London boasts the bars round Old Street’s Silicon Roundabout while Berlin has the St Oberholz café, but in Stockholm the social hub for the high-tech start-up scene is a quarterly poker game.

The game started in the office of a consumer ratings website four years ago, but is now a glitzy event attended by hundreds of tech entrepreneurs and venture capitalists looking for the next billion-dollar Swedish internet company to rival Spotify and Skype.

The expansion of “The Founders” event is a fitting symbol for the rise of Stockholm as a leading European tech start-up capital, which is now rivalling Berlin, Paris and London.

Stockholm is still some way behind London in terms of investment in new companies, but US venture capital firms invested nearly $200m in Swedish tech companies last year and $308m in 2010, more than twice the average amount invested between 2002 and 2008, and more than rival hubs in France and Germany, according to data from Thomson Reuters.

Fred Destin a venture capitalist at US-based Atlas Venture, said: “A couple of years ago Stockholm was still recovering from the effects of the dotcom crash and few people saw it as a major tech start-up centre, but then along came Spotify in 2008 and a couple of other success stories last year and now it has the whole world’s attention.”

Recent successes aside from Spotify, the digital music service worth $1bn, include Klarna, an online payments service that allows users to pay for goods only once they have been delivered. The company won $155m in funding from General Atlantic of the US and DST Global, the Russian backer of Facebook, Twitter and Groupon, last year and has a valuation of close to $800m.

Slightly more than a year ago Qliktech, the business analytics company, successfully listed on Nasdaq and its share price has risen 30 per cent from its initial public offering price. Microsoft bought Skype for $8.5bn last year.

An analysis by venture capital firm Creandum reports that in the past five years, €2.6bn has been generated annually from Nordic tech-company exits, with more than half of this coming from Sweden alone.

Each big success helps to inject money, confidence and talent back into the city, according to local industry insiders. “Every company that makes it acts as a catalyst for new ideas, new start-ups and new investments. It’s a ripple effect,” said Sebastian Siemiatkowski, the chief executive of Klarna.

Wrapp, for example, which is a promising site started last year that enables people to give gifts via Facebook, is headed by the founder of Rebtel – a leading internet telephone company which this year surpassed 150m users – and the former technical head of Spotify. It has recently won funding from Atomico, the international venture capital firm formed by Niklas Zennström, co-founder of Skype.

Other recent start-ups that have benefited from the local scene include Mojang, the creator of Minecraft, an internet game that has already sold more than 2m copies, and iZettle, Europe’s answer to mobile-payment company Square, which last year raised €8.2m in funding.

But there are also problems for Stockholm’s tech scene, which could scupper its hopes of becoming Europe’s Silicon Valley. Domestic venture capital funding still remains subdued following the dotcom crash at the turn of the century. The scene relies heavily on more fickle foreign money.

Talent, which is Stockholm’s key commodity due to its world-class education system and history of high-tech engineering, is also problematically mobile. The people behind popular music website SoundCloud, for example, have moved to trendy Berlin while Videoplaza and Readmill have all moved headquarters to bigger markets abroad.

But for the moment, the majority of successful players have remained in Stockholm in one form or another as the “angel investors” or board members to local companies. “As long as the tax situation for start-ups and entrepreneurs is not getting worse and the poker game survives, keeping people in the city should not be a problem,” said Kristofer Arwin, the founder of the quarterly poker game and the price comparison website PriceRunner.

– In Financial Times

Advertisements