Swedish tech startups and scaleups
swedishtechnews.com
swedishtechnews.com
Pluijzer (Stockholm, social enterprise that develops innovative solutions for a plastic-free future)
So guess I have to start doing that ...
Does anybody know whether that's true?
If so, it really undermines the narrative that is somewhat dominant in Britain, that high income tax will disincentivize entrepreneurship and innovation etc etc
So cool… you're rich but if you actually want to use the money it is taxed.
It kind of makes Sweden into a low tax haven if you're only living off capital.
In Sweden, very very few SWEs earn more than 80k/year.
Earning above 100k is not uncommon.
OK, I believe that. Still a bit from a really good US salary though.
Did you meet many SWEs that had a total compensation of >5 MM SEK/year?
The salaries are taxed in a way that a worker cannot easily save money to start their own business, they need to beg bankers for a loan or go cap in hand to the rich people - and oh be sure they'll have to give shares to the business.
In the UK we used to have a nice route for workers to build up their start up fund - basically you could create a company and sell your (and your co-founders) services to other companies. You could pay yourself a small salary or dividend or both to be able to cover rent, bills and day to day outgoings and in a year or two you could have amassed sizeable capital while gaining expertise. As an example, if you wanted to sell Kubernetes based SaaS product, you could have offered Kubernetes maintenance services etc and learn what kind of pain points corporations have and then work on incorporating solutions into your start up offering. Problem is that government believed it was a tax avoidance and closed this route (IR35). Now you can still offer services, but you are getting taxed on revenue which has no advantage over just being an employee and taking forever to save money.
It is still possible to build a business in the UK the old fashioned way of working hard and making personal sacrifices.
I'd think the rich people is a side-effect of successful pooling in finance. If you can get away with fees of >1% for "just" finding PE deals, that sometimes ramps up profits really fast.
Say you have two startup environment. One where it is affordable with housing, education and most people could try to start a startup and another where those things are expensive and few can. Which one requires more capital and which one is more successful?
Investments are something you get when attractive companies are being created. Not something that creates attractive companies in itself. Plenty of countries have plenty of rich people but most don't stand out in terms of successful startups.
When you know you won't become homeless due to a failed venture it becomes easier to take a chance on something.
For a country with roughly the population of the Chicago metropolitan area Sweden punches well above their weight in everything from startups to pop culture influence[0] to the point where the referenced article calls Sweden "the unofficial capital of pop music".
Turns out when you have a safety net it's a lot easier to make the jump to forming your own startup vs the US where if you leave your job the first step is to figure out how to get healthcare (and pay for it). In the US you're much closer to complete ruin if you leave a job to pursue your wild startup idea.
[0] - https://www.thrillist.com/entertainment/nation/this-is-pop-n...
I think you are overindexing on the safety net part. Here[1] is a chart of startups per capita in Europe. Looking at "startups per 1M inhabitants", Estonia has 1100+ while Germany has only 250 in spite of having a great safety net (apparently).
Same article also shows that Sweden has 1769EUR VC funding per capita, when Finland has only 854EUR and Denmark/Norway don't even show up on the chart. All 4 countries have similar cultures, no?
And let's not even talk about Saudi Arabia which spends a lot on social safety net but I haven't seen much entrepreneurial or artistic exports from that country (oil doesn't count).
I believe "forming your own startup" requires a lot of ingredients - ecosystem or flywheel (see: Silicon Valley), funding for risky bets (see: USA), a bit of hunger, education levels, culture of risk taking etc etc.
[1]
Safety nets, be that a psychological one ( the US with the American dream ) or a welfare angle (sweden, Norway etc) but what seems to be truest or at least in my observation is the psychology of the country in terms of its approach to supporting startups of all flavours matters more. This means,broadly, it being considered an acceptable and successful route of learning business and is not a hyper risky endeavour.
In stable global north countries, it was, historically, considered a radical act to not join a big national or even multinational company. Hell, the terminology of the description tells you the sense of import that we held for the the large beasts of industry.
This all radically shifted with the advent of software, games, websites, SaaS, PaaS etc etc.
It was perceived, over the last 40 years, no longer risky to be in computers, but very wise, and a smart move.
