The Nordics got a good grade on startup development late Tuesday when Startup Genome released its 2017 startup ecosystem rankings, with the Swedish capital breaking the top 20 for the first time and Helsinki appearing among the top eight runners-up.
The upgraded assessment is no surprise for people familiar with Sweden and Finland. Both cities are similar in terms of outlook, the influence of telecoms on the local economy, and ambition of local organizers to play a major role in the European technology economy overall. Finland plays host to Slush every year, the continent’s biggest tech confab. Stockholm hosts its own events but is also double the size of Helsinki and thus has double the startup volume.
Stockholm was rated 8th in market reach among the top 20, just behind Vancouver (15th overall) and ahead of Paris (9th overall). The Swedish capital also ranked 12th in startup experience behind Los Angeles (9th overall) and ahead of Shanghai (8th overall). Stockholm is last in the index for funding however, and in the bottom four for talent.
“The biggest upward movement was Stockholm, which entered the top 20 with an impressive 14th place, thanks to its high Market Reach and amazing ability to create unicorns despite its small size,” the report’s authors wrote, which included Genome CEO and Co-Founder Bjoern Lasse Herrmann, CFO J-F Gauthier, Project Manager Danny Holtschke, Dr. Ron Berman, and Founder Emeritus Max Marmer.
Both cities scored high for their share of foreign customers. Stockholm is 5th in the world; Helsinki is 9th. The authors thought the best reason to explain why the Nordic cities were doing so well making their brands global was to compare it to a more influential ecosystem: Israel’s.
“In Stockholm, Berlin, and Helsinki startups have an incentive to go global — beyond Europe — if they want to grow faster. The best examples of this are Tel Aviv and Jerusalem. Because of its small economy and thanks to their global community, Israeli startups have successfully executed go-global strategies for years.”
Big Finn: Helsinki moves up the ranks
The Finnish capital missed the top 20, but was included in a list of seven other cities as “runners-up.” Those were Jerusalem, Altanta, Delhi, Denver-Boulder (Colorado), Moscow, Mumbai, and Salt Lake-Provo (Utah). They were also noted for their relatively high funding for being outside the top 20 alongside Seoul. The city also got top marks for “startup connectedness” along with Estonia and Lisbon, as well as “startup experience” next to Atlanta and Houston.
“Because of its small community, Helsinki has the ability, as well as the momentum, to develop a position of influence and to produce the connective tissue that is needed to build and grow a robust startup community.”
Their $358,000 in average early stage funding is extremely impressive for an ecosystem weighed at a relatively low valuation of $1.5 billion.
Stockholm reigns supreme in the north
The city has an estimated 600-900 startups, low by global standards, but they make up for quantity in terms of quality.
“Stockholm ranks second in Europe when it comes to producing unicorns,1 outpaced only by London,” the report notes, complimenting Spotify and Klarna for as top European startup colossuses. They also commend engineering taught at KTH and the Stockholm School of Economics for the venture surge. “Both institutions encourage entrepreneurship through incubation programs, in addition to the Stockholm School of Entrepreneurship providing everything else you need to know.”
As noted earlier, the city actually lags in terms of funding. Average early stage funding is only $325,000, more than $30,000 lower than friendly rival Helsinki. Yet, the ecosystem’s overall value is nearer to the mean at $15 billion.
The two ecosystems are very similar: Swedes saw their big bump in entrepreneurship after major layoffs at Ericsson, Finns after Nokia; both have top-notch schools; both have incredible gaming economies; both have strong government support. Both countries exchange large expat populations as well.
It would be fair to say the big difference comes in real numbers, but not proportionately. Startup Helsinki told Geektime last year there were about 500 startups in the capital area (the majority of Finland’s small tech companies). It’s plausible that the number estimated for Sweden is actually conservative and that Swedes probably have twice as many startups as Finns. But that wouldn’t be a knock against Helsinki — Sweden has twice as large a population.
If one took volume out of the equation, the argument that Helsinki is better would be very strong, similarly if one were to say Waterloo, Ontario was a “better” ecosystem than Toronto based on entrepreneur population density. Expect the two ecosystems to continue tussling for position in the future. Helsinki is well-positioned to breach the top 20 should Genome wait two years between reports again.
One major wild card in Finland’s ability to eclipse Sweden is the latter’s ongoing discussion about immigration access. Similar to recent H-1B visa orders by the Trump Administration in the US, Sweden has seen its own South Asian developer community impacted by bureaucracy and increased protectionism in local politics.
Should the environment get more restrictive and Finland is able to stave off that trend itself, Finns could see a windfall in new immigrants who might have otherwise chosen Stockholm as a landing pad.
For now Sweden has the Nordic crown, but they shouldn’t sit on their hands when they’re on the throne.