Dennis Mitzner
While most of Europe has been mired in economic turmoil since 2008, Sweden has managed to stay afloat — and even accelerate its growth.
The country and, 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.
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 is behind some of the most recognizable global brands.
Stockholm has produced more unicorns per capita than any other city in the world, and, in 2014 the city — with a population of 800,000 — 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.
Between 2000 and 2014, Sweden witnessed 263 exits at a total value of $23.7 billion — leaving its Nordic neighbors Norway (75 at $10.5 billion), Denmark (58 at $7.4 billion) and Finland (91 at $6.3 billion) far behind. In 2014 alone, Sweden contributed to 50 percent of all exits in the Nordic region.
With nearly 500 million daily users — adding to Sweden’s exit successes — Candy Crush maker King was acquired in November 2015 by Activision Blizzard for $5.9 billion. 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.
Although 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.
Innovative economics and R&D
Often falsely considered a socialist utopia, Sweden has employed innovative regulations over the years to keep its budgets balanced. According to the official government website, the government set a ceiling for government expenditures in 1996 following a difficult recession. A number of other mechanisms were introduced to make sure “high debt doesn’t accumulate and that debt isn’t passed on to future generations.”
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.
“Innovation is closely linked to research and development. Sweden is one of Europe’s top three spenders in this area, investing 3.6 per cent of GDP in R&D in 2009. Compare this with the EU-wide target of 3 per cent GDP investment by 2020, and it’s clear that Sweden is ahead of the game. A uniquely high proportion of research funding in Sweden comes from private foundations and other non-profit bodies,” says Donnie SC Lygonis, Senior Advisor at Nordic Innovation House.
“Among OECD countries, only the UK has a higher proportion than Sweden. The research financing from companies in Sweden are more modest, but in sum private, nonprofits and companies financing represent 15 per cent of research funding at Swedish universities — a level comparable to the U.S. and surpassed by only a few EU countries,”
A little help from the government
“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,” says Rickard Hansson, a Swedish serial entrepreneur, CEO and founder of Incentive, a Malmö-based startup.
Claudia Olsson, CEO and founder of Lifecensr and a former senior advisor to the Swedish Ministry of Foreign Affairs, echoes Hansson’s reading of the situation. “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 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.”
Hansson also attributes Sweden’s tech prowess to a surprising source. “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.
The end of consensus?
There are several cultural markers that contribute to Sweden’s decades-long success story. Some attribute it to jantelagen, which roughly translates to a mentality that downplays individual effort and places the emphasis on the collective. Today, however, most see jantelagen as a celebration of mediocrity.
“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 — although sometimes seen as a negative in its traditional meaning,” says Caitlin Collins, a manager at Deliberate PR, an agency working closely with Swedish startups.
Although once jantelagen may have had a positive role to play in terms of creating a harmonious culture based on consensus, it’s doubtful whether such a mentality would have given birth to disruptive companies like Skype, Spotify and Klarna.
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.
Fiscally conservative
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 — no flashy hotels or first class travel — 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; many startups have strong owners, as well as a focus on building core values and company culture, and translating these into long-lasting partnerships in the market,” says Fredrik Nilsson, GM of Axis Communications, a manufacturer of network cameras located in Lund, a city located in southwest Sweden.
Although Sweden is moving away from its traditionally homogeneous character based on Lutheran values with a generous welfare state, the country is still 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, we have not been oppressed by wars, and no country in the world has more innovation per capita,” said Stina Ehrensvard, CEO and founder of Yubico.
Even though Sweden is currently in the throes of a housing shortage due to a growing influx of immigrants, it’s unlikely that local or global events will threaten the northern tech superpower’s dominance anytime soon.
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