Our objective is that Sweden will be the best country in the world when it comes to startups. Startup with width and diversity, with founders from all backgrounds, companies in different phases that'll create jobs.
“It would be short-sighted to believe that Sweden will continue to deliver unless politicians wake up. Work towards a vision, it engages people and creates commitment.”
A comment from the Startup Manifesto’s founder survey with 90 startups.
In June 2015, the Swedish Startup Manifesto launched after many politicians and public decision-makers told us that it is hard to know what Swedish startups want and need. We are many, diverse, loud and busy.
The manifesto reached its purpose and goal in becoming the public list that the government, parliament, politicians, public decision-makers and journalists could refer to regarding the main policy issues for startups.
Since then, unfortunately little has happened to convert the Swedish startups’ most critical political issues into concrete motions, propositions and prevailing law. On the contrary, the government has put forward a number of proposals that hamper business, entrepreneurship and growth, while the opposition cannot be said to have been particularly active either.
Our survey with 90 Swedish startups as well as Swedish and foreign investors shows that overall, not much has happened and the same questions remain on the table since the first manifesto launched. While the world is running past.
In 2015, Stockholm was about to pass London as the European city with the most invested capital in startups after Berlin (X). Today, London, Paris, Berlin and Barcelona are ahead of Stockholm while Stockholm is further down the list with Dublin, Amsterdam, Vienna, Madrid and Munich (X).
The same trend is seen nationally. In 2017, Swedish new business creation decreased for the first time since 2013 by one percent, and took a nose-dive of 10.3 percent in the first quarter of 2018 (X) - despite a sustained trade boom.
Our achievements in terms of entrepreneurship, “a second chance”, i.e. coming back after failure, as well as knowledge and innovation in SMEs have also dropped compared to other EU countries in the period 2008-2017 (X).
Sweden is turning into a feeder team for Anglo-Saxon corporations and venture capitalists. It’s a country where the best Swedish startup companies - in early stages - are sold and moved abroad and, where the Division 2 league is absorbed by other Swedish companies in the absence of the capital and talent needed to grow. It’s a country which other European countries accelerate past, while we rest on old accomplishments. Far too few Swedish startups are growing to become the next generation of big Swedish corporations.
In the Startup Manifesto 1.0, the goal was to make Sweden the world's best startup country. Over the years, we have seen that this is not where the problems lie. Starting businesses and startups in Sweden is easy. It is growing from a startup through to a scaleup then to a big business that is almost impossible. The reasons are lack of capital, lack of skilled labour, and a petty attitude towards entrepreneurs.
Digital is the main reason just over half of the Fortune 500 companies have disappeared since the year 2000 (X). We are now at the beginning of an even more significant transformation with automation, artificial intelligence, and a massive disruption of the labour market. What does Sweden's business experience look like in 20-30 years if we only trust that our current large companies will deliver jobs and tax revenues like today? If they even remain?
Our goal is therefore that Sweden will become the world's best scaleup country and Europe's new growth engine. For future jobs, welfare, and prosperity.
Sweden has the innovations, founder talents, knowledge, and ideas. Now politicians need to allow growth and deliver the conditions so that we can go from feeder team to measure up to – and speed past – Israel, Canada, Singapore - with the goal to do as well as the United States and Britain.
Furthermore, Swedish politicians must understand that today it is not primarily Swedish companies that compete internationally. Sweden competes internationally. And can choose to be a feeder team or a growth engine.
Swedish politicians love innovation and startups. They are sceptical of innovators and entrepreneurs. However, every invention, innovation, and company is rooted in individuals. Unless politicians understand - and acknowledge - that growth is essentially coming from people with ideas and motivation, Sweden will not succeed in maintaining future growth, prosperity, and a vibrant labour market.
"The western world's problem is that we are extremely focused on preservation. That is not a good recipe when the outside world is in rapid change. Society must be better at creative destruction, i.e. clearing out the old and non-functioning, without sentimentality, and constantly promoting new experiments and learning. "
A comment from the Startup Manifesto’s founder survey with 90 startups.
