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Stockholm

From Spotify to Klarna to Mojang, Stockholm is midstride in what they hope to be a series of landmark multibillion dollar exits and IPOs. The impact of Swedish entrepreneurs also transcends borders, with the likes of Soundcloud, King.com, and Skype having Swedish origins and founders. Part of Stockholm’s success is attributed to their forward-thinking local and national governments’ investments in digital infrastructure, computer access, and digital education since the 1990s. The culture’s keen appreciation for design aesthetic gives way to beautiful products, and high education levels mean a variety of strong local talent. Yet there are risks. The tax structure is quite unfriendly towards startups and employees, and housing is in short supply and expensive. This drives entrepreneurs to relocate abroad, and makes it difficult to attract much needed international talent to help Swedish startups scale past their small domestic market. Still, Stockholm has momentum. Since 2013, a variety of coworking spaces (Epicenter, SUP46, The Kastle) and notable events have emerged to unite the startup community and help it overcome Swedish ‘Jantian’ modesty.

In This Market

These businesses offer industry expertise and are a source of startup talent and potential customers. They help fuel the local startup community.

Opportunities

  • Robust internet infrastructure. Thanks to significant government investment beginning in the 1990s, Stockholm has extensive broadband penetration and 4G coverage.
  • Strong design talent. Swedish entrepreneurs particularly excel in UX and UI design. In the Web 3.0 world, where great design is often your competitive advantage, this is a particularly valuable strength.
  • High levels of employee loyalty. If you can get someone to join your team, they'll often stay (in stark contrast to San Francisco).
  • 'A Viking Mentality.' Swedish entrepeneurs aren't against seeking adventure - they have no problem leaving their small local market behind and attacking larger global opportunities.
  • Significant government support. From STING to Almi Invest to Vinnova to SISP, there are a variety of well-funded government programs that mentor and invest in Stockholm's entrepreneurs.
  • A history of innovation and internationalization. From Aleksander Nobel to the sheer number of foreign multinationals basing Nordic operations here, Stockholm residents are surrounded by bright, forward-thinking minds.
  • Growing international attention and respect. This may make it easier for startups to raise later stage venture capital without having to relocate. Top vc firms including Accel, Sequoia, Atomico, Greylock and more are monitoring and investing in Stockholm.
  • A high quality of life. Apart from the winter darkness (which some will try to spin as an advantage), Stockholm is just a great place to live. Significant social benefits make it easier to take risks; a vibrant cultural scene attracts talent; and the beautiful city is easy on the eyes.
  • Industries of particular strength / opportunity include fintech, gaming, music, health and education. The hardware and Internet of Things sectors also hold promise.

Risk Factors

  • Taxes are pretty terrible. As some have said, 'Stockholm's success stories have occurred despite government regulations,' which makes it all the more impressive. For example, Swedish employees are effectively taxed twice on equity, eating much of their potential gains and making it difficult for startups to attract talent.
  • It's a very expensive city with a major housing shortage. Not only does this impact the career decisions of locals, but it makes it difficult for startup founders to attract the foreign talent they want and need.
  • Sweden is a small market. Startups must think globally immediately, and quickly expand throughout Europe to feed their growth requirements. For some industries, the small market can provide a nice test environment, but for others (such as eCommerce), it is prohibitive.
  • Product management and engineering talent can be hard to come by. Many engineers are drawn to the high stable salaries offered by MNCs (especially considering the taxes on equity), though that is changing as Stockholm's high profile startups garner excitement. Internationally experienced salesmen and marketers are also in high demand.
  • Seed-stage capital is limited. While there are a variety of government programs helping fund startups, these are of course bureaucratic in nature and simply not enough. The hope is the anticipated exits of Spotify, Klarna and others will mint many millionaires...some of whom will become angel investors and help feed the seed-capital needs.
  • The social safety net and a fear of failure. While the generous social services can be a major strength, they can also breed complacency. Some argue that Sweden is a land of 'safety junkies.'
  • The Law of Jante. A Scandivanian sense of modesty that means 'don't stand out.' This has a variety of implications. It inhibits both global recognition and local startup community, as Swedes eschew sharing their successes. It can also cause people to be less ambitious, or look down on entrepreneurs. It can also make it difficult for entrepreneurs to identify potential angel investors.
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