A few notes on the Nordics tech ecosystem
Hi, it’s Mehdi Benjelloun, VC @CapHorn Invest and founder of the VC bootcamp, baby vc. After discussing with Linus Dahg from Inventure on my podcast, I decided to detail the shifting tech landscape in the Nordics and the lessons we can draw from it.
If, like me, you’re paying attention to tech, you’ve seen that the Nordics have been at the forefront of tech for decades. It might first seem paradoxical for a set of countries that only account for 27 million people.
However, today, Sweden’s capital Stockholm boasts the highest number of unicorns (seven) per capita of any city outside of Silicon Valley. In 2018 alone, the Stockholm startup ecosystem saw two of Europe’s largest exits, with Spotify’s IPO and iZettle’s acquisition by PayPal. Not only in Stockholm, but across the Nordics, technology companies have seen a disproportionate level of success in exporting products and services internationally.
1/ The successes :
The early successes such as Skype, Sony Ericsson, Nokia, Yubic, Stardoll have fueled a new generation of start-ups and entrepreneurs that have founded world class startups, just to name a few :
- 🇸🇪 Sweden : Spotify, Skype, King, Klarna, iZettle, Mojang, Evolution Gaming, Bambora, MySQL, KRY, Aprea, Glooko, NA-KD
- 🇩🇰 Denmark : Zendesk, Unity, Sitecore, Tradeshift, Trustpilot, Siteimprove, NMD Pharma, Viabill, Vivino, Simple Feast, Peakon, Pleo
- 🇳🇴 Norway : Kahoot!, Gelato, Kolonial.no, polight
- 🇫🇮 Finland : Supercell, hmd., Rovio, Iceye, Kiosked, Tactotek — gaming startup sector is certainly a strong part of this country start-up scene, with figurehead gaming brands producing some of the best-known and best-selling games in the world
2/ The funds :
Venture Capital has been early at financing the flourishing start-ups in the region and their early movements. Today, those generalists funds provide good access to seed and early-stage venture capital. Today, most of them are pan-European and have offices spead across the world. To name few of them :
- Inventure, originally based in Helsinki — They have a second office in Stockholm.
- Northzone was founded in Oslo in 1996, then expanding out of the region. They now have offices in London and New York city.
- Maki.vc
- Creandum
- EQT Ventures
- Atomico
- Heartcore is originally from Denmark. They now have offices in Berlin and Paris, they recently pivoted to all-in consumer investment.
3/ The conditions :
English : As Linus Dahg mentioned in the podcast, “international movies and shows are not subbed”. Saying that, you understand that nordics have been practicing english to a yet untapped level in Europe. That can have positive side-effects when expanding internationally or selling in English.
Tuition : On the studies side, university education is free as everyone has the ability to have a shot at making something for themselves. This long history of free education, which is offered all the way through college (with higher education offered at no cost even to residents of other EU countries) has meant that company founders in Sweden have always had good access to educated and skilled workers.
Entrepreneurship spirit : Today more than ever, people are more akin to start-up their own business, “there has been a strong cultural shift and desire to build something, rather than joining something else. The cost of starting a start-up being close to zero” Linus Dahg (Inventure)
Initiatives are then encouraged, some schools even offer entrepreneurship courses in high school.
Culture : The Nordics are known for having a culture of collective trust leading to creativity and transparency. Also, each country benefit a prevalence of qualified engineers, developers, and other tech-focused career professionals, creating an interesting ecosystem with a tech-savvy population and a digitalized society.
Conditions of Life : The Nordics are known for their reputation when it comes to quality of life, gender equality, work/life balance, generous holidays, and extensive parental leave, which certainly does help convince talented workers to come, live, and work in the Nordics.
4/ The safety net :
After the Second World War, political reforms were introduced aimed at providing social and financial security to all Swedish residents. These reforms laid the foundation for ‘The Swedish Model’ and our current welfare system.
The welfare system has provided a healthy safety net for those wanting to start a business. Minimizing the negative implications associated with potential failure for those who dare to take the risk has bred innovation in our country, and this I believe has had a significant, positive impact on the startup ecosystem of today.
5/ Entrepreneurs that want to give back to the community :
For decades, the Nordics have been at the forefront of tech in Europe, but also in the world. These waves of companies from Sony Ericcson to Spotify have created a strong pool of ‘role model entrepreneurs’, from Niklas Zennström (known for founding several high-profile online ventures with including Skype and Kazaa. He also founded the technology investment firm Atomico) and Daniel Ek (founder of Spotify).
In September, Spotify CEO Daniel Ek pledged $1Bn of his wealth to back deep tech startups from europe. Two reasons why it’s a massive opportunity for Europe :
- 1 : Although this article is supposed to “depict” a Nordic tech ecosystem, I deeply believe that we should consider Europe as a whole and its countries as a sub-part of a bigger ecosystem. By pledging his money to Europe start-ups and not ‘Nordics’ for instance, Daniel Ek clearly assumes that he considers Europe as one.
- 2 : In fact, that’s how you create the equivalent of the Silicon Valley in the US. The next challenge is really building sustainable european companies that stay in Europe and that don’t sell to american counterparts. Together we can counteract on China and the US.
Here I want to pinpoint few of them that have shaped this ecosystem, in tech but also before that :
Ole Kirk Christiansen (Lego), Markus Persson (Mincraft), Ingvar Kamprad (Ikea), Stefan Persson (H&M) and more…
Should I include Ibrahimovic in the list?
6/ The Challenges :
Attracting talent : I believe that the quality of a tech ecosystem relies on its capacity to attract foreign talent. On the visa side for entrepreneurs, talented people have been kicked out . VCs are investing in teams, and the ability of start-ups to attract talents is overarching. Today more than ever, the Nordics is challenged by other tech hubs in Europe as companies can come from any European city, and talents going to other hubs, in Estonia or France, which have facilitated access to tech talents. Also, due to its small market, the Nordics have to overcome a brain-drain from local top-talents attracted by working in other countries. Hard in a country when the small size of a population implies a shortage of talent and especially developers that are the bread-and-butter of a tech company.
Also, each language in the Nordics can be tough to learn, and while there are many very good English-speakers there as previously mentioned, the language barrier can be a factor in attracting talent and doing business.
Ressources :
- 🎧 #35 VC WORLD TOUR : The Nordics with Linus Dahg (Inventure)
- 💌 Dragos Novac “SundayCET” newsletter
- 🗞 Discover what happens on the Nordic investment scene.
This article is a first attempt to debunk the nordics ecosystem — and is prone to further enhancements. Any feedback are welcome, you can send me an email at : mehdi@caphorn.vc
From Lisboa, Portugal 🇵🇹
Sisu — Mehdi
