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11 months ago by Paul Marks

Sweden at the Forefront of the Nordic Tech Scene

Nordic Tech: Sweden at the forefront

Perhaps the most successful country within the Nordic tech scene is Sweden, which has also benefited from a solid educational foundation, by pouring a larger percentage of its GDP into its school system (7.3%) compared to Germany, the UK and US.

As a result, it has grown talent and stimulated technological progress, leading to the country producing a plethora of prolific Nordic tech businesses including Spotify, Skype, and SoundCloud.

Cyber security company Yubico is a relatively new addition to the list, having risen to prominence off the back of its Yubikey – a USB-like key that provides fingerprint-encrypted protection against cyber threats and is used by Google employees.

CEO Stina Ehrensvärd, who now splits her time between Stockholm and the Silicon Valley, SAYS the independence given to Swedish children throughout each educational stage of their life is a driver of innovation in the country.

“Kids are not punished for questioning, which is really important for innovation because it starts with asking questions and not being afraid of doing so,” she says.

“Sweden is challenging – I noticed that my Swedish team is actually much tougher to work with than my American team because they know the importance of asking questions.

“It’s an interesting combination in Sweden that involves learning to collaborate and learning to be independent – both of which are key in our industry.

“I’m constantly asking my team questions – starting by not knowing and having an open mind is very important.”

Daniel Ek, founder of the Swedish music streaming giant Spotify, also puts a lot of his company’s success down to the general sentiment of the country.

In an interview with Recode, he said: “Being Swedish myself and starting the company in Sweden, that’s just a very different society than in the US – obviously that’s been impacting us a great deal.

“Just to take something like parental leave. One of the things that we realised as we started hiring more and more people here in the US was that I think it was like two or three weeks if you were a parent that you could take off.

“We saw our employees in Sweden could take six to 12 months off. That just didn’t make any sense why that should be different.

“We rolled out a global parental leave policy throughout the company where now everyone has six months of paid leave.

“Those types of values for us is really important. That’s something that obviously comes from being from Sweden.”

Spotify is now one of the world’s most recognisable tech companies and is shaping the music industry every day.

The company serves as something of a metaphor for the tech scene in the Nordics as a whole – a clean, understated brand with a well-executed, dynamic business model and an entirely original idea.

Despite no surplus of financial or human capital, Scandinavia is nearing the pinnacle of the digital world – having grown so rapidly, only time will tell how much further Nordic tech could climb.

How Sweden became one of the most innovative countries on earth

Tech entrepreneurs share the secrets behind the Scandinavian technology powerhouse that produces world-beating companies as well as security and relative equality.

“We call it the Bjorn Borg Effect,” says Henrik Torstensson, founder of Swedish health app Lifesum. “You suddenly have this person or company that comes along and shows the world that it can be done. Overnight, Sweden was extremely good at tennis. It was like everyone was playing it.”

Sweden isn’t so great at tennis these days, Torstensson concedes, but it is second-to-none when it comes to creating innovative companies – and Spotify is the new Borg.

People underestimate the magnitude of Spotify’s achievements, says Torstensson. He should know, he worked there as head of premium sales before founding Lifesum, a comprehensive weight loss and lifestyle-tracking app that boasts more than 20 million users.

“Only Netflix in the entire world is adding subscribers at a faster pace than Spotify. In any type of media. They’re outperforming Apple, they’re outperforming Google, Microsoft.”

Torstensson talks with an understated modesty that belies the gravity of what he’s saying. It’s a typically Swedish trait – part of a national psyche that has been injected with a huge shot of confidence thanks to multi-billion dollar firms such as Spotify, Skype and King, the developer of the insanely popular Candy Crush games.

The music streaming service is the first European technology company that has taken on the biggest of the US giants at their own game and won. Apple effectively admitted as much when it set up its own rival streaming service in 2015. Spotify has done this from Stockholm, a city of less than one million people that has more unicorns – defined as privately-owned companies valued at more than $1bn – per person than any other city on the planet.

The city’s phenomenal success has caught the attention of the world and rippled out across the Nordic region over the last few years. Just as everyone seemed to be playing tennis in the 1980s, now, it seems, everyone is programming – and the booming tech scene is going from strength to strength. Gothenburg, Sweden’s second city and industrial heartland, is home to a fresh breed of startups, ready to roll off the production line of the unicorn factory. Similarly, in just five years, Oslo’s startup scene has gone from non-existent to thriving, partly thanks to government investment.

None of this is supposed to be here. The Nordics have some of the highest taxes, most generous welfare programmes and lowest levels of inequality in the world. The orthodox view in the UK and US dictates that to encourage innovation, the state should remove its clumsy hands from the wheels of industry, cut taxes, slash budgets and burn red tape. This will incentivise entrepreneurs to create shiny new things.

The US has been incredibly successful at producing world-beating companies; a high level of inequality is the other side of this coin. It sharpens the wits and gives people the jolt they need to get out there and make something in the world. Welfare breeds “dependency” and laziness, so the argument goes. Society’s losers are a necessary by-product of the kind of all-or-nothing environment where winners win, and they win big. Wealth will trickle down. 

