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HomeNordic Markets…But is bigger better? Well, ‘it depends’ would be my answer. Maybe an...

…But is bigger better? Well, ‘it depends’ would be my answer. Maybe an obvious and easy answer but let me elaborate a bit more on why ‘it depends’.

In my previous articles in the Nordic Fintech Magazine (and before that the Copenhagen Fintech Magazine) I have written about the strength of the Danish and Nordic fintech ecosystem. Obviously, my argument would be, that bigger is not always better. The Nordic region being a region of approx. 27 million people – small region, small countries, and small markets – that is a fact. Not much we can do about that.

Opinion piece from Thomas Krogh Jensen, CEO, Copenhagen Fintech, Original brought in the Nordic Fintech Magazine fall Edition 2022.

Yes and no! 

Despite the fact, that Nordic countries and Nordic founders have continuously produced some of the most valuable (financial) technology companies and continues to punch well above their weight, the question keeps popping up. How come bigger is better? If at all? 

Seize matters in terms of… 

  • Jobs created in fintech startups. In Denmark alone, fintech have created more than 4.000 jobs during the last five years. Obviously, that comes with a lot of societal benefits. The biggest being the growth in GDP* 
  • More fast-growing startups are attracting foreign venture capital investments enabling the founders to scale their solutions beyond the Nordics. This is how the flywheel gets started.
  • Attracting talent to the region. With more fast growing (fin)tech companies, we see amazing global talent seeking opportunities in the Nordic region thus making it a more attractive place to settle.  
  • Many startups – in fintech and tech in general – are quite depended on big international/global corporates that they can partner with/sell to. Startups offer new technology and business models, and the corporates offer scale and a potential future investment or acquisition. The likelihood of that happening increases when more global corporates start setting up an office or innovation lab in the region to scout for relevant solutions. That again creates growth and new jobs.  
  • Sustainable (not only green, but a much broader definition of sustainability) innovation is at the core of Nordic fintech solutions. Great news, but it only matters if it scales to impact the global society at large. If not, who benefits beyond the very few? 
  • Impact. The keywords of fintech are democratization (low cost and availability), transparency and inclusion. What is not to like if that is scaled? Not trying to put the Nordics on a pedestal, but values matter, and I think we have something to offer to the world. 

“To really make a difference, Danish and Nordic fintech founders and investors financing their journey really need to think about scale and global impact from the beginning.”

Thomas Krogh Jensen, CEO, Copenhagen Fintech

Copenhagen Fintech has been working for the last five years to position the Nordic region as not only an importer of (financial) technology, but also an exporter. Not only of technology, but also of solutions built on values that are aligned with our tradition of equality, democracy, transparency, and fairness. We are not a region of people that appreciates authority and hierocracy. We like flat structures and that everyone gets a say. Also, to the point when it sometimes slows us down – but maybe that is a good thing? Sometimes we need to slow down to then go fast.  

But I acknowledge that there is also another side of the story. Our restless pursuit of growth and scale is not always better. Technology makes it so much easier to reach millions. ‘Bigger’ is only good when it also translates into ‘better’. We have an enormous responsibility as ecosystem builders, founders, investors, and employees. The most important question you can ask yourself is: “am I fundamentally making the world a better place by launching (or scaling?) this solution”? Does the ecosystem accelerate more responsible digital solutions or the opposite? Do I as an investor back the most impactful solutions that solves important problems for society? Does my money create growth and value for society? AND at the same time also a great return? As an employee am I contributing to building products that makes the world a better place?  

Recommended for you: Get your copy of the Nordic Fintech Magazine Fall Edition 2022

So, seize (and profit) is not always good and relentless pursuit of scale (and profit) is never good unless your product or service makes a positive difference for those impacted by it. To really make a difference, Danish and Nordic fintech founders and investors financing their journey really need to think about scale and global impact from the beginning. We need to build an international mindset right from the start. We need to be ambitious on our own behalf and on the planet – both need it badly.  

That is also why we – Copenhagen Fintech – are proud to have facilitated one of the first dedicated specialized fintech venture funds in the Nordics. Strong institutional investors (that care about societal impact and sustainability) have backed the venture and the first investments have already been made. The aim is clear – both profit and positive impact. We are convinced that both can be achieved. So, if you are an early-stage Nordic fintech founder, please reach out. We are ready to learn from what you are doing.  

But does it really matter? 

Sometimes I also get the question if the venture model doesn’t work counter to creating impact and making the world a better place. I don’t think so. If done right. Venture puts yours and my money to work in a quite a risky environment. Startups. We all know they fail, but we also know that some – the very few – grow and becomes highly valuable – in many different aspects. Yes, it sometimes becomes too much when we talk about unicorns, valuations, and enormous exits. Making very few even more rich. But it also has the potential to change the world. Just like (as one of several examples) Chainalysis is doing it.  

Chainalysis was built on a ‘global-first’ mentality, initially located not only in its first real hub Copenhagen, but also in San Francisco and London. Chainalysis have achieved scale and impact in record time. This is done through the provision of data and services to law enforcement agencies, regulators, and businesses in over 70 countries, powering investigation, compliance, and risk management tools that have been used to solve some of the world’s most high-profile cyber-criminal cases. 

When asked how Copenhagen Fintech played a role in Chainalysis’ success, CEO and co-founder Michael Gronager says: “Copenhagen Fintech has a special place in Chainalysis’ history since they provided us with access to a network where technology was able to thrive. We value Copenhagen Fintech’s specific environment that felt like an incubator where valuable introductions were made, and strong relationships blossomed. For example, Copenhagen Fintech made introductions that are now the cornerstone of Chainalysis’ customer base”. 

Recommended for you: Get your copy of the Nordic Fintech Magazine Fall Edition 2022

Another example of scale and impact going hand in hand is Singlife and Matter. Singlife with Aviva, a Singaporean insurance firm and valued Copenhagen Fintech partner, joined forces with Matter back in April 2022. Despite already being an established and major player in the Singaporean market, Singlife was just starting out their ESG journey and therefore facing increasing pressure from regulators and clients in terms of a more sustainable investment product policy.  

This is where Matter stepped in. Through the partnership, Singlife gets help with initial portfolio analysis, whilst the Matter platform is also available to its employees so that they can make more informed investment decisions, and over time report more information to their clients. 

The conclusion? 

The conclusion to the initial question? Not sure. It’s difficult and it depends. What do you think? Would love to hear your reflection.  

For my part, I believe that working on societal impact from the early stages is the most rewarding. Sic Parvis Magna – “greatness, from small beginnings”. The Nordics are – in my humble opinion – combining the best of two worlds. Small great nations with huge impact!