Land of unicorns

Why Stockholm punches above its weight in innovation and entrepreneurship.

Saritha Rai

The city of Stockholm has fewer than one million residents, roughly a tenth of Bangalore’s population. In fact, at 10 million-plus people, Bangalore has more residents than the entire country of Sweden (9.7 million). The Scandinavian capital is abuzz with innovative ideas and startup savvy. How does a city with so few people grow a density of technology unicorns (startups valued at $1 billion or more) and multi-hundred dollar startups to beat Bangalore hollow?

Spotify, the music streaming service that has been valued at over $8.5 billion to make it Europe’s most valuable venture-backed firm, started in Stockholm. It was Sweden’s fifth unicorn. Alongside Spotify, there is the free video and voice chat app, Skype, King (the gaming studio behind the Candy Crush games), Mojang (maker of Minecraft games) and Klarna, the payment service. Stockholm is the world’s most prolific tech startup hub after Silicon Valley on a per-capita basis. Stockholm is right up there, following on the back of large technology hubs such as Silicon Valley, Beijing and New York.

A tiny city punching far above its weight in innovation and entrepreneurship is no coincidence. Stockholm’s startups enjoy a huge advantage, and its milieu is miles ahead of Bangalore’s in many respects.

Take the underpinning of Stockholm’s innovation ecosystem. The Swedes benefit from no-cost undergraduate education and low-priced university education that frees them to think about starting ventures and funding them without having to worry about paying off huge college loans, like in the United States. The tech scene was decades in the making. In the 1990s, the Swedish government ploughed in generous funds and resources to create world-class technology infrastructure for its citizens. The government gave tax breaks to those buying a computer and set up high-speed internet connectivity. “The investment of two decades ago is now paying off,” says Marta Sjögren, a principal at Northzone, the venture capital firm that is one of Spotify’s largest shareholders. A whole generation of digital-native Swedes grew up in the high-speed internet era, which has led to the nurturing of ideas and plunging into entrepreneurship.

In contrast, Bangalore’s entrepreneurs are on their own, with little or no government support to speak of. India’s positives could be that the country is a lot less regulated when compared to Scandinavia, where testing and beta trials for technology products take time. Also, in India, a big fraction of the population is young and mobile adoption is huge.

There are many other dissimilarities. Stockholm is squeaky clean, its residents enjoy a high quality of life, and its infrastructure is enviable. There is order everywhere — public transport systems run on the dot. Bangalore’s infrastructure is broken. In India’s tech capital, roads are clogged and the recent Diwali rush saw the streets being converted into one giant parking lot. Yet, vehicles sales are high. Public transport systems are pitiful, power blackouts are common and water supply is deficient. On the bright side, the weather is glorious nearly all year round. Perhaps Bangalore’s bedlam helps foster creative entrepreneurial ideas.

Many of India’s technology startups chase users in the domestic market, but Stockholm’s startups aim for the global stage from the word go. For instance, Stockholm-born Truecaller, an app that allows people to identify unknown numbers and block spam calls, does not have a significant user base in Sweden and is relatively unknown in the West. Its largest market is in India, home to 100 million of its 200 million worldwide users.

In Bangalore, an entrepreneur’s life is unpredictable. On the other hand, Stockholm’s entrepreneurs can partake of Sweden’s low-cost healthcare and generous pensions, thanks to the country’s high taxes, which yield a munificent cradle-to-grave welfare system. The city’s high quality of life and social security cushion have helped a smorgasbord of startups thrive. In Stockholm, an entrepreneur is focused on only one goal — his or her startup. “A failed entrepreneur gets up, dusts himself off and starts again,” says Johan Seltborg, founder of Stockholm-based healthcare neuro-rehabilitation startup, Inerventions. Many founders are on their third or fourth startup cycle. In Bangalore, where distractions and hurdles are aplenty, entrepreneurs are set for a hard fall.