When talking about technologies or startups, Stockholm might not be the first place that comes to your mind. However, Sweden, especially its capital, Stockholm, have outpaced other European nations with a mix of unique cultural traditions, visionary tech leaders, globally oriented startups and smart government policies.
The Nordic tech scene has continued to grow stronger. Looking back from 2013 to 2017, Finland and Sweden have taken the first and second place in European venture capital (VC) investments. The new tech hubs like Stockholm has emerged as the international centre for technologies and innovations. With Sweden’s eastern neighbor Finland is struggling to kickstart its startup industry, the Nordic region, representing only 0.3 percent of the world’s population, makes up for 33 percent of the planet’s billion dollar exits.
With companies like IKEA, Spotify, Skype, Ericsson, H&M, Electrolux and Volvo, and tech leaders like Niklas Zennström (Skype), Martin Lorentzon (Spotify) and Daniel Ek (µTorrent and Spotify), Sweden cultivated a batch of most recognizable global brands.
During the past several years, Stockholm has produced the most unicorns, i.e. billion-dollar startups, per capita in the world after Silicon Valley. In 2014 the city took in 15 percent of all foreign investment in the European tech sector. A Google-funded report from 2014 showed that there are 22,000 technology companies in Stockholm, and 18 percent of the city’s workforce are employed in technology-related roles.
According to the data from The Nordic Web & Invest Stockholm in 2016, over $1,4 billion was invested in the tech companies located in Stockholm, which is a $500 million increase compared to 2015, and a 7X increase in just 4 years. Meanwhile, there was a total of $1,75 billion in exit value among Stockholm-based tech companies within one year.
Since the acquisition of Skype by eBay in 2005 for $2.6 billion, the country has witnessed the emergence of a dozen present or future unicorns, including Spotify, King, Mojang (Minecraft) and fintech company Klarna.
In 2018, the American company, PayPal bought Stockholm-based digital payments start-up iZettle for $2.2 billion, which is the biggest ever acquisition for this FinTech giant. With nearly 500 million daily users, Candy Crush maker King was acquired in November 2015 by Activision Blizzard for $5.9 billion. Earlier, Mojang, makers of Minecraft, was bought by Microsoft for $2.5 billion. In 2005, eBay bought the Swedish telecommunications company, Skype for $2.6 billion.
The foundation of the innovation environment
Sweden has long fostered innovation and entrepreneurship. The vital Swedish startup scene has garnered much international attention, but the country has a long history of innovation. Export is an important driving force for Sweden, seeing that the domestic market is relatively small. Other factors are social stability and the access to government support, as well as a high degree of equality.
Sweden maintaining identifiable cultural characteristics with an emphasis on big government and team thinking. The Swedish culture has a unique mix of educated, independent people who are also good team players. Swedes enjoy a good social welfare system that provides a cushion to take risk, they have not been oppressed by wars, and no country in the world has more innovation per capita.
Today, Sweden boasts a low level of national debt, low and relatively stable inflation and a healthy banking system. The healthy state of the Swedish economy has given local entrepreneurs plenty of confidence to invest in companies and ideas. What’s more, Sweden actively supports local startups, and some argue that the government’s decision to invest in R&D is one of the driving motors of Sweden’s startup successes.
Education and research
Sweden’s long-term focus on education and research has also had a major impact on the capacity for innovation. In 1842 the country introduced compulsory schooling for 7- to 13-year-olds (today for 6- to 15-year-olds). This was a game-changing move, as it raised the overall level of education among the people, and became a vital component in Sweden’s journey from poor agricultural nation to prosperous innovation leader. Today about one-third of the population has post-secondary education.
When it comes to research and development (R&D), Sweden proves its commitment by investing, as a rule, more than 3 per cent of the country’s growth domestic product (GDP) in R&D. Government agency Vinnova plays a central part in Swedish research. The innovation agency promotes and funds research projects in a wide range of fields, from health and transport to industrial material and smart cities.
To strengthen Sweden’s competitiveness, the Knowledge Foundation (KK-stiftelsen) funds research and competence development at Sweden’s university colleges and new universities. The Swedish Agency for Economic and Regional Growth (Tillväxtverket) also strengthens competitiveness and facilitates entrepreneurship around Sweden.
Green technology and life sciences are two fields in which Swedish researchers and companies excel. The government has created an office of life sciences dedicated to developing a national strategy for the life sciences to further promote the field. The Graphene Flagship is a giant research project coordinated by Chalmers University of Technology in Gothenburg.
The widespread success of Swedish tech startups is in large part due to Swedish entrepreneurs’ common origins. The Commodore 64 created the first generation of people interested in coding, especially in gaming. The people behind two of the most successful Swedish gaming companies, King (Candy Crush) and Mojang (Minecraft) used Commodore 64 when they found their passion for coding back in the 1980s.
Swedish government also contributes to the success of startups. For example, government programs offer various seed fund programs, such as the ‘market validation’ program that provides grants to startups to get their companies off the ground. There are also government-funded tech incubators that encourage innovation and entrepreneurship.
Sweden is a large country, stretching far from north to south. This is why a well-functioning infrastructure has been vital to Sweden’s development – from railways to telecommunications and broadband. Policies offering access to technology and the internet have contributed to making Sweden the innovative nation it is today.
During the past decades, the Swedish government has invested heavily in the technology infrastructure, creating one of the world’s most digital economies which has been a key factor in the creation of companies like Skype, Spotify and Mojang.
In the 1990s, the Swedish government pushed out a widely developed broadband network and Swedes’ early access to fast internet coupled with subsidised computer-lending programmes helped cultivate a society of early adopters. In 2016, the government also adopted a new broadband strategy. It aims to get all of Sweden connected to high-speed internet by 2025.
