This week concludes my last days at Innovation Norway. Officially, I am part of the dearly departed this Thursday. I will still be contributing to several companies in that region of the world but not as an Innovation Norway employee.
A little over a month ago, I sent out an email to the colleagues and companies that I worked with over the past two and a half years, and among the many responses that I received, one question resonated with me:
What advice would you give to Norwegian (and Scandinavian) entrepreneurs who are trying to start a business?
It’s a great question. So many of the entrepreneurs that I know in Norway struggle with how to approach their market. It is a complex question with a lot of possible answers that I will try to boil down to something digestible.
Accept that your market (Norway and the rest of Scandinavia) will mislead you.
On some basic level, most of the people in Norway should realize that they live in a bit of an economic bubble that distorts their view of the rest of the world. This distortion originates from the fact that Scandinavian companies and consumers are biased toward local products. If given a choice between an inferior, more expensive local product and a superior cheaper product, most will choose the local product. Part of this stems from the fact that Norwegian is not a common language globally, and few international companies focus on Scandinavia as an early target market. This leaves most consumers finding local products before they find global products and the result is that it’s easier to pursue local goods and services. But there is more to it than that. There is a great deal of pride in Norway about what is built in Norway. People from that region want to support local products.
So you might ask…what is wrong with that? The answer is nothing, if you understand that what you are seeing is not representative of global demand for products.
I visited MESH (an incubator in Oslo) about a half year back, and a young entrepreneur approached me with an application that he felt should drive a great deal of investment. He said to me, “I have 4,000 users, and that demands a high valuation and proves that it has the potential to go global!” The sad truth is that it means very little on an international scale. 4,000 users move the needle in Norway, with a population of 5.1 million people, but it is not representative of the sensibilities and demand of a global market.
Go where the money is.
One of the most interesting and disturbing aspects of working in Innovation Norway is the fact that the vast majority of the companies who walk in and ask for money are in for a tough education. Innovation Norway is not set up to financially support all of the fledgling businesses in Norway, let alone the ones that it has already funded. Many of the businesses that I have seen live from one grant to the next, and find themselves perpetually starved for capital. Once you have started your business, the best advice anyone can give you is to figure out where in the world funding is available for your product or service, and go there to raise money. Many markets may not be funded in your region, outside of initial seed capital from the government.
Furthermore, the venture funds are most likely too small for most companies. Many of the larger investment funds receive a significant portion of their capital from the government. This is the government’s way of injecting capital into the system to enable and fund innovation. The problem is that it is like putting a Band-Aid on a much bigger problem. The investment community cannot raise sufficient capital on its own from local (government) sources without such intervention. This means that the pool of institutional investors is far too small for many industries.
You should also understand that competition is good when you are raising money. If you only have one potential source of capital, that source can make all sorts of demands on you, and there is little you can do about it. Find the market that is funding what you are doing, and drum up as much interest as possible. Many of you will find this a difficult suggestion, as most investors want you to live where they fund companies. This has to do with the fact that most of them do not want to travel for board meetings. Regardless….this is a price for raising money that many of you will have to pay.
Find help from people who operate in your market…rather than simply live in your neighborhood.
Many companies bring on advisors and board members from a local pool of people. This can work if you live in an area where there is a large pool of highly qualified experts in your chosen field. It does not work when your pool is more limited. If I were looking for experts in fishing, shipping or energy, Norway is one of the first places that I would look. However, that would not be the case if I needed an expert in telecommunications, because the pool of people simply is not big enough.
Look at the regions of the world that have the best talent pool for what you are doing, and draw from that pool. To the extent you can, bring “known” people into your company. Almost all of my start-ups have been drawn from the same talented groups of people. However, I do reach outside of that when I need experience that my immediate team does not offer. Working with people who are simply on-hand often leads to hardship. When I look back on my own failed endeavors, I can usually trace back the problems to the people who were involved (user experience designers who did not have the drive or talent to design a product, or marketing people who did not know how to drive a users attention). And yes…on occasion, I was not the right fit for what I was trying to do. Surround yourself with the right people, and you are more likely to have a successful outcome.
Learn from failure rather than hide from it.
This is the hardest piece of advice for people to follow in Norway. One of the advantages of living in the Silicon Valley is that it has a culture that accepts failure. The general idea is that if you are going to fail, fail fast. And if you fail, learn what you can from the experience. Anyone who tells to you that success is not driven from the lessons of past failures is not being honest with you. Embrace failure for what it is…a learning experience.
With that said, it is particularly hard to follow this advice in Norway because the culture is not particularly accepting of failure.
I am of the opinion that when you live in a relatively small society, where everyone knows what is happening with…well…everyone; there is a natural desire to avoid embarrassment or condemnation. I once asked a friend in Tromso what he thinks drives this desire to hide failures, and he responded by telling me, “Norwegian’s are not empathetic about failure…they are critical of it”. I do not know if this is simply one person’s opinion, but I do know that tolerance of mistakes does come from empathy.
So my advice is simple. Help people to learn from their mistakes, as you would have them do with you. Embrace failure by saying…this was an expensive lesson that I know how to avoid in the future.
As many of you are on vacation or are returning from vacation, I hope that you will find my words comforting, and that they will help you grow with the opportunities you are pursuing.
I wish you all every success.