Finance Board 2017 on March 9th brought together finance providers, entrepreneurs and business leaders interested in financing international growth. The conference focused on concrete examples and practical lessons learned from the speakers’ and the participants’ own experiences. Understanding the variety of financing options at the different stages of maturity of a growth company is key, and Finance Board 2017 served this purpose perfectly.

Finance Board 2017, "Raising Finance for International Growth", was organized by Boardman2020 network together with ArcticStartup, FVCA, FIBAN, FINAC, and HBH/ VC Zone and was made financially possible by our sponsors Nordea, Marsh, and Team Finland. The event was arranged for the second time now, and it attracted more than 200 participants to Wanha Ylioppilastalo in downtown Helsinki. On behalf of the group of organizers, it was my pleasure to be the program director and the host for the event. The afternoon was packed with insightful keynotes, presentations, and pitches. Based on how much effort it took to have people take their seats after the networking breaks, the informal discussions were also worth their while! Here’s my brief recap of the program content.

This is a long article but I think the insights from the participants are well worth sharing at length. I’ll use bullet point format for the sake of readability and an easy digest.

Keynotes: Ilkka Kivimäki, Lasse Järvinen 

Ilkka Kivimäki from Inventure talked about the Nordics being among the five top startup hubs in the world, the other ones being Silicon Valley, London, Southern Germany, and Beijing. The Nordics only attract 1% of the VC money in the world, yet 11% of the billion dollar exits happened here. This in Ilkka’s view suggests the Nordic investors could perhaps take some more risk in financing the early stage startups.

When asked for some of the key lessons during his career in investing, Ilkka said: “If it feels wrong in the beginning, it probably will go wrong”. So, what are Ilkka’s thoughts on avoiding the ‘wrong’? Here’s one check list for a finance-seeking startup and their investors alike:

• Know your numbers
• Know the competition
• Ask referrals and references, get help with perfecting your pitch
• Are these people the ones that I want to work with? Soft values!
• What do you want in the longer run? Think a few steps ahead.
• Arrogance kills
• Life is short, so work with the best people
• Trust is key

Lasse Järvinen, the CEO and Co-Founder of Bonusway marched on stage a startup case that’s a bit of a curiosity in Finland. As a consumer-focused e-commerce business Bonusway’s business doesn’t really have direct benchmarks here, so their first question in the early stages of growth and the related financing challenges was whom to turn to for help and advice. Lasse described their financing rounds as “sales processes all the way” and explained how he had earned the wrinkles on his forehead. Lasse’s experiences below:

• It’s a normal sales process, only Be introduced!
• Raising finance is a huge mess, so have one person handle fundraising
• Seek investors that will lead
• Be profitable if you can - it does help! At least cash flow-wise.
• Stand behind your numbers and promises
• As startup, you’re always the worse off the more the financing decision takes time – and the opposite is true for the investor
• Hear NO until you hear YES
• Always Be Closing (100% effort on the next probable thing)
• It’s not a deal before the money is in the bank…

Finance Provider reverse pitching and crossfire 

The Reverse Pitching session, powered by Arctic Startup and hosted by Jan Ameri, brought on stage pretty much every type of financing that’s available to startups today, and gave an opportunity to the representatives of these organizations to present themselves. We heard snapshots from the offerings of Nordea, Finnvera, Fiban, M&M Growth Partners, Reaktor Ventures, Norvestia, HBH Investor Services, Invesdor, Nasdaq, Spinverse, Excedea, and Grannenfelt Finance.

The Investor Crossfire section that followed the pitches included some interesting insights. Here’s a brief recap of the presenters’ answers to a question from the audience as to how we can make sure the startup ecosystem stays vibrant in Finland, and that there’s a steady supply of good startups:

• Cooperation among the ecosystem
• Innovation at the universities and in the academic world
• The ecosystem is very Helsinki-centric; we should also activate the deal-flow from the rest of the country
• Immigration is important
• Ask the corporations about what they’re looking for, and start that company.
• Crowdsourcing is experiencing a hype curve; there was a slump but the growth is picking up again.
• Taxation etc… it’s a general country thing, there’s no silver bullet. We don’t need more money, just better companies.
• Don’t sell the companies too early! It does have an impact on the ecosystem, too.
• From the innovation perspective the scene looks promising, great ideas are coming in. Some companies would benefit from more active European level networking.
• Cross-border investments / syndications are starting off very well. Finland is very active and benefits from the pro bono attitude that’s typical of Finland in particular.
• Some companies have all it basically takes to grow but lack the desire.
• We could utilize the EU money better; the perception is, it’s too complicated but companies like Spinverse can help navigate the bureaucracy. 

Final keynote and fireside chat: Aki Soudunsaari and Case M-files 

Towards the end of the afternoon we heard one more interesting presentation from Aki Soudunsaari from Naava, as well as a fireside chat session between Miika Mäkitalo and Mikko-Jussi Suonenlahti covering the case M-Files.

