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

The Sunday Telegraph - Money & Business - - Technology Intelligence -

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

Birds fran­chise.

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

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