Nordic countries: the innovation powerhouse in Europe

Presented today at Arctic15 in Helsinki a new SEP Monitor by Startup Europe Partnership. The analysis is focused on ICT scaleups in Nordic countries including Denmark, Finland, Iceland, Norway and Sweden.

And it shows that investment, in this young ecosystem, is paying off.

These are the key takeaways:

• SEP identified 430 ICT scaleups that cumulatively raise over $6.5B in investments, 84% from venture capital funds and 16% via stock market.
• There’s an average of 1.6 scaleups for every 100,000 people, that is 2.5x the ratio in the UK, almost 6x in continental Europe on average and 9x of Southern Europe.
• 0.5% of GDP in the Nordic countries has been invested into scaleups, versus 0.42% in UK, only 0.15% in continental Europe (Germany and France) and 0.06% in the South (Italy, Portugal and Spain).
• Nordic scaleups raised – on average – $15M each and Sweden is the largest scale-up hub with 149 companies (35% of the total).
• Nordic scaleup ecosystem is relatively young: just over 60% of scaleups tracked were founded after 2010.
• 3% of scaleups are actually “scalers” – such as Supercell, Spotify, King.com, Klarna, iZettle, Zendesk –  able to secure over $100M in capital to fuel their growth.
• Gaming is the most performing sector of the Nordic ecosystem, Software the most “crowded”, Fintech the highest performing in terms of average capital raised.
• 205 startups exited via acquisitions in the last 5 years. 40% were completed by US companies, in line with what happens in other European countries. But surprisingly, 40% of deals were performed by local companies as well.
• 20 scaleups are dual companies: they moved their headquarters abroad – 75% to the US – while maintaining relevant operations in their home country.

Helsinki, June 2nd – It is often rumored that the mild climate is the real secret of Silicon Valley. This rule doesn’t seem to apply in Europe, since the farther north we go, the higher is the ability to start and scale innovative companies. This is what reveals the latest Monitor presented today at Arctic15 in Helsinki by Startup Europe Partnership, the first pan-European platform dedicated to transforming European startups into scaleups by linking them with global corporations. The analysis focuses on ICT scaleups in Nordic countries including Denmark, Finland, Iceland, Norway and Sweden, and shows a young, but very prolific, ecosystem.

SEP in fact identified 430 ICT scaleups in the 5 countries, that cumulatively raised over $6.5B in investments, 84% from venture capital funds ($5.5B) and 16% via stock market ($1B). Furthermore, 60% of scaleups tracked were founded after 2010: it reveals a very young ecosystem and makes the Nordic figures even more remarkable.

“The Nordic countries are without any doubts an innovation powerhouse in Europe. – commented Alberto Onetti, Mind the Bridge Chairman and SEP Coordinator – A solid number of Nordic scaleups have been able to raise significant capital and go beyond the early stage barrier. And the strong acceleration reported in the last two years supports this positive sentiment about the growth potential for the scaleups in the region. You must definitively look North if you are going to spot the next “European Unicorns’”.

In terms of number of scaleups, the Nordic countries are at the same level as the UK as well as Germany and France together (Continental Europe, 413) while they have doubled the number of scaleups Italy, Portugal and Spain (Southern Europe, 218) were able to produce.

It means an average of 1.6 scaleups for every 100,000 people, that is 2.5x the ratio in the UK, almost 6x in continental Europe on average and 9x of Southern Europe.

Sweden shows to be the larger scaleup hub with 149 companies (35% of the total). Finland ranks second with 126 (29%), while Denmark follows with 96 (22%). In Norway and Iceland numbers are smaller, 44 (10%) and 15 (4%) scaleups respectively.

That said, GDP for 5 Northern countries ($1292B) is 1/2 of the UK ($2663B), 1/5 of Continental Europe ($6523B) and 1/3 of the Southern ($4134B) but 0.5% has been invested into scaleups in the Nordics region, versus 0.42% in UK, only 0.15% in Continental Europe and 0.06% in the Southern. And it looks that such investment is paying off, making this area a powerhouse of European innovation. 

“As a media and events company focusing specifically on the Nordics, we see massive interest in the region that is only growing every year – commented Dmitri Sarle, CEO at ArcticStartup & Arctic15 – ArcticStartup – Thanks to the SEP Monitor report, we expect everyone to see what we have been telling the world since 2007 through our media”.

Nordic scaleups raised an average of $15M each (including both capital raised through VC and the stock market). These numbers are below the UK ($28M) and Continental Europe ($24M) averages, but definitively closer to the Southern countries ($10M on average).

Sweden leads by far with $3.4B in terms of capital raised: it is more than three times the amount raised by Finnish scaleups, 2.8 times the total funding collected by Danish companies, and more than 4 times the combined amount raised by scaleups in Norway and Iceland. Anyway, this total amount is significantly impacted by the billion dollar fundraising of the local “unicorn” Spotify. It is also worth pointing out that Danish scaleups raised 1.3 times more capital than their Finnish counterparts, although there are on average 1.3 more scaleups in Finland than there are in Denmark.   

3% (12) of the total scaleups are actually “Scalers”, i.e. scaleups that managed to collect over $100M in funding. They are Supercell and Blyk (Finland); Spotify, King.com, Klarna, iZettle, Tobii (Sweden); Zendesk, Momondo, Tradeshift, Trustpilot (Denmark); Thin Film Electronics (Norway).

They collected almost half (45%) of total funding made available to Nordic companies.

If we add to the scalers the scaleups that received over $20M funding, we found that 15% of the Nordic scaleups (3% >$100M, 3% $50-100M, 9% $20-50M) raised over 75% (45%, 14%, 17%, respectively) of the total funding tracked in the region.

“This SEP Monitor reveals a well-structured, fast-growing and self-consistent scaleups ecosystem in Northern Europe – commented Isidro Laso Ballesteros, head of Startup Europe, EU Commission – These countries represent definitively a driving force for Europe”.

The gaming sector represents the real force of the ecosystem, with 40 scaleups tracked and almost $0.9B in capital raised. In fact, Digital Media supremacy in capital raised ($1.1B+) is driven by the huge amount of capital raised by music streaming giant Spotify. Software is the most “crowded” sector, with over 70 scaleups tracked (but “only” $0.6B in investments). Other relevant verticals are Finance (25 scaleups raising almost $0.7B) and Hardware (36 scaleups collecting $0.6B). It is worth noting that the Fintech scaleups are the highest performing in terms of average capital raised, securing $25M each.

205 of nordic startups exited via M&As in the last 5 years. Sweden is again leading the way with 79 transactions, 1.6 times more than both Denmark and Finland and 3.4 times more than Norway. The number of acquisitions is growing year over year (approximately 150% on average) with a strong acceleration since 2014, in parallel with the growth of the ecosystem.

40% of M&As were completed by US companies, in line with what happens in other European countries. But surprisingly, 40% of deals were performed by local companies as well. The other 15% of M&As were performed by other (not Nordic) European players, while a residual 5% of identified M&As were performed by Asian companies. 

The most attractive vertical for acquisitions appears to be Software Solutions, accounting for 24% of total M&A activity tracked by the SEP Monitor. Other hot sectors are E-Commerce (10%), Gaming (8%), Digital Media and Mobile (6% each).

20 scaleups are finally “dual companies”, i.e. startups that have moved their headquarters abroad, while maintaining relevant operations in the home country. For the vast majority (75% of the total) they moved to the US, more specifically Silicon Valley.