For every Nordic startup that raises $10million+, 3 new companies will be born from it

The Nordic Web and Founders partnered on a data-driven report that takes a deep-dive into the number of companies that have been started by former employees of the Nordic’s biggest technology companies.

The report is based upon The Nordic Web’s research and was launched on November 2nd in Stockholm.

Below are the key findings from the research.

Full disclosure: Founders commissioned The Nordic Web to conduct this research.

 

Introduction

An ecosystem is only as strong as the knowledge and capital that goes back into it. In fact, that is the only way an ecosystem can be born. Without the know-how and resources of those that have been through the pain, failures and successes of building a company before, the next generation is severely disadvantaged.

Therefore, it is vital that when Nordic companies do scale that eventually we see some of this talent fall back into the ecosystem ready to build again. The good news is, that this doesn’t just have to be the founders of these companies, this can be any employee who has learnt firsthand what it’s like to be part of building a company. Too often we focus on the founders, and neglect to think about those that have also benefitted from this journey and now possess the DNA to start themselves.

In this report, we looked at 80 of the Nordic technology companies who’ve raised the most venture capital and looked at all of the companies that have subsequently been founded by former employees.

 

The Headlines

    • On average, for every Nordic company that reaches $10 million raised, another three companies will be born
    • Of the 21 companies who have subsequently produced the most new companies: 10 are Swedish, 5 are Danish, 3 are Finnish, 3 are Icelandic
    • Skype has contributed 14.93% of the total new companies in our sample
    • Companies in 23 different countries have been founded by former employees of Nordic tech startups
    • In fact, only 61.57% were founded within the Nordics

 

Key Findings

Not all of the new companies end up in the Nordics

Just because someone was an ex-employee or founder at a Nordic technology company doesn’t necessarily mean that they will start their new venture within the region, in fact, 38.43% didn’t.

A clear example of this would be ChartMogul in Berlin, started by an early employee of Zendesk.

However, a more dramatic example would be the new companies that have originated out of Skype. Due to Skype having offices and employees in various locations around Europe, the companies we’ve seen started by ex-Skypers are also spread out all across Europe and the United States (http://skypemafia.com)

Therefore, it is not necessarily just the Nordics that benefit from this recycling of talent into new companies but also the wider European region and indeed the world.

 

Smaller ecosystems lead to a bigger nucleus of recycled talent

Plain Vanilla in Iceland are an excellent example of this, with at least four companies (Viska, Takumi, TeaTime and Northstack) coming out of it in the last 12-24 months. As well as Solfar Studios and Solid Clouds coming out of CCP Games recently in Iceland.

This occurs because employees get a taste of startup life and with not many other options to choose from to replicate the same experience, starting something yourself becomes a natural progression.

This could be an advantage for a smaller ecosystem and is key to seeing an early ecosystem evolve.

It therefore becomes important for the more mature companies in smaller ecosystems to foster this environment within their company in order to benefit the local ecosystem moving forward.

 

Skype has contributed considerably more than others

At least 40 companies have been started by ex-Skypers. These companies have incredible diversity across vertical and location, with food companies, tech companies and investment funds all being born and across the Nordics, Europe and the United States.

This large number is probably due to a number of reasons that we have not really seen replicated in the region since, in fact, Skype are responsible for 14.93% of the new companies in our sample.

The $8.5 billion exit is still one of the largest technology exits from the region, meaning a lot of employees became liquid and were able to take more personal risks with their lives.

Skype also employed a huge number of people with offices spread everywhere, meaning its subsequent impact was much larger and more diverse than other big exited Nordic tech companies

 

Recycled talent is especially prevalent in gaming companies

Nordic gaming companies are particularly strong at seeing new companies being formed from former employees, with Rovio, King and CCP Games the most clear examples.

This is likely due to very particular expertise that means there are limited options for employees to move on to and often results in them starting something themselves.

Culture also likely plays a part here, with gaming employees often working within silos or smaller teams which means they are already experienced in working on smaller, nimble projects.

A concentrated talent pool also means that networks are small and negotiable, meaning it can be easier for new gaming founders to recruit who they need immediately.

 

It’s not just companies, funds and angel initiatives also start up

Atomico and Sweet Capital are both VC funds that have been started by the founders of Skype and King respectively, two of the biggest tech exits ever in the Nordics. This not only provides much needed capital but also experience and know-how.

There is an argument to be made for funds and angel initiatives started by ex-employees and former founders actually being more beneficial to the health and future of the ecosystem than new companies.

Nordic Makers is an excellent example of former founders of Nordic tech companies coming together to invest and offer expertise to the next generation.

It is worth noting that it is typically only the founders of well-exited Nordic tech companies that (are able to) start in this space.

 

Norway has yet to really benefit from any of this

Although there is a high-profile example of Vivaldi being founded by the founder of Opera as well as a couple of other companies coming from former Opera employees, it is fair to say that Norway hasn’t seen as much recycling of talent and employees into new companies.

This is likely due to a more nascent ecosystem than other Nordic countries and not many large tech companies to draw from.

However, Norway has seen inspiration come from other areas, even from the corporate world, with several startups being founded by former employees of Telenor.

As well as other tech companies like Tidal, whose employees heading up the Norwegian operations went on to found Unacast and have been outspoken about learning from their prior experiences.

 

Several companies account for the vast majority

Each country has one or two companies that have contributed the largest amounts of new companies back into the ecosystem.

For example: Skype and King in Sweden, Zendesk and Tradeshift in Denmark, Rovio in Finland and CCP in Iceland

These larger companies typically see multiple new companies and initiatives spawn from them whereas the majority of companies often see just one or two develop from ex-employees, this appears to be due to exits, size and resources.

Therefore, we have a small number of companies making up the large amount of activity, with the top 10 most active accounting for 63.06% of the subsequent companies.

 

Key questions to consider

      • Is it healthy or sustainable that a small number of companies make up the vast majority of the activity?
      • What more can be done to increase activity elsewhere? Is it just a matter of scale with these companies?
      • Should we do more to ensure that the new companies are started within the region?
      • Are experienced Angels or new funds actually more beneficial to the ecosystem than new companies?
      • What could other verticals learn from the way the gaming vertical encourages and stimulates talent to start their own companies?
      • Do scarce verticals or ecosystems actually result in a higher number of new companies?

 

Neil S W Murray founded The Nordic Web in 2014 in order to provide the Nordics with the quality coverage it deserves. As well as being Founding Editor of The Nordic Web, Neil is also an active community builder in the region, participating in a number of initiatives, and has previously worked for Tech.eu.