The Nordic countries (Denmark, Norway, Sweden, Finland, and Iceland) have recently experienced a startup boom. Many experts attribute this to their robust welfare system, high levels of education, and innovative business practices. However, with the current global economic climate, many wonder if this boom is sustainable and whether it will continue into 2023 and beyond.
The region is home to some of the fastest-growing startups and companies in the world, including Spotify, Pleo, Klarna and Too Good To Go, to name a few.
The Nordic Model
One of the key factors contributing to the economic success of the Nordic countries is their unique approach to social welfare. The Nordic model prioritises social welfare programmes and progressive taxation, which has led to a high standard of living for citizens and a relatively equal distribution of wealth.
This approach has also encouraged entrepreneurship, internationalisation and innovation, with many successful startups and tech companies emerging from the region in recent years. However, this model has also faced criticism for being unsustainable in the long term. Some experts are concerned that the high taxes required to maintain it will eventually lead to a decline in economic growth.
How the startup ecosystem has grown over the last few years
Long recognised for its emphasis on entrepreneurship and innovation, the Nordic area has consistently grown in the last few decades. However, there are doubts regarding the Nordic model’s long-term viability, particularly for startups and new companies that want to scale.
To face and overcome this difficulty, many Nordic startups are concentrating on building closer relationships with established businesses and utilising their networks to access new markets and customers. The closeness and similarities of the Nordic countries allow for much easier networking and partnerships, which can quickly become an essential part of helping a business scale.
The region’s emphasis on entrepreneurship and innovation will likely continue driving economic growth. But it will be crucial for startups and emerging businesses to focus on sustainable growth, forming well-balanced partnerships and networking to flourish over the long term. That’s what Estelle Roux from StellarUp mentions: “As CEO and co-founder, I know first-hand how critical it is to have access to resources such as funding, smart mentors and peers who can collaborate with you. Adaptability must come into play for a startup’s longevity —which is ultimately our goal. One has to embrace innovation diligently whilst taking calculated risks even when faced with various obstacles or market conditions. This mentality will allow us all to not just survive, but thrive!”
What is driving forward innovation and startups in the Nordics
One characteristic of the Nordic countries is their knack for spotting trends early on. They were among the first European countries where digitalisation was adopted in every sector of society, creating an environment where startups can flourish today.
In 2022, a year of global recalibration, the Nordic region again showed its resilience. Even with the uncertain and unstable geopolitical and macroeconomic global situation, the Nordics achieved its second-highest year for venture capital funding.
A study by Dealroom showcases that in 2022 there was a decrease in late-stage funding (series C+), but early-stage stays stable (with just a 6% decrease compared to 2021) and grows significantly in Norway and Iceland.
That’s something that Will Gray, the CEO and Co-founder of Rekonnect, a MedTech startup from Malmo, points out when asked about his experience raising funds in the current economic land space. “We started in September 2022 and closed in January 2023. Fortunately, we had begun building relationships quite early, so the main task was closing deals with investors, as they had seen us grow over a year. The economic environment meant that investors were much harder to convince and did much more due diligence to convince themselves to invest.”
Established and upcoming startup hubs
Home to some of the most innovative companies in the world, it’s no surprise to learn that, aside from having access to a highly skilled workforce, the Nordic region has access to venture capital funding and a supportive business environment. From Stockholm’s established startup scene to the growing community of Reykjavík, the Nordics offer a diverse range of locations for startups to develop and grow.
- Stockholm: With numerous incubators, accelerators, and venture capital firms fostering new enterprises, the Swedish capital is home to a flourishing startup environment. Fintech, gaming, and health tech are three industries in which Stockholm excels. Malmö and Göteborg are two cities to watch in the next few years.
- Helsinki: Starting to claim its space in the global startup scene, Helsinki is home to global-renowned companies like Supercell and Supermetrics. The city places a lot of emphasis on clean energy and gaming, and it is supported by several government programmes that encourage entrepreneurship and innovation.
- Copenhagen: The Danish capital is a hub for biotech and life sciences startups, with a strong focus on sustainability and innovation. The city has several prominent incubators and accelerators, including Accelerace and Copenhagen Fintech.
Other key cities for startups in the Nordics include Oslo, Gothenburg, and Reykjavík. In addition to these cities, several regional venture capital firms and incubators support and fund new businesses. Let’s get to know some.
VCs and incubators in the Nordics
The area’s key venture capital firms include Northzone, Creandum, and EQT Ventures. These firms have invested in successful startups, including Spotify, Klarna, and iZettle.
In addition, several prominent incubators and accelerators in the region, such as Startup Sauna, Sting, and Startup Reykjavik, provide support and resources to new businesses. These organisations offer mentorship, networking opportunities, and funding to help startups grow and succeed.
Governments encourage innovation and entrepreneurship
Governments in the Nordic countries have long recognised the importance of startups and small businesses to the economy and have implemented policies and initiatives to encourage and support entrepreneurship. This support includes funding for research and development, tax incentives, and access to financing. As a result, the Nordic region has become a hotspot for innovation and entrepreneurship, attracting talent worldwide.
The Nordics is a relatively small market, which is one of the reasons why its mentality is built on thinking globally from the get-go. This global approach, and passion for innovation, accompanied by their risk-taking mentality, is enough for many experts to believe that the boom will continue into 2023 and beyond. The Nordics have become an essential piece of Europe’s startup ecosystem, and we only wish for it to continue flourishing.