Entrepreneurship in Sweden

In these days, entrepreneurship has become prominent in developed and developing countries. Entrepreneurship in Sweden is no different. Motivations behind this fact is that entrepreneurial activities contribute to innovation, economic growth and lower unemployment rates. Development of start-ups can be shown as a major indicator for this entrepreneurial trend. Sweden, is among these developed countries which is home to more than 70,000 startups (see figures below for further info). The Swedish startup ecosystem has shown an outstanding performance over the past few years becoming one of the most popular hubs in the world. Sweden has a healthy business environment for entrepreneurial initiatives which can be concluded from the fact that almost 90% of the firms survive more than two years operating time.

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Schumpeter, one of the masterminds of entrepreneurship notion, defines a process called creative destruction where entrepreneurs (or start-ups) could survive and challenge existing firms via innovating in unexplored markets. This process is considered as the main engine behind economic progress. Countries who emphasize this process provide incentives to create an ideal environment for startups by providing plenty of subsidies; investing in technology & innovation processes; and constituting encouraging social & business environments. One of these countries, Sweden, has constituted a tax reform in 1991 wherein corporate income taxes were lowered from more than 50 percent to 22 percent (lower than U.S’s) within a 30 year time interval (see figures below for further info). Sweden also has local culture and societal values which creates a fertile basis for startups. Sweden has the most non-hierarchical and informal society where team spirit comes inherently. Besides, Sweden’s social welfare and safety system contributes to this atmosphere explicitly. All of these reasons encourage entrepreneurs to feel safe and take risks without losing everything they own. Thus, Swedish start-up is able to show up their potential and reach global achievements. Moreover, in recent years almost $800 million of venture and growth capital was invested in Swedish companies and comparing with previous years, venture capital investments have increased more than 300% from previous year, according to CB Insights. Considering all these, it looks like Sweden has a promising scene for start-ups.

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Number of startups between 1991-2016 (Source: ITPS (1993-2007), Growth Analysis ( 2008- ) 

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Sweden corporate tax rate between 1981-2017 (Source: Skatteverket)

New companies or startups often confront challenges where they need capital and practical support. This is often compensated via platforms such as business incubators, hubs, science parks, innovation centers where they stimulate the growth of companies. According to Swedish Incubators & Science Parks (SISP), Sweden´s national association for business incubators and science parks, there is minimum of 65 (43 business incubators and 33 science parks) centers with 5000 companies with more than 70 000 employees. According to UBI Index, out of 300 university business incubators reviewed worldwide, two of the best are found in Sweden. Incubator at Chalmers University is ranked second in Europe and eight in the world; and Uppsala Innovation Centre as the eighteenth best in the world.

With a population over 10 million, Sweden is in a leading position in Scandinavia when it comes to developing new technology. The Swedish entrepreneurship scene has shown great progress over the past few years. Stockholm became one of the most popular tech hubs in the world. Spotify, Skype, Mojang, King and Klarna are the top five Swedish companies which are referred to as “unicorns” – the name given to start-ups worth more than a billion dollars. Last year, Financial Times published an article declaring Stockholm as the Unicorn Factory.

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Below, are some facts and figures from regarding why this is the case:

  1. Truecaller will soon be the 6th unicorn.
  2. There are more unicorns coming up such as iZettle, Tictail, Wrapp, Yubico, Lifesun, MySQL, Dice, Bloglovin, Stardoll, Soundcloud, Videoplaza, Widespace, MAG Interactive, Sinch, Magine, KnC Miner and many more.
  3. Stockholm has the highest number of unicorns per capita in the world after Silicon Valley.
  4. Europe’s highest valued startup is based in Stockholm which is Spotify.
  5. Two of the four most valuable European startups are based in Stockholm (Spotify and Klarna).
  6. Venture capital investments tripled in last two years.
  7. Almost 20% of the entire working population in Stockholm work in IT.
  8. The number of IT companies in Stockholm has doubled in the past 10 years.

All of these dynamics indicate that Sweden is one of the leading countries which host and support an incredible amount of value creation through innovation and entrepreneurship. Yet it is incredible to witness that these are accomplished by a country only with a population of 10 million which is 89th in the world in population size.

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