COVID-19 pandemic effects on startups in the Helsinki-Uusimaa region

Teksti | Mikko Julin , Marjo Ruuti , Harri Haapaniemi , Mari Vuolteenaho

iEER project, coordinated by the Helsinki-Uusimaa Regional Council, supports a sustainable and socially inclusive recovery from the COVID-19 pandemic in the region. First target of the project was to find out of how local startups have navigated through pandemic times. To do this, project interviewed selected regional startup enablers.

iEER project connects regions

Julius Jansson / Pexels

iEER is an Interreg Europe funded flagship project that connects 7 regions. The initial iEER Interreg Europe project, funded 2016-2020, defined smart paths and solutions to boost and orchestrate regional entrepreneurship ecosystems supporting young entrepreneurs. Now with phase 3, the iEER project aims to support entrepreneurs in their recovery from the economic shock brought by the COVID-19 pandemic in the seven partner regions. iEER has been granted with additional funding for 2021-2022. (iEER Interreg 2022.)

Startups in the Helsinki-Uusimaa region

Steve Blank´s (2010) definition for startup is widely used: “A startup is a temporary organization designed to search for a repeatable and scalable business model.”. In Finland 53 % of startups and 33 % of all new entrepreneurs are in the Helsinki-Uusimaa region (Kotiranta, Pajarinen, Rouvinen & Sadeoja  2018). A total of 1 589 companies were reported to be founded between 2009-2019 (Romanainen & Beckers 2021). Annual investments for Finnish startups have grown during that period from 122 into 509 M€ (Finnish Venture Capital Association 2022).

Startup ecosystem in the Helsinki-Uusimaa region is varied and multifaceted. About 25 % of the regional startups operates in the field of IT and software. Professional and service startups cover 18 % of the startups. 7 % of the startups operate in health care environment. Gaming, financial services, and entertainment sector each represent about 5 % of the Helsinki-Uusimaa region startups. The regional startup survival rate consistently ranks highest (60 %, 2017) amongst all EER II regions for which data is available. (Romanainen & Beckers 2021.)

Corona pandemic effects on startups

The number of companies founded in the Helsinki-Uusimaa region in 2020 was the lowest from the past 10 years. This can most likely be an effect of the COVID-19. Many active and interactive startup initiatives have become dormant because of the COVID-19 restrictions. During the pandemic events and interactions were mostly virtual. Thus, important unplanned interactions were lost during the COVID-19. However, startups are resilient, and they are expected to resume back to their normal activities. (Romanainen & Beckers 2021.)

Majority of startups operating in the Helsinki-Uusimaa entrepreneurial ecosystem are active in ICT-based businesses or applications. Their businesses are less affected by physical interaction with clients. On the other hand, travel and tourism related services, as well as entertainment, e.g. restaurants, were the highly effected by the COVID-19 restrictions. Generally, the impact of pandemic has been more visible in SMEs compared to startups, as SMEs financial resources are often more limited. (Romanainen & Beckers 2021.)

Regional Startup actors

Authorities and the cities in the Helsinki-Uusimaa region have engaged to support startups and scaleups (Romanainen & Beckers 2021). There are over 30 business incubators and accelerators in the Greater Helsinki region (GoTech Innovation 2021). A startup incubator is a collaborative program designed to help new startups. Incubators help entrepreneurs to solve problems commonly associated with running a startup by providing workspace, funding, mentoring, and training. The sole purpose of a startup incubator is to help entrepreneurs grow their business. Startup incubators are usually non-profit organizations, which are often run by both public and private entities. (Willson 2021.) Accelerators have more collective elements than incubators. For example, they are mentorship-driven, and they culminate in a graduation. (Hathaway 2016.)

iEER project interviewed four startup actors from the Helsinki-Uusimaa region. The idea was to learn COVID-19 effects to the startups. Representatives from Maria 01, Aalto Startup Center, Health Incubator Helsinki, and Helsinki Campus Incubators programme were interviewed.

Health Incubator Helsinki is a three-year incubator program for research-based health sector teams and startups. In the first stage, 10 teams were selected to join the program. Maria 01 is a startup community and a selection-based campus for 170+ tech teams. It is the leading startup campus in the Nordics.

