If you’ve missed the Swedish tech boom, then you haven’t been paying attention. From buy-now-pay-later (BNPL) posterchild Klarna to music streaming giant Spotify, the Nordic nation has churned out unicorn at a rate that would make Silicon Valley blush.
In fact, a few years ago, seed-stage investor SparkLabs noted that Stockholm had birthed more unicorns per capita bar none, save for the Californian city.
Over the past few years, the Scandinavian country has particularly cemented its reputation as a hot spot for fintech innovation. Apart from Klarna, Sweden is home to the likes of Tink and Lendify, which have respectively been acquired by payments giant Visa and Danish challenger bank Lunar.
“I think the Swedish tech scene in general is really impressive,” Elin Bäcklund, CTO of fintech startup Ark Kapital, tells Verdict. “For a long time, Sweden has had successful role model tech companies like Ericsson, Truecaller, Spotify and King.
“My experience is that Swedes see business, finance and tech as attractive industries to work in and entrepreneurship is part of our DNA. So I think the fintech revolution has grown from a prosperous environment and a great pool of talent.”
Ark Kapital is a newcomer to the Swedish fintech scene, having only seen the light in 2021. However, it has already made waves. The company secured €165m in March. The €15m equity portion of the seed funding raise was led by LocalGlobe, with participation from Creandum and angel investors including founders of iZettle, Supercell, King and EQT Ventures.
Ark Kapital has impressive pedigree
EQT was one of the earlier investors of Klarna. The EQT portion of the deal is not insignificant as it pertains to the notable pedigree of the people behind the startup. Ark Kapital’s chief product and technology officer Henrik Landgren previously spent six years as Spotify’s VP of analytics before becoming a partner and leading the development of EQT’s artificial intelligence (AI) platform Motherbrain.
Before becoming the CTO of Ark Kapital, Bäcklund was the head of Motherbrain, but she had also clocked up time as one of the co-founders of OpenHack.
“I co-founded OpenHack during my last year of studies,” she says. “The company is not profit and organises social impact hackathons all over Sweden.
“We saw three different demands meet: companies wanting to find tech talent, programmers wanting to attend fun hackathons and NGOs needing solutions to the issues they know very well. So we combined all of them and let companies fund amazing hackathons where programmers code for impact.”
At Ark Kapital, Bäcklund is in charge of developing the AI underlining the startup financing company’s offering. Basically, Ark Kapial has merged banking and AI to create a data-driven precision finance company that enables technology companies to grow faster and smarter through long-term loans.
Her own journey as a tech-head of sorts started when she was young.
“I’ve had it since I was old enough to play children’s games on my dad’s computer,” Bäcklund remembers. “Both my parents are engineers and technology has always been around for me to play with. I started building games, like Memory and Snake, for my younger sisters when I was nine. I grew up with social platforms like MySpace and Playahead and I quickly learned to code my profiles to look better than anyone else’s.
Today, she is using her position to make the techsphere more welcoming for everyone. Bäcklund has previously voiced ambitions to ensure that the company has a 50% gender split.
Other Swedish female fintech leaders, such as Klarna alumni-turned Brite founder Lena Hackelöer, have voiced similar ambitions.
Swedish fintech funding
Swedish fintech funding has gone through ebbs and flows over the past seven years.
Back in 2016, the Swedish fintech industry secured $36m across 13 VC deals, according to data from research firm GlobalData. While the company didn’t record any equity deals during in 2016, things would change over the next years.
The VC deak figures jumped in 2017 when the Swedish fintech industry secured $230m across 23 deals, only to fall to $107m across 16 deals in 2018.
In 2017, the Swedish fintech industry secured $2m across one equity financing deals. While the number of equity deals didn’t change in 2018, the amount raised crawled to $20m.
Last year was a performant year for the sector. It raised $890m across 18 VC deals and over $1bn across two equity offering deals.
Klarna made up of a massive chunk of that money. Last year, the BNPL company secured a $1bn funding round in March and then a $639m raise in June. Klarna secured a valuation of $45.6bn following the latter round. However, it has since lost a significant chunk of that, having suffered an $800m down round that shaved Klarna’s valuation down to $6.7bn.
GlobalData estimates that as of September 2017, there have been more than $1bn injected across 12 VC deals into the Swedish fintech industry so far in 2022. The research firm didn't record any equity deals.
The news comes as there has been a global downturn in fintech funding due to the market volatility caused by the pandemic and the ongoing war in Ukraine.
The Ark Kaptial CTO believes that the downturn could be good for the industry in the long run.
"It’s in a downturn like we’re seeing now that startups will struggle to raise capital but I think it could also lead to an even more innovative environment where the truly useful products will advance," Bäcklund says.
"So the new funding options we’re seeing emerge are more important than ever. The winds are changing and I hope we will see new ways of startup financing and new types of companies in the upcoming years."
GlobalData is the parent company of RBI and its sister publications