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Finnish government backs tech-city development in Oulu

Finland's government wants the city of Oulu to become a world leading destination for IT startups

The Finnish government’s Regional Capital Investment Strategy (RCIS) is transforming the northern university city of Oulu into a leading tech startup hub.

ICT-firms, along with other investor groups, are being offered attractive tax breaks and other incentives to both locate and expand in Oulu.

RCIS seeks to create a dynamic mix of native and foreign investment, including established international corporate names. The end-goal is to put Oulu firmly on the world innovation map, particularly in the areas of advanced ICT, digitalisation and wireless technologies.

The sub-Arctic city of Oulu was little more than a sleepy urban backwater before the advent of Nokia Corporation’s arrival in the mid-1980s.

With 201,124 residents, Oulu is the most populated city in northern Finland. Located 127 miles (205km) south of the Arctic Circle, The Finnish government recognised that to position Oulu as a leading tech city, efficient transport and communications would be fundamental to any strategic development plan. The state-backed capital investment programmes conducted since 2005 have enabled Oulu Airport to grow and become the country’s second busiest air-station after Helsinki Vantaa.

“For Oulu, the government’s investment policy stands fully behind the tech city concept. In order to support Oulu, and other Finnish cities building tech reputations, we must ensure that Finland continues to be an open and welcoming location for entrepreneurs, their ideas, all startups and investors too,” said Kai Mykkänen, Finland’s Minister of Foreign Trade and Development.

Oulu has experienced both highs and lows since the early 1990s. The collapse of the Soviet Union in 1991 hurt technology output and exports. The Soviet Union had been Finland’s biggest export market for goods and services up to then.

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More recently, the demise of Nokia as a global mobile phones giant left its mark. The city’s tech economy was seriously wounded when Nokia began to haemorrhage staff and closed research and development (R&D) units in Oulu after 2004.

The software architecture of the first Nokia GSM phones was designed in Oulu. The city, in just five years, effectively became the centre of excellence for Nokia’s R&D projects as the company emerged from virtual anonymity to become a global major player and leading brand in this market segment.

Nokia’s decision to locate a large chunk of its R&D operations in Oulu was far from accidental. The City of Oulu had set the wheels of progress in motion in 1984 when it commissioned consulting firm Hansacon Oy to present a strategic Action Plan offering solutions and best practice as to how the city could broaden its technology-base by luring a far greater number of R&D related activities.

Nokia’s presence lifted the local ICT-subcontracting market, and created new partners for the company and its subsidiaries.

“Nokia brought a lot of knowledge to the city. It diversified the ICT sector into many areas: financial software; cleantech, the circular economy; and health and life sciences. It helped to lay the foundation for the Northern tech hub we are building here now,” said Juha Ala-Mursula, the executive director of BusinessOulu.

Optimism around the city’s tech-hub future

While the post-Nokia era did slow Oulu’s growth and ability to attract major investment for a time, the RCIS has kick-started activity and optimism around the city’s tech-hub future. There have also been significant international arrivals such as China’s Spreadtrum and Altair/Sony. Spreadtrum is developing advanced LTE modems in Oulu. For its part, Altair/Sony has opened an R&D facility to develop core LTE IoT technology in Oulu.

Strengthening Oulu’s foreign direct investment appeal as a leading Nordic tech city is now a very high priority for BusinessOulu going forward, said Ala-Mursula.

BusinessOulu, which is tasked with implementing the City of Oulu’s industry policies and supporting the development of growth-ambitious tech firms, is seeing a surge in ICT-partnerships, capital funding projects and acquisition activity, from both indigenous and foreign players.

Oulu’s ICT-focused enterprises are on track to raise a record amount of development capital in 2018, based on venture capital funding activity in January-February. Cerenion Oy is a case in point.

The company, which is developing groundbreaking brain monitoring technology based on advanced machine learning algorithms and artificial intelligence, saw increased capital funding by Butterfly Ventures and the Helsinki-based in February.

BusinessOulu agency was also involved in a new venture that established a Finnish-US Cyber Security Research Institute in Oulu in 2017. The project is backed by the US National Science Foundation’s ‘Industry University Cooperative Research Center’ programme and Finland’s Digital, Internet, Materials & Engineering Co-Creation (DIMECC) organisation.

Cyber Trust Programme

The Finnish-US collaboration follows in the wake of the success of the DIMECC hightech ecosystem’s Cyber Trust Programme (CTP). Finland’s leading ICT and technology software players, including Nokia, F-Secure and Bittium, assembled under the CTP cooperation umbrella to develop advanced technological solutions to improve cyber security.

“Oulu is the ideal choice for this internationally important cyber institute. This is a model example of what can be accomplished with the most effective innovation platform in Europe, and when public funding is used to boost cooperation with cutting-edge companies and top universities,” said DIMECC’s CEO Harri Kulmala.

Corporate “matchmaking” events, such as the influential Polar Bear Pitching (PBP) conference, are adding a more forceful dimension in the funding of ICT-startups in Oulu.

The most recent PBP, held in February, comprised an Oulu Investor Day during which around 100 one-on-one meetings were organised between investors and companies.

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