Sweden is quietly becoming the home of Europe’s rising finance stars

By Oliver Smith 23 March 2016

Its cheerleaders say we should forget London and Berlin and instead embrace Stockholm, but what's so magic about Sweden?

Earlier this year we looked at the Nordic region and its secret successes.

The birthplace of businesses like Vivino and Spotify which quietly found fame and millions of users, despite most people assuming they must be American or British creations.

Read more: Vivino, yet another secret Nordic success story

But if there’s one country within the Nordic region that rises above its peers Denmark, Finland, Iceland, Norway and that we should be paying more attention to, it’s undoubtedly Sweden.

Companies based in the Swedish capital of Stockholm received 50% of the entire amount of venture capital invested across all five of the Nordic countries last year,

And in 2014 the capital accounted for 18.3% of all European financial technology investments, with London just ahead with 37%, leading some to speculate that we might be handing over our title as Europe’s financial technology capital in just a few years.

Meet the new European finance capital?

“Let’s not forget, that despite the hype, the most valuable European financial technology company isn’t from London, it’s from Sweden (Klarna),” Neil Murray, a European technology journalist and founder of The Nordic Web covering the Nordic region since 2013, told The Memo.

Indeed you may not have heard of companies like Klarna, or iZettle, or Trustly, but they are all pioneering new technologies that are changing the way European consumers and businesses manage their money.

“Stockholm is the financial capital of the Nordics, and has a legacy of people working in the financial services industry (although on a lot smaller scale than London of course),” says Murray.

iZettle for instance has built a card reader that, when paired with a smartphone, can let small retailers accept card payments, you might have even spotted them used by small shops and coffee houses in London. Today iZettle has even branched out to offer lending, with short-term loans based on the past sales of its users.

Trustly has a service that lets online business securely take payments directly from customer’s bank accounts, rather than messing around with typing in card numbers.

Both of these businesses started life in Sweden but quickly attracted investment of $244m and $28m respectively to grow to serve the rest of Europe.

“A few years back the startups were almost all “homegrown” – even though they expanded internationally at a very early stage,” Torbjörn Bengtsson, a business development manager for Stockholm Business Region, told The Memo.

“But it is only the last few years that we have seen people start to move to Stockholm to start new companies as Stockholm has received (long overdue) recognition for being a great startup hub.”

Because today there are a host of reasons why digital businesses, not just financial technology ones, are coming to Sweden.

But why Sweden?

“The general business environment here is quite straightforward,” Johan Nord, Trustly’s chief commercial officer, told The Memo when we asked him the question, why Sweden?

“You have good lawyers, good accountants, good service providers, lots of highly educated people, both with technology and commercial backgrounds.”

Indeed the high levels of talented tech workers, designers and engineers in Sweden’s workforce was pointed out by a number of people we spoke to.

“There are many startups here that have successfully scaled out of Stockholm, because there are so many experienced people to recruit with the right background,” said Bengtsson, from Stockholm’s Business Region.

Similarly its technological infrastructure, with internet penetration at 94.8%, and as we mentioned about the entire Nordic region, an international mindset along with a prevalence of languages, all factors which are helping Sweden’s rise.

But before you start thinking about moving your business to a country ranked the 10th happiest in the world (the UK, a shameful 23rd), there are a few things you should know.

Work still in progress

“It’s still at a very early stage, and although it is attracting the third highest number of financial technology investments in Europe after the UK and Germany… it is still not the powerhouse that London and the UK currently is,” says The Nordic Web’s Neil Murray.

In particular Murray points out that the number of Swedish digital businesses being acquired or listing their shares on the stock exchange is still fairly low in comparison to those other European business hubs.

“Housing is an issue – Stockholm is one of the fastest growing cities in Europe and the supply of housing has not kept up with the growth – although when you do get one the cost is considerably lower than in say London,” says Bengtsson.

Housing is also one of the main challenges identified by Johan Nord, due to a rent control scheme that limits the number of rental properties on the market, but he says so-far Trustly has managed to avoid housing affecting their recruitment.

“A lot of other companies are getting innovative by renting company flats or finding short-term accommodation to help their staff to find a more permanent living arrangements,” says Nord.

“But we’ve been very successful in hiring people and we continue to hire.”

So while it still has some challenges to overcome, with growing interest and excitement around the financial technology and design-led businesses emerging, Sweden is without a doubt the jewel in the Nordic region’s crown.