What lies behind Stockholm’s tech success stories?

Stockholm is well-known for its tech credentials – and its thriving startup scene continues to draw in top talent and investors.

May 30, 2019

In recent years, Stockholm has become synonymous with technology trailblazers, forward-thinking entrepreneurs and a growing band of unicorns – startups valued at more than $1 billion.

With strengths in fintech, e-commerce and entertainment, its first wave of innovators included music streaming giants Soundcloud and Spotify and Candy Crush video game makers, King.

Now, the next generation of startups are making a global name for themselves, from invoicing systems specialist Klarna to card payment processor iZettle, now owned by PayPal.

“We’re seeing new firms being launched by people with those large global names on their CV,” says Erik Skalin, JLL head of agency for Sweden. “So it certainly feels like it’s the second wave.”

Strong interest from investors is underpinning growth. A combination of angel investors such as Sweet Capital and private equity from the likes of Verdane Capital are supporting Stockholm’s tech scene with recent successful fundraisings such as e-scooter startup VOI.

“Capital from across the Nordics continues to back Stockholm-based tech firms and that allows for more innovation,” says Skalin. “It also creates a city with a wider range of skill sets.”

Unlike other European cities, the Swedish capital has not incentivised tech startups; the city was already on an upward trajectory as far back as the 1990s.

“Stockholm was an early mover in tech,” Skalin says. “The bursting of the dot-com bubble put a pause on the city’s progress, but early signs of growth and innovation were there.”

A commitment to transparency is a mainstay of Swedish working life, with employees in Sweden able to look up a colleague’s salary. Brand and corporate values matter, Skalin says.

“It’s something that firms look to reflect in both the location and physical appearance of the office space they occupy, says Skalin. “And it helps attract talent.”

A tech-led office market

As Stockholm’s tech scene has moved away from its 1990s reliance on mobile phone giant Ericsson, its office market has adapted too, with growing numbers of small and mid-sized firms creating a healthy mix of tenants and ensuring the city is not dependent on just one source of demand for space.

The emergence of startups has also altered traditional Swedish thinking around workplace design.

“The needs and demands of a young, collaborative workforce at a computer gaming firm are different than those of an insurance firm,” says Skalin. “More unconventional tenants means new ideas about how office space is configured and the types of amenities on offer.”

For many startups today, the focus is more on social areas and flexible spaces which encourage interaction and enable people to work in ways that best meet their needs.

With lease lengths running to fixed terms, the growing demand for greater flexibility is an issue, Skalin says.

“These are fast growing companies - they cannot tell from one day to the next how many people they are in the office,” he says. “So the option of taking space in coworking spaces and hubs, like SUP46 and United Spaces, is becoming increasingly popular.”

However, it’s not just major global coworking operators who are providing space, he explains, pointing to the popularity of Stockholm’s Epicenter, created by local real estate investor AMF Fastigheter in 2014 in a converted bank. The centre has attracted the likes of Swedish online gambling firm Mr Green, which relocated its staff there last year.

City centre still the first stop

The way tech firms think about location, however, has not changed. Spotify last year took a major office building in Stockholm’s central business district for 1,300 staff.

“The CBD is the focus for tech firms and that’s unlikely to change,” says Skalin. “These firms are aware of the pull and draw of the location when recruiting talent.”

Other areas of the Swedish capital could grow in appeal, Skalin says, pointing to Södermalm island, where firms such as online book publisher, Publit are based.

“It’s a popular, vibrant part of the city with its independent coffee baristas and young, edgy, feel,” he says. “That is strongly aligned with the talent that tech firms look to recruit, so some firms may possibly look to move to the island.”

With Stockholm-based firms well-positioned to continue innovating, Skalin says the next challenge is how the Swedish capital handles being more international and faces off competition from other European cities.

“Retaining its reputation as a top European tech city will mean issues such as infrastructure within the city and ensuring a good quality of life remain pertinent,” he says. “Stockholm is on the map, but in an increasingly competitive world, it will need to work hard to retain and attract talent.”

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