Thursday, March 28, 2024

How Sweden became the Silicon Valley of Europe

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Sebastian Siemiatkowski, the billionaire founder of Klarna, is preparing to hold one of the largest fintech companies in Europe’s history. This is a capitalist event. Feast, he attributed its runaway success to an unlikely supporter: the Swedish welfare state.

In particular, the 39-year-old clearly pointed out the government policy of the late 1990s, namely, to place a computer in every household.

“Low-income families like me cannot use computers, but when the reforms started, my mother bought us a computer the next day,” he told Reuters.

Siemiatkowski started coding on this computer when he was 16 years old. More than two decades later, his payment company Klarna is worth US$46 billion and plans to go public. It did not provide details, although many bankers predict it will be listed in New York early next year.

Sweden’s home computer drives and simultaneous early investments in Internet connectivity help explain why its capital Stockholm has become fertile ground for startups, bred and incubated companies like Spotify, Skype, and Klarna, even though some of its tax rates are world-wide The highest in the world.

This is the opinion of Siemiatkowski and several technology CEOs and venture capitalists interviewed by Reuters.

During the three years (1998-2001) of the program, 850,000 home computers were purchased through it, covering nearly a quarter of the country’s 4 million households at the time. They didn’t need to pay for these machines, so they included Many people cannot afford it otherwise.

When Klarna was founded in 2005, Sweden had 28 broadband subscriptions per 100 people, compared with 17 in the United States—dial-up is still more common—according to World data, the global average is 3.7 banks.

While Apple’s iTunes was still based on downloads, Spotify allowed users to stream music, which gave the Swedish company the upper hand when streaming became the global norm.

“This will only happen in a country where broadband becomes the standard, and in other markets, the connection speed is too slow,” Siemiatkowski said.

“This has given our society a few years ahead.”

Some executives and activists say that Scandinavian countries have shown that deep social safety nets, often seen as anti-entrepreneurship, can promote innovation. This is a result that the designers of the Swedish welfare state might not have thought of in the 1950s.

Childcare services are largely free. If your business fails or becomes unemployed, a series of income insurance funds can provide you with protection, guaranteeing up to 80% of your previous salary during the first 300 days of unemployment.

“The social safety net we have in Sweden makes it less easy for us to take risks,” said Gohar Avagyan, 31-year-old co-founder of Vaam, a video messaging service for sales promotion and customer communication.

Startup rate VS Silicon Valley

Although the overall investment scale of larger European economies and their long-term financial centers, such as the UK and France, is larger, Sweden’s influence in some areas exceeds its weight.

According to a 2018 study by an OECD economist, its entrepreneurial rate ranks third in the world, second only to Turkey and Spain, with 20 startups per 1,000 employees, and the three-year survival rate of startups The highest, 74%.

According to Sarah Guemouri of venture capital firm Atomico, Stockholm is second only to Silicon Valley in terms of unicorns—start-ups worth more than $1 billion per capita, roughly 0.8 for every 100,000 inhabitants .

Guemouri, co-author of the 2020 European Technology Company Report, stated that Silicon Valley-San Francisco and the Bay Area-has 1.4 unicorns per 100,000 people.

However, in a country where the capital gains tax rate is 30% and the income tax may be as high as 60%, no one can be sure whether the boom will last.

In 2016, Spotify said it was considering moving its headquarters out of the country on the grounds that high taxes made it difficult to attract overseas talent, although it has not yet done so.

Yusuf Ozdalga, a partner at venture capital firm QED Investors, said that for non-Swedish speakers, obtaining funding and the administrative or legal tasks associated with starting a company can also be difficult to manage.

He compared this with the Dutch capital Amsterdam, where the Amsterdam government adopted English as the official language in April to facilitate the lives of international companies.

VC’s “Interesting Dilemma”

Jeppe Zink, a partner at London-based venture capital firm Northzone, said that one-third of all exit value (amount received by investors when cashing out) of European fintech companies comes from Sweden.

He added that government policies have contributed to this trend.

“This is an interesting dilemma for us venture capitalists, because we are not used to supervision to create markets. In fact, we are inherently nervous about supervision.”

Anders Ygeman, the Swedish Minister of Digital Affairs, stated that social regulation may make innovators “possibly fail” and then “restart and run”.

Peter Carlson, CEO of the start-up company Northvolt, said that the ultimate success bred success, the company produces lithium-ion batteries for electric vehicles, valued at 11.75 billion US dollars.

“When you see the success of others, you really have a ripple effect, I think this may be the most important thing to create a local ecosystem.”




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