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​​Sauli Törmälä points out that so-call​​​ed ‘long-horizon’ funding is important at the beginning. More than just venture capital is needed, and at a sufficiently early stage. This provides the long-term approach required to develop scalable products.​

Business angel speaks out: Growth from the international arena

Sari Alhava | 13.6.2016

​”To succeed, new growth companies need expertise, a scalable concept, stable funding and enough daring to enter the international markets,” sums up entrepreneur and business angel Sauli Törmälä.

​Sauli Törmälä, a serial entrepreneur and business angel in the technology sector, says that he is delighted with the emergence and success of the game industry.

”Of course, not all have succeeded, but fairly many have. I also believe that measurement technology will become a major source of employment in the near future. Finnish know-how is top level and I have faith in growth companies in the sector,” Törmälä says.

Specialising in measurement technology, since the 1980s he has had a ringside view of the development of many growth companies. Among other posts, Törmälä has served as Managing Director of TopWave Instruments Ltd, which developed a technology for the quality control of plastic bottles for soft drinks.

Since then, other technology sector companies such as KSV Instruments Ltd, BioNavis Ltd, FocalSpec Ltd and Helmee Imaging Ltd have grown under his leadership. In addition, he is a shareholder or board member of several Finnish and Swedish startups and research groups. He has gained a range of perspectives in these capacities.

Törmälä believes that the key to getting spin-offs and young, growth-oriented startups to flourish lies in bringing executives fully on board. The core team is just as important.

“Whereas location, location and location are the keywords when selling houses; team, team and team is what counts for startups. The ability to collaborate and the expertise of the core team lay the foundation for success – while the lack of them prevent it,” says Törmälä.

In addition to investing in itself, to succeed a company needs to invest in the early phase of the growth path, i.e. in education and research. Törmälä is concerned about the government’s decision to cut funding in these areas.

“If the cuts are only temporary, they may have some positive effects. Greater efficiency and revisiting current practices are needed in many areas. But permanent cuts would be a terrible decision with respect to the development of technology and other growth companies.”

Threats and weaknesses

For growth companies in the startup phase, being starved of capital is the greatest threat and reason for failure. To avoid this, from the outset companies need to ensure that they have sufficient basic funding, and products which they can sell in sufficiently large volumes.

Sauli Törmälä has been delighted with the funding provided by Tekes – the Finnish Funding Agency for Innovation.

“For example, I have compared our system to the corresponding one in Sweden, and the one here is much better. It seems to me that it is uniquely business-friendly. Tekes has provided sufficient funding options. It has also provided plenty of help and coaching at the application stage.”

He also likes the fact that Tekes forces applicants to draw up a proper project plan. That is the only time at which planning can be done properly and the process ensures that it is actually done.

Weaknesses do exist

“Cooperation between the funding agency and startup could be closer and the threshold for making an application lower,” says Törmälä.

In addition, resources are needed in order to make venture capital available and help with its acquisition.

“On the other hand, companies can learn a great deal when seeking funding. Technology companies tend to describe their technology to funding agencies, rather than providing revenue forecasts. As an engineer, I’ve been guilty of this myself.”

The concept must be scalable

Scalability is often a bottleneck for startups.

“When beginning from the technology end in particular, firms too often form a kind of engineering practice based on chasing a single customer or meeting a single need and assuming that others have the same problem,” Törmälä stresses.

Instead, firms should patiently commercialise ideas that are scalable. The basic technology should be turned into a finished product that tackles a sufficient number of pressure points and for which customers are willing to pay.

Törmälä calls on businesses to research the issues rather than act on the basis of a single customer or gut feeling.

“Market research should be performed at an early stage on any idea provided by a customer. If there is interest in the product, it should be made scalable and introduced to the world. This is currently succeeding better on the software side than for measurement technology.”

Make your first sale

Many companies still lack experience of international marketing and sales. It is worth investing in such activities.

“However, you should not begin selling too quickly or eagerly. I have often reminded people that you shouldn’t ‘sell your chickens before they are hatched’, so to speak,” Törmälä says.

Törmälä has heard that internationalisation funding from ELY Centres is being reduced, when – in his opinion – it should be increased.

“Reducing such funding would be terrible news for growth companies. Small startups have a high financial threshold for attending international trade fairs, but these are important to growth. Finnish companies were once adept at entering foreign markets, typically by establishing a US subsidiary. Direct subsidies can no longer be provided for this. However, it is easier to offer products on local terms from a local office,” Törmälä notes.

IMP_1_16_bisnesenkeli_lisäkuva.jpg
 

The entire FocalSpec team.​

Spin-offs in full swing

VTT’s spin-offs have a strong foundation: their starting point is a technical insight they are seeking to commercialise. Sauli Törmälä believes that any euros invested in them are bound to be paid back.
He gives the latest news on a pair of VTT’s spin-offs.

“FocalSpec Ltd has reached a promising stage. We have technical measurement solutions for demanding industrial applications, for which scalable products are just emerging.”

Helmee Imaging Ltd continues to develop VTT’s technology using a machine vision system for the quality inspection of objects with mirror-like surfaces – and is commercialising the technique.

“We are currently trying to gain more reference customers. We have already achieved our first major deals and a foreign investor has come on board,” says a delighted Törmälä.

He refers to the mounting prices of VTT as a concern. 

“Few startups, including VTT spin-offs, can afford to use VTT’s services for product development, unless the project is EU funded. I hope that account is taken of this in the future,” says Törmälä.


 

 

 

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