Transcription
As you might already know, Europe doesn't do that well with startups. In the 50 years between 1975 and 2025, for instance, Europe produced just 14 homegrown companies worth over $10 billion. In the same time, the US produced 241.
Similarly, at the start of last year, the US hosted nearly 700 private companies valued at over a billion dollars, colloquially known as unicorns. The EU, meanwhile, had just over a hundred, although that number has grown a fair bit in the 18 months since.
One notable exception, however, is Sweden. Sweden has produced a remarkable number of unicorns, including big names like Spotify, Klarna, and iZettle, and now hosts a bunch of Europe's biggest AI companies like Sana, Leggenda, and Lovable. On a per capita basis, Sweden consistently turns out more unicorns than any other European country, apart from maybe Iceland. So, in this video, we thought we'd try to figure out why Sweden does so well with startups and what lessons there might be for the rest of Europe. So, let's get straight into it.
When you ask Swedes about this, they often point to Sweden's knack for innovation. To be fair, Sweden does frequently top the EU's annual innovation scoreboard. And last year, the World Intellectual Property Organization ranked Sweden second in innovation, only to Switzerland and just ahead of the US.
This is in some part a reflection of Sweden's impressive education system. In Sweden, university is free and students can get loans for living expenses. Today, Sweden's workforce is impressively well educated. One-third of the population and more than half of the people between 25 and 34 have some form of higher education, which has given way to higher levels of innovation.
Sweden was also ahead of the curve on digital technology. In the 1990s, as part of a wider liberalization drive, the Swedish government introduced tax incentives for corporate tech investment, digitized some public services, and invested heavily in fiber optic internet. By 2005, about 75% of homes had a computer, and Sweden was one of the world's most digitally connected countries. This has helped Sweden's tech sector punch above its weight, a trend that has continued into the AI era.
But these reasons don't feel like they fully explain Sweden's unique outperformance. After all, lots of other European countries have innovative workforces and great education systems, and the tech gap between Sweden and the rest of Europe has closed in recent years. So, what else could it be?
Well, as we see it, another big but underappreciated reason that startups seem to fare so well in Sweden is the depth of Sweden's so-called capital markets. For context, capital markets basically refer to any form of financing that doesn't involve borrowing from a bank. Capital markets are especially important for startups because banks don't generally like making what they see as unpalatably risky loans to startups.
Capital markets can be split into two: the private market and the public market. When we talk about the private market, we're basically talking about finding some venture capitalist or other private investor who lend you the money. When we talk about the public market, we're basically talking about listing your company and selling shares in it on a publicly traded stock exchange.
Anyway, Sweden has remarkably deep capital markets in both the private and public markets. In the private markets, Swedish funds, including pension funds and insurance funds, are pretty massive relative to Sweden's GDP and invest more than their European counterparts in small-cap companies. There's also a wide network of so-called angel investors, especially in and around Stockholm, many of whom got rich betting on the prior generation of Swedish unicorns.
Sweden's public markets are just as good, as evidenced by the popularity of the Swedish stock market. According to an analysis by DealLogic, in the decade running up to 2024, over 500 companies listed in Sweden, more than the total number of IPOs in France, Germany, the Netherlands, and Spain combined, and not miles away from the UK, despite the fact that the UK economy is about six times that of Sweden. In 2025, Sweden actually saw more IPOs than even London, including a $4.26 billion IPO for Verisure, Europe's largest IPO in at least 3 years. IPOs are also remarkably popular with smaller companies, and Swedish firms are far more likely than their European peers to go public.
All in all, Sweden has the deepest capital markets of any EU member state and even deeper than those in the UK, despite its world-renowned financial sector, which is why Swedish companies rely surprisingly little on foreign financing.
So why are Sweden's capital markets so great? Well, the fundamental reason seems to be that Swedish households are far more likely than their counterparts in the rest of Europe to actually invest their savings. Swedish households invest over half of their savings in stocks, more than twice the average in the Euro area, whilst keeping just 19% of their assets in cash, the lowest in the EU. This is both good news for Swedish savers who generally see better returns on their savings than other Europeans sitting on cash, and great news for Sweden's capital markets.
So why are Swedes so keen on investing? Well, it's in part because Swedes are pretty financially literate and thus more aware of the fact that they'll get better returns by investing in stocks rather than sitting on cash. A World Bank study from 2018, for instance, found that Swedes were quite literally the most financially literate people in the world, matched only by Norwegians and Danes.
But it's also a consequence of consistent public policy efforts to encourage investment. As far back as 1984, the Swedish government introduced "Allemansspar," a product enabling ordinary Swedes to invest in stock markets, decades before most other European countries developed similar schemes. By 1990, there were already 1.7 million of these accounts, and subsequent rule changes in the 1990s allowed people to invest 2.5% of their pensions into stocks of their choice.
In 2012, the government also introduced a new investment product called the ISK, which allows Swedes to invest a certain amount of their savings in funds and stocks at a lower tax rate. Sort of the Swedish equivalent to an ISA, but without a cash option. The ISK has become incredibly popular in Sweden with nearly 4 million unique account holders in 2023, roughly a third of Sweden's entire population.
The ISK has been so successful that the EU is apparently looking to it as a model for a future EU-wide saving and investment account in the hopes of getting Europeans across the continent to invest more of their savings and thus improve the depth of Europe's capital markets. But if an EU-wide account proves too politically contentious, the other lesson for European policymakers here is that improving financial literacy could be a relatively cheap and easy way of improving both household and national finances on the continent.
As we mentioned earlier, the latest edition of our magazine, Too Long, is out now. And if you subscribe using code TLDDR26, then you'll get £4 off your first copy, bringing the price as low as £3.99, our lowest ever price, as well as getting you 20% off every future issue as long as you stay subscribed.
Speaking of future editions, let me show you for the very first time this summer's edition of the magazine, currently entitled "Trump's Rules of War." This map on the cover shows a dot for each region struck by Trump since returning to office last year. And there's always the chance it'll look even redder before we go to print. Inside this issue, we'll be running through each of these different conflicts, air strikes, and incursions. Excursions to take care of nuclear weaponry. >> Sorry, excursions.
So, if you want to track that timeline with us and better understand what's motivating Trump here, then you'll want a copy of this summer's Too Long, where we'll also be discussing a whole load of other topics. Luckily, if you subscribe today, you'll not only get the spring issue immediately, but you'll also be signed up for this summer, too, ensuring this issue lands through your letterbox or in your inbox as soon as possible.