The most exciting startup scene you have never heard of isn't in Seattle or London--it's in Scandinavia.
The Nordic countries, particularly Sweden, have the highest percentage of unicorns per capita in the world, and have developed more successful brand-name billion-dollar startups--Spotify, Skype, and Klarna to name a few--than any other region besides Silicon Valley and Beijing, which has 17 in a metropolitan population of more than 20 million people in a greater provincial area of more than 100 million.
After speaking to several leaders in the Nordic region's startup ecosystem, I've found clear reasons for its success.
Defining the Meaning of Cluster
Startup ecosystems invariably thrive in strong clusters. The Valley, which encompasses San Francisco, Palo Alto, Mountain View, San Jose, and more talented engineers per capita than anywhere on earth, is of course the most famous.
What is unique about the Nordics is how their leaders have created a very close cluster despite comprising several countries. Shared cultural history and affinity, as well as similarities in language and low levels of border control, are very clear factors in making the region feel like a neighborhood.
"There's been a rise of startup communities in Finland and other Nordics as well," said Panu Keski-Pukkila, founder of Hardware Startup Finland. "These communities function at the intersection of municipality, corporations, and academia, bridging gaps and opening up exciting opportunities for their startups."
Education, High Quality of Life, and Social Stability
Like Silicon Valley, the Nordics are home to some of the world's best universities and boast one of the most highly educated populations in the world.
Sweden, in particular, has a highly entrepreneurial culture. Stockholm has become a cultural hub for startups, soaking up the prodigious engineering talent of neighboring countries such as Estonia. At Slush, which was held in Helsinki in November, I sat next to the chief technology officer of Estonia at the speakers dinner, and his enthusiasm for Finnish companies' increasing penchant for using Estonian software development firms and freelance talent was unbridled.
"Even though the Nordics account for a significant percentage of unicorns worldwide," said Ankit Desai, managing partner of R&D labs at Universal Music, "the actual number of people in the startup scene is not that high. So it feels like everybody knows everybody, and there is a lot of support--right from top schools offering workspaces and business contacts in their own incubators, to investors being easier to reach, to the government making it easy to start a business."
This educational strength is complemented by consistently high quality of life ratings--Norway and Sweden are routinely rated among the top five countries in the world in which to live--and high social stability.
This in turn contributes to building a stable and ballooning ecosystem, as local powerhouse startups take advantage of international markets in Europe and the U.S. but feel no compulsion to leave.
Local Capital Ecosystem With an International Outlook
Perhaps the Nordic region's greatest attribute is the combination of a robust homegrown capital ecosystem and a deeply international outlook--in terms of both regional and global internationalism. Unlike ecosystems such as Israel's, which relies heavily on international--particularly U.S.--funding at the institutional level--Nordic startups can depend on their local ecosystem for funding while still developing an international culture.
In this particular way, the Nordics far outstrip any other region, even Silicon Valley, which has long seen market opportunities in China and Europe but always focused primarily on the healthy U.S. domestic market.
"The Nordics have a unique blend of a strong engineering, design, and data culture that goes back many generations; a small tech-savvy local market that is a great test bed before going global; and, most important, a product-driven problem-solving mindset that starts with the individual and goes all the way up to policymaking," said Marta Sjögren, a principal at Northzone. "A Nordic startup DNA is being formed."