Norway is no stranger to the European startup ecosystem and, while the Nordic country has vibrant cities like Trondheim or Bergen, Stavanger, and Tromso, the throne (the startup one, we mean) remains in the city capital of Oslo. From there, the Norwegian ecosystem finds itself interconnected to other ecosystems in the rest of the Nordics as well as to the UK and mainland Europe.
It has been stated countless times that Oslo, and more generally Norway, has a strong collaborative ecosystem bolstered by solid support from public-private institutions. At the same time, many Norwegian investors have been currently closing funds. An example from earlier this year is Verdane, a European specialist growth investment firm, which announced their fund Verdane Edda III at €1.1 billion in February. Verdane will partner with ambitious growth companies to help digitalize and decarbonize the European economies. We also recently covered the funding rounds of proptech Plaace and deep tech startup OTee, both Oslo-based.
Only a few months ago, we made a list of 10 Norwegian startups poised to make waves in 2024 and beyond. In that article, we explored Norway’s prowess in developing industrial technology, unraveling the secrets behind its ability to punch above its weight on the global stage.
Risks and taxes
Over the past decade, the Norwegian tech ecosystem has thrived with successful startups, fueled by entrepreneurs who foster and invest in new ventures, supported by a government aiming to cultivate non-carbon industries for future generations.
In the last weeks, however, there have been protests in the tech community regarding a government-proposed 37.8% exit tax on any unrealized assets over €43k that were accumulated in Norway. Entrepreneurs have made their voices heard about possible adverse effects on the startup ecosystem.
Investors have also expressed their fair share of worry about the measure. Tor Bækkelund, Co-founder and Managing Partner at RunwayFBU, an early-stage venture fund targeting European industrial software technology entrepreneurs, said that the recent government tax proposals (2x increase in wealth tax and existence tax) are a counterproductive measure if Norway wants to continue building industries and companies. He pointed out that tech entrepreneurs do not have the capital, nor do they want to offload capital from the companies to pay tax, limiting future funding and growth opportunities of their venture.
“The recent exit tax will drastically reduce entrepreneurship, the needed risk capital and willingness to take risk to build any new company from Norway. Entrepreneurs will seriously consider whether Norway is the right place to be. The government does not seem to understand the negative ramifications this will have long term,” added Bækkelund.
But now we want to view the fundamentals of Oslo and Norway’s potential. A good way to do this is to explore its history, its success stories, as well as its investors.
Journey to the startup world
Since the 1970s, Norway has been predominantly shaped by the dominance of the oil and gas industries. However, today, the nation is directing its focus toward fostering more innovative technological alternatives.
Norway’s emergence as a promising tech hub within the Nordic ecosystem is necessarily accentuated by its proficiency in industrial software—a sector in which the country has quietly excelled. In addition to its stature as a significant energy producer, Norway draws strength from its reservoir of industry experts and visionary founders who originate directly from the sectors they seek to revolutionize. Malin Carlström, General Partner at Climentum Capital, a VC firm based between Copenhagen, Stockholm and Berlin, said: “In Norway, founders come from the industry, not from expensive business schools.”
At the same time, the country boasts vast untapped potential for birthing new industries, harnessing 80% of dormant industrial data. Unlike other prominent tech hubs such as London, Paris, or Berlin, Oslo isn’t striving to replicate Silicon Valley’s model. Instead, it is carving out its unique niche in industrial technology, leveraging its profound understanding of the sector’s challenges and requirements.
Oslo, and Norway, tend to compare themselves with Stockholm, and Sweden. This is natural neighboring countries rivalry, but that can be fruitful if taken the right way. In that sense, Matt Weigand, Global Partner at Accel, commented: “Norway has the talent and the industry domain expertise. The only difference between Norway and Sweden is that there was a success story before in Sweden in software.”
Now let’s take a look at the most powerful stories coming from Oslo, i.e. unicorn startups that have become global names. Something to draw inspiration from.
