To make a profit out of your investment, you need a bigger problem

Finland is a land of engineers and we can create some great products. By great I mean they include plenty of impressive features. So many brilliant features that startup founders are out of breath after listing them all in their pitch. The problem? They tend to not care whether the problem they’re trying to solve is big enough globally.

I’ll give you an example: there are several Finnish startups who are developing an “AirBnb for parking space”, meaning that anyone can rent out their parking spot for someone else when they do not need it. Some of these companies are developing the product by piloting it in Finnish towns. Yet in most Finnish towns finding a parking space really isn’t that hard nor do most Finns live in places where people would be willing to pay for parking in their spot. However, there are places like Mexico City (with four times the population of Finland), where people can spend an hour every morning looking for a parking spot, while others pay for parking as part of their rent whether they need it or not. There are plenty of cities like Mexico City, where these startups would solve a real problem.

Finland, Finland, Finland, the country where I quite want to be

Despite all this, Finnish startups often insist on doing research in Finland, piloting their product in Finland, doing marketing in Finland first. When the product with all its fine features is finally ready, and it’s been piloted in Finland, rolled out in Finland (you get the drift)… that’s when most startups start looking at other markets. But the issue is, if your greatest potential is in, say, Mexico and you do your research in Finland, it’s a bit like testing women’s products on men: they both need shirts but they appreciate different things.

If you want to make a substantial success out of your investment, you need to find startups that solve globally significant problems. It doesn’t need to be climate change or world hunger, but it needs to be a real, everyday problem that enough people are prepared to pay for, like having a parking spot close to work.

How do I make sure there’s potential?

By turning the process upside down. Before asking startups where they plan on finding customers who need the product they’ve spent a lot of time and (your) money on developing, have them figure out what the problem is they are really trying to solve first. Then, they should find out where the problem is the greatest, and start talking to people in that market as early in the development process as possible. That way, you know exactly what your best customers want and need and, when the product is ready for its first pilots, you know exactly who to talk to. When you’re ready for a launch, you’ll not only know your target market and your customers, you’ll also know there definitely is a customer base large enough on a global scale to justify spending the time and the money in developing a killer product.

If more pitches and investment negotiations were focused on discussing the size and significance of the problem startups are solving, we’d be heading in the right direction. A tip to all startupers: the best pitch ever would be one where you would not only show the size of the problem (not just the market) but also where it is the greatest and how you’re planning on solving it having considered the needs of your customers in these markets.

If you’ve already developed the product, it might not be too late! But you should find out the best markets for products as soon as possible using data, pilot your product there with potential future customers and be ready to make changes to your product, even if it means stripping features. The team needs to be open to both an unexpected market choice and product development.

What’s our role in all this?

We’ve partnered with FiBAN to drive a change: we want more Finnish startups to be born global and to help companies find a global angle to their product. It’s important for us to support sustainable investments that underpin real, global problems and are therefore more profitable for investors, startups and the society. Our job is not only to question your market choice and product-market-fit, but also to support startups and investors to scale up as quickly and sustainably as possible. We hope to do this in close cooperation with FiBAN members and partners as well as their startups. I, for one, am looking forward to bigger problems!

Salla Hänninen,

CEO at Palava Global

salla@palava.global

About the author

Salla is an unusual, and self-declared, hybrid of a linguist and an economist (MSc in Intercultural Communication for Business and the Professions, University of Warwick) with a professional background in journalism, training, international PR & marketing, and internationalisation consulting. She founded the first version of Palava after returning from the UK in 2014, yet its current version, Palava Global, was founded by Salla and Ilkka Lavas in 2018. Palava has grown from a one-woman operation into a much wider mission to make sure Finland’s GDP is on par with its Human Capital Index score.