Startups in the Nordics
Artem Petrenko, Director for Business Development at Sigma Software, is working on the Nordics market with special outlook towards startup partnering. His experience and vision of the market gives him a prospect of the risks and possible ways around them. Sigma Software began software development for startups in 2006, and Artem took part in the cultivation of this new expertise.
Artem, can you please tell us about your experience in the Nordics startup market, and what is the secret of startup successful momentum in these economies?
In 2006, when we started activity in Sweden by joining Sigma Group, we’ve already had significant experience boosting startups in the US market and an understanding of the startup lifecycle and culture. What I’ve found with Nordics was a unique and fruitful startup ecosystem supported by the government. There are many possibilities with incubators, angel investors, VCs, and other players. Startup incubators are usually connected with investment funds (government or public) and can be industry-specific (such as Healthcare, Finance, Media, IoT) or all-purpose. Incubators are great hubs to start with, they help startup originators shape the ideas, find investments, advise on operations, and much more.
The current situation is rosy, but what will tomorrow bring? Do you see any threats for the existing successful startup environment in the Nordics?
Yes, Nordic startups have great access to the financial capital, however, the threat I see is an oncoming lack of human capital. Every startup wants to find an in-house employee to gain an engaged and committed worker. Startups normally motivate key personal with shares options in addition to a competitive salary. However, this approach raises a question of technical excellence, required skills, and efficiency of delivery like in all other companies. Experience shows that finding qualified and efficient people is a difficult task and eventually, the problem of resources crops up.
The demand for computer professionals is impressive and is expected to grow. According to the European Commission, Europe could face a shortage of up to 900,000 skilled ICT workers by 2020. Moreover, even if required specialists are available on the market and are ready to join another great startup, there still exists a recruitment curve, which can be quite lengthy, up to 6 months.
One of the ways to quickly respond to the need to increase or decrease a team, for example to deliver MVP, is to engage a consulting company onsite which may have available specialists on the bench However, in this case, a startup needs to compete with such giants as Volvo, IKEA, Ericsson, Scania, and so forth.
Okay, but what do you think would be a possible solution?
There is not just a possible solution, but an absolutely workable solution, and we have proven it. Of course, I’m talking about nearshoring and expansion to East European countries. The market of software talents is booming there. Let’s take, for example, Ukraine, during last 5 years the market doubled in number of consultants and right now totals somewhere around 100,000 employees. Recent changes of the EU legislation make it even easier to travel from Ukraine, since no visa is required for visiting Schengen zone. Moreover, if we take travel time, it takes 2.5 hours to fly from Stockholm to Kiev, with flights every day, it’s actually faster than to travel from Stockholm to Gothenburg by train.
That’s right, but every startup needs best efforts from specialists, who work for it, to succeed. How can a founder guarantee the same performance and dedication from an external vendor’s team?
It’s a very good question! The company must have a culture of relations with startups as well as an understanding of what’s important. Fast MVP delivery to the market, quick response to feedback from users, and reasonable quality at start. And of course, it’s all about communications. If we take a great team that can deliver code perfectly, but cannot communicate, make assumptions, and take the responsibility, we would get much worse results compared to an average skilled team with high a communication culture. Agility followed by reasonable routines (processes) are invaluable with constantly changing requirements, demands, and ideas.
In line with this approach, we advocate the philosophy that founders need to focus on business aspects of their idea, while professional consulting companies should take the responsibility to find the best technical solution and implement it in the most efficient way possible: assign suitable resources, choose a reasonable way of work and make the magic to deliver. Meanwhile founders will have an opportunity to handle business issues, promotion, attract investments, and so forth. As an add-on to the regular graphic design, development and testing services, we have even launched a specific CTO-as-a-Service package according to this philosophy.
So Sigma Software provides not just individual developers, but complete teams?
Of course. For efficient Agile development, engineers’ teams usually have a SCRUM Master, who acts as a business analyst and/or a proxy product owner. This person helps the customer to set up processes, communicate with the team, and organizes internal development procedures. We, however, may join at any stage of the startup evolution, starting with promo materials creation to attract the investments and finishing with the load testing with thousands of users. This requires a completely different team setup and we know how to make this work.
What are the most distinguished startups you have had a chance to deal with?
One of the successful startups we worked with is Vidible, a leading cross-screen video management and exchange technology platform. Our team began development for this startup in 2012 with a group of 5 engineers and a Product Owner at the customer side. The idea of the startup was to develop a platform to allow buyers and sellers of digital media to manage and monetize video content across all devices. The developed platform was high performance (able to process 100K transactions per second) and managed to hit the increasing demand for video content tools and resources. In 2014, the startup was purchased by AOL for a reported sum of around $50 million.
In general, we worked with over 50 startups worldwide and with 10+ in the Nordics. We have experience cooperating with serial entrepreneurs as well as with VC funds that require confidence in technical aspects.
What is your advice to people who would like to create their own startup?
First, one needs to understand what a startup is. A startup is a possibility to quickly test hypotheses that are not yet present at the market. Try and win, or lose, and challenge the idea, change direction, approach, and concept and try again and again. This is a possibility to test your hypothesis for validity in the market and receive feedback. Classic PDCA (Plan-do-check-action) schema. If you can do this quickly – and with a solid technology partner it can be done much faster – then you can attain value as a startup.