The reasons why Sweden is a hotbed for digital innovation

Is the phenomenon restricted to Stockholm?

Stockholm is a hub for innovation, but it's not only Kista Science Park near the capital that's responsible for the success of startups. "With an open metropolitan network comprised of 1,200,000km of fibre optic cable – which could wrap around the earth 30 times – exciting young businesses are popping up all across the city," says Sanfridsson.

Clusters of tech companies can also be found outside of the capital. "Kista has certainly become one of the hotspots, but tech companies exist and thrive throughout the whole of Sweden," says Hedin. "Indie development is a strong undercurrent, and they typically thrive in non-corporate environments."

Science parks are spread around the country. "We've got science parks in connection to most university towns, like Ideon in Lund or Mjärdevi in Linköping," says Linda Krondahl, CEO of THINGS. "They all build a small local ecosystem, often joining forces with larger local companies in the area."

Kista Science Park in Stockholm

Kista Science Park in Stockholm is one of many hubs

Does the government help?

Absolutely. "The Swedish government has invested over €10.5 million (around £7.8 million, $11.8 million) into the manufacturing industry over the past few years," says Jonathan Wilkins, marketing manager of European Automation. "At its core it aims to make the country a key region for companies to develop products in."

The Swedish government has done a great deal to establish an attractive environment for startups. "It has helped households buy PCs to promote computer literacy and ensured that the country's broadband internet connections are among the world's fastest, which has allowed local businesses to participate on the global startup scene," says Sholay.

However, the government has other goals for the tech sector. Females and immigrants are poorly represented in the entrepreneurial class, while funding for startups is often badly organised. "The good news is that Sweden is proactively addressing these problems," says Walerud, who adds that Sweden needs innovation in existing companies too, not just startups. "The fact that five ministers, including the Prime Minister, are on the council means that our ideas do get heard – and it shows how seriously the government is taking innovation."

Candy Crush

Candy Crush creator King also hails from Sweden

Is Swedish innovation just a passing phase?

Innovation in Sweden is nothing new. "Look at inventions like dynamite, the safety match, colour graphics for computers and the Allen-wrench," says Hedin. "It's a long and very successful track-record."

That legacy of success shouldn't be underestimated. "Thanks to the recent global success of Swedish companies, we have a 'you can do it' feeling in the startup scene in Sweden," says Krondahl. "We do lack the access to the capital and investment-willingness that you can see in Silicon Valley, but our companies are therefore usually pretty bootstrapped from the start, and learn how to get as far as possible with limited budgets."

Sanfridsson points out that Stockholm's Royal Institute of Technology, founded in 1827, accounts for over one-third of Sweden's technical research and engineering education capacity, which helps keep the city as an international business and technology hub.

Skype

Nordic startup Skype was sold to eBay, then Microsoft

Why do many Swedish startups leave to scale-up?

The Stockholm culture encourages the development of many great ideas, but startups do struggle to scale up. "The Swedish market is simply too small and too dispersed to reach a critical mass of local users," says Philips. "The most lucrative user base sits in the US, but because of the time difference – up to nine hours – it's difficult to enter that market from Sweden."

A workaround is to split the business functions per country. "Spotify moved its HQ to London to look after business operations, while the Stockholm office still handles research and development," says Philips. However, the small size of Sweden means that startups' ideas will always be most successful outside the home market.

Tech leaders from the US and elsewhere now have their collective eye on Sweden. "In much the same way that during the early 2000s Israeli companies were given airtime by VCs after a number of innovations had come out of the country, Sweden has now earned its stripes by birthing Spotify, Minecraft, Memoto, and a number of other global success stories," says Sholay.