Sweden is at the bottom regarding the number of entrepreneurs compared to other innovation-driven countries (X). The combination of high tax and high risk means that not enough people want to start a business (X). Being employed is still the norm. Large companies are unusually active in Sweden and account for a higher proportion of our jobs than in other countries. The vast majority were founded BEFORE the Second World War! The primary reason is tightened labour market legislation and taxes from the mid-60s onwards, preventing companies from developing.
Today's corporations are expanding in other countries, and as global competition has increased, we cannot rely on them continuing to be successful. On the contrary, we can expect that we will continue to see businesses close down in Sweden and headquarters moving to other countries, losing contact with their Swedish roots, with the result that subcontractors and surrounding businesses suffer from reduced opportunities to grow. Sweden must therefore actively and engagingly work to replace export revenues, jobs, and innovation in new companies. Now.
Swedish startups suffer from the lack of large tech corporations
Unlike the United States and other skilled startup countries, the new major companies that have grown in Sweden since the 1980s are rarely high-tech. Instead, they are service-producing and have often taken over activities from others, such as outsourced staffing or jobs from the public sector. Well-known examples are Securitas, Attendo and Capio. They work to increase productivity within their areas and often rationalise employment opportunities (X).
The lack of Swedish high-tech companies similar to Microsoft, Apple, Google, Facebook and Amazon also makes it difficult for Swedish startups to create valuable collaborations and get help in global value chains. One reason why startup and scaleup companies move away from Sweden are to create those opportunities.
Abroad, it is clear how innovation flows work in practice. Some startups scale and become new big companies, others are bought up, and their innovation becomes new features and business areas within Google, Microsoft, Amazon and other – mainly American – corporations (x).
Sweden invests almost all of the state's R&D money in mature companies that can find their capital in the open market (X), as well as in the commercialisation of research at universities and colleges. This practice occurs even though over 18 billion SEK is accumulated in unused research grants (X). Moreover, this continues even though it is a well-known fact that only 5% of European startup companies are spin-offs or spinouts from higher education institutions and that both large companies and universities have long lost their monopoly on innovation (X).
It’s in the startup companies that the majority of innovation takes place, and Swedish startup companies are invaluable for innovation transfers to our larger companies, whether it is through collaboration, acquisitions, or competition.
Sweden invests heavily in research and development, one of the reasons we place high in lists of "the world's most innovative countries". However, it is also well known that the result does not match the effort. Sweden counts as an innovation leader in the EU, but is last in the EU regarding innovation growth by 0.3% compared with 2.7% for the EU as a whole. It is even worse in comparison with our major global competition such as China at 5.8% and South Korea at 6% (X).
The weak effect of investments is primarily due to the fact that the state research and development funds go to institutions, mature businesses and bureaucracy, rather than to individuals – innovators, inventors and entrepreneurs – that create innovation, new companies and growth. The OECD notes that Sweden has the least generous tax credits for research and development (x), again a clear indication that politicians want to control innovation, but do so towards the wrong target groups.
Creating more jobs is on the agenda of most politicians. At the same time, both the EU (X) and Företagarna (X) indicate that lack of skills and competence are the main obstacles to growth in Sweden. More education can partly solve this problem, but workers must also feel that training pays off. Moreover, Sweden is one of the countries where higher education pays the least (X). One option is to import labour, but here too the high tax burden plays a role and makes Sweden less attractive (X).
To fuel Swedish growth, create new major companies, and finance future welfare, Sweden needs to be a more attractive country to work in. Top-level talent from abroad, like today's students, already select nations with better access to health care and better standards in schools combined with higher living standards.
The fact that small businesses create four out of five jobs is not the entire story. A tenth of the companies that grew the fastest between 1997 and 2007 account for the whole increase in jobs during the period (x). At the same time, only 13 percent of companies have very high growth ambitions (X). If we look internationally, Swedish companies take a bottom position concerning growth ambitions. Among those who are planning to increase their staff with more than five people, only Greece and Spain are behind Sweden (X). It is worrying for the future.
