Venture Capital Sweden

Venture Capital Sweden

The number of venture capital investors in Sweden has been growing through determined effort and the country is now one of the leading nations for startups, intentionally providing a supportive environment. These investors have funded both non-profit organizations and public organizations there. Things are rapidly changing from the days in Sweden when it was more likely that a company would be funded by a public sector investor than a private one.

These changes have occurred over a generation. Despite Sweden’s efforts in cities like Stockholm, according to the Swedish Venture Capital Association (SVCA), the market had significant room for expansion. In 2012, over 40% of the funding from venture capital n the country came from the public sector and 57% came from private investors. This mean that almost half of the wealth that was used to stimulate growth is coming from private investors.

Investors in Sweden help businesses at different stages of their growth. Some come in at the pre-seed or seed stage and supply the cash needed for the business to grow from the very first step. Others supply funding later on and assist with expansion via equipment purchases or branching out into other areas.

Startups that focused on computers and consumer electronics were able to attract the greatest level of investment in Sweden. However, venture capitalists were also ready to help build companies in other areas, such as life sciences, communication, business, energy and the environment.

The SVCA realized that more work had to be done to attract investors to the market. This was because the Swedish venture capital market had not seen consistent growth throughout the years. For example, in 2012, the amount of investment actually declined as compared with investment in 2011. While investment was occurring in a wide range of companies, traditional venture capital funds were more likely to end up with established companies than those which were just starting up.

Syndicated investments

As less venture capital funds ended up with early stage companies in the earlier years of Sweden’s startup development , venture capital investment in Sweden sometimes looked more like private equity funds than venture capital funds. This trend of syndicated investment often impacted foreign companies, which would not agree to be the leading investor. Previous insecurity in the market caused some companies to be undervalued in the expansion phase but now all of that has changed.

The relative lack of funding options just a few years ago meant that instead of thriving via venture capital, younger companies were finding it difficult to do business in Sweden. They could not access the funds that they needed as easily as more established companies could. These older companies were already more competitive in several ways and by continuing to attract more venture capital, they were able monopolize some sections of the market.

Tax Incentive Schemes Used To Boost Investment

In 2013, a tax incentive scheme was developed to encourage investments in small businesses. This resulted in deductions and tax reductions for the investor. In addition, a foreign resident’s sale of shares in a Swedish company were not taxed. This helped to push investment and growth.

Well-Known Start-ups from Sweden

Ericsson is one of the big companies that was founded in Sweden and is now recognized around the world. There are startups, such as Klarna, which are not always immediately recognized as being Swedish because they are thought of as global brands first. However these startups are making an impact on the way consumers worldwide do business.

Klarna is offered as a payment option by a wide range of retailers, making it easy for shoppers to buy now and pay within thirty days without attracting interest. Spotify is another Swedish startup, known for its impact on the way music is marketed and enjoyed.

When Nuklas Zennstrom and Dane Janus Friis founded Skype, it allowed families everywhere to stay in touch. Their peer-to-oeer calling service helped travelers to adjust to new countries. Business people were able to conduct interviews with Skype and children have learned new languages via Skype calls.

Other startups from Sweden include:

  1. Truecaller, which raised EUR 90.8 million in funding
  2. EA Digital Illusions
  3. iZettle
  4. NA-KD

Top Start-up Cities in Sweden

There are three cities in Sweden which are widely regarded as having the most vibrant startup ecosystems in that nation. They are:

  1. Stockholm
  2. Gothenburg
  3. Malmo

Stockholm is known for tech startups and may be the home of the new Silicon Valley. This is reflective of the changes in Swedish society that have occurred in the last thirty years. Entrepreneurs in Sweden are respected, due to the billions that they have helped to generate and the global success of Swedish brands like Minecraft and Spotify.

The Finnish Venture Capital Association has stated that in terms of investment volume in startups, Sweden is second in Europe. Most of these investments are based in Stockholm and that is why this Swedish city is called the Unicorn Factory. Stockholm is the third top startup hub in the world and has one of the highest densities of developers in Europe.

Venture Capital Exits in Sweden

Billions of dollars have been produced through venture capital exits in Sweden. Most notably, Spotify’s IPO generated 27 bullion and iZette’s acquisition was for 2.2 billion. Stockholm is steadily producing exits at a rate that makes Sweden a leader in Europe.

The returns from all its IPOs and acquisitions have caused a surge in angel investing. The number of exits has also resulted in a rise in the number of serial entrepreneurs in Sweden.

The Swedish cofounder of Atomico has said that the exits create a generation of founders who will go out and obtain funding from other founders. Success generates more success and that’s what is happening in Sweden.