With this rise of the geeks, then came adjacent entrepreneurial activity, fancy coffee shops, better food, etc
Now,this has probably played out one way or the other on every country.
What I have seen, is that entrepreneurs are more present and more numerous than ever, but there are numerous obstacles in their way.
Import limits, sending money internationally, basic banking, travel restrictions, gender limitations, sexuality limitations, freedom of the press, dictatorial governance with a lot of religion as the policy.
These are the limiting factors to growth. Investors will always invest, we can derisk it somewhat with tax breaks, but money makes money.
Ultimately what's designs a great startup ecosystem is excellent people making excellent things with or without government assistance and working together, as a cohesive unit to celebrate and champion making cool shit for money. Be it coffee, be it BBQ, be it software, be it yoga.
Independent businesses require a state that trusts its people, and the people trust the state.
Germany is an odd example, but from my experience with German entrepreneurs is the risk tolerance of Germany investors is very very low. So it's get customers then get money. However, that said, Germany has produced a few good businesses so perhaps there's a method!
It can never be one size fits all when it comes to creating the perfect environment, much like gardening, you've got to work with the strengths of the plot, the soil, the weather etc.
However, if we all think we should replicate the valley on our respective locations then we're truly missing the strengths and values of our communities.
High taxes and a welfare state do of course have some role to play (positive and/or negative), but as you say there other important parts that probably matter more.
One thing we can say empirically is that Sweden have had it difficult to create large sustainable companies from startups like it did hundred years ago, Spotify is a notable exception.
Also, for things that aren't purely nebulous (not just thinking of finance here) you can't just go out and start anything anywhere. If you start something in Norway you'd better not rely on cheap local labour, but you might gamble on cheap electricity. Saudi Arabia just has no comparative advantages apart from oil and Hajj tourism.
An actual advantage that I think Sweden has, is the combination of a highly educated and highly creative workforce. Your stereotypical Swedish engineer isn't just educated for economic reasons (because if it was about money, he could have done a dozen easier things anyway). He also has some serious creative ambition. If you are rich enough to pay him and clever enough to steer those ambitions down a profitable path, you can make a ton of money on people like that.
That's why I counted both startups and funding received by those startups.
How the incentives play out you have to ask someone else about tough ;)
Edit: Got curious and looked up income tax. Turns out I was slightly wrong, Income is regularly taxed around 55% for really high income, but if you also count in VAT ("moms" in swedish) you get ~70% taxation.
The 'Swede' I know best (Doctor) left for that reason.
The argument most often used is 'But I Get Good Services' - which I'm suspicious of because 1) well, you could just keep the money and spend on the services you want, instead of the services the state chooses for you and 2) there's incredible efficiency in private institutions. I don't see any government in the world ever making a good 'Spotify'. Despite it's flaws, it's nice to have 'music when I want it'.
In short, probably thinks like 'Healthcare for Everyone' (though maybe not socialized entirely) and better retirement comp. are really good ideas and should be universally applied (much as we now know that 'central economic planning soviet style' is a bad idea).
But 2/3's to the State is just a gigantic amount.
Even a small adjustment such as '15% must go towards your Healthcare Insurance' and then let people pick plans, or, 10% must go to a 'Retirement Savings Plan' (of which some of it cannot be withdrawn until 65 and some of it pooled) might even be beneficial.
I think that would start to create some social nudging functions (i.e. payment for Healthcare) while being a bit more fair (i.e. service quality sometimes proportional to money put in).
And maybe the 66% kicks in, but at some much, much higher rate, like over 1M in income.
Finally, we don't seem to account for just 'organizational intelligence' which I think is the biggest difference.
When I see the lunches Swedish kids get I don't think 'they are rich' I think 'they are smart'.
Lunches, esp. mostly vegetables do not have to be expensive, I think the whole 'burgers and tater tots' you see in USA is just stupid, lazy thinking.
Just being a bit creative with the menu, a bit conscientious with the process, and esp. having children help quite a bit would help. Any school kid can do 'something' and past age 8 they can wash veggies, help clean up, sweep. They do this in Japan for a lot of things, why can't we? I suggest children can even learn to prepare certain kids of veggies responsibly.
Since a lot of education is kind of just 'daycare' why not give them some responsibilities as well? I mean, it's like a 'win win'.
