Stockholm — Tech Capital of Europe

Report of the Go Global Mission to Stockholm (25 - 28 October 2017)

As an entrepreneur, it is important to broaden your perspectives and keep an eye out on the world, even more so in this digital world we live and work in every day. Hence, I was very excited to join the Go Global Mission to Stockholm, an organization of startups.be and Jong VOKA Oost-Vlaanderen.

Sweden has been an inspiration for me ever since I became involved with technology and startups. The country has an impressive track record: after Silicon Valley, Sweden has the highest number of unicorns per head of population in the world. Iconic companies like Skype (sold to Microsoft), King (the maker of Candy Crush, IPO), Mojang (the company behind Minecraft, sold to Microsoft) and Spotify (you know Spotify), have all been founded in this Nordic country.

How is this possible? What are the reasons behind Sweden’s overwhelming success? Is this story future proof? 3 days in the country’s lovely capital Stockholm would provide all the answers.

A 2 hour flight from Brussels led us to Bromma, a cozy airport about 20 minutes from downtown Stockholm. Hard to imagine this is the main entrance to a European capital where so much value has been created over the past decade.

First stop on our trip was the Stockholm Fintech Hub, a huge co-working space located conveniently above Stockholm’s central train station. Besides the fancy decoration, I noticed a couple of interesting things here:

• Specific knowledge of fintech is brought together. Instead of competing against each other, the fintech companies all join in one place and benefit from each other’s relationships, insights and experiences.
• The hub partners with big incumbents such as VISA, Nordea and Barclays. These big companies embrace disruption by startups, and immediately offer them a platform to test their ideas.

Off to a good start!

Our visit to Invest Stockholm gave us a lot of insights on the success of Stockholm. The seeds of the Swedish tech boom were planted in the 90s, when the government subsidized the required infrastructure for the digital age.

First, every household in Sweden was granted a personal computer. Every successful tech entrepreneur of today grew up with a PC! Digital natives avant la lettre.

Second, almost every household in Sweden has fiber internet access. Hard to imagine in Belgium, where to this day the public and private sector are still arguing who is going to make the required investments.

It is clear that government initiatives in the nineties have laid the foundations for the incredible success of the past decade.

The impact of these exits cannot be underestimated. As often happens with successful entrepreneurs, they do not rest on their laurels. After selling Skype, Niklas Zennström went on to found Atomico, now one of the most famous venture capital firms in Europe. Same goes for the founders of King with their fund Sweet Capital.

As a result, there is plenty of capital available to invest in promising startups that might become the unicorns of the coming decade. Success often creates even more success. The future of the Swedish tech ecosystem seems bright.

Some (fun) facts about Sweden:

• The government has a monopoly over the distribution of alcohol. It can only be bought in special convenient stores. In a pub, a delicious Heineken will cost as much as 8 EUR. Skål!
• Winters are long and dark. This is sometimes cited as one of the reasons why the Swedish are so good at tech: what else to do one a long cold November evening than code?
• Sweden is a front runner in gender equality
• Parents get a combined 480 days (!) of parental leave after birth
• 67% of 2-year olds are internet users
• Sweden is a “no cash” society
• Programmer is the most common job in Stockholm
• Stockholm is suffering from a housing crisis

Day 2 started with the highlight of our trip: a visit to Spotify. The music streaming service has over 50 million paying subscribers and is valued at 16 Bio USD in the private markets. Even though it is still making a loss, it is reportedly preparing its long-awaited IPO for somewhere mid 2018.

Spotify is one of those iconic tech companies of this age. The company, led by the enigmatic founder Daniel Ek, has proven to be an exceptional innovator on multiple levels:

1) Business model innovation: in the wake of illegal P2P networks like Napster and Kazaa, Spotify sought to find a legitimate way to revolutionize the music industry.

2) Technical innovation: the secret sauce to Spotify’s early success was the incredibly fast loading of songs. This was an engineering challenge of enormous size and difficulty. The majority of people at Spotify are still deep tech engineers working to make sure load times stay at this amazing level, even at such a huge scale.

