Startup Ecosystems in London and Stockholm

London

London continues as Europe’s startup capital city, with an ecosystem value of $314bn last year– significantly higher than rivals Berlin ($94bn) and Paris ($89bn). The 2022 Global Startup Ecosystem Report placed London in second place as a startup hub, alongside New York, behind only Silicon Valley. The Financial Times estimates about 40,000 tech startups have made London their home.

London’s startup ecosystem has shown its resilience despite Brexit and the coronavirus pandemic, securing the global second spot for the third year running.

Financial Incentives

One of the key reasons the London startup scene is thriving is because starting a business in the UK is simple. After paying a government company formation fee of £12, a registration certificate will be received within 24 hours.

London offers a vibrant early-stage funding environment, providing up to £150,000 of investments back in income tax relief to investors. Startups can obtain funding from Venture Captial (VC) and angel investors, and they can also benefit from schemes such as The Seed Enterprise Investment Scheme (SEIS) – encouraging individuals to invest by giving them tax benefits, which has now become one of the most successful government-backed schemes.

The Enterprise Investment Scheme (EIS) is another scheme that encourages companies to raise money. Tax relief is offered to investors who buy shares in a new company. Thanks to EIS, a startup can raise up to £5 million each year, and up to £12 million throughout a company’s lifetime (including any amount received by VC).

Beyond these schemes, UK-based startups can also seek funding from grant-making trusts. There are around 8,000 of these trusts in the UK.  Finding one that is related to your business can add significant financial assistance. These grant-making trusts are currently awarding a total of £3 billion in annual grants, with an individual grant size amounting to £10,000.

An influx of capital into the UK from Silicon Valley is helping to drive forward growth. The US’ biggest tech giants have also all invested in making London their home. Google’s “landscraper” – its £1bn headquarters that is as long as The Shard is tall – is set to open in King’s Cross in 2024.  Nearby, Microsoft’s office is located in Paddington, while in the south-east, Apple is leading the regeneration at Battersea Power Station.

A Vibrant City

US tech giants and British startups and scaleups all choose London for the same reasons. The cosmopolitan city has access to a world-class talent pool, high-quality public transport infrastructure, access to six international airports and a vibrant business culture.  These favourable conditions enhance the same network effect principle that drives value in social media companies. The more skilled tech workers in London, the more valuable that network becomes, and so more people and startups choose to locate themselves in the city.

This is also true for capital, with London home to nearly 70% of the UK’s private equity and venture capital investors.  Further boosting the ecosystem are London’s prestigious universities, with the likes of Imperial College London that is renowned for science, engineering and business subjects. Academic institutions provide both a flow of talent to the city and ideas, which often materialise in the form of university spinouts.

Fintech

While London attracts startups from all sectors, there is one that dominates: Fintech, or financial technology, which includes everything from digital banks to payment infrastructure.  More than 2,000 Fintech companies are located in the capital, and, according to Beauhurst data, 71% of London’s high-growth startups were Fintechs in 2021.  All 26 of the UK’s current Fintech unicorns (valued at $1bn+), including companies like GoCardless, Wise and Revolut, are based in London.

As the highest net exporter of financial services, and around 300 of the world’s banking headquarters based in the capital, it seems only natural that Fintech leads the way when entrepreneurs and digital innovation are added to this environment.

The government plans to support the Fintech sector with new visa pathways for foreign workers, enhancing the regulatory toolbox, reforming market-listing rules, and exploring a central-bank digital currency.

Stockholm

The success of Swedish startups such as Spotify and Skype has made Stockholm a globally recognised startup hub and attracted significant international investment. According to the ‘Swedish Tech Report 2022’ the value of Sweden’s startup ecosystem nearly doubled in just a year, to be valued at €239 billion.

Tech Prominence and Unicorns

Stockholm is home to nearly 3,000 startups and scaleups, and boasts 208 VC investors and 101,000 tech employees.  The city has also produced more tech unicorns per capita than any other region in the world, except for Silicon Valley – that is, 0.8 per 100,000 inhabitants. Some of those unicorns include the buy-now-pay-later Fintech firm Klarna, lithium-ion battery developer Northvolt, and e-mobility provider Voi.

Stockholm reflects Sweden’s overall growth in the tech sector. Last year, Sweden not only retained its place as the EU’s best-performing innovation leader, but also emerged as Europe’s fourth top ranking country in VC funding per capita, reaching $540 (€504).

Support and Knowledge Sharing

Government and startup support organisations continue to nurture the ecosystem with a range of initiatives. For example, the Stockholm Innovation Scholarship is awarded to five innovators in different categories: simplify everyday life, creative industries, life sciences and health, travel and tourism, and social impact and sustainability. Another example in Kista is the Urban ICT Arena, where smart technology is created, tested, and displayed in a real urban environment.

Stockholm-based Epicenter is “a house of digital innovation” and a hub of over 550 companies. It provides a community and learning platform, alongside a meeting arena, for entrepreneurs around the world. Many of the next generation of fast-growing companies like iZettle, Fishbrain, StarStable and Einride have been a part of the Epicenter ecosystem at some point, sometimes even starting at Epicenter.

Epicenter Stockholm was founded in 2014, when three Swedish entrepreneurs wanted to accelerate the growth of Sweden’s entrepreneurial ecosystem. Today, Epicenter Stockholm has more than 6,000 members, and partners including Microsoft, Google and the Nordic Council of Ministers. It also runs sister hubs in Oslo and Helsinki.  Their programmes are run and supported by experienced serial entrepreneurs, who have scaled companies themselves, and who work closely with all participating startups.

Sustainability and Cleantech

Stockholm excels in the area of social impact investments and sustainability-driven startups.

Based on data from the Startup Heatmap Europe, Stockholm ranks second in Europe in sustainability-focused startup ecosystem activity, ahead of Berlin and Paris, with only London ahead. With outstanding tech startups and accelerators like +impact, and investors like Norrsken VC, the city of Stockholm has positioned itself as the “home of impact.”

Sweden has become a leader in renewable energy, partly due to the country’s ambitious goal of reaching net-zero emissions by 2045. Stockholm in particular has benefited from holistic city planning, close public-private ties, and the region’s target to become CO2 free by 2040. The city’s growing demand for new fuels has pushed it to become a leader in biogas, ocean power, and smart grids.

Lithium-ion battery maker Northvolt raised $2.75 billion in June 2021 to expand capacity to meet increasing demand for electric cars. Other examples of successful Cleantech startups include VOI Technology –  owns, operates, and manages electric scooters for urban commuters in Stockholm; Epishine – develops and produces printed solar cells that consist only of organic materials; Volta Trucks – an automotive company offering electric trucks for sustainable cities.