The remaining meal functions can be done by a staff.
We can't avoid inherent costs in things but I suggest there is enormous upside in being intelligent about things in 'whatever' systems: Drugs, Incarceration etc..
My minimal exposure to Swedish startups is that they have way better communications - they present their concepts using language, visuals, way ahead of others. This despite Swedish formal education system flailing a little bit behind others (that's a complicated thing). p All of that said I 100% agree that 'safety net' will improve the likelihood of participation 'early stage' startups, not sure what it means beyond that stage.
An interesting definition of “fair” - in Sweden the principle is equal health care prioritized according to who needs or benefits most from the care, not how much you pay. If you see it from that point of view, tax is not a transaction where you pay for the services you receive. You pay for the society you receive, which includes people in general being more healthy, not just yourself.
Most people are somewhere in the middle, but there absolutely are people do nothing and people who are always being constructive, some in powerful ways.
A society in which 100% of resources would be allocated in that manner (basically communist) would completely fall apart.
I think 'same treatment Healthcare' is actually a bit of a hard-socialist idea that happened to make it's way through society historically (because it needed to have some socialization) but that will ultimately fail, it's on the edge in Canada right now as they are discussion private options.
In much the same way I think fully-private healthcare is a failure.
For the later (fully private) we have to understand the mechanisms are not the same as for regular products or even food etc. - there are existential issues which create gigantic asymmetries. So there must be heavy regulation and likely socialization in certain aspects.
But the converse is still true: 'everyone the same' is a disaster for most of the economy, it's also maybe not such a good idea for healthcare.
FYI - in Sweden the are Private Clinics.
In Canada, where I am from, we have pretty crazy laws, some of those most limiting in the world.
It's illegal to provide private services for all but a minority of issues.
Just consider that: a mechanic can fix your Mazerati, but it's illegal for them to fix your arm.
In practice - there is filtering. 'Important People' somehow manage to get good access, like Sports Stars, politicians. Actual Doctors/Hospitals are not owned by the government (as they are in UK) so they are selective, but the billing rates are theoretically the same.
On the other end, you may or may not get the surgery depending on if you're an alcoholic/smoker etc..
Due to all of this there are very, very weird asymmetries in Healthcare all over the place, notably Doctor's guilds controlling access to their domain, pricing insanity in the US for actual services, insane drug prices due to IP laws and lobbying, inability of governments to innovate effectively. One weird artifact of the later is how much we have to depend on the advancements of other nations.
The NGO style they have in the US is an interesting model as well.
I'm honestly baffled anyone seriously thinks that. It takes a minimum of reflection on all of the services provided by a functioning state and their role in society to realise that is just highly impractical. You get economies of scale, you get people who can't afford "services" who can not die, you get social mobility, happiness (if the workers servicing the ones that can afford services are unhappy slaves, that would impact service), etc.
> there's incredible efficiency in private institutions. I don't see any government in the world ever making a good 'Spotify'. Despite it's flaws, it's nice to have 'music when I want it'.
There's incredible efficiency in public institutions too, they just optimise for different things. One for money, the other for reach, impact, accountability. Despite it's flaws, it's nice to have healthcare when you need it without fear of bankruptcy.
The only areas in which it's ostensibly 'more efficient' are where there are natural monopolies and market conditions that make it impossible to do otherwise, and so we accept socialized intervention.
In most cases, we only socialize 'when necessary' - not the other way around.
"There's incredible efficiency in public institutions too, they just optimise for different things. One for money, the other for reach, impact, accountability." - I can hardly believe anyone could think that. That's what they put on paper, generally not what they do.
Both public and private organizations are fighting for their own institutional survival and power - it's just the mechanisms of influence are different: one gets money from taxpayers with some kind of 'oversight' which is not necessarily responsive to needs, the other, lives or dies on whether or not the provide value to people for a given price (aside form private monopolies).
It takes a 'minimum of reflection' to realize this as we have unlimited practical evidence for it ... were this to be even remotely true, then everything would be socialized as a 'matter of scale and efficiency'. We would be inexorably pulled in that direction - and yet - basically few things are, except maybe Healthcare in the US, as one of those markets that 'requires more social intervention' but for which there is currently very little.
