Finnish Startup Community's political goals
Over the next 20 years, thousands and thousands of major startups will be built to solve global problems. We should mold Finland into an ideal home for these companies. This way, a large part of the value generated ends up in Finland and boosts our economic growth. And that's the only way to secure the future of our precious welfare society.
What startups need to grow in Finland
Startups need three things to grow in Finland and succeed internationally.
First, they need access to capital so that promising companies can scale and expand into global markets. Second, they need talent to ensure that skills shortages do not become a barrier to growth. Third, they need world-class expertise driven by research, innovation, and the commercialisation of new technologies.
1. More capital for Finland
Finland must attract more long-term domestic capital into innovative growth companies. This requires stronger tax incentives to encourage investment in startups, as well as reforms that allow charitable foundations and other non-profit organisations to invest in venture capital funds under the same tax treatment as direct investments in startups.
A new tax incentive to encourage investment in innovative growth companies
Finland’s tax system should encourage domestic capital to flow into innovative growth companies.
Why this change is needed
Domestic wealth is currently not being channelled into innovative startups at the scale required. This limits access to growth financing and slows the creation of new high-growth companies.
One example of a successful model is the United States’ Qualified Small Business Stock (QSBS) regime, which provides tax incentives for investments in privately held growth companies. Under certain conditions, capital gains from qualifying investments can be partially or fully exempt from taxation.
Empirical research shows that the QSBS regime increased the creation of new firms by as much as 12% in the industries covered by the scheme (Chen & Farre-Mensa, 2023).
What should be done
Finland should introduce a tax incentive that encourages investors to reinvest capital gains into innovative, scalable growth companies. The objective should be to increase the circulation of domestic capital into startups.
Venture capital funds, angel investors, private individuals, and institutional investors should benefit from the incentive when returns from previous investments are reinvested in new growth companies. This would help ensure that more domestic capital remains in Finland to finance the next generation of innovative businesses.
If the short-term fiscal cost of a QSBS-style system proves too high, alternative solutions should also be considered, such as reforming the current dividend tax relief regime for unlisted companies.
Remove tax barriers for charitable foundations investing in venture capital funds
Charitable foundations, universities, and other non-profit organisations should be able to invest in venture capital funds under the same tax treatment as direct investments in startups.
Why this change is needed
In Finland, venture capital investing is primarily conducted through limited partnership fund structures. This is the standard legal structure for venture capital funds investing in early-stage companies.
The current tax framework places charitable organisations in an inconsistent position. When they invest directly in startup companies, investment returns are generally not treated as taxable business income. However, when the same investment is made through a limited partnership venture capital fund, the returns may be classified as taxable business income solely because of the fund’s legal structure.
This discrepancy arises because limited partnerships are treated as pass-through business entities for tax purposes. Since venture capital funds are generally considered to conduct business activities, the income distributed through the fund may become taxable even when the underlying investor is a charitable organisation.
The outcome is difficult to justify. Two economically identical investments may receive different tax treatment simply because one is made directly and the other through a venture capital fund.
This reduces the attractiveness of venture capital funds for charitable organisations and limits the amount of long-term domestic capital available to Finnish startups. While large institutional investors can often work around the issue using feeder funds or profit-participating loan structures, these solutions are expensive, complex, and impractical for smaller foundations and other non-profit organisations.
As a result, the current system discourages fund-based startup investing, even though venture capital funds are often the most effective way to diversify risk and support early-stage companies.
What should be done
The tax treatment of investments made through limited partnership venture capital funds should be reformed so that income received by charitable organisations through a fund is taxed in the same way as equivalent income received through a direct investment.
In practice, this means investors should only be taxed on fund income where the corresponding income would also have been taxable if the investment had been made directly. If a direct investment in a startup would generate tax-exempt investment income for a charitable organisation, the same treatment should apply when the investment is made through a venture capital fund.
Rather than creating a narrow exemption for a single category of investors, the reform should be part of a broader modernisation of the tax framework governing limited partnership investment funds. A working group established by the Ministry of Finance has previously examined a pass-through taxation model under which both domestic and foreign investors would be taxed according to how the underlying investment would have been treated if held directly.
Such a reform would eliminate the current tax asymmetry between direct startup investments and investments made through venture capital funds. It would also reduce the need for costly parallel investment structures that are only accessible to the largest investors.
Ultimately, the reform would enable foundations, universities, and other charitable organisations to allocate more long-term domestic capital to Finnish venture capital funds, increasing the financing available for startups developing new technologies, expanding internationally, and creating growth in Finland.
2. Talent to build growth
Startups compete for talent globally. Finland must therefore ensure that highly skilled international professionals can relocate quickly and begin their lives here without unnecessary barriers. At the same time, employees should be able to share in the value they help create through a competitive employee stock option system.
Introduce cash refunds for R&D tax incentives for loss-making early-stage companies
Finland’s R&D tax incentive should also benefit companies that are not yet profitable.