The Norwegian’s unicorn club
When it comes to speaking about an ecosystem it is important to highlight its success stories. And what better way than to mention the Norwegian-born unicorns.
Even though the edtech Kahoot! is probably one of the country’s most recognizable companies, which crossed the unicorn threshold in June 2020 after raising $28 million, it was a year earlier when AutoStore emerged as Norway’s inaugural unicorn, having been acquired by American fund THL Partners at a $1.88 billion valuation. Established in 1996, AutoStore specializes in designing high-speed robots, modular storage grid systems, and proprietary control software, offering its customers enhanced inventory storage and picking efficiency.
After those initial success stories, other innovative startups followed a similar path. For example: Online grocery startup Oda achieved unicorn status through a secondary transaction following its €223 million funding round in April 2021. In May of that same 2021, Cognite, an industrial software SaaS startup, also joined the unicorn ranks with a valuation of $1.6 billion after a funding round raised $150 million. In August 2021 Gelato, a Norway-based on-demand print platform, secured a massive $240 million in funding, taking its valuation to $1.05 billion. Something to have in mind is that Gelato’s journey began in 2015 when it won the Oslo Innovation Week Award. Speaking about organizations and investments, let’s take a quick look at the city’s most preeminent investors.
Present and future of Oslo’s VC
Oslo’s vibrant startup ecosystem wouldn’t be complete without a growing group of venture capital firms fueling the startup scene. When we talk about top VC funds in the Norwegian capital, there are a few that are unavoidable to mention when it comes to highlighting early-stage investments. For example, StartupLab, an incubator and early-stage investor or Alliance VC, which invests in early-stage tech companies across Norway, Sweden, and Finland.
Others include Skyfall Ventures, targeting Nordic early-stage companies with a focus on software-driven startups; Hadean Ventures, a life science venture capital fund investing in healthcare verticals across Oslo and Stockholm; or RunwayFBU, an early-stage venture fund targeting European industrial software technology entrepreneurs.
RunwayFBU recently organised the Think Big Norway conference in Oslo, where industry leaders and investors gathered to discuss Norwegian tech in depth. With Accenture Nordics, RunwayFBU presented a report about the future of industrial technology in Norway, following the success of companies like Ardoq, Cognite, Gelato, Tibber, Tise, Touchnetix, and Xplora Technologies.
Pending tasks: a lesson repertoire
What lessons is the country learning? The Nordic region, particularly Norway, is primed to influence the global industrial technology landscape, supported by advanced tech adoption, substantial R&D investment, and leading automation levels, according to the RunwayFBU/Accenture report. Successful Norwegian industrial technology firms not only underscore vast potential for further growth, but they are crucial for economic diversification, innovation, and global market reach, something the country is looking to push forward.
There are many different paths to accomplish the mission of building a successful industrial tech company out of Norway, according to the above-mentioned report. But certain factors make the road more viable. This would involve, for example, a diverse mix of investors in the cap table, including international venture capital and private equity firms. In particular, private equity firms enable the possibility of Norwegian startup expansion to other markets via robust networks.
Here, the concept of “patience capital”, i.e. the necessity of long-term investment, is crucial. On top of that, there is Mergers & Acquisitions to drive growth by enhancing portfolios, and accessing technology or distribution networks, remaining important, while also requiring strategic planning to mitigate risks and ensure success.
In the area of workforce dynamics, the report also shows that successful companies operate with small to medium-sized workforces, leveraging digitalization and AI to boost productivity, indicating future industrial companies may require fewer full-time employees. But maybe one of the most important things and pending tasks is improving the Norwegian ecosystem as a whole. How exactly? Enhancing support for growth and exit opportunities, including competency in go-to-market strategies and facilitating access to suitable investors, is crucial for sustained growth and competitiveness.
If Norway manages to overcome these challenges, it can accelerate the growth trajectory of industrial tech startups and solidify the country’s position as a key player in the global tech ecosystem.
