France must be inspired by Swedish Unicorns
Sweden counts seven unicorns, which are startups that are valued over the $1 billion mark. France has only three — with Criteo, Vente-privée and Blablacar — and should be inspired by the country which has seen the birth of Ikea, Skype, Soundcloud, and Spotify, the latest to make its entry in the stock Exchange this spring.
And yet, this entrepreneurship thinking — if we look back in time — is of French inspiration. At the end of the 19th century, the Francophile and modernizing Swedish minister of finances at the time, Johan August Gripenstedt paved the way to free trade inspired by the liberal French economist Frédéric Bastiat. What if right now history were to reverse itself, could French president Macron draw his ideas from the Swedish “startupper spirit” of the 21st century?
Spotify offers the best of music anywhere and anytime in the world; Skype gives the possibility to communicate anywhere on the globe; Soundcloud enables everyone to share his musical creations; Klarna has revolutionized payments online. Sweden has seen the birth of many of the Web giants and is effectively a source of inspiration for Emmanuel Macron, who is determined to make France the “Start-up Nation”. “Free and Protect” is the path France is currently taking, a path shown by our Swedish neighbors and on which France has for a long time stumbled.
What if the Norse god Thor, symbol of agility and strength, was Swedish?
With around 7 unicorns, Sweden shelters the most powerful tech companies of Europe. It is more than France that counts only 3 with Blablacar, Criteo and Vente-privée. It is as many as Germany, but very far away from the United Kingdom that counts 22 unicorns. However, compared to the number of inhabitants, Stockholm is in fact the second biggest producer of unicorns, second only to the Silicon Valley.
This success is the fruit of an ecosystem suitable to innovation: 40 innovative hubs such as the one in Kista Science City, the biggest TIC cluster of Europe and third in the world; 43 incubators including the “Uppsala Innovation Centre”, ranked fourth incubator affiliated to a university in the world by the research center UBI. It is therefore not surprising that in 2016 Sweden was ahead of France: it is ranked third country in the OECD in terms of R&D spending with 3.2% of its GDP, just behind Israel (4.25%) and South Korea (4.2%), while France is only the twelfth, with 2.25% . The same applies to the number of patents, where Sweden is ranked tenth according to the World Intellectual Property Organization.
Bolstered by its culture of dialogue and questioning, the Swedish mentality is auspicious to creation and risk taking. Foreign from the Jacobin model, exchanges in Swedish society are mostly horizontal. In Stockholm there are numerous occasions for networking, whether it is in the many afterworks or in the coworking places that are recently flourishing. As Skype founder, Niklas Zennstrom, said: “If you want to be an entrepreneur, it’s not a job, it’s a lifestyle”.
Has the “Swedish miracle” given birth to divine unicorns?
Sweden can indeed boast of conciliating a protecting Welfare State and a liberal economy. Is this the social-liberalism sought after by Emanuel Macron? The Swedish Welfare State was developed in the 1970s: subventions were granted when companies were in trouble, unemployment insurance reached all times high. Nevertheless, we must note that the Swedish economy did not resist the oil crisis and the Northern state crisis of 1990s. It that around that time that the country undertook a liberalization of its economy. State monopolies in telecommunications, transportation and electricity were dismantled. Health and education sectors were also opened to competition. These reforms led Sweden to have the highest growth rates in Europe during the last two decades. In 2017, Sweden had an economic growth of 2.7% .
It is thus an incentivizing State that Sweden embodies. It creates and pushes forward the conditions favorable to innovative entrepreneurship while conserving a company governance balanced thanks to codetermination. The corporate tax rate changed from 58% in 1991 to 22% nowadays. Income tax is capped at 57%, and at 30% for capital income. To these tax reductions is added the creation of public investment agencies, such as Tillväxtverket or Vinnova, akin to “Bpifrance” in France. Vinnova, which was founded in 2001, is actively participating in financing research in NITC. It has launched the program “Drive Sweden”, a strategic program of investment in automatization of transports. If you are having a walk near Göteborg, you can admire the very first bus without driver in the world, pure product of “Drive Sweden”. Better than the Google car or the Robocar, here is the autonomous bus!
And yet public capital are not a panacea. It is for this reason that Sweden is witnessing a development of the sector of capital risk for a decade, which was then rather low. Investments in capital represents only $180 million in 2015 in Sweden, whereas it is $757 million in France, and $59 698 million in the USA. Indeed, according to a study in the Journal of Business Venturing, Swedish investors would take less risks than their English or American counterpart.  This could explain, in part, the low weight of capital risk in Sweden: only 4 investment funds are able to invest tickets of 5 million euros, namely Creandum, NorthZone, Atomico and EQT Ventures. Aware of this lack of capital, the Swedish State has created companies of capital risk in the 2000s, such as Fouriertransfrom, to finance projects in the car sector, or Inlandsinnovation, to bolster the north of Sweden. These funds echo the announcement of President Macron, saying that an investment fund would be given 10 billion euros to finance rupture innovation.
Will the French Tom Thumb spread pebbles to manage to follow the Swedish way?
Despite the launch of the French Tech 5 years ago with the creation of Bpifrance, the availability of generous tax exemptions such as the CICE or CIR and more than 300 incubators and accelerators, French startups still struggle to reach summits. Could the Swedish remedy be the right elixir?
Besides the liberal gimmicks, there may be other factors that explain the Swedish miracle. To grow, a start-up has to go international very fast. To do this, speaking English is a must. English is the language of business, and above all the one of start-ups. Yet, according to a study of the languages institution English First, 71% of Swedish people can hold a conversation in English, whereas only 54% of French people can. Macron, when discussing this problem during his speech at Sorbonne University said that every French student should speak at least two European languages in 2024. But the road still seems long… And our interior market is not helping us! The small market of 10 million Swedish consumers forces Swedish start-ups to orient themselves very quickly to foreign destinations. From their humble beginnings, Swedish start-ups are thought beyond their borders, making their country a platform of exportation. Beyond the territorial anchors, the French Tech must export itself!
The listing of Spotify on the stock market with a valorization of $20 billion proves that Sweden is able to convert the try thanks to the American Nasdaq. It is a victory by KO to the French Deezer. But after the CES in the USA, the Slush in Sweden and the Technology of Tel Aviv, the salon Viva Technology, which took place the last 23rd to 25th May, shows the French can go on the ring and, who knows, win the next fight.