Finnish Second Round Startups Take the VC Funding

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It was only a few years ago that the Finnish games industry was still the younger brother of the Nordic juggernaut that is the Swedish games industry. Much has changed in just a few years, however, and once the Finnish games industry started growing, it grew quickly. Very quickly.

In fact, the total turnover of the Finnish games industry has risen from a mere €87 million in 2009 to an astonishing €1 billion by the end of 2014, flying past the €725 million that now younger brother Sweden generated in 2013.

 

Much like the global games industry, the Finnish industry consists of a few very large studios that have helped blast the total turnover to the €1 billion mark, and then a whole bunch of studios that generate nearly no revenue at all.

179 new games studios popped up in Finland between 2011 and 2014. An impressive number indeed. But the flipside is that most of these studios have to close down within a few years. Because as the latest numbers reveal, only 17 out of the total of 260 Finnish games studios have survived for more than 10 years. And 69% of all Finnish games studios are less than 5 years old.

All in all, this means that you have a few studios generating the vast amount of total revenue, which means that if just one of these studios fail, the impact this will have on the industry can be devastating.

To put some numbers to the claim, in 2014 only 20 studios generated more than €1 million in turnover, with a median turnover at only €100 000.

GrowthEmployees

Number of employees in the Finnish games industry (Neogames Industry Report 2014)

 

The quick growth in total turnover has also influenced the turnover per employee. Because while the Finnish games industry is larger than the Swedish industry in terms of turnover, the amount of developers employed in each country is about the same at approximately 2500 people.

In Finland, the total turnover and the number of employees in the industry grew at the same pace until 2010. From thereon, however, the turnover started exploding, growing relatively faster than the growth in number of employees.

As of 2010, the turnover per employee was a mere €97,300 in 2010, but only 3 years later, in 2013, that number had catapulted to an astonishing €409,000.

 

The growth in turnover generated by few very young Finnish studios in the last few years has meant that venture capital firms from all over the world has started looking towards the Nordic and specifically the Finnish games industry.

This is great for the industry as a whole, as it means that more money is being pumped into the Finnish games industry eco-system. And we are not talking dimes and pennies here.

From 2011 to 2014, the total amount of financial VC transactions (investment, acquisitions, owner exits) was $1.76 billion.

When you start digging into the numbers and the studios that receive funding from VC’s, however, a certain pattern starts showing up. Looking at the studios that received VC funding between 2011 and 2014 (note: Not the same as total financial VC transactions), a total of 17 studios received more than €0.5 million each.

And with the sale of Supercell in 2013 for $1.5 billion, the rest of the venture capital firms that were previously skeptical about the potential of the mobile industry, are now eagerly looking for the next Supercell success – something that is also revealed when looking at the games produced by the 17 studios that received VC funding, of whom 12 studios target the mobile platforms just like Supercell.

However, and this is where it gets interesting, 15 of those 17 studios are second round startups, which means that they are companies that have been started by a team who have previously owned another studio.

 

Read more about: The Second Round Startup Boom in the Finnish Games Industry

 

While the numbers reveal that nearly all of the VC funding received by Finnish games studios went to second round startups, it has never been a big and well-kept secret that second rounds startups have an easier time of acquiring VC funding in the games industry.

As a case in point, in the past 4 months alone, Sweden has seen both two of the industry’s veteran profiles, Ben Cousins who have been working at DICE, EA, and Lionhead, and David Goldfarb who have worked on the Battlefield series and Payday 2, form a new studio called The Outsiders, as well as King.com’s Tommy Palm who were in charge of Cady Crush Saga, leave King to form Resolution Games.

The Swedish and Finnish games industries differ in the overall focus of the studios within the industry. Because where the Swedish industry saw early success with AAA developers such as Dice and Avalanche Studios working on PC and console titles, the Finnish industry focuses primarily on mobile games.

 

Read more about: Swedish Games industry showing Explosive growth 

 

But despite their differences, it seems that both industries are starting to find great success in their second round startups. And we are not only talking about a few second round startups in Finland. 14% (25) of the studios established between 2011 and 2015 are second round startups.

“The fact that the Finnish game industry has been able to produce approximately 30 second round studios is also a clear indication of its maturity”, a recent industry report by Finnish non-profit industry organization, Neogames, says.

In the end, this means that while it is true that most Finnish studios do not make it past the first 5 years of existence, they might have an easier time the second time around. The second round startups aided the Swedish games industry in stabilizing, and they will do the same for the Finnish games industry.

Authors
Sune Thorsen

Sune is not only a gamer and writer who wishes his keyboard-typing-speed would translate directly into Nintendo 64 controller agility, but also the co-founder and CEO of NordicGameBits.

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