Aalto Startup Center (ASC) focuses on sustainable research-based and innovative deep-tech startups. In 2020 ASC served its programs for over 40 companies. Launched in 2021, the Campus Incubators programme aims to create new companies with growth potential together with universities. The programme, developed by the city of Helsinki, develops pre-incubator and incubator activities for campuses located in Helsinki.

Harvests from the interviews

Health Incubator Helsinki (HIH) had been kicked-off in 2020 by the city of Helsinki said Christian Lardot, Incubator leader from the HIH. It is a five years project to boost research-based startups. There are limited numbers of startups in health research. It is an important image to the Helsinki-Uusimaa region, but it also strengthens the competence, says Lardot. The more competence there are around the area the more it attracts newcomers.

The main aid for the startups is funding. Also, building networks and promoting to build pitches are supported. HIH is more than a room. It helps startups to move on to the growth trajectories. COVID-19 pandemic has had little effects on health-based startups. As no physical testing were allowed during the Covid restrictions, some of the activities were slowed down. Lardot estimated that there might have been a minor reduction on the number of new startups during the pandemic era.

Maria 01 is a startup campus with premises for new startups, speaks Ville Simola, Chief executive officer from the Maria 01. Maria 01 offers services that help startup to get funded, works with peers and service providers, run community services that create team spirit among startups, and organize events, especially from the community-based point of view. Their mission is to be “the best place to grow”.

According to Simola, COVID-19 has had minor impacts on startups. In a certain industry, e.g. travelling, effects may have been negative. But in a big picture pandemic has accelerated startup growth. A major reason for this is the rapid digitalization. Almost all startups are involved in digital environment.

From the Maria 01 point of view the main limiting factors for startups successions are lack of space and lack of skillful labor. In a large-scale, Helsinki might lose some of its attraction if space problem will not be solved. Currently, the biggest bottleneck in startups growth way is to find skilled personnel, to get them to come to the Greater Helsinki region and to make them feel comfortable to stay and to work in Finland.

Jussi Laine, project manager of the City of Helsinki’s Campus Incubators program (2021-2024), noted that their goal is to create at least 100 new companies in a year, increase RDI-based entrepreneurship, and strengthen the development of campuses as centers for innovation and entrepreneurship. Through the Campus Incubators program, the City of Helsinki, in cooperation with the universities in the region, is developing business incubator activities on campuses to support student- and research-driven entrepreneurship. The main goal of the program is to create new, innovative companies and to support the growth of startup´s RDI-based business in the post-corona world.

Higher education institutions play an important role in the development of competence, commercialization and entrepreneurship culture within the Helsinki-Uusimaa region. Together with universities, the project will produce new pre-incubators and incubators for campuses in the region. The idea is to strengthen existing incubator concepts, service models and pathways  to boost business and entrepreneurship. Program aims to increase field resilience in the event of unexpected situations such as the COVID-19 pandemic.

Marika Paakkala, Director of Aalto Startup Center (ASC), mentioned that private investments received by startups have grown strongly during the COVID-19 period. Local and international investors have been active to the direction of the ASC. During pandemic, investment-oriented discussions were taken place in online meetings even at a lower threshold than ever.

Some startups have had hard times during the COVID-19 period. They have been receiving business support from the public sector. For some companies, the original business idea has disappeared, and companies were forced to change their direction. However, there has not been a real wave of bankruptcies.

Supported companies have been allowed to work at the Aalto Startup Center during the pandemic times. Digital infrastructure support for startups has been available, but this help could have been intensified. Social and ecological responsibility is more visible in the operations of companies than before. ASC is part of the Sustainability-driven accelerator network.

Helsinki-Uusimaa region startups navigated well through COVID-19 times

The effects of COVID-19 have been diverse to startups. Some industry has suffered, but the main message has been that startups in the Helsinki-Uusimaa region have coped well with the pandemic times. Record level of investments speaks for that. Digital transformation during the pandemic has been important, as most startups in the region are involved with digital platforms.

Scarcity of skilled workers might be a limiting factor for startup´s future growth. This should be treated with respect, and to ensure that Finland is a competitive place to live and work. Green transition, climate technology, and development of health technology will give a massive potential for startups to grow. Future for Helsinki-Uusimaa region startup scene looks promising.



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