The Nordics pose a difficult problem for peddlers of this thesis and offer a fundamentally different paradigm for success. 

Coinciding with Scandinavia’s rise, something appears to be turning rotten at the heart of Silicon Valley, the world’s foremost technology and innovation powerhouse. In 2017, a pervasive sexual harassment problem has been highlighted; lack of diversity has continued to plague the scene at senior levels, and a series of other corporate scandals have marred its reputation.

Meanwhile, the policies of many western governments are delivering stagnant wages and weak growth, which has helped fuel the resurgence of racially charged, right-wing identity politics – and a worrying breakdown of social cohesion.

Risk-taking environment

For Sam Manaberi, founder of Gothenburg-based startup Trine, Sweden’s social safety net and wealth equality are at the very heart of what makes his country so innovative.

“Sweden is an awesome place to start a business and an awesome place to raise a family,” he says.

“I decided there isn’t that much risk in starting a business. Maybe it had to do with the fact I’d lived in the US for several years – that’s real risk.”

“Here, the worst thing that could happen was that I lost the salary I would have earned. Healthcare works really well and there are great schools. That safety net was so, so important.”

Torstensson’s colleague, Victoria Bastide, at Lifesum worked in Silicon Valley for 15 years before moving back to Stockholm. “In Sweden you have more people who aren’t from a wealthy background that are daring to create startups,” she says.

“In the US you’re taking a huge gamble: your kid’s college fund, your house, your health. If you lose your job you lose your health insurance.” 

Nordic countries also have a strong scientific tradition going back centuries, which has been supplemented by exceptional – and free – technical education. In Sweden this has provided the impetus for world-beating companies such as Ericsson and Volvo to grow. Swedish firms invest in research and development at almost double the rate of their British counterparts, and the culture of “paying it forward” – successful founders putting money and expertise back into the startup ecosystem – is deeply ingrained. “You don’t just go to Spain and drink pina coladas,” as Torstensson puts it.

Embracing failure

But the national psyche has undergone some recent changes that have been crucial to Sweden’s success, says Leandro Saucedo, chief investment officer at podcasting app Acast.

“Before the last five, 10 years, failing in Sweden was not an option. The attitude was: if you’re going to start a business, do it. Don’t be too successful though. And don’t fail. Don’t fail.”

“OK, Ikea rules the world today but it took 10 years before he opened his second store because he needed to be profitable first,” Saucedo says. “Historically and culturally that’s been way you build a business in Sweden.”

“Now, people realise that if you want to create the next Facebook you have to switch your mindset. With that, the failure mentality has been accepted. It wasn’t when we were younger”.

Many Swedes in the current crop of startups were teenagers when the dotcom bubble burst in spectacular fashion. Entrepreneurs of that period were vilified in the Swedish media, says Saucedo.

“A lot of those companies obviously failed miserably but, as kids, we thought, that’s cool. Why did this go belly-up? Fast-forward 10 years and these kids have started their own businesses.”

Government also played a key role in the development of today’s thriving startup scene by subsidising computers and fast internet connections.

“In the 1990s, you could be a working-class kid with a computer at home even if your parents didn’t make a lot of money. By the early 2000s you could have a pretty decent broadband connection,” says Torstensson.

“If you have a whole generation of kids – not just the top 10 per cent, but all of the kids – online, five or 10 years before everyone else, I believe it pays off.”

Sweden is often ahead of the curve, says Saucedo. “For better or worse, we are extremely trend-sensitive,” he says, reclining in his chair, dressed in a smart blazer with purple paisley-patterned cravat and immaculate long blonde hair brushed back over his head.

“If red is the colour of the month, Stockholm is red. You go to a nightclub with people from other countries and they are like, ‘People are so dressed up. Everyone is so trendy’ – but in reality, nobody is standing out,” he explains.

“If everyone has an iPhone you have to have an iPhone, but you can’t have one with diamonds because that’s too much.

“The only way to try to be edgy is to be on the trend earlier than someone else. Everyone is up to date and early adopters.”

This makes it the perfect petri dish to test new tech ideas. When Facebook created the ‘Like’ button, they chose Sweden as the place to try it out first, says Mary Ghahremani, Acast’s manager for Sweden.

Nordic tech firms also offer an ethos that Silicon Valley may have lost say Ola Sars and Joel Broms Brosjö, co-founders of Soundtrack Your Brand, which provides music streaming services to companies.

“In Silicon Valley, people roll in, do their time, whatever’s needed to get their stock options, then move away to the next thing,” says Brosjö “It’s like the old gold-digger mentality.” 

“You don’t build anything in a year,” Sars adds.

Only a handful of staff have ever left Soundtrack Your Brand since the pair founded it in 2013, along with fellow co-founder Andreas Liffgarden.

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BLOG: The Nordics and their Technology Innovations

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