Mike Butcher writes in his Techcrunch article today that ”Norway looks like it is losing the battle to join the global innovation race”. Norway has only 42 companies in Crunchbase compared to Finland with 55 and Sweden with 131.
Yast is one of the 42 Norwegian companies in Crunchbase, and knowing the article will spark off some discussions in Norway, I wanted to give my input based on my recent 3 months experience in San Francisco/Silicon Valley.
My reasoning for trying out Silicon Valley for a while was to figure out if we had totally missed the point or if we had started the company in the wrong country. When we spoke to people in the industry of time tracking and billing software, no one seemed to support our freemium model. The only number of interest was paying customers, everyone else was considered free riders useless to the growth of the company. I had to stay less than 2 days in the office of our partners at AppDirect downtown San Francisco before I felt our methods where not only accepted, but rather the way of doing things.
I think it is time for Norwegians to be aware of how others look at us, not only how we look at them. Facebooks recent acquisition of Instagram at 1 Billion USD is not even possible to explain in Norway. ”They did not even have revenue?!?!”. But seen through Silicon Valley eyes. It’s just another acquisition in a cat and mouse game of powerful actors where the winner takes it all.
After my return to Norway, I tried to figure out why that is. Norway is an exporter of raw materials. It is the backbone of our economy. Business models related to these industries are traditional. You produce, you sell and you transport. Competitors do not pop up from the ground every day. The demand goes up and down, but you can be pretty sure there always will be someone in line to buy oil tomorrow.
This is not the case in Silicon Valley. I am not sure if any of the following Silicon Valley companies have the same business model today as when they started: Twitter, Google, Facebook, ebay, Zynga, Salesforce, Intel, Cisco, Apple or even HP. But they know that if they don’t make it right today, they are history tomorrow. This makes a huge impact on business culture and how to valuate companies.
That is why continuous business modelling is a crucial part of any strategy “over there”, and why a loyal user base is so valuable. With the globalisation of ”everything” these days, if you’re not the best, you are none at all. That is why buying users is just as important as buying a revenue stream. They may not be your income today, but they may be you’re income tomorrow.
Another comparison done by Butcher, is Norway compared to Sweden and Denmark. And yes, we are similar in many ways, but not necessarily in the business aspect. Sweden has always been better at building brands, services and products than Norwegians. (I guess that’s what happens if you don´t have natural resources.) With the Skype exit, Sweden got the privilege of having, what Dylan Tweney from Venture Beat describes, “Someone has to take that first leap, start a company, recruit talent, and then stick around long enough to do it again.”
As a consequence, Wrapp raised 5 MUSD by Skype co-founder Niklas Zennström before they even launched. Knowing it takes a lot of money to reach global domination, I would guess they pushed a lot of money into it straight away to tell the world: “No matter what you say, we are one of the big players in this field” hence achieving media attention to back up their launch. But using the funding rounds as a tool for market positioning is another tool outside of the Norwegian toolbox. As a side note, here are 4 Scandinavian companies that have caught my attention in terms of funding lately. I don´t think any of these would have been able to raise that amount in Norway.
However, Norway has investors that have been around for a while. But they reinvest in a business they know. Oil, gas and fish. And I don’t blame them. If I had billions, I would probably invest in web start-ups because that is what I care about. And If I were to raise critique towards Butchers article, it would be that he uses an innovation report including Norway, but excluding the oil sector. That is like making an innovation report of Silicon Valley, excluding the ICT-sector.
And I need to say, Innovation Norway and the locally funded programs have been extremely helpful. And during my months in Silicon Valley, Innovation Norway in San Francisco really backed us up.
However, it´s time that Norwegians get used to big numbers, become ambitious and back up entrepreneurs who understand what it takes to be a winner in the global market. If we don’t, those entrepreneurs will soon end up in Stockholm, Copenhagen or San Francisco.