Why this change is needed
Finland’s current R&D tax incentive is based on an enhanced tax deduction introduced in 2023, allowing companies to deduct more than their actual R&D expenditure from taxable profits. In practice, however, the scheme primarily benefits companies that are already generating taxable profits.
Loss-making companies receive no immediate benefit. While they may eventually utilise the deduction through tax loss carry-forwards, this does little to address the financing constraints faced by early-stage startups when R&D investments are actually being made.
For startups, the key challenge is often access to capital during the early stages of product development. The possibility of receiving a tax benefit years later, if and when the company becomes profitable, provides only a limited incentive to invest more in research and development today.
The challenge is particularly acute for companies developing breakthrough technologies, where commercial success may be many years away and remains highly uncertain. As a result, the current tax incentive often fails to encourage either companies or investors to increase R&D investment during the period when it is needed most.
Both the Government Institute for Economic Research (VATT) and the Research Institute of the Finnish Economy (ETLA) have concluded that Finland’s current R&D tax incentive is poorly suited to early-stage technology companies, despite these being the firms where financing constraints are often greatest and the need for R&D investment is highest.
What should be done
Finland should introduce a cash refund mechanism as part of its R&D tax incentive for loss-making companies.
The refund should correspond to the tax benefit the company would have received had it been profitable. This would ensure that early-stage companies also benefit from the incentive and receive additional funding precisely when R&D investments are being made.
If necessary, the scheme could be targeted specifically at early-stage and R&D-intensive companies, where the potential for technological breakthroughs and new innovations is greatest.
A substantial body of research shows that R&D tax incentives increase business investment in research and innovation. For example, a study examining the expansion of the UK’s SME R&D tax credit found that a one per cent reduction in the cost of R&D increased R&D investment by as much as 2.6 per cent. The reform also led to higher patenting activity and improved productivity. The study found that smaller companies respond particularly strongly to R&D tax incentives because they face tighter financing constraints than larger firms (Dechezleprêtre, Einiö, Martin, Nguyen & Van Reenen, 2016).
Reform the timing of employee stock option taxation
Finland is currently reforming the taxation of employee stock options so that taxation would take place when shares are sold rather than when options are exercised. The success of this reform will depend on its practical implementation.
Why this change is needed
Employee stock options are one of the most important tools startups have for attracting and retaining talented employees. They allow employees to share in the future success of the companies they help build. A clear and predictable tax framework would enable more Finns to benefit from startup success, strengthen domestic ownership, and improve Finland’s ability to recruit highly skilled professionals.
The key issue is the timing of taxation. In practice, there are two possible approaches: taxation when options are converted into shares, or taxation only when the shares are eventually sold and employees receive actual income.
Under Finland’s current system, taxation often occurs when options are exercised. Employees may therefore be taxed before receiving any cash proceeds, meaning they pay tax on unrealised gains that may never materialise.
This is particularly problematic because valuing startup shares at the time of exercise is inherently uncertain. Unlike listed companies, startups rarely have continuous market valuations, exposing employees to significant financial uncertainty before they have realised any economic benefit.
The problem becomes even more severe if the value of the shares subsequently declines. In such cases, employees may end up paying tax on gains that disappear before the shares are sold. A fair tax system should recognise these situations and avoid creating disproportionate tax risks for employees.
What should be done
Employee stock options should be taxed only when the underlying shares are sold and employees receive the proceeds. Taxation should apply to realised income rather than unrealised gains, making the system both fairer and economically more efficient.
As the current reform progresses, it is essential that the new system remains simple and practical for both employees and employers. It should not create an administratively burdensome reporting regime requiring annual declarations even when no taxable income has been realised.
Reporting obligations should therefore be limited to events that are relevant for taxation. Employees should report when options are exercised and when the resulting shares are sold. Requiring annual reporting solely to confirm whether shares have been sold would create unnecessary administrative costs and increase the risk of reporting errors for both employees and companies.
The legislation should also address situations where the value of shares falls after options have been exercised. One possible solution would be to allow capital losses arising from employee stock options to be offset against the employment income previously taxed on those same shares. Such a targeted mechanism would protect employees from disproportionate tax risks while remaining narrowly focused on genuine stock option cases.
The Government has already committed to reforming employee stock option taxation, but the success of the reform will depend on its detailed design. The final model must ensure that taxation genuinely occurs only upon realisation, remains simple and predictable for both employees and employers, and functions effectively in international corporate structures. It must also remain internationally competitive.
A well-designed stock option regime would encourage wider use of employee ownership, improve startups’ ability to recruit and retain talent, strengthen domestic ownership, and enhance the international competitiveness of Finland’s startup ecosystem.
3. Strong research, innovation and commercialisation
Finland’s greatest competitive advantage lies in its world-class research and highly skilled workforce. To translate these strengths into economic growth, research must lead to more successful companies. This requires a smoother pathway for international talent to relocate to Finland and stronger incentives for universities to commercialise research.
