Above: The Supercell team
Question: Is the Finnish economic environment friendly to startups?
Paananen: Yes, very. We have a great ecosystem for startups here these days. It’s easy to set up a company. We have a very competitive corporate tax rate. Starting from next year it’s going to be only 20 percent. It’s one of the lowest in Europe. It’s super competitive from that perspective. It’s easy to get people from abroad to move here. The bureaucracy is very low in that respect. And the environment is a very safe environment to live in. We have the best school system in the world. Finland has been on the top of those studies for the last couple of years. There are a lot of benefits on that side.
One huge benefit is the public funding that we get from the government. How we started Supercell is that we formed a group and invested a few hundred thousand euros from the six of us into the company. Then we got a loan from the government for 400,000 euros or so. Without that loan, Supercell probably wouldn’t exist. They give these types of loans to entrepreneurs. Even if you fail, you don’t need to file personal bankruptcy. It’s a great model. On top of those loans, later on you get subsidies. We’ve gotten a couple of million in subsidies along the way, which have been quite helpful. It’s also quite easy to raise money from abroad into Finland. Leading venture capitalists like Accel, Index, Atomico, and others have invested in Finland.
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One of the personal reasons I have, outside of Supercell, I truly believe that one day the Helsinki area can become a gaming hub – the Silicon Valley of Europe, if you want to call it that. A lot of other areas are trying to do the same, like Berlin and London and others, but I do think we have a great environment. We have a shot at it, at least on the gaming side. There are a lot of great gaming companies here.
Above: Supercell office posters.
Question: You mentioned the subsidies that you got after the initial loan. Could you elaborate on how that works?
Paananen: Basically, the government, from its organizations, can give two types of funding. There are loans. They can fund us with up to 70 percent of the total cost of a project. Those loans, eventually you need to pay them back, but they have a very low interest rate – like one percent, and maybe you have to pay them back in five or seven years’ time.
Then you have these subsidies, which you don’t have to pay back. At best guess, they might subsidize 50 percent of whatever expenses you have. We also got that type of funding very early on.
Basically, if you think from an investor’s perspective, or a venture capitalist’s perspective, it’s a beautiful thing. Say that I’m a VC and I invest one million euros. In relation to that one million, I already know that the company will get an additional one million from the government. That’s non-diluting money, so it won’t dilute my ownership stake. The public funding makes Finland a really attractive investment landscape.
Q: I understand that this is very good for you, but I’m curious about what it means for the Finnish taxpayer. [Laughs]
Paananen: This year alone, Supercell—I think the founders and the company together are paying something like [€270 million] in taxes. They spent maybe five or six million on us early on. So I think it’s a good investment from the Finnish government’s perspective. Somebody calculated that Supercell alone returns every single penny that the government has ever invested in any startup combined. Just with the success of Supercell, we’re paying it all back and more.
This country needs to reinvent itself after the collapse of Nokia. We need new companies. It won’t be enough to just have Rovio and Supercell. We need more and more. Everybody here realizes that. It’s a long-term investment from the government’s point of view.
Above: The big sign at company HQ.
Question: What’s your view of the game industry as a whole? Are you hoping that it becomes much more like Supercell? Do you see the large publishers losing influence?
Paananen: I wish that, in the games industry overall, more power would shift to the creative people. When I grew up, I played games like the old LucasArts games, or SimCity, all these great games. They weren’t made by big teams. Teams were quite small then. They were limited by disc space and all that stuff, but still—Because you couldn’t really impress people with graphics, there was more focus on gameplay. They were just fun. There were all these legendary creative geniuses working on games at the time. I would love to see the industry going back to that golden age of games, where small teams full of creative energy and passion would have more control.
It feels like the marketing people took over. For some reason, games started to use movies as their role models. All of a sudden you had to make a massive investment in a game. It was all about the first week’s sales, exactly like in the movies. Companies tried to create huge buzz before a launch, exactly like in the movies. I’m not sure it’s the right model for games.
Above: Supercell’s HQ is in an old Nokia research building.
Question: What do you think is the key factor behind innovation, when you think about the development of new games?
Paananen: It comes down to two things. One, give all the power to your creative geniuses. Organize your company so that you put the creative people front and center. Give them all the freedom possible. And then give them the permission to fail. You have eliminate the fear of failure completely, because if you don’t, those guys won’t take risks. Without risks, there’s no innovation. Without innovation, there’s no hit games. You need to create a friendly, warm environment for those creative folks.
Question: Is there a rule or any criteria for deciding what’s a success and what’s a failure?
Paananen: Yes, there is. Sometimes people misunderstand our culture. Some people think that this is just a culture where teams can do whatever they want and results don’t matter. Nothing could be further from the truth. Before the teams start to work on something, we do spend quite a bit of time with them to pre-define the metric goals that they need to reach when they go to beta. We’re really strict about those goals. If they don’t reach those goals, we’ll kill the game. That’s it.
I won’t specify those goals, but they mostly have to do with retention and engagement in the game. How many people come back after 30 days? How many times do they play per day? And so on. We define those very carefully. That’s the agreement between the team and the company. So long as the team reaches those goals, we’ll proceed to launch. If they don’t, we’ll kill it.
Because of the small size of the teams, Supercell can be a relatively high-pressure environment to work on games. It’s not for everyone. You need to be proactive and very passionate about games and what you do. If you’re not, you won’t do well here. But for the right kind of people, it seems to be quite a nice place to work.