Unveiling Stockholm’s Stealth Startup Breeding Ground

In this week’s edition of PYMNTS’ Weekly Tech Center Roundup, we speak with Sebastian Siemiatkowski, co-founder and CEO of Klarna, and Brian Billingsley, CEO, North America at Klarna, to uncover why the infrastructure supporting Sweden’s burgeoning tech sector is not one to be underestimated.

THE EUROPEAN STANDOUT

Silicon Valley isn’t the only place producing billion-dollar tech companies.

From Spotify to Skype, King (the gaming studio behind Candy Crush) to payment technology company Klarna, it’s no wonder Sweden has gained the reputation and nickname of being a bonafide “unicorn factory.”

On a per capita basis, the Scandinavian country is known for producing 6.3 billion-dollar companies per million people, coming in second only to Silicon Valley.

But how did the country get here? What’s the secret sauce behind its ever-growing tech innovation?

As many European countries are facing economic downturns and turmoil, it’s been noted that the growth of Sweden’s own economy and tech environment continues to accelerate.

Sebastian Siemiatkowski, co-founder and CEO of Klarna, a startup unicorn in its own right that launched in Stockholm back in 2005, said that it has to do with the culture and societal framework of the country. Klarna itself recently landed on the CNBC Disrupter 50 list, nabbing the No. 8 spot out of the 50 global companies recognized. With $338.6 million in funding and a valuation of $2.3 billion, Klarna has worked to revamp the online purchasing and checkout experience.

But long before Stockholm gained recognition as a global tech center and breeding ground for some of the world’s most recognizable brands, the country was already taking the necessary steps to establish the tech environment it has today through the government’s efforts to pick up the pieces after enduring a financial crisis in the 1990s.

In an effort to get the economy back on its feet, Siemiatkowski said there were many government initiatives — such as a drive for increased computer literacy and the early introduction of a high quality broadband infrastructure — that set the scene for the country to thrive.

The government recognized, Siemiatkowski added, that establishing this foundation was similar to building roads or laying down railroad tracks, in that “the earlier you support such infrastructures, that would then support economic growth in general.”

Having systems in place like free education and free health care may also factor into Sweden maintaining a tech community that is very unique from others found around the world.

“It’s a society that has been built around social mobility and the ability for people to really express themselves and be good at a variety of different things, whatever life path they choose,” Siemiatkowski explained, adding that for those who have talent and want to accomplish things, there are systems in place to support that ambition.

Though Sweden’s unique environment may be significant in cultivating the talent within its borders, Brian Billingsley, CEO, North America at Klarna, noted that it has also made it an attractive prospect that brings tech talent to both the country and Stockholm itself.

“People are much more apt to move due to the great things the city has in place,” he said, pointing to the great public transit, exciting social network and kid-friendly offerings.

COMMUNITY DEVELOPMENT

Though Sweden, and specifically Stockholm, have become well-known as startup havens, Siemiatkowski pointed out that the startup community in particular has come a long way since the early days of Klarna.

“Back when we started in 2005, we were lucky there was an incubator at the school we attended that actually supported us and inspired us to take the step and do this,” he said.

During that time, the overall impression on entrepreneurship was quite different.

While today people are inspired and eager to set off to try to transform their ideas into successful business endeavors, Siemiatkowski said back in the ‘90s, to say you were being an entrepreneur was associated with simply being out of a job.

This was due to the government’s idea to combat unemployment by incentivizing people who were without work to set off and start their own companies, so back then “it was almost shameful to be an entrepreneur in social context,” Siemiatkowski explained.

But years later, he noted there’s been a massive change in the perception of entrepreneurship and the potential of what it can bring.

It’s hard to say whether this is due to the growing list of tech company success stories that have come out of Sweden or just something that’s happened naturally as the country’s economy made a swift and significant comeback.

Either way, it’s clear the startup community in Sweden is inspired to keep getting bigger and better.

“It’s a big enough market where you can make a real business just inside Sweden, but given that it’s only 9 million people, most of the entrepreneurs think globally much faster than their counterparts do,” Billingsley noted, giving an example of how the country’s small size can still work to the advantage of the startups within it.

Launching a startup out of a smaller country may seem like a harder route to some, but Siemiatkowski said it only forces you to work harder, to be “very precise in what you want to accomplish and what you want to do.”

According to him, the country has “created the frameworks within which innovation can then thrive.”

But even with all the prerequisites available to enable people to be successful, Siemiatkowski said a key differentiator for startups – whether in Sweden or elsewhere – is the supply of great advice.

His words of wisdom?

Be skeptical and tough when it comes to deciding who to receive mentorship and guidance from. After receiving a lot of poor advice early on, Siemiatkowski discovered the challenge in knowing what excellence really looked like.

But receiving the right advice from investors about five years after Klarna started helped to open up access to a totally different perspective.

“Connecting that talent to people who have really accomplished and built great big successes, that’s where there’s need.”