Which governments invent the iPhone? (or could ever?). Hint: it's not a technology, it's a product which requires a product/market orientation, the ability to shift nimbly in innumerable areas of specialty, that no government has ever exhibited any capacity for - except - during wartime. When did they develop Web Analytics? Networking equipment? Effective merchandising mix even for things like groceries which is what give us the amazing variety and quality of products and produce we have? Farming equipment, processes, resources? Search Engines? Automobiles? Music streaming service? Chip designs? Video Games? Superhero Films? Toys? Makeup? Clothing? IoT Products? Furniture, lighting, tools? Construction equipment? Giant supply chains for all of those? Distribution chains? Financial services for investment banking? Retail? Commercial?
This list is really long.
I mean, it all could be done by an elected committee, but in most cases, not nearly as well.
In 1920 - yes - I can kind of understand it; 'on paper' of we merely had the government take over all of the auto-manufacturing plants, we could theoretically reduce costs by 10% by clearing out management, and, reducing profit taking! Citizens Unite! ... but it would not have been good for the future.
After a century of experimentation with all of that, we have some good data.
The government of Canada, in 2022 can't get my Health Records online.
They have spent $800 Million (>10x over budget) on an in-house payroll service for their employees that does not work. That's a lot of money, and it's the tip of the iceberg.
Where is the inquiry?
Obviously governments are necessary for enforcing basic regulatory requirements all over the place as it would not be efficient for us to have private practice to do that, but it depends on the situation. (For example, I wonder if 'rating agencies' need either to be socialized or to have extra careful oversight?)
Some public services with natural monopolies (roads, energy transport) obviously must be socialized in some way, because we can't have 10 different competing electricity grids and/or 'toll roads everywhere'. But of course, government generally does not actually 'build roads' - they contract that out to competitive bids, hopefully with oversight. That would be absurd.
Case and Point for the 'Governments are Better' enthusiasts - in which countries are the roads actually built by government employees? And have a better situation overall? I'll bet nowhere, because it makes no sense at all - even in an industry that is 'very large' with ostensibly a lot of room for 'scale' ... private contractors do the actual road construction.
'Pure R&D' is generally impossible in private markets outside of companies that are 'swimming in profits' (aka Google, MSFT) and even then it's not very pure, which is why higher education has to be strongly associated with government.
Basic education, regulatory considerations, strategic investments of scale impossible by private markets alone (aka chip fabs), investments in markets which are political in nature (weapons systems, space systems, some large energy projects), in which there are other, existential considerations/inelastic situations that combine to warp outcomes (aka Healthcare) there have to be interventions.
In most but not all cases, we have socialization because of necessity not because there are advantages, and vast majority of currently private markets would not benefit from being socialized.
Finally ... maybe this is mostly moot - I'll bet (but I'm not sure, correct me if I'm wrong) that most of the extra taxation in Sweden goes mostly to redistribution type expense, aka paternity leave, retirement, welfare services etc. which are all very expensive, and that Gov. Sweden is probably not directly doing a lot of market oriented things anyhow. I mean, they're not making furniture, coffee, or Music services ...
If it wasn't low taxes that achieved this then what was it?
Other things it’s got going for it is a highly educated English-speaking population, geographically favorable location between Europe and the US, which, together with the favorable tax policies, makes Ireland especially useful for American tech and pharmaceutical companies.
(This isn't really true anymore but that is a different story)
I tried to use a mix of "criteria" such as company age, whether it acts like a startup/scaleup (rapid innovation, invests heavily in growth, needs external funding to get going), whether it's covered intensely by the startup-focused tech media etc.
To me, Klarna ticks those boxes.
Aaah. Not a startup anymore.
Just because a company uses computers in some form, doesn't make them a tech company. I know many retailers who are just that: retailers, who use pretty sophisticated software and employ a ton of developers, but they aren't tech companies and would never claim to be one.
* https://metry.io/img/metry-product-information.png
* https://norban.se/assets/img/front-page/section-1/room_7@1x....
* https://nordtechgroup.com/wp-content/uploads/2021/08/undrawd...
* https://www.nuvoair.com/_nuxt/img/home-enterprise-img.97f461...
* https://sanitation360.se/wp-content/uploads/2020/12/puff_pro...