Swedish startup companies have, however, an entirely different attitude. A survey at the startup hub SUP46 by the Confederation of Swedish Enterprise showed that SUP46's startups try to recruit twice as many people as do other companies of comparable size (x). Every way of helping Swedish startups to grow into scaleups is, therefore, a very cost-effective way to increase the number of jobs.
There is a scepticism against startups among Swedish politicians. Many feel that startups are mostly grumpy primadonnas who do not contribute enough jobs and have too many demands. If we completely remove the arguments mentioned above for how startups and scaleups contribute to increases in growth, employment and innovation – still an important function remains: structural change.
If our Swedish startups cannot grow to scaleups, then the sector as a whole cannot grow. The Swedish business sector will be less competitive and remains to a greater extent in old industries with lower development and lower growth rates(X). It will also be vulnerable to rapid elimination from abroad through foreign companies offering more efficient solutions. Reforms that improve startup companies' growth opportunities are therefore more critical for Sweden than for individual companies.
Swedish business policy is usually two steps ahead, and one and a half in retreat. There are many investigations and publications about how Sweden should act, and what reforms must be implemented to create future-guaranteed growth.
All Swedish politicians are happy to talk about innovation and want to be included in the spotlight next to successful Swedish startups and entrepreneurs. However, instead of creating cross-party, concrete, long-term growth solutions, politicians ponder insignificant changes to the most significant inhibitors of growth - while time goes by and the world passes us by. Now is the time to take proper action and stop acting like wussies.
If we want Sweden to be a welfare state with a high standard of living and smart technology, environmental, and service solutions at the forefront, then we must invest in growth, which means startups and scaleups. Alternatively, witness our companies move, sell out, or die.
Objective: Sweden will purposefully create conditions and remove obstacles that inhibit startups to grow to scaleups, and create growth, jobs, and export revenues.
"What is needed is a government that sees entrepreneurship as an asset and not as something evil and potentially criminal, which must be combated and taxed by all means."
A comment from the Startup Manifesto’s founder survey with 90 startups.
Create a legal startup/scaleup definition that can be tied to different rights and actions. This allows us to define what kind of companies in which sectors within which time frames should receive special support since they are considered to have the greatest positive impact on our society.
Long-term thinking and stability in the rules and legislation of industry and labour markets are crucial for founders and investors to dare to go ahead with their business venture. We have not experienced this during the last term of office.
42% of surveyed startups think this is one of the three most important policy issues.
READ MORE: During the latest term of office, the Government has presented a series of proposals that partly have reduced the number of new businesses, and partly have weakened confidence among Swedish startups regarding Sweden as a base for future operations. Politicians must understand that it is not only established laws that affect the decisions of entrepreneurs and investors but also signals from official investigations, proposals and propositions, as well as attitudes towards and the view of, entrepreneurs and entrepreneurship.
Swedish politicians must begin to measure the effects of their decisions regarding innovation policy and growth policy. Today tax money is suboptimally allocated with lack of results and lack of growth.
READ MORE - Sweden should:
Politicians and legislators have a difficulty prioritising and budgeting for positive startup and scaleup legislation if there is no proper research showing the effects that startups and scaleups have on growth and the social climate. In Sweden, there is little research on the impact, and it is similarly under-researched abroad. Sweden needs proper research funds allocated for significant research around startups and scaleups.
READ MORE - We propose that the Government allocates funds for research on startups and their impacts on the economy, labour market and innovation, but also what types of legislation, measures and financial incentives that internationally have proven most successful in creating fast-growing startups that become successful companies. There are also specific issues: Sweden invests significant funds in the commercialisation of research in favour of entrepreneurs - is this the right priority? In other countries, what methods have shown to give good results in increasing the availability of seed capital, but also for increased diversity among the founders?
All new and revised rules and laws, at all levels of the state, county council and municipality, should undergo the EU SME Test to determine the impact of new legislation on small and medium-sized enterprises.
READ MORE - Proposals, investigations, motions, bills, laws and regulations have a disproportionately high impact on small and medium-sized businesses, including startups and scaleups. Large companies have the resources to hire lawyers and lobbyists to influence new legislation, but smaller companies do not. The EU lists Sweden as one of the 11 EU countries using the SME test (X), but we have seen little use of it in recent years with the widely publicised policy issues that hinders startups and scaleups, such as the 3:12 legislation, the Reepalu Investigation, the exit tax, collective labour agreement requirements for different types of procurement and public support, and the proposal that a state authority should determine who may be employed in companies if the prospective employee is a non-EU citizen.
