EU research funds should go to venture capital firms, not companies

“Governments should not be passing funding to companies – governments should be sending money to venture capital firms. There needs to be an entrepreneurial stake in investment.”

This was the message from Risto Siilasmaa, Chairman and interim CEO of Nokia, as he called for a greater push towards public-private partnering in Europe at the European Union’s Innovation Convention in Brussels this week.

Siilasmaa, a business angel and entrepreneur who has invested in some 40 technology startups, said that Europe is doing too much at government and civil service level.

While public funding is essential as a catalyst, civil servants aren’t as adept as venture capitalists when it comes to picking winners, he says. Venture capital firms should be competing among themselves for EU funding, as route to ensuring the quality of the start-ups that get public funding.

Pick the team, not the idea

When asked how to pick winners, Siilasmaa said, “It’s best to pick the team over the idea.”  If the idea is not great, the right team will be capable of getting more out of it.

Siilasmaa also called for a lifting of the legislative burden the EU inflicts on companies. “In Finland, there are 182,000 pages of EU regulation,” he noted, and the Parliament and the Commission are continuing to churn out more. “Who can read all of that, let alone understand everything?” Siilasmaa asked.

Europe also needs action to make sure it does not fall behind in the global innovation rankings. Becoming, “an outdoor museum for Chinese tourists,” was a scenario no one wants to envisage, he said.

Having a long-term vision also counts, and helps create a different perspective. For example, Masayoshi Son, the founder of the mobile phone services specialist Softbank, recently laid out a 300-year strategy for his company. “When you look far enough ahead, the everyday pains of today become pretty meaningless,” Siilasmaa said.

Nokia’s slide in the phone market

Siilasmaa also dispensed advice for companies in a later phase of the business cycle. Nokia, once the undisputed leader of the mobile market, has suffered a profound fall from pole position. Last year, its mobile phone division was sold to Microsoft.

“The world changed a lot around Nokia. Hardware used to be everything. Nokia did the right thing for too long,” he said. “With hardware, you were the king, the software maker was not even a prince.”

Now, however, the hardware is now commoditised and the software platform is the starting point for phone manufacturers, Siilasmaa observed.

It’s hard to see the signs of a failing enterprise. At the beginning of Nokia’s slump, “Revenue was going well even though competitiveness was slipping,” said Siilasmaa.

The answer to this form of blindness? “You need to be most paranoid when you’re doing well.”