The Finnish Startup Community has expressed its disappointment with the government’s decision to cut Business Finland’s innovation funding. According to the community, the cuts come at a critical moment when research and development (R&D) investments by Finnish companies are in strong growth, and they threaten to prevent many promising innovations from developing into finished products.
Established in 2021, the Finnish Startup Community is an advocacy organization aiming to elevate startups to become a new pillar of the Finnish economy by 2030, alongside the forestry and metal industries. The community states that the new cuts are in direct contradiction with this goal.
Public Funding Critical in Early-Stage Commercialization
The community is particularly concerned about Business Finland’s early-stage funding instruments, such as the Tempo funding and the Young Innovative Companies (NIY) program. Due to cuts in budget allocation, the NIY program has already been suspended for the current year.
These are two key public funding instruments aimed at startup companies under five years old at different stages. Tempo funding is targeted at the very earliest stage and is a grant of up to €60,000, covering 75% of a project’s costs. It allows a company to test a completely new product or service idea and survey its demand in international markets. The NIY program, on the other hand, is aimed at clearly more advanced startups that have already demonstrated significant growth potential, often with existing revenue and international business. It is a multi-stage program that can offer up to one million euros in funding, which is now granted entirely as a subsidy.
“Business Finland’s Tempo and Young Innovative Companies funding are among the most effective instruments in Finland’s innovation and growth policy. They are designed for early-stage companies whose product, service, or business model has great potential but whose risk level is still high. It is precisely at this stage that the role of public funding is irreplaceable,” urges Riikka Pakarinen, CEO of the Finnish Startup Community.
Innovation activity refers to the commercialization of research knowledge. This is a phase where even small public support can be decisive. According to Pakarinen, funding like Tempo helps companies validate the market, test solutions, and build initial customer relationships. Without it, many innovations would never advance to the stage where they could attract private venture capital investments.
“Tempo is therefore not an expense. It is a strategic investment in the future growth of the Finnish economy,” Pakarinen argues.
A Contradiction with R&D Investments
The decision to make cuts is baffling, as R&D investments in Finland have been growing for eight consecutive years. Domestic startups alone invested approximately 800 million euros in R&D activities in 2023.
“Of this, about 260 million euros is directed towards so-called deeptech startups, whose innovations are based on long-term research and technological development,” Pakarinen explains. The term deep tech typically refers to companies whose technology is based on significant scientific or engineering challenges, such as artificial intelligence, biotechnology, or quantum computers. Some of the best-known Finnish deep tech companies include the virtual reality headset developer Varjo, the quantum computer builder IQM, and Solar Foods, which produces protein from air.
The community notes that it is only after a successful commercialization phase that these R&D investments begin to yield results and economic growth. If the path from research to market is cut by reducing innovation support, the potential of all R&D investments risks being lost. In the worst-case scenario, promising Finnish innovations may move abroad in pursuit of funding.