Why This Tiny European City Is a Hotbed

For Entrepreneurship
Stockholm, Sweden, is rapidly becoming a hotbed for digital innovation. In fact, the capital
city was recently ranked the second most prolific tech hub in the world (Silicon Valley was
No. 1), according to VC firm Atomico.
At large, Sweden is home to six billion-dollar businesses, anchored by giants like Spotify,
Klarna, SoundCloud, and Skype. Stockholm alone was a runner-up for the highest percentage
exit growth in Europe, according to data recently compiled by the Global Startup Ecosystem
Index.
Sweden has long housed rich investors with experience. The caveat, though, was that it
lacked business angels who were willing to support younger companies that couldn't
land larger amounts of funding from VC firms, which hindered entrepreneurial activity.
Essentially, many saw opportunity in starting a Stockholm-based business, but very few were
inspired to actually do it, according to think tank Global Entrepreneurship Monitor.
In recent years, however, Stockholm has made massive strides in terms of economic growth.
Small businesses have become prolific creators of jobs. The city has raised its standards for
fostering new talent and implemented new regulatory systems to drive entrepreneurship. With
health care costs on the decrease, better pension plans, and tax deductions for people who
privately invest in startups, many are realizing that Stockholm has become a much safer place
to start a business.
Here's why this European city is gaining ground as a digital IT hub and hotbed for
innovation:

1. Tech-savvy talent
Sweden's recent initiatives to improve the education system have paid off substantially by
boosting Stockholm's talent pool. There are roughly 197,000 tech workers in Stockholm
alone, according to a 2014 study. That's nearly 20 percent of the work force, which is the
highest percentage of any city in Europe.
Such efforts include the push for more STEM-focused (science, technology, engineering,
mathematics) schools, and business accelerators like the Stockholm School of
Entrepreneurship and the Royal Institute of Technology. With cheap or free access to
education, students don't have to struggle with the stress of paying off university debt before
starting up.
Carl Waldekranz, 29, who co-founded the online retail marketplace Tictail in 2012, calls the
city one of the best places in the world to build a tech venture. "Free education creates this

massive talent pool," Waldekranz says. "We've seen a huge growth in the number of
engineering and design talent."
Tictail is an e-commerce platform on which shoppers can browse products (home, garden,
and jewelry are among the most popular categories) made by smaller, independent retailers
from across the world.

Tictail is an e-commerce platform for micro-entrepreneurs and shoppers.

When hiring, he adds, you can bring on top-notch engineers in Stockholm and surrounding
locations for a fraction of the cost you would pay in another area, like Silicon Valley. Those
savings can then be reallocated to other areas of business.
Sweden's government has also matured by investing in subsidized personal computers and a
solid broadband infrastructure, which has played a major role in cultivating new talent and
increasing the drive for innovation.
For a platform like Tictail, which caters to micro-entrepreneurs and retail customers, the need
for tech talent is crucial. Waldekranz and his team built out Tictail's feed algorithm, which
generates advice to business owners as they grow their presence on the platform, all from
scratch.

2. An increasingly strong and supportive VC presence

Sweden's venture capital scene is growing rapidly. Stockholm alone is home to firms such as
Creandum Ventures, which counts more than 250 million ($273 million) under management
in over 20 companies.
Recently, the Sweden-based media giant Modern Times Group hired former Google
employee Rikard Steiber to head up venture lab MTGx, with goals to support and fund small
startups.

Tictail received funding from Creandum as part of its staggering $22 million Series B
funding round, announced in July. To date, the company has raised $32 million.
"They've been such great sounding boards for me, and they've helped me build up my own
confidence," says Waldekranz. Meanwhile, Creandum sees Tictail as filling a major gap in
the marketplace. "The startup is creating a platform and community to help micro-business
thrive online," says investor Johan Brenner. "It's a huge market opportunity that has only had
the surface scratched."
Overall, as much as $457 million was invested in Sweden in 2013, representing a 2 percent
uptick from 2011, according to the European Commission. Meanwhile, U.S. ecosystems are
beginning to take notice, as success stories like Klarna are upping the country's startup
credibility. Waldekranz, for his part, was surprised that East Coast investors like Thrive were
already aware of Tictail and its business model before it came to the U.S.

3. Small city, big advantages

Stockholm is a small hub. As Sweden's capital and most populous city, its current estimated
population is 897,000. Waldekranz notes that this is a blessing in disguise, since it forces
business owners to think globally--instead of trying to hack only the national market--in the
beginning stages of building a startup.
At just three years old, Tictail is a newcomer in the tech space. It's up against more vetted ecommerce retailers, such as Etsy and Shopify, which each have a larger, more established
market reach. Waldekranz says he views Etsy to be nationally focused; but Tictail, by
contrast, wants to help people find niche wares from different countries.
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Still, he insists that the company's main goal is to be mobile-friendly, which is what really
sets Tictail apart from competitors. "We want to believe that we have a huge technology
advantage over them," says Waldekranz, "having come into a market where it was already
clear that mobile would be the leading platform for e-commerce in the future." To wit, more
than half of Tictail's sales (55 percent) are executed through mobile activity.
Today, the startup hosts 85,000 emerging local designers and brands. Though the company
wouldn't disclose revenue, it says that a new shopper is born every three minutes on the
platform.

While Waldekranz sees Etsy as going through something of an "identity crisis" as it expands
beyond U.S. borders, he says that Tictail, in true Nordic form, has been outwardly oriented
from the beginning.
Published on: Aug 7, 2015
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