Sweden is the only country in the world to have a penalty tax on entrepreneurs (the so-called "3:12 rules"). Our overall corporate structure reflects this, where 96.3 percent of companies are single or small companies that have difficulties to grow. The investigation carried out since the last manifesto aimed at simplifying the rules, instead, it ended in a tightening of the 3:12 rules (x).
57% of surveyed startups think this is one of the three most important policy issues.
POLICY TRACKER: Thumbs down
READ MORE – In the Startup Manifesto survey, 57% percent consider this to be a top three most important issue. Today, entrepreneurs are penalised compared to passively purchasing shares in a large listed public company. Entrepreneurs often renounce salary, social security, vacation and pension payments, only to be met by 58% tax when they sell their company - if they follow the rules. If an entrepreneur wants to invest in new companies after a sale, the regulations require that the funds lay in fallow for five years in order not to suffer up to 58% in taxes. This does not encourage others to entrepreneurship, rather only to poor solutions to avoid taxation. Simplification of the 3:12 rules is, therefore, a must.
Time is money. Knowledgeable, innovative employees who can develop innovative products and services are the single most substantial cost in a Swedish startup or scaleup company. The company must also compete with companies from other countries that are radically much more competitive due to lower taxes on labour. A first step is to include all employees in a start-up in the Research Deduction, which provides a 10% deduction on the payroll tax.
42% of surveyed startups think this is one of the three most important policy issues.
READ MORE – In the past, the highest cost of starting a business was buying or building a factory, buying machines for manufacture, or buying goods to sell. Both the accounting system and tax legislation are adapted to this. Today, and especially for startup and scaleup companies, the cost lies in knowledge, people and time. Working time is the highest taxed resource we have with a 70% tax wedge, which is the highest in the world. Compare this to 48 percent on average for the OECD countries. A comparison with our top startup countries makes it clear why Swedish startups have difficulties to grow. The tax wedge is 47 per cent in Israel, 44 per cent in the United States and 35 per cent in Canada - half compared to Sweden (X). To innovate, compete and grow internationally, startups and scaleups must get more for their money. Sweden is also among the OECD countries that have the worst opportunities to deduct costs for innovation (X).
Remove legal barriers and facilitate the sharing economy where digital platforms quickly match people's demand for shared goods and services against supply. It not only leads to sustainability and environmental benefits but also to a new labour market - if allowed! Sweden is lagging behind. Can we afford it?
READ MORE – The government appointed an investigation and discarded the leadership of a major future industry already in the mission statement by prohibiting changes in labour laws or constitutional amendments. The investigation resulted in that the Consumer Agency should inform consumers (X). In Finland, the sharing economy has grown phenomenally, in no small degree thanks to a thorough review of relevant regulations. The UK government has declared that Britain will become a Mecca for the sharing economy and a PWC study shows that nearly six out of ten Americans think that accessibility, not individual ownership, is the new kind of ownership. In the mid-2020s, the Swedish sharing economy is expected to be worth twelve billion Swedish crowns, but the potential to contribute to jobs and growth is much higher if Swedish politicians advocate for development, instead of preventing it (X). The sharing economy is especially valuable for young adults and new immigrants to gain a foot in the labour market. Today, 60-65 per cent of newcomers are unemployed after five years, and Dutch research shows that temporary work increased the chance of permanent employment - especially for foreigners (x).
Known examples of companies within the sharing economy are Airbnb (housing) and Uber (transport). In Sweden, there are, among others, Yepstr (extra work for youth) Workaround (find temporary office space), Techbuddy (find IT help), Heetch (pooling/taxi), DogBuddy (dog sitting), and Taskrunner (small services).
