-functioning network of angel investors and sufficient early-stage funds. Aaltoes student entrepreneurship community, Startup Sauna, Slush and Junction have brought the players together. And large numbers of international players have also been pulled in,” Kivimäki explains.

Kivimäki points out that getting the attention of international investors cannot be taken for granted. Nevertheless, there is now a lot happening in Finland and Sweden that international investment managers also are keen to keep an eye on.

“The change has been really fast. Looking to the future, Asia seems to be particularly interesting, and Slush has been helping to blaze trails in that direction. Supercell is a prime example of successful acquisitions from China,” adds Kivimäki.

Kivimäki believes industry-wide, international networking is essential. In almost all follow-on financing rounds, expertise and international connections to target markets are sought for companies, not just money. If a financing company does not have an interface to the world or the ability to help its companies to sit at the top tables, it has no right to exist.

Market on a sound footing

“The Finnish investment market is now on a much stronger footing than in the early 2000’s. Market activity rises and falls, but there’s no sign of an actual downturn,” he says.

Kivimäki believes the supply and demand for money are now well balanced. There is money, but not an oversupply of it that could result in poorly screened investment decisions. There is still constantly room for improvement:

“The level of ambition can always be higher.”

Easy money carries risks

In Kivimäki’s opinion, Tesi’s role as a financer of growth has been critically important over the last 20 years when private money was extremely cautious about investing in venture capital funds. Tesi’s investments have, on average, also been very profitable. In the long run, though, he believes private money is a wiser path to follow.

“I don’t think the number of good firms can be increased simply by pouring in public money. Easy money encourages laziness. The fact that Maki was able to raise almost MEUR 80 of private capital in a very short time is evidence that there’s no longer such a burning need for public financing as there was in bygone years,” he says.

Kivimäki is critical also of loans the European Investment Bank gives to very early stage companies.

“I’m not sure whether they’re a good or bad influence. The state guarantees some of the loan, but the entrepreneur also shoulders a part. If the firm fails, the entrepreneur loses the company and is left in debt. VC investors are prepared for the cold fact that not all companies fly. The failure of a portfolio company is painful for them, but they quietly lick their wounds, and the entrepreneur is not saddled with debt,” Kivimäki points out.

Best in the business onboard had an exceptional start as a Finnish venture capital fund. Traditionally, public bodies such as Tesi and the EIF form the cornerstone of a new fund, and supplementary money is raised from private institutions and smaller investors. Maki’s founders, Ilkka Kivimäki and Pirkka Palomäki, did it the other way around.

“First we raised MEUR 30 of private money, then we had our first close. In spring 2018, we included institutional investors. Tesi’s investment of MEUR 10 makes it the only public-sector player in our first fund,” reports Ilkka Kivimäki.

The large number of small investors is special, and so is the fact that some of the best in their business are onboard.

“Our investors have a wealth of knowledge and expertise. We know that when we need expertise in, say, marketing automation or processors, we can call someone who knows and is genuinely passionate about that field. That’s really neat,” quips Kivimäki.

“We have altogether 73 LPs, of which ten are institutional and the remainder private. We talk about the Maki family, and that’s a real concept not just idle talk. LPs are an essential component of our investment process,” he adds.

 A disproportionately innovative nation

A good third of Maki’s deal flow comes from outside Finland and represents many different sectors.

“We believe a diverse range of sectors is wisest in the early stages. If we define what we invest in too strictly, we can’t react to changes occurring during the four-year investment period. The segment exploiting artificial intelligence, for instance, was turned upside down in just 18 months once the first processors enabling heavy-duty AI calculation reached the market. Disruptive changes are difficult to foresee,” states Kivimäki.

Kivimäki thinks that Finland is an excellent location for a company or a fund, and that Finns rank at the top of the list – Finland is such a small country that investment prospects must be sought abroad. Finns’ best characteristic is their ability to swim against the current, because it fosters originality: “We’re not forced into a mould.”

“Finns’ propensity for innovation and talent for doing things first is disproportionately large – after all, there are only five million of us. Too often it has turned out that we did all the difficult work, developed Benecols and Xylitols, and our neighbours reaped the benefits. We don’t always know how the game is played or where value is created.”

Making an impact must also make a profit

Kivimäki has observed that companies making socially important changes are often also very rational commercially. He maintains, however, that consumers cannot be expected to pay for responsibility.

“We must find solutions that are sensible from the consumer’s perspective but simultaneously responsible and ecofriendly. One example is our portfolio company Spinnova, which replaces both a toxic viscose process and cotton. Cotton is replaced with wood fibre or some other recycled fibres to make top-quality yarn by “printing”. The method is fully mechanical, so no toxic chemicals are needed,” he says.

“If even one-third of what we now know about climate change is true, each person must shoulder responsibility for their own actions. There’s no going back to irresponsibility,” concludes Kivimäki.

Maki Ventures Oy

What it is: Fund company founded by Ilkka Kivimäki and Pirkka Palomäki.

Where it is: Office in Helsinki at Maria01. Five-person team.

Fund:, MEUR 80. Makes seed round or Series A round investments in promising tech startups. First investments Disior Analytics, Neuro Event Labs, Sumpli, Glue, Valpas, Happeo, Altum Technologies, Spinnova, Ultimate AI and RFRSH Entertainment.

Investors: In addition to the founders,’s other investors include Risto Siilasmaa​ (Chairman of Nokia), Ilkka Paananen and Mikko Kodisoja (co-founders of Supercell), and Mistletoe Venture Partners International (founded by Taizo Son). Other institutional investors include OP Financial Group, Nordea, Varma, Ilmarinen and Tesi.



This article was first published in Tesi’s Annual Report 2018 here.