Angry Birds is not the only Finnish success in gaming
The Helsinki metropolitan area has long been recognised as a hotbed for small mobile technology start-ups, but a recent trend has turned to gaming companies. A number of deals have confirmed that international investors are eagerly surveying Finland for the next Rovio. But what makes Finland so attractive?
“Quite simply, it is because we are very good at what they do in international standards,” says Ville Vesterinen, CEO of Grey Area. “We have a great pool of game developers that are not only very talented, but also very experienced. Many game developers have worked years in this industry and gone through two or three different companies, picking up lots of skills along the way. We have a great engineering pool that comes from the great engineering university education of the 1990s.”
The Finnish market is very small by international standards, but Vesterinen says that is not a problem.
“We don’t have a large home market,” he admits, “but that matters a lot less than previously because of the proliferation of new digital direct-to-consumer distribution channels. These include Facebook, AppStore and the Android Market, among others.”
Grey Area received 1.9 million euros in funding early this year from Index Ventures, London Venture Partners and Initial Capital. Lifeline Ventures contributed seed money to Grey Area in 2010.
Much of Grey Area’s success comes from the massively multiplayer online game Shadow Cities. It is a location-based game, so the gaming area is the user’s actual physical location, made possible through the iPhone’s GPS service. Your city literally becomes the location for the game, where neighbourhood landmarks become “gateways” that are fought over by different factions.
“Mobile gaming is one of the most exciting and active sectors in consumer technology today,” Ben Holmes of Index Ventures says. “Of all the start-ups we met, we thought Grey Area had the biggest vision and passionate team to execute on that vision.”
This spring another Finnish gaming firm, Supercell, raised 8.8 million euros from Accel Partners, London Venture Partners and the German gaming titan Klaas Kersting. Their game Gunshine has some half a million active players. Supercell is only two years old, having been founded by former employees of Remedy, Digital Chocolate and Sulake.
“We are proud to have Accel and Mr. Kersting as investors,” Ilkka Paananen, Supercell’s CEO told Arctic Startup. “Given Accel’s extensive experience and track record in gaming, internet and social media, their investment is a powerful endorsement of Supercell’s vision of combining the power of social networks with deep and immersive core games that are instantly accessible from anywhere, anytime.”
IPOs and new funding models
The leader of the Finnish games industry is, no doubt, Rovio. It has been able to turn its Angry Birds game into a global brand, selling plush toys, Halloween costumes and even considering a movie.
“We’re insanely profitable,” CEO Peter Vesterbacka told Bloomberg. “We are very, very profitable. We’re not a publicly traded company yet but we can fund our own growth.”
Vesterbacka has repeatedly hinted that Rovio would go public eventually, telling Bloomberg that it might happen “a year from now.”
It is not only gaming companies to receive global investments recently. Another company to gain funding is Blaast, a secretive firm that is apparently developing a cloud-based mobile platform. This would give more modest mobile phones access to smart phone capabilities by pushing some of the more complex functions into the cloud.
“Our investors include Ambient Sound Investments, Pekka Vartiainen and other angels,” CEO Joonas Hjelt told Arctic Startup. “Blaast is also in the Finnish government’s Vigo program with Veturi Venture Accelerator, one of the investors.”
Besides traditional venture capital investors, the Finnish industry has seen some innovation in the funding model. The investment fund Mediatonic invests in the intellectual property rights of a product, and doesn’t purchase equity in the target company.
Finnish gaming industry’s bright future
According to estimates by Neogames, the Finnish national game organisation, turnover in the industry has climbed from 40 million euros in 2004 to an estimated 165 million this year, a 22 per cent annual increase, even through the recession. About 13 Finnish firms in the sector have sales over one million euros. The number of employees has more than doubled since 2004, to over 1,200 people.
Finland has traditionally been a strong player in mobile games. Some 39 per cent of Finnish gaming companies say mobile is their primary platform. This is followed by online, with 22 per cent, PC with 16 per cent and consoles with 14 per cent.
Although the financial crisis and ensuing recession hit the industry, it has recovered strongly. During 2009 and 2010 24 new gaming companies were established.
“Things are going great,” concludes Vesterinen. “We’re currently 16 people strong and hiring new talent. Shadow Cities has been a success beyond belief and now we are working feverishly on our next game title. No company has emerged yet to rule the mobile space and that’s what we aim to do. We could not be more excited!”
Text: DAVID J. CORD, Helsinki Times