The Finnish PropTech Cluster, A Global Testbed For Innovation?

The Finnish PropTech Cluster, A Global Testbed For Innovation?

With nearly 17 companies per million inhabitants, Finland has the very best concentration of proptech companies in Europe, consistent with Unissu (a global platform for proptech). How has this small Nordic country with a community of just 5.5 million people advanced into a proptech cluster? 

As the birthplace of Nokia and global gaming leader Supercell, Finland may be a hub for innovation and a promised land for engineers and coders. Key institutions like Aalto University and VTT Technical research facility of Finland Ltd drive R&D and have strong programs that encourage commercialization of innovation. Business Finland, a government-funded organization, promotes Finnish businesses abroad, works to draw in investment to Finland, and finances innovation. 

In 2016, the Finnish government and key industry stakeholders lofted Kiradigi to stimulate continuous digitalization and modernization within the built environment. This project brought the government agents, municipal leaders, and industry companies together to drive change. During a larger country, involving all key decision-makers won't be possible, thanks to the sheer number of players involved. Between 2016 and 2018, Kiradigi channeled about 16 million Euros of public and personal funding into the world, including 130 different projects to stimulate innovation and make new businesses. Kiradigi will now advance as KiraHub, a non-profit funded by key industry organizations. The Platform of Trust was recently established to function a digital platform for sector companies to assist fulfill legal obligations associated with supplier evaluation and smart identification cards for site workers. 

Proptech Finland was launched in 2018 to make a community for proptech. Proptech Finland has forged strong connections within the Nordics and Europe and has been using them to foster links between startups, corporations, and investors in Finland and internationally. 

SLUSH, the world-renowned startup event in Helsinki, has carried attention to the startup scene and captivated global investors. 

Since 2016, RAKLI (the Finnish Association of Building Owners and Construction Clients), Proptech Finland, and therefore the Nordic Proptech Initiative have organized a proptech-focused side event, RecoTech, building further momentum for the movement. 

 

To succeed, Finnish startups need to continue focusing on solving real pain points and validating their value propositions

Most Finnish proptech companies are still small, with average revenues at almost 2 million Euros in 2017, but growing quickly with mean revenue CAGR in 2015-2017 of 63 percent. Sub-clusters in planning, design, and property management are emerging. Companies are using all the technologies typically related to proptech, but most often build their businesses around 3D design, BIM, augmented and computer game, cloud computing, and IoT. Key companies like Assetti in land portfolio management, Hyperin in retail land management, 720 Degrees in indoor air quality, and Leanheat in energy efficiency (recently acquired fully by Danfoss) are building growing positions in Finland, Europe, and beyond. Skilled players in building technology like private-equity-backed Fidelix in building automation and iLOQ in smart locks have developed into fast-growing, profitable businesses. As these and other companies have grown, private equity and risk capital funds are showing significantly more interest within the sector. 

In construction, innovative players are challenging the faction. For instance, Fira, based within the Helsinki region, has a completely new specialize in the customer experience and has revolutionized traditional plumbing projects with its two-week pipe renovations. Fira has invested automatically in smart services and tests innovations first within its own business before commercializing them. Jussi Aho, Fira’s CEO, said, “Digital innovations in construction got to correspond to the technical reality of the location. they need to be tested. I think that innovation is made through the interaction between different types of individuals. The solutions are found between us.” 

Admares, a born-global player from the Finnish West Coast, has developed the potential to mass-produce complete smart buildings during a factory setting. Admares is about to disrupt the world by moving the bulk of construction activities off-site, virtually eliminating the necessity for traditional construction labor and therefore the construction site, significantly reducing construction time, and improving quality. 

In spite of the various conditions that spark innovation and facilitate commercialization, startups in Finland face multiple barriers. Currently, no proptech-concentrated fund endures in Finland or the Nordic countries. Finns often shine at creating technically-advanced products, but struggle with marketing or building successful service businesses around them. Established players are slow to check innovations emerging from local startups. consistent with Proptech Finland founder, Mikael Långström, “even when companies have success piloting a startup’s services, significant delays often occur, because the processes for implementing innovation more broadly don't exist.” Some startups have had to prove their concepts with sales to leading players in other countries before Finnish companies would even consider purchasing their services. 

Nearly all recognize the vast potential of proptech. To succeed, Finnish startups got to continue that specialize in solving real pain points and validating their value propositions. They also need established players willing to check their products and services and to seek out committed investors. Perhaps Fira’s Jussi Aho said it best, “We are at a really exciting time now. land and construction are among the last sectors to be transformed by technology. there's nearly infinite potential for improvement. I'm unsure that we even understand the size of the challenge yet.”

Weekly Brief

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