If you were asked where the most tech innovation comes from, you’d probably answer Silicon Valley – the home of Google, Amazon and Facebook. And you’d be right.
But what you might not know is that Stockholm is a close second. The Swedish capital produces more billion-dollar companies per capita than any other region in the world after San Francisco. Companies like Spotify, Skype and fintech commerce firm Izettle all originated in Sweden.
Someone who is certainly aware of his country’s growing reputation as an innovation hub is Par Hedberg, “the godfather of Swedish tech”.
Hedberg is the founder and chief executive of Sting, a Scandinavian tech incubator that has helped nearly 300 startups in Sweden since its inception in 2002, creating 2,639 jobs in the process. Companies backed by Sting collectively generated over £219m in revenue in 2018. As a further sign of success, eight of its alumni companies are now publicly listed on the Swedish stock market.
“We’re nurturing the whole system in Stockholm,” Hedberg tells me.
“Some of our startups are scaling very nicely here in London, in Silicon Valley, and elsewhere – we have attracted £419m in private capital to these companies.”
Hedberg, a former national freestyle skiing champion, spent most of his career working as a chief executive at several big tech business, but by the late 90s he wanted a new challenge.
“The last mission was a turn-around project for a company, and after that I was totally exhausted, and fed-up working for large firms. In 1999, I decided that now I’ve done my ‘military service’, so I wanted to work with new startups,” he recalls.
“I did that for a couple of years with a colleague of mine, and invested some small sums in a couple of laser technology companies. And then I got the possibility to start Sting.”
Sting backs startups across a wide range of tech sectors, from artificial intelligence and healthcare to sustainability and digital media.
But it is nonetheless selective: about 400 startups applied for its programmes last year, but less than 10 per cent were accepted. Those which are successful receive business development coaching, plus help with finance and recruitment.
So what is Hedberg actually looking for in a startup?
“The first thing is: do they address a problem or a need that seems to be big in the world? Because if it’s not that big, it can never be a big company,” he explains.
“The second one is: the people who say they are going to do this, do they have the qualifications, characteristics, and motivation to do it?
“And number three is: does their solution to that problem seem to be innovative? Have they come up with something that is really smart, that nobody else could come up with in a week?”
Hedberg is keen to work with startups that can become big and expand internationally. As he points out, Sweden’s domestic market is relatively small – the country’s population is just 10m people (for comparison, London’s population is estimated at 8.8m). Such a small domestic market can be a major challenge for a startup.
“We need entrepreneurs to go abroad from day one. We need to find markets that are much larger than Sweden’s, and that’s also a challenge because then you’re not in your own country. In the UK, you have a large domestic market; if you’re in Germany, you have an even larger market,” he laments.
“Sometimes our companies might have a fantastic solution and are addressing a really interesting problem, but there are usually 10 competitors elsewhere in the world.”
However, when firms overcome these challenges, the results are impressive. Notable Sting alumni include: Karma, the app which aims to prevent food waste by helping restaurants sell surplus meals; Midsummer, a publicly listed company that produces flexible solar power cells; and Yubico, a cyber security company that has attracted over $30m in investment.
“Yubico is fantastic,” Hedberg adds. “This company is like a bumble bee: it shouldn’t fly. It has a female founder who was an artist, with her hacker husband. But it’s growing very nicely and it’s doing really good.”
But Hedberg isn’t only concerned with how individual companies are doing. He’s keenly aware of how the success of Sting and its partners will help support Sweden’s welfare system, which is well-known for being both generous and worryingly expensive: the country has the second highest tax burden in the world after Denmark, and many economic studies warn about the unsustainable cost of its welfare programmes.
“We’re in the business of creating new wealth for the country. If these companies grow, they replace the big ones that are not growing any longer, and we can continue to have the welfare situation that we have in Sweden.
“New companies like Spotify, Klarna, Izettle, they employ many more new people than (Swedish telecoms giant) Ericsson is doing. We need these new businesses to build the tax base, and then we can continue to have the welfare.”
It’s refreshing to hear a business leader talking about the wider benefits that a company can bring to society, rather than just how much money it has made for shareholders.
Looking ahead, Hedberg hopes to get more involved with startups working on complex technology projects – the kind that require lots of labour and capital to produce a prototype – rather than relatively simple digital ones.
“We’ll probably work slightly more with the sort of really complicated deep-tech things. We did that more when we started, and then over the last five or six years we’ve moved more and more into the digital. We’ll continue with that, but I would like to work a little bit more with startups that are addressing important, big problems, not a new app,” he says.
“We’re also working on changing the gender balance. We have done a lot on that in recent years. Last year, we took on 33 new companies, and 42 per cent of them had a female founder – which is, I think, a European record.”
Newspapers often speculate about where the “next Silicon Valley” will appear and dethrone the one in the US. Some say it will be London’s Silicon Roundabout; others tip Berlin, Paris, or Tel Aviv.
But with people like Par Hedberg trying to help companies that are addressing the world’s problems, my money’s on Stockholm.
Main image credit: Sting