A two-week service promise for international talent
Highly skilled international professionals should be able to relocate to Finland and start both work and everyday life within two weeks.
Why this change is needed
Startups compete globally for highly skilled talent. Today, key relocation services—including residence permits, personal identity codes, digital identification, bank account opening, municipality registration, and arranging schooling or childcare for children—are often fragmented, slow, and difficult to navigate.
An uncertain and lengthy relocation process weakens Finland’s competitiveness in attracting international talent. It can directly influence whether highly skilled professionals choose Finland or another country.
Finland needs skilled international workers to support business growth and achieve its research and development ambitions. More than half of all R&D investment is spent on personnel, and reaching Finland’s national R&D targets will require tens of thousands of additional experts by 2030.
What should be done
Finland should introduce a two-week service guarantee for highly skilled international professionals and their families. Performance should be measured from the moment an application is submitted.
The service guarantee should cover the entire relocation process. Within two weeks, international professionals should be able to complete all essential administrative procedures required to begin working and establish their lives in Finland. This includes residence permit processing, obtaining a Finnish personal identity code, opening a bank account, accessing digital identification, registering a municipality of residence, and securing school or childcare places for accompanying children.
The identification process for international professionals should be streamlined, and digital identity solutions should be expanded. Public services should be delivered through a seamless, largely digital process with a single point of access.
The availability of English-language education should also be increased, and the application process for international families should be simplified. Children should be able to enter schools flexibly, even during the academic year.
A fast, predictable, and user-friendly relocation process would strengthen Finland’s attractiveness as a destination for investment, innovation, research, and high-growth companies.
Reform university funding to encourage research commercialisation
Finland’s university funding model should place greater emphasis on turning world-class research into new companies, jobs, and economic growth.
Why this change is needed
Finnish universities produce world-class research, but too little of it is successfully commercialised. In 2021, universities and university hospitals invested more than €1.7 billion in research and development, with universities accounting for approximately 81% of that investment.
The real value of this research depends on whether it generates new technologies, innovative companies, and high-productivity jobs. While Finnish legislation already recognises universities’ responsibility to create societal impact, research that remains in laboratories does not strengthen productivity, improve wellbeing, or generate new business.
Funding incentives strongly influence institutional priorities. Finland’s current university funding model primarily rewards degrees awarded, academic publications, and competitive research funding. These are important objectives, but they should be complemented by clear incentives to commercialise research.
Universities naturally focus on what they are measured and rewarded for. If commercialisation were included in the funding model, universities would have a much stronger incentive to help researchers transform scientific discoveries into globally competitive businesses.
Research-based spin-offs—companies established to commercialise technologies developed within universities and research institutes—have already produced some of Finland’s most successful technology companies, including Spinnova, Solar Foods, and ICEYE. Internationally, university spin-offs such as Google and Genentech demonstrate the enormous economic and societal value that research commercialisation can generate.
Research-based startups are particularly valuable because they build on long-term scientific work that private companies often lack the incentives or resources to undertake independently. Their impact extends well beyond exports, contributing to healthcare, clean technologies, productivity, and Finland’s long-term technological leadership.
Commercialisation practices also matter. Valuable research often fails to reach the market because technology transfer processes are slow, unclear, or structured in ways that discourage venture capital investment. Affordable laboratory and office facilities, access to research infrastructure, and professional commercialisation support can be decisive for early-stage technology companies.
According to VTT, its spin-off companies attracted 8.2% of all venture capital invested in Finnish growth companies between 2013 and 2022. This highlights the significant contribution that research-based startups can make to Finland’s innovation ecosystem. A similar assessment should be conducted across all Finnish universities and research organisations.
What should be done
Finland’s university funding model should include stronger incentives for research commercialisation. One practical approach would be to introduce a new performance indicator that rewards universities for creating high-quality research-based technology spin-offs.
The indicator should prioritise quality rather than quantity. It should consider factors such as whether a company successfully commercialises university-developed technology, attracts external venture capital, and demonstrates credible international growth potential.
Technology transfer practices should also be harmonised across higher education institutions. Researchers, founding teams, and investors need clear and predictable rules governing the transfer of intellectual property into new companies. Transparent, commercially reasonable, and internationally competitive licensing practices would improve startups’ ability to raise funding and scale globally.
Universities should provide stronger support for research-based startups by offering affordable office and laboratory space, access to research infrastructure, and professional commercialisation expertise during the earliest stages of company development.
Researchers themselves should also be rewarded for commercialisation. Bringing research to market should strengthen, rather than hinder, academic career progression. When both university funding and academic career incentives recognise commercialisation, more scientific breakthroughs are likely to become successful businesses.
Finland has the opportunity to build world-leading technology companies on the foundation of world-class research. Achieving this requires a funding model and institutional practices that consistently encourage commercialisation, entrepreneurship, and long-term economic growth.
The Finnish startup and growth company ecosystem is going good – but “good” is not enough in this global competition. We have to be the best in the world because in this game, the best get the best talents.
