Why Stockholm becomes even more attractive for startup funding
I read this article on Crunchbase. It is interesting and it relates a bit to an article I posted earlier in our blog. I recommend you to read it.
Here are some reflections that I do from reading the article:
Startup funding in general has definitely not dried up because of corona. Some industries are doing even better in these times. On example is that Ed-tech is in high demand. I’m coaching a great company called EdAi and it's very interesting to experience the education industry “digitalizing” so rapidly.
Angel funding is still slower. I think it does not show up in the article as much as I see it in reality. I think that is for mainly two reasons. First, the numbers in the article is from Q1 and USA is obviously a large part of it. First of all we were not hit by the crisis until late in the quarter, and the US was hit even later. Secondly I also think that the definition of seed/angel funding is skewed towards seed funding done by early stage VCs. They still have their funds quite full and they have not stopped doing business. Angels are more hesitant, and angels are more often doing the really small pre-seeds.
Even before the corona crisis Stockholm was a very attractive place to invest. Stockholm has great tech-talent. Even though the salaries are high by Swedish standards it is very good value for money in an international comparison. Sweden has a very flat salary curve compared to other countries. This means that we are on a continuous look out for where we can cut costs on “expensive” entry level jobs and that we have a “cheap” well educated talent pool to do so. Sweden, especially Stockholm is on the forefront of the gig economy conversion. Our “safety net” in terms of social security and our way of taxing entrepreneurs and small businesses could improve but it is actually working quite well when it comes to motivating people to take the step.
Stockholm is a connected market in two ways. Our infrastructure both physical and digital is great. The mentality of the people and business are open towards international markets. However we still have problems with the authorities, it is hard to immigrate to Sweden even though you have a job and can support yourself.
Unrelated to corona the housing market in Stockholm is actually starting to look better for tenants. We have had a lot of problems with the housing market and it will continue. This is one of the big criticisms that Stockholm gets for ease of doing business. In the short term it is probably even better for tenants now during 2020 since the influx of international workers and students have vanished.
My observation is that the company valuations in Stockholm and Sweden are low when compared internationally. There are great opportunities to be found as an investor in startups and scaleups. The corona crisis has probably even prolonged this opportunity since international investors may be pulling back from Sweden a bit now if they regard it as their “new” market and have to protect their domestic investments during the crisis. I think investors are underestimating the growth potential in Swedish companies. This can also be seen in an international comparison of the listed stock markets. Credit Suisse usually continuously comes out with reports where sweden get top rankings on yields. Sweden is a great performer.