Slush 2022: Winds of change blow through Helsinki
Located in the depths of the Helsinki Convention Centre, where attendees are greeted by smoke, strobe lighting and electro-dance music played by neon-haired DJs, the Slush conference really earns its reputation as one of the more leftfield tech events in the industry calendar.
But the Finnish tech show’s clubby, laid-back atmosphere belies the fact that it means serious business, enabling its start-up founder attendees to strike deals with funders and venture capitalists over miso truffle salads, plant-based hotdogs and lashings of Kombucha.
Now in its thirteenth year, the show was at pains to point out in its pre-event blurb that each one of its 4,600 early-stage founders had gone through a vetting process to be there, and while there’s no longer a direct flight scheduled from San Jose to Helsinki, Silicon Valley’s presence can still be felt among the 2,600 investors.
Some venture capitalists visited the Nordic technology haven for the first time this year, including Pear VC, Benchmark Capital, FirstMark, Meritech, Tiger Global, Spark Capital and GGV.
Perfect place to pitch
“On a European scale I’d say that this is the best place to do business and that’s what the investors say too – at other places they go to have fun but here, they come to make deals,” said Timo Paloheimo, head of marketing at Finnish self-driving truck start-up Sensible 4.
Edouard Thimon, co-founder and COO of French Swiss start-up Fooddetective – which has just raised a $5.5m seed round for an API that helps food and drink businesses manage their tech stack – also marvels at the quality of the speakers, fifty of whom this year can boast building billion-euro companies.
“You come here for the business and the high-quality speakers,” he said.
But while the event may claim to be the biggest gathering of VCs in Europe, funders are applying caution following a turbulent year. The war in Ukraine disproportionately hit Scandinavian start-ups due to their nations’ proximity and borders with Russia.
As Paloheimo recalled: “When the Ukraine crisis started it was difficult for a few weeks before Finland and Sweden joined NATO. US investors just looked at where we were on the map and saw this huge border with Russia.”
However, while applying to join NATO may have eased things in the Nordics, the subsequent energy crisis, rise in interest rates and Big Tech’s Big Lay Offs following rounds of redundancies at Facebook and Twitter, will all inevitably have an impact on today and tomorrow’s start up culture.
The easy money from venture capital dealmaking that has flooded the market over the past three years is fast evaporating in an inflation-induced, high interest-rate environment.
It’s causing many private investors to take a hard look at funding start-ups, many of which could be years away from turning a profit.
Several high-profile firms such as Swedish buy-now-pay-later firm Klarna and delivery start-up Instacart have seen their valuations reduced during recent funding rounds – a process in the start-up world that’s referred to as a ‘down round’.
On day one of Slush the no nonsense plain-speaking billionaire VC Doug Leone of Sequoia Capital pulled no punches during the show’s opening address, with a stark warning to start ups that the playbook used over the last ten years will not work for the next decade.
“We’re not going to get away with this quickly, How long? Who really knows but it’s not going to be a 2024 recovery.”
“The malaise we experienced in the 1970s lasted 16 years and we must be ready for a longer period of challenges than we’ve faced in 2008. It will not be 12 months,” Leone said.
Speaking on the stage with fellow Sequoia investor – the firm’s rising star Luciana Lixandru – Leone advised founders to think of this period as their “crucible moment”.
“Think of what happened in the last two or three years. You were rewarded no matter what – whether you made a crap decision or a good decision you got money. And that’s a lousy way for you to learn your craft. All that’s gone now and the healthy balance between founder and business partner is now in place.
“I view this as a cleansing period. It’s an incredible opportunity for you to undo some bad habits and become true business-people to invest your precious capital in the things that really have pay back.”
The VC advised his founder audience to look at how they can turn themselves into strong firms in a world where “fewer companies are going to get funded” and to take advantage of the flood of talent that is currently being unleashed on the market.
“The major companies have layoffs; you have a chance to upgrade and get stronger if you play your cards right.”
Leone also advised founders not to get caught up in valuation mania but to think about their company’s long-term plan – maybe even swallow a down round if they have to.
“If you’ve got to raise $50m and you were at a valuation of $500m last round, but this time it’s $350m, take the money. Explain to your employees what the plan is,” he said.
Speaking with Mike Butcher, editor of online start-up bible TechCrunch in Slush’s nicely designed media room, the veteran tech journalist predicted that many interesting start-ups from around the globe would launch in the coming years, comprising of former big tech staff.
“That idea they were harbouring, which they may have done as employees – they will now do within start-ups that they form – which in turn may end up being bought by their former companies! It’s counter cyclical in a way, just like 2008 all over again,” he said.
Slush 100 controversy
The current tech skills gap means that any idea that enables the free flow of highly skilled tech workers ought to be a winner – and indeed, for a short while, it was.
On the eve of the event’s second and final day British-based start-up Immigram was crowned winner of the Slush 100 pitching competition and was lined up to receive €1m investment from five leading VCs: Accel, General Catalyst, Lightspeed Venture Partners, NEA and Northzone.
The talent immigration start-up claims to help IT specialists and tech talent relocate to the UK – as its founders Anastasia Mirolyubova and Mikhail Sharonov had done back in 2016.
The B2B SaaS platform offers to help tech talent from more than 10 countries apply for the UK’s global talent visa, settle and connect with opportunities.
Soon after Immigram’s winning pitch however, images surfaced of a Russian jobs board that seemed to show it hiring for roles in Moscow. This, coupled with the winners’ Russian passport status, upset the European start up community – some of whom accused the judges and the show’s organisers of being tone deaf.
By Monday, the award had been revoked (with Immigram having also opted out of the competition) – forcing the organisers into a humiliating climbdown on LinkedIn.
“We should have reviewed all participants’ operations more closely before letting them enter the competition,” it admitted (although Immigram has never sought to hide its origins – indeed, they were the inspiration for the platform).
At this point the two other finalists deserve a mention: Ukrainian start-up Zeely – which offers an app for small and medium business owners; and Sociability – a four-year-old Eric Schmidt-backed start-up which aims to help disabled people find and share information about the accessibility of the built environment.
It’s a shame an otherwise well-considered and finely-honed event became mired in controversy in its last few hours, threatening to overshadow the rising stars, the funding rounds struck and the useful advice.
But it also highlights how the freewheeling globalisation of finance and technology is coming to a screeching halt, forcing investors to become more risk-adverse not only to early stage start-ups but also to the origins of the founders and stakeholders involved.
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