Sweden: Breaking The Rules

SWEDEN

Breaking the Rules

Conventional wisdom has it that low taxes spur businesses to invest and grow, and that social-welfare programs breed lazy people looking for handouts. Sweden’s booming startup scene – call it Silicon Valley North – suggests otherwise.

Known for multibillion-dollar firms like Spotify and King (the developer of the Candy Crush games), Sweden also boasts one of the world’s highest tax rates and most robust social-welfare systems. Yet its capital, Stockholm, is home to more “unicorns” – or startups with $1 billion valuations – per capita than any other city in the world, the Independent reported.

Gothenburg, too, is spawning a new generation of promising startups. And Sweden’s success has spilled over into Norway, where Oslo’s startup scene has gone from nonexistent to thriving, partly thanks to government investment, over the past five years.

They’re not all “fun” firms like Spotify and King, either. iZettle, a commerce platform that competes with Paypal, is also knocking on the door to the unicorn club. TechCrunch reported last month that iZettle had recently attracted an additional $47 million in investments and valued the company at $948 million.

Local entrepreneurs say the social safety net actually encourages Sweden’s culture of innovation by reducing the risk associated with failure. Meanwhile, a tax system that limits inequality, transparency policies that make salaries public knowledge, and a culture that discourages the flaunting of wealth have helped foster the collaborative spirit that’s key to startup success, they argue.

“In Sweden, you have more people who aren’t from a wealthy background that are daring to create startups,” said Victoria Bastide, who moved back to Sweden after working in Silicon Valley for 15 years to join Lifesum, a health-tracking app company.

The Milken Institute, a think tank based in California, recently ranked Stockholm as Europe’s second-best-performing city when it comes to offering opportunities for prosperity, reported the Local Sweden, a website for Sweden-based expatriates.

“Stockholm has one of the top ecosystems in the world for creating and launching new firms, with a thriving early-stage financing community that would rival American tech centers such as Austin or Portland,” the think tank concluded. Among the main factors: government investment in education.

“Its educated population is an asset; 38 percent of working-age residents have tertiary qualifications (7.3 percent above the European average),” the institute noted.

Interestingly, the recognition of Nordic success comes as Silicon Valley is taking heat for a so-called “bro culture” that breeds sexual harassment, the Independent noted, and as rising inequality is driving far-right and leftist populist movements around the world

In 2017, allegations of inappropriate relationships and harassment hit Google’s Andy Rubin and David Drummond, as well as Uber’s Travis Kalanick and Amit Singhal, along with a number of others. Meanwhile, a 10-page memo written by former Google engineer James Damore exposed the race and gender fault lines running under Silicon Valley after it was leaked to the internet.

Does that mean California has something to learn from Sweden?

Maybe, bro. Maybe.