The three secrets to building your startup the Swedish way

Swedish startups are killing it. The country has produced some of the world’s most recognizable brands like IKEA, Ericsson, H&M, Electrolux and Volvo — as well as some of the fastest growing startups in the world like Spotify, King, Mojang, Skype and Klarna. Stockholm, the Capital of Sweden, has produced more billion dollar valued companies per capita than any other city in the world. From 2000 to 2014, Sweden, with its less than 10 million inhabitants, saw 263 exits at a total value of $23.7 billion.

Many credit the country’s tech success to structural advantages. The Swedish government invested heavily in broadband and personal computers in the 1990s; Sweden’s generous welfare state reduces financial risk for founders and early employees; and there’s even a tax deduction for people who privately invest in startups. However, I would argue that the key reason behind the success of the Swedish startup ecosystem, is organizational culture. There is something about the Swedish mentality that builds thriving teams. Most startups, regardless of origin, could benefit from adopting some Swedish thinking into their culture, and I have grouped these take-aways into three themes:

  1. Tear down the pyramids!
  2. Keep it simple, stupid!
  3. Go west child! Or east!

Tear down the pyramids!

Swedes typically hold the collective over the individual, so self-promotion and establishing hierarchy has little acceptance within teams. As investors, we often observe that employees are motivated by the organization’s purpose and vision rather than individual success, and achievements are reflected back on the team rather than relished by the individual. To the surprise of many Americans, Swedes are actually quite uncomfortable using monetary incentives as a key motivator. A Swedish employee doesn’t work for a boss — but rather for a company, which has interesting implications for multi-national teams. Foreign managers may even feel that Swedish employees are being downright insubordinate, while the employee is absolutely convinced he/she is contributing to the greater good of the company. Similarly non-Swedish employees working for Swedish bosses are often confused by their seeming unwillingness to lead other than by example and in order to generate consensus. Promotion and advancement are decided by the leadership team and peers rather by the direct report as is often the case in the US and other countries.

This Swedish approach provides a strong basis for any startup company culture. Startups need to address a market rapidly and cut through the noise with a sharp product. The team needs to be small, flat, tight-knit like a SWAT-team, and move very fast in unison. At this point in a startup’s life, the team has to be highly motivated by a bold common goal with personal goals taking a back seat. Decisions must be made fast, and problems often have to be solved outside of what the organization has been structured to address. A non-hierarchical and collaborative, rather than competitive, organizational culture where employees can move in and out of different roles to solve customer problems in real-time is one of the key reasons why Swedish startups are so successful.

A very successful management book on this topic was written in the 1990’s by the CEO of Scandinavian Airlines, Jan Carlzon, called Moments of Truth. The Swedish title was actually “Tear down the Pyramids” which is a view I still subscribe to, to this day.

Keep it simple, stupid!

The more recent Swedish success stories have to a large extent been based on low-touch, highly scalable sales models exemplified by the likes of Ikea, H&M, Skype, Spotify and Klarna. Low touch is enabled by an extreme focus on simplicity in concept, design and intuitive user experience. I remember Spotify co-founder Martin Lorentzon saying explicitly when we invested in his company; “Complexity which we see everywhere is so incredibly ugly — simplicity is beautiful and it is the key thing we are trying to accomplish with Spotify. Just press this play button and you will be able to play all the music in the world.” This focus can be seen in the strong preference towards a scaled down, minimalistic tone of voice in most creative expressions, from furniture design, to functional architecture and literature.

Simplifying through reduction (for inspiration see https://www.reddit.com/r/sixwordstories/) is something each startup should master and I strongly advise spending time on this if you don’t get it in your water like the Swedes do. The more smart people around a table, the more complicated things tend to get — so the challenge is to fight that force and to look at simplicity as a key goal in itself.

Go west child! Or east!

In the 18th century, Sweden was the largest producer of iron ore in the world and in the centuries that follow, an impressive number of multi-national companies were born that continue to dominate industrial niches globally to this day. Today, being a sales person at Ericsson or Sandvik, means travelling to different countries at least 150 days per year, and almost all Swedes have a close relative or friend who works for one of the export giants. It is engrained that Sweden is a small market suitable for product testing, but not big enough to make you successful. A by-product of this is that Swedes become guinea-pigs for all kinds of crazy new ideas-such as 3G & 4G (and soon-to-be 5G) telephony, which was first invented and rolled out in Sweden.

Consequently, thinking globally from the outset gives Swedish companies an advantage in mindset in today’s international world where geographical borders need to be crossed fast to create sufficient scale and claim markets before competitors emerge. Swedish startups build multi-language multi-currency and multi-platform support very early, even into the minimum viable product. One of Northzone’s Swedish portfolio companies, mobile banking app Qapital, even launched in United States as its very first market at the seed stage and skipped launching in Sweden altogether. So, my advise to startups is to look critically on and beyond their launch market and not necessarily go after their obvious geographical home market.

As the world gets smaller and the pace of innovation increases, we as a global venture capital firm with Nordic roots, try to bring this Swedish formula into the mix when we invest. And for any start-up looking to conquer their market, I believe there could be great value in them drinking some of that Kool-Aid too.