High welfare policy
Often falsely considered a socialist utopia, Sweden has employed innovative regulations over the years to keep its budgets balanced. Although the Swedish government still needs to struggle to maintain a stable fiscal revenue. For ordinary people, Sweden’s high welfare policy provides a relatively stable guarantee. It is this guarantee that provides the possibility of trial and error for entrepreneurship, even if they fail.
In addition to the technological advantages, there is an enabling social safety net for those who venture on the entrepreneurial path. Entrepreneurial mothers and fathers have been able to enjoy a relatively high quality of life while building their companies. While cultural idiosyncrasies and the Swedish government’s active role help companies get off the ground, conservative fiscal policies and discipline are what keep them afloat.
Swedish corporate culture
Swedish corporate culture is also very helpful for startups, the so call “jantelagen” may have had a positive role to play in terms of creating a harmonious culture based on consensus, which roughly translates to a mentality that downplays individual effort and places the emphasis on the collective.
Equality and flat hierarchy within businesses — each person’s opinion tends to be respected, regardless of their position, offering significant advantages in today’s fast-moving and innovative environment. Arguably, this has its roots in Jantelagen.
However, in its traditional meaning, Swedes attach negative connotations to jantelagen and believe it to have an adverse influence on creativity. After all, the raison d’être of startups is to challenge existing traditions, thinking patterns and frameworks in their pursuit to create better alternatives.
While cultural idiosyncrasies and the Swedish government’s active role help companies get off the ground, conservative fiscal policies and discipline are what keep them afloat. Swedish companies are more fiscally responsible than most, even for management. Every dollar matters. Swedish startups are long-term oriented. While it may take startups a longer time to break through, they have more staying power.
The World Economic Forum (WEF) ranks Sweden as one of the most competitive countries in the world in its Global Competitiveness Report, with top grades for macroeconomic stability and innovation capability. Challenges include relatively high taxes and labour regulations.
Other potentially negative factors are steep rents and a lack of housing in the bigger cities, which in some cases makes it hard for Stockholm in particular to attract young talent in competition with other European cities. High tuition fees for students from outside the European Union may also have a negative effect on Sweden’s attraction.
Another cited challenge is the weather. Sweden’s persistent, dark and cold winters might be a tough selling point. At the same time, those harsh winters are given as an explanation for the high degree of creativity in Sweden. Some argue that the long, cold season encourages would-be innovators to stay indoors to hone their skills and develop their ideas.
Stockholm’s Silicon Valley
Kista is the largest Information and Communications Technology (ICT) cluster in Europe, and the world’s second largest cluster after Silicon Valley in California. It is the largest corporate area in Sweden, important to the national economy due to the presence of, among others, Ericsson Group, the largest corporation in Sweden. There are large research efforts in this entire area, which therefore is dubbed Kista Science City. It is the research park of KTH Royal Institute of Technology.
Kista Science City is the leading ICT cluster in Europe. The cluster is home to some of the world’s most famous ICT companies such as Ericsson and IBM, as well as a range of exciting startups and the leading universities of Stockholm. Kista is also an arena for future technology – our testbed Urban ICT Arena is located here, where 5G and IoT technologies are being tested. Kista Science City is built upon the Triple Helix Model – a innovation collaboration between businesses, the public sector and academia.
Kista Science City is the location where a large portion of the research and development of the world’s 4G LTE mobile telephony infrastructure is being developed, a European ETSI standard used worldwide and Kista Science City has been the largest such cluster in Europe for decades. Ericsson has had its headquarters in Kista since 2003, with 100,000 employees worldwide, but with its research and worldwide headquarters in the Kista Science City.
Kista is the largest corporate area in Sweden and important to the national economy. The construction of the industrial section of Kista began in the 1970s with companies such as SRA (Svenska Radioaktiebolaget, now a part of Ericsson), RIFA AB (later Ericsson Components AB, and later still Ericsson Microelectronics AB, and now Infineon Technologies), and IBM Svenska AB (the Swedish branch of IBM).
Kista hosts entire departments of both KTH Royal Institute of Technology, such as Wireless@KTH, and Stockholm University (formerly jointly known as “the IT University”). There are also Swedish national research institutes (pure research, no students) such as the Swedish Institute of Computer Science and Swedish Defence Research Agency, FOI who has its headquarters there, just as Ericsson, Swedish IBM and Tele 2, among others has. Also the Swedish Co-location Centre of EU innovation and entrepreneurial education organisation EIT Digital is located in Kista and offers a 2-year Master program in collaboration with KTH Royal Institute of Technology.
Alternative innovation: Gaming and Musictech
Stockholm is the birthplace of a couple of prolific global brands, Spotify, Candy Crush Saga and Minecraft. Undoubtedly, the city is now becoming a top cluster for the video game industry and music technologies in the world. The fast internet access speed and high smart-device penetration make the city the perfect test-beds for not only the video game industry but also animation and latest tech innovations, such as VR (Virtual Reality).
Stockholm has the most competitive gaming industries. In the Södermalm area of Stockholm, emerged the highest concentration of gaming studios and talents on earth. Numbers of world-famous studios here, including Dice, Mojang, King, Starbreeze, Paradox, Interactive and Rovio, attracted thousands of international developers from around the world. Sweden has infiltrated the global pop music for decades, with the great artists such as ABBA, Robyn, Zara Larsson, Avicii and the top music producer Max Martin.
Stockholm has outpaced other European cities with a mix of unique cultural traditions, visionary tech leaders, globally oriented startups and smart government policies. The fast-growing tech industries and vibrant atmosphere enable Stockholm to continuously spread its dominant influence worldwide and become a paradise for IT-professionals.