When you hear the word “startups” you might immediately think of Silicon Valley. Sure, the region in California may still be the world’s most prolific tech hub, but Sweden is a close second. And what’s more, Sweden isn’t just producing startups, it’s breeding unicorns – startup companies that are now valued at USD 1 billion or more. Quite impressive when you consider that 90 percent of all startups are doomed to fail. Even more so for a country with a population of just ten million people. Professor Robin Teigland from the Department of Marketing and Strategy at Stockholm School of Economics specialises in how startup companies become unicorns. Her research has led her to believe that the key to success is treating a startup more like a film production than a company:
“Think of a startup like a temporary organisation continuously moving from project to project in which you need a different constellation of resources for each phase. Then you can use your network to access the resources you need, where the focus is on access rather than ownership. This way you can be more flexible and change direction more easily,” Teigland explains.
HIGH ETHICAL STANDARDS
To carry out her study, Teigland spoke to the CEOs of various unicorn companies, one of whom divulged their formula for success, explaining it involves maintaining high ethical standards, designing a business model that focuses on profitability and not just growth, and seeking out suitable talent with the same values as you – wherever it may be in the world.
Interestingly, her study also suggests that bringing in an external CEO can contribute to a startup’s success. She examined the board and management of Swedish unicorns and found this was a recurring phenomenon. However, Teigland does admit this approach can backfire, as it did with one company she investigated:
“It doesn’t always work. It depends on the skills of the founder of a company as well as those of the CEO who’s been brought in.”
Other factors that can have negative consequences for startups include putting too much focus on technology instead of what the user needs, and hiring within one’s own network instead of seeking talent elsewhere. That being said, the informal networks in Sweden are a strong contributing factor in the country’s startup success, and Swedish culture also plays an invaluable role, Teigland believes:
“Informal networks are one of the reasons for Sweden’s startup success. Resources flow through these networks and Sweden’s low power distance and flatter organisations, as well as its ‘lunching out’ culture, enable the building of networks and the sharing of resources.”
Source: This article was originally published in the Advantage Sweden magazine.
FIVE STARTUP SUCCESS FACTORS
Companies need to adapt to changing market conditions. A more flexible structure makes it easier to access the right resources at the right time and to pivot quickly when needed.
- HIGH STANDARDS
Quality breeds success, both when it comes to what a company offers, but also when building a team. Find the best people and give them tools to grow.
- FOCUS ON PROFIT, NOT JUST GROWTH
Lots of growth can feel great, but if profits don’t follow, even the fastest growing startups will have a hard time reaching unicorn status.
- INFORMAL NETWORKS
Swedish companies’ flat hierarchies and strong informal networks facilitate the flow of ideas and resources across new constellations, breeding further innovation.
- PUTTING THE USER FIRST
The most advanced technologies derive their power not from their complexity, but from how many people use them. Never forget that it’s all about satisfying users’ need.
SIX SWEDISH UNICORNS YOU SHOULD KNOW
This digital music streaming pioneer came online in 2008 and now boasts more than 70 million subscribers that pay to access a digital catalogue of more than 30 million songs. The company has a valuation of USD 19 billion, with an IPO expected in 2018.
Co-founded by Swedish entrepreneur Niklas Zennström in 2003, this innovative internet voice and video chat service was purchased by Microsoft in 2011 for USD 8,5 billion.
Perhaps best known for creating the hit game Candy Crush, King has created more than 200 games played by roughly 300 million users every month. The company was acquired by Activision Blizzard in February 2016 as part of a deal worth USD 5,9 billion.
Founded in 2009 by Markus “Notch” Persson, Mojang is the game developer behind Minecraft, one of the best-selling video games of all time with 144 million copies sold. In September 2014, Microsoft bought Mojang for USD 2,5 billion.
This online payment service was developed by three students back in 2005 and now has 60 million users generating 650,000 financial transactions a day. The company has an estimated value of more than EUR 2 billion.
- EVOLUTION GAMING
Founded in 2006, the company is a major player in the booming online gaming sector. Its share price more than doubled in 2017, pushing Evolution Gaming’s value over USD 2,7 billion.