One area where we are committed to enhance our proposition to entrepreneurs and invest more time and money is the Nordic and Baltic area. Index Ventures has already invested a disproportionately high share of funds and time here relative to the size of the markets. Here we reflect on what Index has been up to in the region, and just why it creates so many innovative and successful tech companies.
Excluding some unannounced seed investments we have made more than 13 investments in companies which were either founded in, or have a substantial presence in the region. From these, we have already completed 6 successful exits.This vibrant entrepreneurial ecosystem has created successful companies across many sectors. From software and enterprise successes such as MySQL
, through to next generation telecom leaders like Rebtel
, and pioneering consumer services like Stardoll, Just Eat,
and our most recent investment iZettle.
Also, outside the Index Ventures portfolio there have been other successes like Spotify
.So why does this region create so many successful startups? A recent survey from Businessweek
identifying the most creative countries in the world placed Sweden at the top of the list with Finland, Denmark and Norway all featuring in the Top 10. The survey highlighted tolerant societies, an excellent talent base and educational system and high adoption rates for technology as being the key contributing factors. To these I would add the following observations about what lies behind the success of tech startups in the region.
- Tightly integrated teams where business skills and technical awareness are pervasive. Often in startups from continental Europe and the US there can be a substantial divide in culture and skill-sets between the technologists/developers and commercial/marketing teams. What I have observed particularly in the Nordics is that a solid grasp of both commercial and technical issues runs throughout the workforce, rather than having these skills and experiences constrained to organizational silos. This makes forming a tight culture and effective working practices much easier for leaders and founders of startups.
- A long standing export culture. For companies in these markets, building a big business by focusing on local opportunities is rarely an option. Right from the outset, startups need to look beyond their own borders and identify the routes to market and viral product characteristics which can make them successful globally.
- Home markets act as hi-tech test beds. Most of the countries in the Arctic region have high levels of broadband and mobile penetration and a population which is engaged with technology and eager to try new services. This makes them perfect test beds for new digital products and services. In addition getting early traction and validation with customers or partners, whether it be companies or government is typically easier and faster in smaller markets.
Beyond the Nordic and Baltic countries lies Russia and Ukraine which although being very different ecosystems are very attractive areas for investment. In Russia Index has invested in Ozon and Babyboom. Each of these investments benefit from Russia being one of the largest and fasted growing domestic markets for internet products and services. It is also along with Ukraine one of the deepest pools of technical talent.
We are convinced that not just Europe as whole, but specific innovation clusters such as Talinn, Helsinki, Stockholm, Copenhagen, Oslo and Moscow can continue to produce world-beating tech companies. You should therefore expect to see a lot more of me and my colleagues (in our warm clothes…) helping our existing companies, participating in events such as Seedcamp and Slush and trying to find great entrepreneurs and talent from the frozen North.
A few weeks ago, after many many months of development by Playfish and the EA Sims studio, The Sims Social was released. When Playfish was acquired by EA in 2009, part of the thesis was that with EA’s strong game brands and the Playfish understanding of social gaming, a winning combination could be forged which could give Zynga a real run for its money.
There is a lot to admire about Zynga as a Company with its highly disciplined marketing and product development processes and the incredible ability it has shown to scale and release new and bigger hits on a regular basis. However on an emotional level I have always felt that Zynga were the “bad guys” often borrowing heavily on others innovative ideas and in their early days using questionable methods to monetise. By contrast the Playfish team were always the “good guys” – creative, fun, hard-working and respectful of other companies IP and innovations.
Source: DAU Comparison from Developer Analytics
While am sure Zynga has many great titles in the offing, at least for now the hot game seems to be the Sims Social, recently overtaking Farmville on DAU and with a shot at catching Cityville over the coming weeks. So congratulations to the Playfish team on all their hardwork post the acquisition. Congratulations also to EA for identifying the best Company to acquire, persuading them to sell and then realising the synergies. Nothing is healthier for the VC ecosystem than happy and satisfied acquirors and everyone loves to see the “good guys” still thriving at the end of the movie…
We are delighted to announce that Sami Lababidi has started to work part-time at Index Ventures as an Entrepreneur in Residence. Sami was absolutely pivotal in the success of Playfish but always extremely humble and generally left the promotional slots to be filled by Kristian Segerstråle and Sebastian De Halleux.
We got to know Sami during the investment process in Spring and Summer 2008. At the time Playfish was already one of the most successful gaming companies on Facebook, with titles like “Who has the Biggest Brain” rapidly growing to what at the time seemed very impressive metrics. We didn’t know then that just round the corner Playfish was just about to crack the code with Pet Society. This game reached millions of users and essentially defined the social game as we know it today.
Equally pioneering however was what Sami and the technical team were doing behind the scenes to support this growth. Way back in 2007, at the very early stages of the Amazon Web Services ramp-up, Sami had taken the decision that to build a Company which could keep pace with a rapid viral growth in usage, he would have to completely re-invent the technology stack. Essentially Playfish decided to go “all-in” on the emerging cloud services platforms. The decision to exclusively use Amazon, Rightscale, Google apps, Boku and other SAAS components not only proved vital in supporting the growth when it came, but also meant that almost all development resource in the Company could be focused on building great games not managing infrastructure. This pioneering approach is now essentially the de facto standard we see in all web startups. Over the following years Sami has kindly shared his opinions on technology and internet with us particularly around cloud services which has become a key theme in our portfolio.
We learned from our experience with Thai Tran (previous EIR who we have backed at Lightbox) that technically gifted EIRs are immensely valuable both for their insights and leads. We also know that they tend to follow parabolic rather than elliptical orbits – so we look forward to working with Sami for as long as are able to hang on to him!