This article was taken from the September 2011 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online.
London's startup scene is booming -- you need only read Wired to see that. But what are Europe's other hot digital cities -- and which are the companies and founders to watch? Welcome to Wired's first annual guide to the continent's rising stars.
STOCKHOLM
Sweden has 'the most digitally connected economy in the world', and a global mindset when it comes to developing innovative tech startups.
Co-ordinates: 59°21'N 18°04'E
Population: 850,000
Size: 188km2
Global Cities Index ranking 2010: 23
Four times a year, a hundred or so entrepreneurs and a handful of venture capitalists meet at a secret location in Stockholm to play poker. "It's a closed group and only by invitation," says Kristofer Arwin, the founder of PriceRunner and TestFreaks, who started the event out of his office four years ago. "We were 20 entrepreneurs.
Now there are about 160 in the network." At the most recent event, Spotify's chief product officer Gustav Söderström rubbed shoulders with boo. com founder Enrst Malmsten and Lea Bajc, a hyperactive venture capitalist. "You become friends with these guys," says Arwin. "All these people have got to know each other and have started new businesses, and become investors in other businesses, pretty much because they got to know each other in these circumstances."
Arwin's poker night may be more symptom than cause of the emergence of a proper Stockholm entrepreneurial ecosystem, led by pioneering ventures such as Kazaa, Skype, MySQL, The Pirate Bay and Spotify. An analysis by venture-capital firm Creandum reports that over the past five years, €2.6 billion (£2.3 billion) has been generated per year from Nordic tech-company exits, with more than half of this coming from Sweden alone.
Tight links exist between Swedish startups. Along with Arwin, Rebtel CEO Andreas Bernström and iZettle cofounder Jacob de Geer; the CTO of Stardoll used to be a young engineer called Daniel Ek; and Spotify's own CTO Andreas Ehn left to set up his own business in Stockholm, but also serves as an advisor to Videoplaza and Ocean Observations. INSEAD business school ranks Sweden second in its Global Innovation Index Reports for 2009-2010. "You have to have a global mindset when building a business, because the Swedish market is so small," says Pär-Jörgen Pärson, a partner at Northzone Ventures, which has invested in Spotify, Tobii and X5 Music. The home market is, however, a good testbed for tech companies: a report by the World Economic Forum in March found that Sweden had the most digi- tally connected economy in the world. "We're a nation of early adopters," says Sorosh Tavakoli, CEO of Videoplaza.
But it is rare for successful tech companies to remain in Sweden. Videoplaza, Spotify, Readmill and SoundCloud have all moved their headquarters to bigger markets, suggesting that setting up a company is easy, but retaining talent once established is not. "Entrepreneur founders in Sweden can get rich off their equity in an exit scenario, but tying employment to options results in ridiculous taxes for both the employee and the company," says Matthias Miksche. Niklas Zennström started Skype in Stockholm, but quickly moved its base to Luxembourg: "The way to incentivise people in tech companies is stock options," he says. "Swedish law is unattractive."
1. Klarna
Norra Stationsgatan 61
Klarna allows its users to pay for products purchased online only after they've been delivered. All you need to do is enter your name, date of birth and address and Klarna fronts the payment. Risky? Not if you have enough data. Like Wonga, Klarna crunches huge amounts of information about user behaviour to predict whether they can repay: "Basically who's trustworthy and who's not," says Sebastian Siemiatkowski, CEO (left).
When the company launched in 2007, it analysed publicly available personal identity numbers of Swedish citizens. Now it's mining Facebook and other social sites. "It helps immensely," says Siemiatkowski. "Traditional scoring methods are based on where you live, but people's behaviour has so much more to tell about their trustworthiness."
Klarna is forecasting revenues of €80 million for 2011, with a profit of €7m; it has a burgeoning Android app for payments and recently opened its first office in Germany. With Mike Moritz, a partner at Sequoia Capital, sitting on the board (he did the same for Yahoo!, Google and PayPal), the company has built slowly to 500 employees. Later this year, Siemiatkowski will unveil Klarna 2.0: "Our vision is for you to be able to click 'buy' anywhere on the internet, and for us to assess on that click whether we should approve you."
