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From a record year of growth in venture capital to groundbreaking innovations in climate action and digital health – Sweden is leading the way for change. At the heart of the global innovation arena, Sweden has not only redefined the norms for sustainable business practices but has also positioned itself at the forefront of the impact-driven movement.
In 2021, a year marked by global upheavals and record-breaking achievements in venture capital, Sweden and the Nordics emerged as a shining star on the international startup scene. A massive sum of $5.5 billion, equivalent to 26% of all startup funding in the region, was raised to support impact-driven startups. This figure, when placed in a global context, surpasses investments made in the USA by over three times.
But it's not just the statistics that are impressive. At the heart of this success story lies Sweden's capital, Stockholm, which stands out even more. From an impressive sum of 1.3 billion euros in 2020 to a staggering 3.6 billion euros in 2021, Stockholm has not only solidified its position as a European startup hub but has also exceeded expectations, surpassing both the UK and Germany. As a result, Stockholm was crowned as the home for investments in impact-driven startups. But how did they manage to achieve this?
Political origin
Impact-driven startups are defined as companies that focus on addressing one or two of the UN's 17 Sustainable Development Goals, which constitute the core of their business. These goals represent a "common blueprint" for peace, social inclusion, and sustainability for both people and the planet. Opening up and making data available can create a fair and healthy playing field that benefits all parties. Instead of viewing impact as an addition to corporate goals, impact must be at the core of their business. For Invest Stockholm, it means that "if you take away impact, you take away the business."
By the end of 2021, there were 460 impact-driven startups in Sweden. In 2022, Stockholm launched an official campaign to recognize the city as "home" rather than the "capital" of impact - a terminological change that may explain why impact-driven startups are such a priority. Influenced by the informal concept of the "people's home" (folkhemmet), Swedish politics hovers between socialism and capitalism. With the public's right to access nature, guaranteed by allemansrätten, there is also a respect for the environment that predates the growing global awareness of the climate crisis.
This heritage is reinforced by universities and research institutions like the Stockholm Resilience Centre, which has contributed to fundamental ecological theories since the 1960s. Sweden's patent laws also mean that intellectual property rights belong to the researcher rather than the university they work under.
Jenny Berthling from Invest Stockholm explains the industry's close relationship with public authorities through "how the openness and accessibility of data can create a healthy, equitable playing field that benefits all stakeholders."
Taking climate action.
Last year, 158 of Sweden's impact-driven startups committed to advancing the UN's Sustainable Development Goals for 'Climate Action.' Impressively, this was surpassed by 119 companies in the areas of 'Good Health and Well-being' and 'Industry, Innovation, and Infrastructure,' with 112 startups actively contributing.
The growth within this sector has become a magnet for talent. An exemplary case is the story of an early intern who founded Volta Greentech, a company pioneering the creation of animal feed from seagrass, showcasing how innovative ideas can thrive. The Swedish automotive industry, a core sector for the European economy in terms of employment and prosperity, faces the necessary challenge of embracing climate innovation. With an annual production of around 20 million vehicles and a workforce of 13-14 million people, it becomes clear that change is inevitable.
Jesper Wigardt, Head of Corporate Communication and Public Affairs at Northvolt, a green-focused battery manufacturer founded in 2017, explains how the company aims to have a significant share of 20% in the European market for green battery production by 2030. Headquartered in Stockholm, their first of three gigafactories has been established in Skellefteå, northern Sweden. The choice of location, after careful consideration of 1020 sites in the Nordic region, illustrates the importance of logistics, infrastructure, political climate, and sustainable energy supply for companies striving for a positive impact.
"If we assume that all these cars will one day be electric, our founders quickly realized that Europe would face significant challenges if we do not establish battery production on a large scale here," explains Wigardt.
Northvolt, which secured impressive funding of $2.75 billion last year, stands as a prominent example of a successful impact investment. Jesper Wigardt concludes by emphasizing that talent attracts talent, mentioning inspiring success stories, such as a former intern who started Volta Greentech, a company now producing animal feed from seagrass.
"We evaluated everything from logistics and infrastructure to proximity to ports and airports, the political climate, the availability of labor, universities, and, of course, access to energy," he says. "Manufacturing these batteries is a process with high energy consumption, and it is essential to consider both the cost and carbon footprint. The location had optimal access to wind, solar, and, most importantly, hydropower."
"Ultimately, talent attracts talent," Jesper notes, adding, "We see some fantastic spin-offs, like one of our first interns who founded Volta Greentech, a company producing animal feed from seagrass."
Was 2021 a one-time event for impact?
The impact sector is not solely about climate technology. Kry, based in Sweden and the largest player in digital healthcare in Europe, managed to raise an impressive sum of 262 million euros in venture capital last year.
The healthcare sector is massive, constituting the largest portion of the economy in most industrialized countries. It represents anywhere from 12 to 18 percent of the total value of goods and services produced – GDP. Kalle Conneryd-Lundgren, Chief Operating Officer at Kry, emphasizes that this is particularly crucial given the aging population. He argues that if we can utilize healthcare resources more effectively, it can have a tremendously positive impact on society. According to him, there is hardly any other field with a similar potential to make a difference.
"It is safe to say that, as we've seen over the past few years, and with an aging population, this figure will increase," he continues. "If you improve resource utilization in healthcare the way we are doing, the impact on society is enormous. I can't see any other area that is more impactful to work in."
But was what happened in 2021, with significant investments in the impact sector, just a coincidence? Perhaps a consequence of the severe impact the pandemic had on the economy? For Kalle Conneryd-Lundgren, it was just the beginning of a long journey.
"During Covid, everything came to a halt in many countries, and it was necessary. I think this made many people, including investors, realize how important it is to be careful about where you invest your money and focus your attention," he says. Despite financial markets being under significant pressure, recent global events – such as Covid and the energy crisis triggered by Russia's invasion of Ukraine – indicate that the demand for companies aiming to do good in society will increase even more.
Thriving Opportunities: Nordic Region 2023
In 2023, the Nordic countries, including Sweden, emerge as thriving hubs for entrepreneurship. Among these nations, Sweden takes the lead, securing the third position as the optimal destination for starting a new business.
Sweden's allure lies in its remarkably low startup costs, equivalent to only 0.5% of Gross National Income (GNI) per capita. With the highest Gross Domestic Product (GDP) among the top five countries, amounting to $59,324 per capita, Sweden paints a picture of economic strength. Alongside its relatively moderate cost of living, estimated at $881.20 per month excluding rent, the nation represents a comprehensive customer base with disposable income, ready to support local startups.
Meanwhile, Denmark shines with the highest monthly wages in 2023, offering an enticing opportunity for those prioritizing lucrative incomes. With an average salary of $5,965, Denmark leads in Europe. The country also welcomes prospective entrepreneurs with exceptionally low startup costs, only 0.2% of GNI per capita, securing the second position in terms of quality of life. However, living costs are on the higher side, approximately $1,107 per month.
Further north, Finland claims the title of the world's happiest country in 2023. Securing the second spot in the ranking of the best places to start a business, Finland combines a low corporate tax rate of 20% with generous average salaries of $4,550. The country not only stands out for its happiness but also performs well in the category of overall quality of life.
These Nordic countries, each with its unique advantages, attract entrepreneurs and businesses to explore the extensive opportunities they offer in the ever-changing landscape of 2023.