3) Organizational innovation: much has been written and said about Spotify’s organizational model. The concepts of autonomous teams (grouped in squads, tribes & alliances), the agile way of working, the flat organization, … have been widely documented and copied by other tech startups. Many attribute the success of Spotify to this special culture of continuous experimentation and improvement, cultivated by the founders from day 1.

It will be very interesting to see what happens to this culture when Spotify goes public. Not making a profit yet, investor pressure might force it to tighten reigns and start cutting costs.

Later, we paid a visit to Detectify, whose founder notoriously hacked Google and got access to a huge amount of customer data. He received a bounty of 10.000 USD and went on to start a successful company in ethical hacking.

I arrived at the hotel at around 10 pm. Having some energy left in the tank, I put on my running shoes. I really enjoy jogging in big cities. Since there is always something new to discover, you hardly notice you are running after a while.

I ran to the Gamla Stan island where I accidentally bumped into the changing of the guards routine at the royal palace. Quite hilarious and way over the top if you ask me!

This run wasn’t only for sightseeing, though. Last week, I decided I am going to run my first marathon in 2018! There you go, the word is out, no coming back to it now. I couldn’t really miss the second training on my schedule, right…

Day 3 started at Klarna, another Swedish unicorn, active in online payment processing. A couple of years ago, it also received a banking license. We got a presentation about the major branding exercise this company had undertaken earlier this year. The result was fascinating: from a dull banking brand to an extravagant colorful identity. Klarna wants to be a bank focused on the consumer’s experience, not on its own payments product. It definitely stands out in its sector with this bold and brave move I can only applaud.

Next stop was the Goodbye Kansas Gaming Studio. Stockholm has an enormous amount of talented gaming engineers, resulting in big hits like Minecraft, Candy Crush Saga, Angry Birds 2 and a host of other console and PC titles. We were told the long dark nights might have something to do with this.

Final stop was at EQT Ventures, one of the top tier venture firms in the Nordics. EQT Ventures is owned by Sweden’s wealthiest family, the Wallenbergs. Over the past century (!), the Wallenbergs have accumulated an enormous portfolio of global industrial players, including Electrolux, Atlas Copco, ABB, SEB, SKF, … to name a few. Add Volvo, Scania and IKEA to the Sweden’s list and you get a sense of how many successful international corporations this country produces. Same goes for its music industry: ABBA, Roxette, Ace of Base, Europe … and more recently Avicii, Robyn, Swedish House Mafia. Due to the small internal market, anyone aspiring a big entrepreneurial or artistic career just has to move abroad as soon as possible.

EQT Ventures is the venture capital firm of the Wallenberg conglomerate. Besides funding (with its 565 Mio EUR investment vehicle), it also offers active guidance to its entrepreneurs (growth, engineering, marketing,…).

EQT Ventures invests in scale-ups that have reached product market fit and about 100k MRR. It sweet spot investment size is between 8 and 10 Million EUR.

EQT gave us a demo of their internal data processing tool called Motherbrain. This platform gathers all publicly available data on technology companies (e.g. Crunchbase, Pitchbook data,..) and enriches them by adding trends in social media activity, number of followers, press coverage, … EQT believes this gives them a competitive advantage in discovering promising startups earlier and getting into deals faster.

4 startups had the opportunity to present their company:

• Jochen Moerman of Caldr, an interaction platform between doctors and their patients
• Aelbrecht Van Damme of WinWinner, a matchmaking platform for alternative financing
• Jelle Van Camp of Emma, a platform focusing on preventive healthcare
• And myself, I pitched Hyperlane, the DevOps automation platform for WordPress and Drupal websites

The trip ended with a nice dinner in the city center of Sweden’s lovely capital.

My key takeaways from this Go Global Mission to Stockholm:

• The success of Stockholm is no coincidence but the result of a bold bet by the government in the nineties
• Successful exits can ignite a flywheel that leads to even more success stories. Let’s hope the Belgian ecosystem has a big blockbuster exit soon.
• Sweden is obviously a great country to live in.

Looking forward to getting back into the action at Hyperlane on Monday, fully energized and inspired by 3 awesome days.