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Swedish venture capitalist giants anticipate increased global interest in local startup scene

Local venture capitalists in Sweden do not fear the arrival of international players

For the Nordics, and especially Sweden, there is more capital available in the tech startup sector than ever before, and the time is now for entrepreneurs to capitalise on the venture capitalist (VC) opportunity in front of them.

The proliferation of VC funds, compounded by angel and seed investors, has fostered an ecosystem in Stockholm – and progressively in Gothenburg and Malmo, too – whereby digital startups not only have access to investment, but have choice and stronger negotiating terms on which to obtain this funding.

One such facilitator over the past two decades has been Northzone, Europe’s longest-established VC fund. It was first established in Oslo, Norway, before expanding to London, New York and the Swedish capital.

“To date, we have raised nine funds, and have $1.2bn under management, with the latest round of $500m targeting early-stage investments across Europe and the east coast of the US,” said Marta Sjögren, partner at Northzone. “Since day one, our ethos has been to be the chosen partner to audacious entrepreneurs who are building global companies.

“We support these entrepreneurs from their early days through their growth journey. One high-profile example is Spotify, which we led through a round of funding in 2008 up until its listing on the New York Stock Exchange last year.”

Having backed more than 200 companies over the past two decades, Northzone has seen first-hand the evolution of the Nordic startup scene, enabling not just money, but acceleration strategies too. It is perhaps these additional attributes that make VCs the giants of the startup world that they are today. “VCs play an integral part in enabling entrepreneurs to build global companies,” said Sjögren. “They are key components of a thriving ecosystem, both as an enabler to attract talent, and from a knowledge-sharing perspective.”  

Sjögren herself spends most of her time in the Nordics, and has seen the national startup ecosystems evolve enormously over the past decade. But in something of a “chicken and egg” conundrum, it is hard to evaluate whether the innovative domestic climate and culture spawned the VC revolution, or whether VCs triggered the rise of digital startups. In truth, it seems more of a virtuous circle.

“There are three components that are needed for a tech ecosystem to thrive – talent, capital and role models,” said Sjögren. “Stockholm has developed all three of these. So, you could say that the ingredients have been there for a long time, but what you see now is much more of a developed ecosystem, nurtured by a new generation of experienced private early-stage capital and VC funds, such as Northzone.”

Read more about startup hubs in Sweden

Sting (Stockholm Innovation and Growth) is another company to have provided a platform for many Swedish startups that have gone on to become international successes. As the country’s longest-established technology accelerator and incubator, Sting has partnered with more than 300 companies across a range of sectors, paving the way for a combined equity of €526m. Its angel investment arm, Propel Capital, has invested in more than 110 companies since 2014.

“When I first founded Sting, the word startup didn’t even exist,” said the company’s CEO, Pär Hedberg. “Nowadays, the Stockholm ecosystem contains a much larger volume of brilliant tech companies and entrepreneurs, as well as investors. These people and organisations are turbocharged by venture capital funds present in Stockholm.”

In 2001, there were about 20 Swedish VCs and no international VCs in Stockholm. Now lots of international investors are there, with plenty of new firms being created, comprising educated and experienced ex-entrepreneurs and investors.

Hedberg called this role model-driven evolution the “Björn Borg effect”, explaining: “Once you see it done well, you want to give it a go yourself. There are now lots of success stories, which, in turn, lead to more angel investors and a much more competent angel community made up of entrepreneurs. There didn’t used to be any role models here; today we have several, many of which are unicorns.”

Healthy penchant for new tech

Hedberg lists growing internationalism and workforce diversity as additional contributors, alongside a healthy penchant for new tech and an inflation-low risk climate in Sweden. But this by no means underplays the role that companies such as Sting and Northzone have played in helping to create this environment.

“For our startups, in the early stages when they need incubating or accelerating, business angels and family offices are the most important investors,” said Hedberg. “They give organisations the initial leg-up required to get off the ground. From there, international funds are scouting Stockholm much more now, making it more competitive, which is a good thing too.

“Even more international VCs will establish themselves here in the future because our ecosystem is so diverse and strong. As Europe becomes more and more integrated, international expansion will be easier, meaning Sweden’s playing field can only get bigger, which is very exciting.”

The notion of international input and output as an accelerator of the already-thriving Swedish scene is shared by Sjögren, who said more and more investors from around the world are recognising the strength of the Nordic tech ecosystem.

“This means that more capital will be flocking to the market and entrepreneurs will have even more to choose from,” she said. “I think this is overall a positive trend, and we will see more bridges being built between the Nordics and other strong ecosystems, such as London, New York, Silicon Valley and Asia.”

For Northzone, its meaningful understanding of local markets across Europe makes it more than just resistant to this impending international deluge. If anything, the resultant rise of even more exciting startups will bring more opportunity from an investment perspective, and the onus will now be on them to unearth the next Spotify, Avito, Klarna or Trustpilot.

“I am personally excited about the increasing role of diversity and inclusion of ideas and talent in our ecosystem,” said Sjögren. “Over the past decade, we have grown from a very homogenous community to a vibrant and diverse one. There’s still a long way to go, but every step matters.”

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