Back in the 1990s, Sweden began investing heavily in its technology infrastructure. The government wanted all households and businesses across the country to have access to IT infrastructure and broadband to create ‘an information society for all’. High-speed internet lines were installed and citizens were given tax breaks to buy home computers. Schools adopted robust engineering programmes. Innovation became part of the national identity – a trait that has helped this small country stand out in the face of fierce international competition.
As a new generation grew up equipped with the necessary skills to achieve in the tech economy, Sweden evolved into a nation of entrepreneurs and disruptors. The World Economic Forum soon named the country as the world’s most digital economy, and a cycle of inspiration and innovation began.
A decade later and the government’s vision had been realised, but the journey didn’t end there. By 2014, Sweden had raced beyond being an information society and had become a hub for startups. That year marked a milestone for investments in Stockholm-based fintech companies. A total of $266 million was funnelled into such firms, and investments made in fintech comprised 32% of total investments made in privately owned Swedish companies that year.
By 2015, Sweden had claimed the number-two spot in rankings of the world’s most productive tech hubs. Global technology Investment firm Atomico reported that for every million people, the Scandinavian country was producing 6.3 billion-dollar companies. This, compared to Silicon Valley’s 8.1 at the time, placed Sweden firmly on the tech map. Stockholm was attracting around one-fifth of Europe’s total fintech investments.
There was no doubt that the country had positioned itself as a leader in fintech innovation. However, expansion required generating user numbers many times that of Sweden’s population of fewer than 10 million, and entrepreneurs looked beyond borders for growth.
Europe’s unicorn hub
In the past few years, the country has produced numerous globally recognisable names in disruptive digital services. Free file-sharing sites The Pirate Bay, Kazaa and uTorrent were all founded in Sweden. Voice-call and video-chat service Skype became Stockholm’s first unicorn – a startup valued at more than $1 billion – in 2005, when it was sold to eBay for $2.6 billion. Six years later, Microsoft acquired the service for a cool $8.5 billion.
Microsoft also bought Mojang, the video-game developer behind Minecraft, for $2.5 billion. Another game company, King – creator of the popular Candy Crush Saga, was also founded in Sweden and listed on the New York Stock Exchange in 2016 with a market capitalisation of $5.5 billion.
In June 2015, the world’s leading music-streaming service Spotify was valued at $8.53 billion, just seven years after its launch. In February, it reported 159 million active users around the world, with 71 million premium subscribers.
Other Swedish success stories include Klarna – an online payment service that works with e-commerce businesses and retailers. In 2017, Klarna announced that it had received a large investment from Permira, which bought a 10% stake. Though both sides kept quiet on the figure, the Financial Times reported the investment value at $250 million. In April this year, Klarna announced its integration with Magento Commerce as a Core Bundled Extension, offering customers more flexibility in payments.
“Investor appetite for the fintech industry is high, and that is helping to drive the exponential growth of startups in Stockholm”
iZettle is another prime example. The JP Morgan and Carnegie-backed company provides a commerce platform for small businesses in Europe and Latin America, offering tools for payment, sales and expansion. It recently announced plans to go for Europe’s biggest IPO in fintech and aims to increase its turnover by at least 40% each year for the next three years.
Investor appetite for the fintech industry is high, and that is helping to drive the exponential growth of startups in the industry in Stockholm. Such growth has also inevitably led to rapid expansion in new working styles. Collaborative hubs and coworking spaces have appeared all over the city, providing casual meeting points where ideas can be shared and support can be found.
A decade ago, these working communities didn’t exist in Stockholm, but now they’re so prolific that they require division into specific industries. Embassy, for example, offers coworking labs specifically designed for VR and gaming companies, while H2 Health Hub is a coworking space dedicated to digital health services. Elsewhere, ImpactHub and Norrsken Foundation attract social entrepreneurs. For fintech companies, Stockholm Fintech Hub is the place to be. It is the first space for the financial technology ecosystem is Sweden, and the second biggest fintech hub in Europe.
The hub hosts an impressive number of fintech startups, including Billecta, a solution for reconciling invoices and payments; Capin, which helps CEOs and risk managers work smarter by automating claims reporting and other manual processes; and Revolut, a digital banking solution that allows users to spend in any currency without incurring fees.
Stockholm Fintech Hub has been such a success that in late 2017 it announced expansion plans for Finnish capital Helsinki. The goal is to create a pan-Nordic alliance of financial start-ups, banks, service providers and other relevant players.
Unsurprisingly, Stockholm also plays host to numerous fintech events. Hackathons, roundtables and forums are all on the calendar, with some events drilling down into specific topics, such as women in fintech, the merging of humanity and technology, challenges and opportunities in the invoicing space, and the mindset of a tech investor.
Last month, BLOXPO – Europe’s largest blockchain conference – arrived in Stockholm, bringing with it politicians, global blockchain experts and business players from a range of industries. BLOXPO is designed to inspire people and organisations to invest, build and launch companies with blockchain.
September will see Blockchain & Bitcoin Conference Stockholm unite the world’s leading crypto experts. The conference focuses on implementing blockchain and cryptocurrencies, exploring the prospects for crypto business in Stockholm and considering trends in cryptocurrencies for 2018.