A few interesting comments from our startup survey:
The EU is preparing a special tax targeting digital giants like Spotify. The tax proposal only refers to large digital companies and is based on tax on turnover - not profit - something very unusual. The proposal is particularly difficult for fast-growing companies that need capital to scale up operations through investments and new jobs. A second, more long-term, proposal is also on the table where digital companies shall be taxed where the users are. This should especially burden small countries and small companies, especially administratively. Sweden needs to act vigorously against this.
READ MORE - Sweden has been against the proposal, but Prime Minister Stefan Löfven changed his mind in March 2018. In June, the Finance Minister Magdalena Andersson made a statement that Sweden is again against the proposal (X). The second proposal would hurt Swedish startups, small companies and game developers especially hard. Sweden so far against that proposal as well together with Denmark and Finland (X). The proposals hurt Sweden more than other EU countries because we are a small country with large exports and major growing technology companies. However, it also harms a Europe that needs more digitisation and many more large, successful digital companies (X).
Article 13 is a controversial part of the new European copyright legislation that directly threatens Swedish startups and scaleups (X). By forcing Internet companies that in any way share and store user-generated content to filter material uploaded to their services, the proposal creates significant competitive disadvantages, both against companies in other markets and against established large companies. The Swedish government has voted for the proposal in the first vote.
READ MORE - Article 13 is not only a threat to innovation and the development and survival of Swedish and European startups (X) but has also received significant criticism from human rights organisations (X). Due to the requirement to filter content to block the publishing of copyrighted material, the proposal inadvertently leads to excessive filtering and content removal, as well as constant monitoring of user activity on the web. It would violate the freedom of expression, the freedom of information and the right to privacy, and oppose a number of existing EU laws. It also gives US companies like Google and Facebook a powerful competitive advantage as they have the resources to build and maintain the advanced content filters that Article 13 requires, which startups do not have. We, therefore, demand that Sweden act vigorously on this issue.
Sweden needs to clarify and revise the GDPR legislation. It is a beautiful thought that may be destructive to the European technology industry that misses business opportunities and innovation because of stifling and fuzzy legislation. In the long run, it may mean that Europe loses the coolest startups in, for example, machine learning, AI and blockchain and will get left behind in the development race.
READ MORE: The GDPR legislation, which entered into force on 25 May 2018, is an example of when startup and small business issues have not been addressed. Uncertainty, fear and despair were heard from many companies because of the massive regulations, the unclear legislation, the constraints, and the lack of opportunities to correct before high fines are imposed. How many new, digital businesses are not founded because it becomes too difficult, too complicated or too expensive to comply with the rules? How many avoid Europe and focus on other markets instead? How much innovation does the law inhibit due to being risky, complicated and expensive?
"The state has a number of laws that ensure that 1) We as entrepreneurs do not earn too much money on our companies, and 2) If we violate any laws, we face real punishment. The state does not have support for entrepreneurs. If the state had wanted to help us, they would have actively contacted us and asked how they could help us. It is incredibly far away for the state to reach above zero and start to be a support to companies. For now, focus on just trying to destroy a little less. :) "
A response from the Startup Manifesto’s founder survey with 90 startups.
OBJECTIVE: The knowledge society of today and tomorrow is based on attracting and retaining the best talent. Sweden does not do this today.
"Of 70 employees in the company, it's only me who is in Sweden. The others are in India. For that reason, I “avoid” most of the problems with running a company in Sweden. "
A comment from the Startup Manifesto’s founder survey with 90 startups.
Six out of ten startup companies at SUP46 experiences that the problem of recruiting is a significant barrier to growth - twice as many as in all small and mid-sized companies (X). It is also the single most significant barrier to growth for startup and scaleup companies. In 2018, every fourth recruitment attempt for Swedish companies fails (X).
Sweden has the world's highest tax wedge. In a global society, this is a direct competitive disadvantage for two reasons: First, the development of a Swedish startup company's products costs twice as much as in Canada, for example. 70 percent of investors' money goes to the Swedish state, while only 30 percent goes to the innovator for rent and food. Secondly, we have difficulty recruiting skilled workers from abroad. If we want Swedish startups and scaleups to stay in Sweden and grow into big companies, the tax wedges must be reviewed.
