In the business world, unicorns are new companies valued at more than $1 billion. From computer games (Mojang, the maker of Minecraft) to streaming music with software (Spotify) to payment systems (Klarna), Swedish technology companies have been hugely successful — and many have attained that enviable title.
Sweden (and Stockholm in particular) has been a technology hub for a quite a few years, but it has previously been upstaged by Berlin. That situation has changed. In ranking after ranking, Sweden now comes out on top (after Silicon Valley). And Stockholm’s thriving technology ecosystem is becoming well-known in the tech world.
In per-capita terms, Sweden is now the #2 tech hub in the world, boasting 6.3 billion-dollar companies per 1 million people. Global financiers have caught on, and Sweden has attracted the most venture capital per capita of any country in Europe. In absolute terms, Sweden trails only Germany, which is a far larger country than Sweden.
Some tech companies, such as Skype, are well-known in Europe and the US, but some Swedish startups have targeted developing markets instead and grown exponentially as a result. Truecaller, for instance, an app allowing users to find phone numbers and block unwanted messages and spam, has 100 million users, most of them in India.
How did Sweden become a technology hub?
According to the 2014 Global Innovation Index (GII), Sweden is the third-best country in the world for innovation (behind Switzerland and the UK). Sweden’s strengths include the country’s high number of researchers, the level of expenditure on R&D, and Sweden’s many reputable universities.
The latest Global Competitiveness Report, which also assesses a country’s innovation capacity, mentions in particular Sweden’s high rankings in education and training. Swedes also have rapid Information and Communication Technology (ICT) adoption rates.
Swedish entrepreneurs/innovators themselves, meanwhile, like to highlight a particular feature of being in Sweden: Because their home market is small, companies start out with a global mindset. Everything is in English, and every feature is adapted to the global market.
There are deeper underlying factors, of course, such as the country’s excellent technology infrastructure and computer literacy (the government has pushed for universal computer literacy by subsidizing personal computers).
One venture capitalist even mentioned Sweden’s conformist culture as a competitive advantage for the local tech industry: If something you make is good, it becomes hugely popular and profitable in a relatively short time, since everyone has to have it in Sweden.
In a similarly unintuitive development, Sweden’s welfare state actually helps blue-sky thinking and innovation by making innovation less risky — innovators do not need to fear they will end up homeless.
Moreover, the fact that Stockholm now has so many successful tech companies, and is the chosen venue for such a large number of startups, creates virtuous dynamics, in that expertise and related services are readily available in a stimulating and highly competitive environment.
Ironically, one of the aspects that could hold Stockholm back is the city’s popularity and success. Housing prices and rents have soared in recent years, and the cost of relocation makes it increasingly difficult for small Swedish firms to attract foreign talent.
For now, Sweden has so many success stories and so much buzz that this is likely a minor concern. No one expects Sweden — or any other country — to rival Silicon Valley in terms of volume (US tech companies are typically far bigger than European ones). But by being the second-most important technology hub in the world, Stockholm is definitely punching above its weight.
Oana Aristide is a Senior Economist on D&B’s Global Data, Insight and Analytics team. Based in the UK, she covers three Scandinavian countries as well as Romania, Japan, Malaysia, and the Philippines as a contributor to D&B’s Macro Market/Country Insight Products. She has a background in central banking.