Nordic tech steps up as Spotify sets the tune
The Scandinavian start-up scene is on fire in midwinter ice, Robin Pagnamenta in Helsinki discovers
It’s approaching midnight in Helsinki and a thick crust of ice lies plastered across the wooden jetty stretching out into the pitch-black Baltic Sea.
As steam and music blast out of Loyly, a bar and restaurant overlooking the Gulf of Finland, Brian Halligan emerges from the smoke sauna, puts down his beer and prepares to take his first ice swim.
“This is insane,” cries the 51-year-old Bostonian, whose online marketing company Hubspot, founded in 2006, is worth more than $5bn (£3.9bn).
Helsinki in early December may be dark and freezing cold, but Mr Halligan is among an army of 20,000 tech movers and shakers from around the globe who have made the pilgrimage to a unique event.
Since its creation seven years ago, Slush – which claims to be the world’s biggest not-for-profit start-up event – has emerged as the vibrant showcase for the booming Nordic technology scene.
If the $26.5bn float on the NYSE in April of Spotify, the Swedish music streaming service that is Europe’s biggest ever venture-backed publicly listed technology company, offered proof of its maturity, then 2019 promises more to come from Scandinavia’s start-ups.
Since 2013, more than $9bn has been pumped into technology companies based in Sweden, Finland, Denmark and Norway, according to figures released this week from Atomico. They include household names such as Sweden’s Skype and Soundcloud, as well as Finnish gaming giant Rovio, developer of the Angry
Sweden has now produced seven “unicorn” technology companies valued at more than $1bn – the third highest in Europe after the UK at 19 and Germany’s 11.
That’s not bad for a nation with just 10m people. Denmark and Finland have produced a further three and two respectively. Insiders offer different explanations for the boom. “It’s the
long, dark winter nights,” smiles Thor Fridriksson, founder of Teatime Games, an Icelandic gaming company.
“And the Nordic countries tend to have a good education system, too.”
For Henrik Torstensson, founder of Lifesum, a Stockholm-based healthcare app, the region’s naturally global outlook has also played a role.
“The Nordics are very small markets, so if you want to build something you have to go global very quickly,” he says. “Since the first companies broke out there has been growing positive momentum.”
The following day, inside the Messukeskus expo centre a few miles away, the event pulsates with electronic music, lights and dry ice – lending it more of the feel of a
nightclub than a business conference as start-up founders conduct intensive speed-dating sessions with investors and advisers.
“Nothing normal ever changed a damn thing,” read a sign above the entrance to the event last year. “Hey weirdos, step in.”
Even so, some delegates say that Slush has gained a slightly more corporate feel than a few years ago, with a small but noticeable minority of suits mingling with the beards, tattoos and ponytails.
Par-jorgen Parson, an early investor in Spotify and fintech company izettle through Northzone, a Stockholmbased venture capital fund, believes the region is entering a new phase, fuelled by the recent financial success of a string of companies emanating from Stockholm, Helsinki and Copenhagen.
“There are more than 100 people in Stockholm who made more than $10m out of Spotify alone,” he says. “So there is an incredible potential now for angel investors. Already there are 25 new start-ups founded by former Spotify alumni … We just have these phenomenal role models.”
While Sweden and Finland have had successful established technology industries for decades through companies like Ericsson and Nokia, it is during the past decade that this has translated into a dynamic start-up scene, boosted by strong language skills, local business acumen and good infrastructure including transport and broadband networks.
Relatively easy access to funding, low interest rates and government support have played a role too.
Stockholm’s tech boom in particular has had a big impact on the city’s local economy with about 18pc of the city’s workforce now employed by the IT industry – only slightly lower than San Francisco’s 23pc.
“There is a critical mass of companies there and to a lesser extent in Helsinki and Copenhagen,” says Parson.
Mr Torstensson agrees: “The biggest winners have really raised the bar. When people see a company like Spotify with nearly 100m paying subscribers, it affects everyone – their ambition and their aims.”
Despite its expensive reputation, the cost of hiring skilled staff is actually significantly lower here than in Silicon Valley. “And you get to hang on to talent for longer,” says Parson.
It’s not all been plain sailing, however. With a strong currency and high cost of living, Norway has been a relative laggard compared to its neighbours in cultivating a thriving technology start-up scene.
Parson believes Norway’s oilpowered economy has hampered the growth of innovative technology start-up companies, although there are signs this may be starting to change. Others fret about Chinese companies who are picking off some of the successes, pointing to Tencent’s €10bn (£8.9bn) acquisition in 2016 of Supercell, developer of the Clash of
Clans series of games, as a prime example.
But with government support including loans and grants available to commercialise university research and a steady pipeline of graduates from higher education eager to join the gold rush, the region is well placed to capitalise on its recent success.
Risto Siilasmaa, chairman of Nokia and part of an earlier generation of the region’s entrepreneurs, points to the way Slush is organised by unpaid student volunteers mainly from the University of Helsinki as evidence of a “deep sense of ownership” surrounding the event – especially among young people, who view the start-up scene as an exciting and potentially rewarding place to work.
One symbol of the close links with academia can be glimpsed at Think Corner, a three-storey university campus in central Helsinki stuffed with beanbags, stripped wooden workspaces and the obligatory sauna.
Resembling a Nordic take on the archetypal Silicon Valley workplace, and funded by the university, it offers an open collaborative space available for anybody to use, work or hold meetings – students, business-people and anyone else.
“It’s a space for co-creation and collaboration,” says Marjo Ilmari, head of start-up finance for Business Finland, a government agency.
Specialisms are emerging. Finland has excelled in the world of mobile gaming – partly a testament of its history with Nokia, formerly the world’s biggest mobile phone maker until the market was convulsed by the launch of the iphone in 2007.
About 300 gaming companies are now based in the country of 5.5m people. Sweden, meanwhile, has a string of companies in music, healthcare and financial technology.
Back in Loyly, where Swedish and Finnish entrepreneurs are milling at the bar with hotshot VC investors from California and executives from companies such as Salesforce and Hubspot, the atmosphere is charged.
Refreshed and dressed again after his late-night swim in the swirling, icy waters of the Baltic, Brian Halligan raises a glass and flashes a broad grin.
“That actually felt pretty good,” he laughs. “But I’m not going in again.”
Entrepreneurs are entertained at the Slush 2018 start-up conference, attended by the EU’S Margrethe Vestager, above right