READ MORE - Swedish students are the students within the EU who most often work abroad. The question is if they come back. Among international students, more than half say that income tax levels are important or very important when choosing which country to work in (X). Compared with the international competitors, this means that Swedish startups and scaleups pay more for their employees, and that qualified people avoid Sweden when they receive less pay. Our schools and our health care are also no longer of the high quality that skilled foreign labour can overlook while earning a lower compensation.
The entire Swedish taxation system needs to be reviewed, but there are some simple, quick decisions that can improve the situation and increase competitiveness. You can read about them below.
The new legislation on employee stock options was, for many Swedish startups, and in particular scaleups, a disappointment. This applies in particular to the limitation of staff, under 50 employees, and in maximum turnover, SEK 80 million. It means a competitive disadvantage compared to, for example, the United States and the United Kingdom, and increases the difficulty of growing a company in Sweden.
1/4 of the surveyed startup companies believe that a change is one of the three most important policy issues, despite new legislation in the field.
POLICY TRACKER: Meh...
READ MORE – The new legislation is positive as we have gotten a formal framework. However, it is a disappointment in five points:
Lack of skilled workforce is the most significant growth barrier for Swedish companies, and even more so for startups and scaleups. During the period since the Startup Manifesto 1.0 was launched, Sweden has gotten a bad reputation on the international labour market due to year-long processing times for work permits, due to employee expulsions out of the country for trivial employer mistakes, as well as due to the overheated housing market. The fast track employment visa that the government has introduced is not enough. Sweden must invest vigorously to become one of the most attractive countries for highly educated talent.
34% of surveyed startups think this is one of the three most important policy issues.
READ MORE - Startup companies believe that personal taxation, salary levels and the housing market pose significant problems for foreign recruitment (x). In addition to these, there are a number of important reforms Sweden needs to do to attract talent from abroad:
Entrepreneurs are an asset! Create and market a more relaxed visa process for entrepreneurs and increase understanding of the authorities for existing overseas entrepreneurs. Stop expelling founders who prioritise employee wages and company survival in front of their own salary - as long as they pay their own expenses.
READ MORE – The battle for innovation power and startups is intense between different countries. Many countries offer and promote favourable startup visas to foreign entrepreneurs, including Swedish startups, which are often provided significantly better terms than in Sweden. In Sweden there is already a "Startup Visa", but few people know about it and Sweden does nothing to attract or retain foreign entrepreneurs - on the contrary. Today, founders are expelled or threatened with expulsion, because priority has been given to the company's growth, investments, and employee wages before his or her own wages (X, X) or employees have been expulsed because the employer has made trivial errors (X). Since the last manifesto, Sweden has gained a bad reputation on the international talent market.
The housing shortage stifles Swedish startups because startups are hard to grow if they can not recruit staff. The housing shortage costs Sweden SEK 21 billion a year in growth losses (X). The housing shortage leads to failures in hiring the right staff, which in turn is the most critical growth factor for Swedish companies.
It is noteworthy that only 11% of Swedish founders think that this is one of the three most important policy issues, while 50% of founders with a foreign background believe it is.
READ MORE – The housing shortage does not make Swedish startups move to Västerås, Luleå or Åmål. They move to Berlin, London or San Francisco. It's not just about housing for the founders, but also for recruited staff who are not local. The housing shortages in the big cities indeed require long-term solutions, but startups need short-term creative solutions here and now to prevent growth losses or relocation:
In the longer term, deregulation is the key. The problem for startups is primarily not the cost, but the availability – to find a home at all for a shorter or longer period.
OBJECTIVE: Sweden should be the best country in the world to invest in startups and scaleups. For the state, changes in taxes and venture capital should mean good business short-term through increased capital inflows, and long-term through an expanded tax base.
“Great Britain and the United States have an attitude of support through targeted tax cuts rather than hand-outs. And a social support that is positive towards new business.”
A comment from the Startup Manifesto’s founder survey with 90 startups.
