Tech Performer
Sweden Leads Europe in Startups
Sweden
outperforms in tech, has a roster of $1 billion-plus start-ups and could be a
model as the European Union refigures its growth policies.
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Spotify
and Skype are globally recognized brand names. Klarna, a financial tech firm,
and King Digital Entertainment, the maker of the video game juggernaut Candy
Crush, are other examples of homegrown tech powerhouses.
·
Sweden
has had a different experience. It has produced more tech unicorns — start-ups
valued at more than $1 billion — per capita than any other country in Europe.
·
t
ranked fourth in the number of unicorns, after Britain, Germany and France,
countries whose populations are six to nine times as large.
·
In
interviews, a dozen entrepreneurs, investors and economists agreed that an
ingredient of Sweden’s success were initiatives in the 1990s that gave a wide
swath of the public access to personal computers and broadband.
·
A
tradition in Sweden of public and private investment in research and
development, which currently amounts to 3.4 percent of total output, one of the
highest percentages in Europe.
·
Swedish
businesses have always been pushed to search for customers outside the country,
which has a population of only 10 million.
·
Half
of the country’s gross domestic product comes from exports, and the tech sector
accounted for 11 percent of total exports in 2022.
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Free
education, free health care, free child care. “You can afford to take risks,
you will not be on the street” if you fail, he said.
·
Sweden
(along with Belgium) spends more on education as a percentage of gross domestic
product than any other member of the European Union.
Sweden’s
economy has, in many ways, suffered from the same tribulations as the rest of
Europe: recent bouts of crushing inflation and recession, and now the prospect
of meager growth in a world split by geopolitical and
economic conflict.
Nevertheless,
the Nordic country has a roster of high-tech entrepreneurs that is the envy of
its neighbors. Spotify and Skype are globally
recognized brand names. Klarna, a financial tech firm, and King Digital
Entertainment, the maker of the video game juggernaut Candy Crush, are other
examples of homegrown tech powerhouses.
“They
have something — particularly in the tech sector — which other European
countries do not really have to the same extent,” said Jacob Kirkegaard, a senior fellow at the German Marshall Fund.
That
entrepreneurial track record has been attracting renewed attention at a time when
anxieties are mounting about Europe’s ability to compete with American and
Chinese advancements in high technology.
The
United States has turned out a generation of companies like Google, Meta and
Amazon, while China’s tech scene flourished with firms like Alibaba, Huawei and
ByteDance, the owner of TikTok.
Europe,
of course, has its own star tech giants like the Netherlands’ ASML, a global
leader in the semiconductor sector. But as a whole, the continent is seen more
as a bystander than an innovator, known more for its aggressive regulation of
foreign tech firms than building businesses of its own.
The
economic impact of falling behind is substantial, but it also has important
social implications. European policymakers worry about the long-term effect of
relying on foreign corporations for communication, social media, shopping and
entertainment rather than on companies with what is widely referred to as
“European values.”
Those
values include a stronger appreciation for protecting privacy, preventing the
dissemination of hateful speech and maintaining strong labor
protections and a better work-life balance.
Critics
of European tech policies complain about less access to venture capital and a
cultural aversion to risk-taking. Europe’s tech workers often have often moved
to the United States rather than build companies at home.
But
Sweden has had a different experience. It has produced more tech unicorns —
start-ups valued at more than $1 billion — per capita than any other country in
Europe after tiny Estonia, according to a report on European tech by Atomico, an investment firm. And it ranked fourth in the
number of unicorns, after Britain, Germany and France, countries whose
populations are six to nine times as large.
In interviews, a dozen entrepreneurs, investors
and economists agreed that an ingredient of Sweden’s success were initiatives
in the 1990s that gave a wide swath of the public access to personal computers
and broadband. At the
time, most people were just getting used to the screeching woof of dial-up
modems.
Fredrick
Cassel, a partner at Creandum, a venture capital firm
that invested in Spotify and Klarna, said his ability to use the internet at
home set him on the path to being a tech investor.
The
push to get a PC in every home and build connectivity gave Sweden an edge in
producing an “engineering generation,” Mr. Cassel, 50, said. “I have a hard
time seeing that happen without those two pieces of infrastructure in place.”
The
Swedish tech entrepreneur Hjalmar Nilsonne had a
similar experience. He remembers getting his own Pentium II HP computer in 1998
when he was 10 years old: It “changed my life, by introducing me to programming
and the internet.”
Mr.
Nilsonne, who founded and later sold Watty, recently co-founded a start-up called Neko Health with Daniel Ek, the
founder and chief executive of Spotify.
“He
had the exact same story as I did,” Mr. Nilsonne said
of his Neko partner. “We started playing around with
computers. We learned how to build websites. We started selling websites to
friends and family when we were teenagers. And that was all possible because we
had very early access to the internet.”
Swedish businesses have always been
pushed to search for customers outside the country, which has a population of
only 10 million, said Asa Zetterberg, the managing director of TechSverige, a trade organization.
That has forced start-ups and industry,
she said, to “be competitive in the global economy.”
Half of the country’s gross domestic
product comes from exports, and the tech sector accounted for 11 percent of
total exports in 2022.
Niklas Zennstrom, a
founder of Skype who is now chief executive of Atomico,
said that start-ups could get early funding but had a much harder time getting
financing for expansion in Europe compared with their counterparts in the
United States.
Pressure
for more financing comes amid a push by governments around the world to more
forcefully direct economic development. The United States has kicked up
spending on semiconductors, alternative energy and electric vehicles by
hundreds of billions of dollar to compete more
aggressively with China.
President
Biden’s signature pieces of legislation emphasized subsidies, loan guarantees
and tax incentives for companies investing in the green transition and advanced
technology.
The
Biden policies also nodded to social support like requiring chip makers that
receive subsidies to supply affordable child care. But the focus is on
industrial and technological nuts and bolts.
Founders
and investors in Sweden repeatedly pointed to the crucial role that the
country’s expansive social safety net plays in encouraging entrepreneurs to
experiment and take risks — despite the high taxes it takes to finance the
programs.
An
effective “social welfare system” is the best way the Swedish government can
encourage entrepreneurship and innovation, Mr. Cassel at Creandum
said.
Sebastian Siemiatkowski,
the founder of Klarna, similarly credited Sweden’s safety net.
He said his immigrant parents were often
unemployed when he was a child. Still, he was able to get health care, attend
the best schools and get a home computer early on “without having any money.”
Sweden (along with Belgium) spends more
on education as a percentage of gross domestic product than any other member of
the European Union.
Mr.
Siemiatkowski pointed out that Sweden is also way
ahead of the United States on equal opportunity. The country ranked fourth on
the World Economic Forum’s social mobility index in 2020, the latest available.
The United States ranked 27th.
That,
he said, is an important reason that Sweden “punches above its weight.”