In the European Scaleup Landscape, the Kings are in the North. Sweden is one of its innovation cornerstones, according to the new SEP Report “Scaleup Sweden” realized by Mind the Bridge, with the support of Nasdaq and Baker McKenzie.
Data show that the Nordic countries over perform in the general ranking, considering their relative size (5% of Europe’s population and 6% of the GDP) with 16% of scaleups (1,144) and 19% of capital invested ($24.2B). Sweden, in particular, confirms its fourth place in the 2019 Scaleup Country Index, behind the UK, France, and Germany, accounting for a total of 542 scaleups able to raise $17.5B capital since inception. In other words, Sweden hosts 8% of the total number of European scaleups (7,034) which attracted approximately 14% of the overall capital injected into the European tech scaleup ecosystem ($125.6B). All the other Nordic countries rank behind.
Worth to say, however, that data about capital raised have been largely driven by Spotify’s IPO ($9.1B), the largest IPO for a tech scaleup in Europe up to date (second globally only to Facebook).
“2018 has been the year of Spotify. Its gargantuan IPO has been a critical milestone both for Europe and Sweden. It has been proving that Unicorns can bear and grow in Europe and in Sweden as well – commented Alberto Onetti, Chairman of Mind the Bring and SEP Coordinator – It has also confirmed the ability of the Nordics, and Sweden in particular, to produce tech giants. This year Northvolt and Klarna just joined Spotify in the exclusive ‘super-scalers’ club of tech companies able to raise over one billion dollars.”
“Sweden has de facto become one of the innovation powerhouses in Europe together with UK, Germany and France. And, with Spotify, Europe has now its first Big Tech. – commented Isidro Laso Ballesteros, Deputy Head of Innovation Ecosystems – European innovation Council (European DARPA) at European Commission – As European Commission, we are working to have more countries following this path and fostering innovation.”
That said, after years of robust growth, Sweden has shown a slower ramp in 2018. With only 53 new scaleups and a net of Spotify IPO proceedings, it raised y$1B as a new capital. A lower amount compared to prior years ($1.7 and $1.8B) that is not enough to keep pace with Germany and France that are adding over 100 scaleups per year and investing about $4B annually.
On the other hand, despite the low point, the capital invested in 2019 in Sweden is still more than double compared to the two other major Nordic countries (Finland and Denmark, with $0.5B and $0.4B respectively). In the general Country Index Finland ranks 8th with 256 scaleups and $2.5B raised, Denmark follows in 11th position with 173 and $2.2B while Norway ranks 13th with 132 and $1.6B, respectively.
As shown in the Scaleup Europe Matrix* – aimed at measuring the innovation economy in comparison to the size of the overall economy – Sweden overperforms the European average. Compared to last year, its position moved furtherly on the right, which reflects a consistent increase in capital raised by Swedish scaleups. Sweden’s Scaleup Investing Ratio in 2019 increased to 3% from 1.7% in 2018 (being the top performer country in Europe), while the Scaleup Density Ratio (5 startups per 100.000 people) is in line with the previous year (ranking second behind Iceland) well above the European average (1.2).
In addition, the scaleup ecosystem in Sweden appears to be more mature when compared to the European average: 28% of Swedish scaleups were established before 2010, versus 26% of the European average. But while 2016 represented an inflection point (131 scaleups closing a funding round) and 2017 was still a growing year (163), 2018 registered a (relative) slow-down in financing activity (133 funded companies).
Investments in Sweden
43% of the total capital raised by Sweden scaleups ($7.5B) has been provided by Venture Capital, while $10B (57%) comes from the stock markets, mainly impacted by Spotify’s IPO, as mentioned. 22 Swedish scaleups went public locally at Nasdaq in Stockholm. The value of Swedish IPOs is equal to 14% of total European IPOs. No ICOs have been reported.
Nasdaq Stockholm has maintained its position as one of the most active IPO markets in Europe. This is particularly true for the Nasdaq First North Growth Market, Nasdaq’s junior market which has more flexible listings requirements specifically designed for growth companies.
“The Nasdaq First North Growth Market has welcomed a total of more than 280 new listings raising around €3B in capital since 2015. Perhaps more importantly, 48 companies have matured and switched from our growth market to our Main Market during these years – added Niclas Holmberg, Managing Director – Global Listing Services Nasdaq – Companies on the Nasdaq First North Growth Market also raised an additional €3B in secondary offerings in the last two years only, confirming that companies continue to leverage our platform also after the IPO.”
Focusing on tech scaleups, Mind the Bridge research shows 45% ($3.3B) of all VC investments poured into Swedish late stage companies comes from US investors (well above the European average of 26%). Domestic investors account for 32% of the total funding ($2.4B) that is 4% more than the European average (28%). UK funds play the largest part in the investments by the Rest of the world.
In addition Sweden hosts a total of 34 (6% of the total) dual companies – scaleups that, shortly after inception, move their HQs abroad, while keeping relevant operations in their country of origin – that cumulatively secured over $1.3B (8% of the total capital raised). This is about 28% more capital compared to scaleups that pursued a local funding strategy ($40.5M on average versus $31.7M). 21 out of 34 choose US as their destination: not surprisingly, 13 of them opted for Silicon Valley (Palo Alto in most of the cases). 9 Swedish scaleups moved to the UK (8 out of 9 chose London).
The Swedish scaleup ecosystem is mainly composed by small scaleups. 78% of scaleups have raised between $1M and $10M, yet they have secured only 9% of the total capital invested. On the contrary, 2% is composed by companies that raised between $100M and $1B (the so-called “Scalers”) able to secure 75% of the total capital. The “middle class” segment (between $10M and $100M in capital raised) represents 20% of the overall scaleup population and 16% of the total capital.
If we look at capital raised, the Swedish scaleup landscape appears to be driven by Digital Media: $11.5B raised, 66% of the total, but this data is overly biased by Spotify. If we look at number of scaleup companies, Fintech tops the chart, with 63 scaleups, which raised $1.4B (8% of the total). Enterprise Software and e-Commerce follow.
In Sweden, the “Network Effect” contributes to Scaleup Concentration: the largest hotspot is Stockholm, with 329 scaleups headquartered there (60% of total), which raised $15B (89% of total). The Oresund area (Malmo and Lund combined) follows with 61 scaleups (11% of total).
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*Methodology (for a complete list, please see the full Report)
- “Startup” <$1M funding raised
- “Scaleup” >$1M funding raised
- “Scaler” >$100M funding raised
- “Super Scaler” >$1B funding raised
“Dual Companies” > Startups founded in one country that relocated their headquarters – and with that part of their value chain – abroad, while maintaining a strong operational presence in their country of origin.
- “Scaleup Density Ratio”
Number of scaleups per 100K inhabitants. A measure of density of scaleups in a given ecosystem.
- “Scaleup Investing Ratio”
Capital raised by Scaleups as a percentage of GDP. A measure meant to measure the capital invested in scaleups in a given ecosystem, compared to the size of the overall economy of that country.
- “Scaleup Country Index”
Country ranking built upon Scaleup Density Ratio and Scaleup Investing Ratio. A measure of the overall innovation commitment of a given ecosystem and its ability to produce significant tech players.
- “Scaleup (City) Hub Index”
Hub ranking built upon Scaleup Density Ratio and Scaleup Investing Ratio. A measure of the overall innovation commitment of a given city/tech hub and its ability to produce significant tech players.
- “Scaleup Matrix”
The matrix visually compares ecosystems by factoring the Scaleup Density Ratio and Scaleup Investing Ratios.