Swedish startups are suffering from capital shortages. On average, Israeli and US startups get seven times as much early-stage venture capital, and even more in later stages. Since the last manifesto, early capital has dried up, in favour of later, larger investments from 10 MSEK and upwards, while we have more early startups competing for investments. It is also true that Swedish individuals have fewer resources to start and expand a business than in other OECD countries. Combined with the lack of early capital, it is hardly surprising that the number of companies borrowing from family and friends has doubled since 2016, indicating that the capital supply chain does not work optimally for the smaller companies (X). Capital shortage means that many startups are closed down at very early stages, or sold too early, often abroad. The Riksdag and government must seriously investigate how early seed capital can be stimulated in Sweden through deregulation and tax incentives, and then act.
Here are some suggestions:
Actively encourage private individuals, business angels and VCs to invest at the very early stages, which means that more startups get over the "Valley of Death" and reach either real revenue or additional investments.
READ MORE: The EU generally has a lower number of angels in comparison with other areas of the world (X). The existing Swedish investment deduction applies only to private individuals and small investment amounts, therefore it has had little real effect.
However, there are several good examples to stimulate investment:
We urgently demand Sweden to introduce internationally competitive investment deductions for early-stage companies to boost growth and innovation.
The United Kingdom has found the middle-road between risky investments in unlisted start-up companies and safe investments in listed companies. A Venture Capital Trust is a listed company that invests in startup companies and provides highly beneficial tax deductions for investors to increase capital inflows to growth companies.
READ MORE - Investments in British Venture Capital Trust companies have increased in 2017 to a record of almost 9 billion SEK (X). As a VCT company is listed, it becomes a less risky business for small investors as well as institutional investors whom today have limited opportunities to invest in early-stage growth companies.
If Swedish politicians want to see increased innovation and growth, there are two ways to handle it: either support innovation through tax cuts or increase government innovation grants. In Sweden, general startup grants are few, and competition is intense. Innovation deductions are among the least generous in the world. The tax wedges are double against, for example, Canada, while the availability of early private seed capital has decreased. It is positive that the previously untapped innovation funds have been activated in Saminvest, but too early to see any results.
READ MORE - Many countries today know how vital it is to support innovation in startup companies and are switching from supporting institutions to supporting entrepreneurial individuals. The Office of the Auditor General noted in 2014 that the government venture capital was misdirected and only 0.2% was invested in seed companies (X) - and nothing has happened since.
In Finland, the successful state TEKES fund with generous contributions has led to an explosion of new companies and products (X), while those in Israel, work with advantageous loans given to innovative companies that remain in the country (X). In Singapore, seed financed startups are funded by matching 3 kronor from the state for each private krona up to 200,000 SEK, but also by matching private investments at a later stage up to 26 million kronor (X). Canada offers a wealth of state-owned startup initiatives, between just over $300,000 to $7 million, and above all continuous funding rather than single occasions (X). Especially interesting is the program where young people (18-39 years) get 100,000 kronor to start or buy a company and two years of mentorship (X).
Refocus the innovation system from a narrow focus on institutions to facilitate the commercialisation of research, to a growth initiative regardless of the entrepreneur's background. Individuals - innovators, inventors and entrepreneurs - stand for innovation today, not academic institutions and large corporations.
READ MORE – Most successful Swedish startups are the result of an entrepreneur recognising a need and creating a solution that customers want to pay for. These entrepreneurs rarely get much support at all, and the number of entrepreneurs who want to start an innovative company, but are hindered by a lack of funds, is probably substantial.
On the other hand, the output of the commercialisation of research is low, and the researchers themselves are deeply dissatisfied with the current system. Over 18 billion SEK is currently accumulated in unused research grants. Nevertheless, the state allocates 99.2% of the annual R&D budget of approximately SEK 26.5 billion to the academic institutions, despite the fact that that spin-off companies from universities constitute an extremely marginal part of Sweden's newly-established knowledge companies (X). If Sweden's innovation strategy is to succeed in reversing the downward trend of low innovation growth and lost competitiveness, more innovation sources other than the research sphere must be supported.
OBJECTIVE: Young Swedes should want to realise their own ideas, not be employed, and realise others. They should gain a wider perspective and want to create growth and global companies.