2. Mojang
Asogatan 140
Minecraft may be the best-selling videogame never officially released. It first appeared in May 2009 as a developmental alpha; since then, it has sold two million copies, earning developer Mojang (Swedish for "gadget") €26.4 million. It's still in beta. "It's still not complete and bug-free," explains Mojang managing director Carl Manneh. Developer Markus "Notch" Persson dreamt up Minecraft, in which the user constructs a world from cubic blocks, soon after he quit Swedish online games company King.com, and released updates as and when they were developed. In September 2010, he set up Mojang with Minecraft revenues. The company now has nine employees, has released a mobile version of
Minecraft for Android, and is working on a new game, Scrolls. Oh, and Minecraft will finally be officially released in November. The company wants to retain its startup vibe, though: it holds "gaming Fridays" every week, from noon onwards, and on entering its offices, Wired was nearly taken out by a stray Nerf bullet. "Once our decision-making is too slow, we'll know that we're either too big or too small," says Manneh. "We'll still have tons of fun. If not, Mojang won't exist any more."
3. Bambuser
St Eriksgatan 46A
Twitter and Facebook weren't the first websites to be blocked by the authorities in the Egyptian protests. At 12pm GMT on January 25, mobile video-streaming platform Bambuser announced it had been taken down after experiencing an sharp increase in activity.
Executive chairman Hans Eriksson watched the videos being broadcast live from protesters' smartphones: "Suddenly you found yourself in Tahrir Square, following the people. We hadn't anticipated the use, but we had hoped for it to happen." Bambuser was also blocked in Bahrain, with videos from both countries picked up by mainstream media such as the BBC, The Guardian and Al Jazeera.
Eriksson, 44, won't reveal exact details, but says page views top a million per month and that the number of active registered users is in six figures. The company isn't yet profitable, but it is aiming to raise a third round of funding by the end of September. Eriksson wants the site to "become the service of choice to update and engage with people in real time, from any device to any device".
Ones to watch
4. Stardoll
In 2004, retired Finnish housekeeper Liisa Wrang started a "paper doll" game on her blog; Stardoll now has 100m registered users, counts Index and Sequoia among its backers and has a licensing deal in place with toy giant Mattel. The company is generating revenue from virtual currency transactions and recently won a dispute over where such payments should be taxed, reclaiming
€2m in VAT paid.
5. Rebtel
Launched in 2006, VoIP provider Rebtel has a smart approach to global phone calling: it creates local landline numbers in the countries of a user's origin and destination, routing the international part over the internet. It is about to launch a PC application.
6. Hoa's Tool Shop
Set up by psychology postgrads, Hoa's Tool Shop provides software such as the Viary iPhone app, which helps therapists and coaches become part of their clients' everyday lives. The app is being used by healthcare company PBM.
7. Tobii
John Elvesjo, Henrik Eskilsson and Marten Skogo started eye-tracking company Tobii in 2001. It now has 260 employees and recently teamed up with Lenovo to launch a prototype laptop with a built-in eye-control sensors (see WIRED 05.11).
8. iZettle
Smartphone credit-card payment company iZettle negotiated a raft of financial regulatory bodies, and overcame technical challenges, to roll out a prototype reader scheme this summer (see WIRED 08.11).
If successful, the service is expected launch in the UK.
9. Videoplaza
Launched in 2007, this ad platform for video viewed on PCs, tablets, mobiles and connected TVs has secured contracts with Swedish, French and British broadcasters. It has since relocated its HQ to London, with the tech remaining in Stockholm.
10. JayCut
JayCut is a video-editing tool that lives in your browser. Already profitable, the 2007-launched company talks of a "creative revolution" in allowing users to edit web media anywhere, on any device. Customers include Procter & Gamble and IKEA.
11. Voddler
A free videostreaming service primarily designed for connected TVs, Voddler launched last year and has one million registered users. Deals are in place with Paramount, Disney and Sony and the service offers 80 per cent of its 4,000 titles for free.
12. Shootitlive
Set up by Eivind Vogel-Rödin and Martin Levy in 2008, Shootitlive allows images and video clips to go from camera to web in seconds. It is used by Scandinavia's largest newspapers and The Times used the platform for its royal wedding coverage.
Where to meet
Il Caffè, Bergsgatan 17; Scandic Hotel Anglais, Humlegårdsgatan 23
Stockholm is small and Wi-Fi ubiquitous, so any café will often do for the tech crowd. But Il Caffè on Kungsholmen attracts the entrepreneurial hardcore: tiny and slightly dishevelled, it's known for its friendliness, good coffee and free internet. Larger groups who prefer a little more finesse head for the lobby in the Scandic Hotel Anglais in the centre of the commercial district.
This article was originally published by WIRED UK