Aki Soudunsaari presented Naava as a good example of utilizing pretty much every possible financing option there is. Successfully, too: Naava has raised EUR 8M in VC funding to date, and it rides on the strengthening trend of health-consciousness and the psychological effects of nature and clean air. “Know where the trends are headed” was indeed one of Aki’s points in his presentation. Trends are always business drivers for the smart ones. Here’s a collection of Aki’s points and considerations related to raising finance, picked from the presentation:

• Make the decision as to whether you want to raise finance or not. You’ll end up in a golden cage with investors.
• The first 20 units of the Naava green wall were sold already before the product existed. How? It was a trust thing. Openness and honesty about both the potential and the uncertainties were actually an asset at this stage.
• Next: EUR 100k financing from the entrepreneurs, doubled with ELY public funding
• Reached EUR 200k in revenue with profit. Now went as far as possible without funding.
• Seed1 and Seed2 rounds, total EUR 2.5M, for R&D and marketing (involved: Sitra, Butterfly Ventures, angel investors)
• The A round was closed with the US-based Delos as leader, joined by Halton. Importantly, both had a mission match with Naava with the health and wellbeing themes. “People don’t buy WHAT you do, they buy WHY you do it.”
• It’s important to get the “old backers and believers” involved in order to get funding from new investors. Emphasizes the role of continuous investor communication, celebrating both the wins and the harder lessons learned. Investors can also be a great marketing channel!
• Crowdfunding as a marketing channel: Sought crowdfunding through Pepin, a Swedish agency. Why Pepin? ‘Nordic forest air’ is part of the Naava branding, and Swedes are known for their marketing attitude.
• Key learnings with regards to resources: Can you partner with someone who already has slack resources?
• Investing in the team: People need to grow faster than the company!

As the last but certainly not the least interesting case deep dive, Miika Mäkitalo (CEO of M-Files)and Mikko-Jussi Suonenlahti (Venture Partner at Draper Esprit)discussed M-Files that in 2016 raised EUR 33M in VC funding, one of the largest funding rounds in the Finnish history. So how come M-Files did not settle with being ‘a relatively successful Finnish company based out of Ylöjärvi’ but decided to make the most of its momentum and challenge the traditional ways companies manage documents globally? Here’s a collection of points and insights from Miika’s and Mikko-Jussi’s Fireside chat on stage.  

• M-Files has grown from EUR 7M to 40M in revenue in a few years’ time. How did it all start? “We started by looking at what’s out there in the market, concluded that it’s rubbish – and did what a Finnish engineer would do: Built a better product!”
• The investor’s original headache: There are 250 document management software companies out there with VC funding and established businesses. ‘Why on earth would we invest in the 251^st?’ Let’s ask the customers. They made a round of 35 calls to customers of M-Files, and what was their message: Ease of use! The customers loved the product, which convinced the investors.
• Document management is a relatively boring business… which may make a great reason to invest in it!
• How to crack the US market? It’s not about the size, it’s about the idea and a successful small team knowing what to do.
• Getting funding is a serious sales and pipeline management task: It would be ideal to have 3-4 term sheets on the table, which means 7-8 deep workshops, which again means at least 10-15 DD meetings with investors.
• Finding an investor and closing a round is NOT closing, it’s a START. So it’s important to share the same ideas and priorities.
• Why did we choose to raise a series B? Spent a bit more than planned, went for topline growth, the momentum was higher than ever, got covered by Gartner, etc.
• How has the year gone after the 33M round in mid-2016? New product coming with an intelligence metadata layer; no need to know in which format or system your information is.
• Gartner is copying M-Files’ definition what the future of document management is!
• What is the vision of M-Files for a few years ahead? Hopefully some hundreds of million in revenue, customer success! We’re building an outstanding Finnish success story.
• Not losing time is critical; time is even more scarce than money
• What has been the biggest challenge with the investors once you got them in?
  • Being aligned on reporting structures
  • Management having time to execute on every great idea during the next week or so…
• How to ensure successful digital sales and retention in the future? Even though we’re super easy to use, the sales process isn’t always that easy. Requires a robust sales and marketing machine plus great customer success management.
• How did you manage to find the talents to the team? First very senior contacts from our network to get Board members. A good story and a vision that the people are excited to be part of are important!
• How to avoid the pitfalls of internationalization? Have a world class product, start in English, have a bold attitude; Just go and make mistakes, and learn from them. It makes sense to try different sales models in parallel and choose the best one based on experience.
• The availability of capital is cyclical! Startup, it’s wise to let the market speak once you have your term sheets on the table.
• Execution, execution, execution…. From an investor’s point of view and to their great delight, Miika as the CEO has consistently delivered on what he has promised to do.

The M-Files case was also covered by the Finnish business daily Kauppalehti this week:

http://www.kauppalehti.fi/uutiset/se-oikea-loytyi-sadan-sijoittajan-joukosta/xASJuduQ

http://www.kauppalehti.fi/uutiset/sijoittaja-patistaa-kysymaan-asiakkailta/YfcJUxxM

So there. Like said this became a long text but hope you found some valuable thoughts and insights from the above. Thanks again to all the presenters, co-organizers and partners for a great Finance Board 2017, and lots of success for the spring and summer!

// On behalf of the organizers

Markko Vaarnas

Managing Partner of Takeoff Partners and a Board Member of the Boardman2020 network