“Promote a positive community spirit towards those who create the jobs of the future. Through direct statements by politicians and their representatives but also by SVT and SR. Perhaps make it a basis for cultural grants, the same way grants have demanded a focus on gender issues this year.”
A comment from Startup manifesto’s founder survey with 90 startups.
We should educate entrepreneurs, creators and problem solvers - not workers. People who do not want to get a job, but create it. Then we can meet future needs and the future labour market!
READ MORE – In Sweden, we have happily excused the bad PISA results by believing Swedish youth are more creative and better problem solvers than the high-performing Asian countries with their traditional cram schooling. That's no longer the case. The Swedish students' results in problem-solving has fallen noticeably, and according to the Swedish National Agency for Education, it is probably linked to a lack of motivation and perseverance (X) - fundamental characteristics for all entrepreneurs and creators!
The focus throughout the school - from preschool to university - should be about creating your own job, not getting a job when you graduate. The majority of the jobs in the future have not even been created today. Moreover, we do not know what they are or what they will require. Future companies and public organisations will also employ fewer people, so we need more business owners and entrepreneurs, both those who build billion dollar companies and those who "only" provide for themselves and their family.
Even among those who become employed, other personal qualities are required for those who work in startup and scaleup companies. The SUP46 members primarily seek people who can take initiatives and who can work independently. In contrast, the majority of regular companies prioritise people who are responsive and service-oriented (X).
Without high quality at the primary and secondary school levels, there are naturally even fewer people with the right skills to recruit in the future. The mediocre quality of schooling also hinders the recruitment of staff from abroad. Swedish schools must dare to lift those who have talent and those who are ambitious, but also make clear demands and show all students why education is ever becoming more critical.
READ MORE - The schooling problem also becomes important when recruiting competent personnel from abroad, especially for companies in later growth stages. Well-educated, competitive staff obviously want the best schools for their children. We do not have that in Sweden. The heavily debated issue of school profits also threatens to roll back development with different types of schools. To attract highly qualified employees, Sweden needs to develop world-class schools at all stages.
Without labour, Swedish startups and scaleups cannot grow. In five years time, we need 70,000 more people working with IT, from developers to AI experts. Although more and more people are looking for IT education at universities, the places have not increased over the last three years (X). To cover the demand, study places need to be expanded extensively at universities and colleges, as well as at trade schools. However, we should be aware that it is still not enough to cover the need for 70,000 more IT professionals.
READ MORE - In 2008, there were a few hundred eligible first-hand applicants who weren't accepted to programs with an IT orientation. In 2017 there were over 2,500 people. Sweden needs to recruit every person who wants to train for a job in the IT sector. The lack of skills and labour is today Sweden's most significant growth inhibitor. In a survey among the startup companies at SUP46, 92 percent of those who tried to recruit during the past six months were looking for a person with college education, and 12 percent were looking for people with postgraduate educations. The comparative number for other companies were 31 and 1 percent respectively (X). Startup companies have also found it significantly harder to get the right skills. For growth companies, qualified higher education is a prerequisite for growth.
Instead, two other things have happened:
First, a series of proposals and reforms have been presented that seriously harm entrepreneurs' confidence and entrepreneurship, such as the debate on profits in the welfare sector, the exit tax, the first proposals for new 3:12 rules, the proposal for an authority to determine who a company should employ, and demand for collective labour agreement requirements for different types of procurement. The result we see, among other things, is the declining numbers for new businesses.
Secondly, the outside world is running past us, from innovation growth to startup investments.
Today, the world is developing and changing at a furious pace. Standing still and passively not doing anything is to walk backwards. If Sweden is to remain a high-tech and innovative welfare state in the future, Swedish politicians must not only start. But scale up. And dare to allow growth. That way, Sweden's well-established and good startup conditions can also be scaled up and not only become the world's most startup-friendly country, but also the world's most scale-up-friendly nation. The future is being built in our startups. Sweden and our politicians must decide if they want scaleups to grow here or somewhere else. We hope the decision will be here. In the future where Sweden's ten largest companies all was founded in the 21st century.
Both individual entrepreneurs, startups, and actors within the startup community have come together and stand united behind the manifesto.
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