VWV Volumes #10: Art Legend Kia Uusitalo '23 discusses the Nordic Startup Scene
A Dive into the Success Behind the Nordic Startup Scene
A dive into the Nordic startup scene Silicon Valley has long been known for being the frontrunner in the global startup scene with its lucrative venture capital funds, top-notch talent, and many success stories. This status has, over the years, been challenged by the growing startup scene in the Nordics.
In the last decade, the Nordics countries have become an interesting market for venture capital investing. Countries such as Sweden and Finland have had a vast amount of success on a global scale considering their small size. In 2017 Finland had over 10% of all global exits and the most venture capital by GDP share in Europe . On top of that, Finland is home to many global games such as Angry Birds from Rovio and Clash of Clans and Hay Day from Supercell. Sweden has successfully become home to many unicorns such as Klarna, King, Mojang, and Skype. And let’s not also forget their successful $27 billion IPO with Spotify.
The Nordic VC scene has been growing rapidly with over $3 billion raised in the last 5 years from which $2.7 billion has been invested. Many VC’s have expressed positive attitudes towards the future of startups in the due to having seen and experienced high-quality investments. But what makes these companies high-quality investments? What differentiates the Nordics from other startup hubs? What are the pros and cons of pursuing entrepreneurship in the Nordics compared to let’s say the U.S?
1) Safety nets increase risk taking and a focus on higher education build talent
Living in any of the Nordic countries is a perfect opportunity to take risks without jeopardizing one’s livelihood. In recent years, Nordics countries such as Sweden, Finland, Denmark, and Norway have prospered in global happiness rating reports done by the United Nations Sustainable Development Solutions Network. The reason behind this are the safety nets created by the government such as free health care and strong unemployment benefits. These benefits relieve the burden of worrying about basic human needs and allows for citizens to turn their extra energy and time into something productive such as building companies.
In addition, despite their high taxes, the governments of Nordic countries provide free education and grants to people pursuing higher education. This high level of education has created a pool of qualified labor in all fields of innovation. The growth of highly skilled labor creates the perfect environment for problem solving and capable startups. According to investors, the access to high-quality startups has been seen as one of the most important factors in Nordic VCs successes. So no wonder that according to the 2018 Global Innovation Index the Nordics have ranked on top in innovation; Sweden in 3rd position, Finland 7th, and Norway 9th.
2) Tight-knit ecosystems enable innovation and collaboration
In cities such as Helsinki, Stockholm, and Gothenburg startup ecosystems are tight-knit. These smaller ecosystems make for stronger communities, where talented entrepreneurs collaborate and actively build their ecosystem to become more accessible and experienced. The effects of these communities can be seen with how Finnish startups have addressed their need for talent in fields of software engineering and computer science. For example in 2018, the founders of Supercell partnered with Rovio and Nokia in funding the making of HIVE, a free coding school with a focus on collaboration and innovation.
Moreover, Finnish entrepreneurs have built startup campuses such as Maria 01 and nonprofits that help talented pre founders begin their entrepreneurial journey. These communities make for an abundance of opportunities for VCs to find high-quality investments. These communities have even addressed their need for outside international funding through SLUSH, a yearly startup event which attracts over 25,000 attendees from investors to entrepreneurs. This creates the perfect opportunity for these ecosystems to mingle and connect with international startups and investors.
3) Wellbeing and trust key for long-term success
Contrary to the long workdays in other countries, the Nordics take a different approach. Work-life balance is an important component of work culture. Don’t be surprised if you find offices empty after 6 pm.
According to Icebreaker.vc, an early stage startup fund based in Sweden and Finland, healthy founders make the strongest companies which is why they have made the wellbeing of their founders one the main focuses of their fund. By avoiding burnout these new companies have a better shot at lasting in the long-term and performing better as a team.
Moreover, investors and founders are adamant about transparency and openness with over 80% of investors agreeing that this is their top-priority. This builds trust between the community of investors and founders, which makes for better and efficient communication between them. For example, many companies are non-hierarchical and considered a “flat” type of management. This style of management makes for successful entrepreneurship as the sharing of ideas and improvements is facilitated.
Final thoughts
The Nordics have successfully created an environment for risk-taking, highly skilled labor, sharing of ideas, and innovation through healthy public finances, well-functioning institutions, a vibrant entrepreneurial ecosystem. Entrepreneurs are highly valued by society and often give back to others, which has a positive impact on long-term growth. But are there any cons to the entrepreneurial scene of the North? In addition to the long winters, the Nordics still face the problem of gaining access to international capital. It is easy to get acquainted with the major players in nordic countries but startups willing to grow at a global scale have to seek outside funding from the rest of Europe or the United States.
In addition, as good as the welfare system in the Nordic sounds it can also discourage entrepreneurship from some people. It is easier to find a job with good employment benefits without having to hustle to the top. So in short, i would say the Nordic countries have a bright future ahead of them but it can still be improved.