Why 2018 will be a breakout year for Nordic Tech
Q2 2018 is right around the corner, and with it, the long-awaited Spotify IPO. Investors and founders will be watching with baited breath to see what Spotify’s performance will mean for the public tech market. Meanwhile, regulation and the political climate in the US, UK and China may drive founders and talent away from traditional tech hubs. Brexit still plays heavily on the minds of Europe, while in the US and China, concerns over the immigration policies of Presidents Trump and Hu have founders reconsidering where to start their companies. Consequently, the Nordic tech scene is more exciting than ever, featuring a stable environment with a thriving startup community that looks poised for a breakout 2018. Let’s take a look at what to expect:
The Next Success Wave is incoming
As mentioned, Spotify’s IPO will be a benchmark event for the rest of the Nordic ecosystem as one of the biggest exits and success stories in the region’s history. In addition to Spotify’s high-profile liquidation event, the incoming IPOs from Unity and iZettle will bring international investors sniffing into the Nordic startup community again. Considering the average annual exit value of 2010–2014 is roughly $4.1B, the total exit valuation of these 3 startups total roughly $12.6B. No doubt, this impressive year will make an impact on the tech scene:
- Renewed international interest and capital: These latest achievements combined with the Nordics’ track record of profitable exits will once again bring in international interest into the area, much of which will be from first-time investors in the region. Asian investors, in particular, will find the Scandinavian scene attractive, having lessened their interest over the past few years.
- Morale boost: Any success story is always a strong boost to entrepreneurs and their team, but the triumphant IPOs of several Nordic startups will certainly increase the belief and drive of others in the community.
- Influx of liquidity: Perhaps most importantly, exits and IPOs inject liquidity into the ecosystem, giving employees the economic stability to leave their companies and start their own ventures. Furthermore, this new cohort of entrepreneurs will know how to scale a global company and experienced success. They will further be emboldened by their peers, a new class of angel investors, who are similarly cash-rich.
- The Compliance Inquisition: Compliance is shaping up as one of the biggest themes of 2018. Globally, Facebook’s privacy and election disasters are the current headlines, and in addition, autonomous vehicles, ICOs, AI’s role in replacing jobs will necessitate regulatory and compliance risk in a very present way. Here is where the Nordics have a competitive advantage; the Scandinavian governments have always encouraged innovation, whether it be subsidies for consumer computers or advantageous healthtech policies. As US startups get squeezed by compliance standards, Nordic startups may be able to achieve widespread adoption of frontier technologies at a faster rate.
DeepTech retakes center stage
One of the biggest boosts to the entire Nordic tech scene in 2018 will come from Amazon Web Service’s expansion into Sweden. The influx of three state-of-the-art servers locally will allow startups to have speed and ease of access to key technical resources.
- New standards of computing: The AWS servers give entrepreneurs access to the best data storage capacity as well as cloud-based services, all with a lower barrier for entry. As a result, startups can scale quickly and establish cloud-native solutions and tech. In particular, developers will be able to access edge computing, the technical ability to quickly process and compute data at the source, or edge of the inputs. This will be a massive boost for industries that Scandinavia is particularly strong in, mainly, AI, Autonomous Vehicles, and Internet-of-Things.
- Web 3.0: Nordic startups were the foundation for much of Web 2.0 development, with MySQL, Linux, PHP, C++, Ruby originating from the region. With Web 3.0 looking to be cloud-based and reliant on intelligent systems, AWS will give Nordic developers the opportunity to make the same impact.
Whereas Fintech and Consumer Tech have dominated the landscape in recent years, 2018 will be the year for DeepTech to emerge as a leader.
Scandinavia will dominate the eSports scene
The Nordics have always known how to make great games. Supercell, King, Rovio, and Mojang have captured consumers around the world with Clash of Clans, Candy Crush, Angry Birds, and Minecraft respectively. With European eSports viewership expected to double by 2020, the Nordic region will dominate the field in terms of competition, audience, and investment.
- Big Tech continues the eSports charge: Tencent, Alibaba, and Disney have all been fighting to dominate the gaming landscape by acquiring ownership in major gaming studio they can get their hands on. With Scandinavia consistently pushing out great games, these corporations will continue hunting for juicy targets (Tencent acquired Supercell, Activision Blizzard King, and Microsoft Minecraft). These companies aim to accelerate eSports competition in their portfolio companies, as competition creates communities that, in turn, create network effects. As a result, studios like Supercell and King will look to create huge eSports tournaments and competitive hubs locally.
- Sweden and Denmark dominate competitions: While the US and Korea are top competitors, Sweden has consistently been in the top 5 nations over the last 20 years, with Denmark quickly catching up. As the digital world increasingly accepts eSports as valid entertainment, Sweden’s digitally native culture and history of athletic success will be competitive advantages in creating a centralized and passionate eSports ecosystem.
- A new cohort of gaming studios: Building upon our earlier point, as liquidity continues to flood in from Rovio IPO and Unity’s upcoming IPO, cash-rich employees will have the economic freedom to branch out and start their own gaming ventures. With the increased global and local interest in eSports, there will no doubt be many studios devoted to creating genre-defining games for both Mobile and AR/VR.
Final Thoughts
It is an exciting time to be involved in the Nordic tech scene. The success stories of Spotify and Unity and iZettle will blaze a path for new founders and investors. Meanwhile, AWS will elevate the already excellent technical capabilities available in the Nordic region. The unicorn factory in Stockholm shows no sign of slowing, and the centralized tech hubs in Copenhagen, Oslo, and Helsinki are growing even faster. As a result, I expect we will see a huge cohort of first-time Nordic founders emerge and usher in a new wave of technological success for the Scandinavian region.