* https://securifid.se/wp-content/uploads/2021/10/kvinna-locki...
* https://www.sinch.com/sites/default/files/styles/medium_hq/p...
* https://workamo.com/img/hero-image.png
* https://www.airmee.com/images/icon_airmee_delivery-fresh.png
It's actually really hard to get photos of real people in positions and context you want, and, there are so so many mitigating factors when there is more realism.
Cartooish characters radically simplify everything. Even things like DEI - not enough 'People of Colour' , that can be changed instantly.
One could just remove all of that and be judicious about the use of 'people' (Apple does that - not a lot of 'people' in the docs etc.) but then you lose the 'human connection'. People 'relate to' People.
Once a few companies start doing it the 2cnd then 3rd tier follow for reasons they may not understand (copying happens a lot, it's just like 'benchmarking', it's 'easier' and 'safer'). 4th tier never cared.
The swedish startup I used to work for was setup in this way to scam taxes.
You can do it to fiddle around with tax, but it's separately quite sensible to hold all your IP in a single region & entity to minimise the complexity - otherwise you'd have every territory licensing IP to every other territory, a.k.a an absolute mess.
It's not my experience that Sweden is a great place for startups, the bureaucracy is extremely hit/miss. Setting up tax information for example is really difficult as a non-Swedish speaker and even tripped up my Swedish speaking friend (who is a project coordinator on the new Skane hospital: so she's somewhat aware of the tax system). How much of your daily work will be administration, how much will be selling services, how much money will you make do you estimate; you must give us an estimation: if it's too far off then we will fine you!
Information in English is... scarce, but gives the illusion of being available.
Hiring is also very complicated, you have to be very explicit in your contracts because anything not spelled out immediately falls in favour of the employed; which is nice, but as a novice employer that's very scary, because I don't know everything obviously.
What in your mind makes you think it's a good place?
(Sweden is still probably easier than Germany, though that's a low barrier tbh)
Edit: good to know about the UK
14GBP to Companies House, extra 10GBP to reserve the right to your name.
File your books every year, expect to be audited randomly for a few years.
Sure, I assumed this because you need that in any country you operate a legal entity.
> which requires a officer with a registered address in the UK.
This is the same in Sweden too
> Then you need to argue HMRC valuation discounts if you want to issue EMI options, which are only valid for 3 months, so you need to do it repeatedly. And then EMI option schemes are 15+ pages long contracts. Sweden has an equivalent stock option scheme that's ~2 pages, in comparison.
You have more experience than me there, I never had this as a problem to solve so you could be right.
You can apply for temporary exemptions, but they are temporary and you are supposed to have good reason.
There’s no explicit requirements that any particular position must be held in Sweden, you can be a VD in the EEA for example, but you still need at least one legal responsible person to be domiciled.
EMI itself is not a scam. Whether a company follows through on giving you the options in a reasonable timescale is another thing, and whether the shares are eventually worth anything is another again. As with all things startup option/share related, consider it a lottery ticket with an unknown chance of paying out.
That being said, £50k after all the tax is still better than £0 and if the £50k was paid as a one off bonus, you could pay it into SIPP without paying tax.
I remember when I asked them why I cannot get normal shares? They said that EMI will be better for me because I will save on tax. I said, why if I want to pay tax, it pays for our schools, hospitals, why should I be taking the advantage? So they said that the board don't want to do that, because it will create "a legal issue" when they will be looking for next round of investments.
So if any future employee reads that, if a company insist on EMI shares and don't want to give you real shares or money upfront, then jump the ship!
As with all countries there are definitely things you need to learn. We relied on our lawyers to draft employment agreements because we were already using them as part of our seed fundraise. There are companies like Pocketlaw (https://pocketlaw.com) that provide solid, standard agreements that you could use.
Unfortunately the employment law is written in support of factory workers, not knowledge workers. So many employers are very cautious when hiring because a non-performing employee is very expensive to get rid of, as long as they have been employed for 6 months or more.
Are there any Swedish incubators similar to Y-Combinator that are facilitating startup growth?
https://sting.co/ https://www.abi.se/ and lots more listed at https://www.sisp.se/medlemmar
I am a top-tier FP guy among other things.
Just read.