Swedes remain hot property in hi-tech boom

IP communications firm Skype, originally formed in 2003 by Swede Niklas Zennström and others, was first bought by US auction site Ebay for close to 23 billion kronor ($3.5 billion) in 2005.

The Microsoft purchase is the latest twist in the owernship saga of the popular service, but significantly the new owners have decided to retain a base in Stockholm as part of the deal.

This is a story with similarities elsewhere as a host of Sweden-based hi-tech business have changed hands in recent years but still remained tied to the country in one way or another.

There are several reasons for this development, not least one of history, according to many of those involved.

At the start of the internet bubble at the turn of the Millennium, there were plenty of strong Swedish enterprises at the forefront of the new digital age, among them high profile names at the time like internet consultancies Icon Medialab and Framfab.

Even the doomed Boo.com has, in hindsight, been judged by many to have been ahead of its time and paved the way for any number of successful online clothes businesses that have sprung up in the years since it’s costly demise.

Historically then, Sweden is good place to find developers as well as entrepreneurs. But other aspects also play a role.

”There is a lot of talent in Sweden and the companies are often good value (to a buyer). Swedes are well educated and have a great work ethic,” says Hampus Jakobsson, himself an example of how young Swedish entrepreneurs have branched into other fields after selling their own company.

Jakobsson was originally a founder of hi-tech firm TAT (The Astonishing Tribe), which specialises in computer graphics. After the company was sold to Canadian firm Research In Motion, Hampus decided to continue in the new set up but at the same time work with investing in other start ups. After all, he knew where to look for them.

”There is often a good group dynamic among Swedes, so the technology team is often rock solid, making them highly attractive,” he says.

In many respects, Jakobsson is far from alone. In many cases when individuals have sold their start ups or listed them on the stock market, they have become entrepreneurs themselves. When they go looking for companies to invest in, it is often at home in Sweden where they begin their search.

Another good example is Skype founder Niklas Zennström, whose next move after selling was to start a venture capital firm Atomico, which in turn invests in other technology companies, many of them in Sweden.

Similarly, Michael Widenius, co-founder of MySQL, works with Open Ocean Capital, a venture capital firm that invests in young technology companies and which has backed Mosync.

But while it is a trend that is likely to continue, according to Hampus Jakobsson, Swedish companies make very attractive pickings for foreign investors too.

”I think the Swedish VC, investor scene is not mature enough to help Swedish companies to grow and expand so an exit (to a foreign buyer) is rather natural. Furthermore, as the investors aren't savvy enough to push up the valuation the price for acquirers is often better too,” he says.

It’s not just the technical side that makes Swedes interesting to foreign buyers though. Creativity is also a major plus. “They are so strong in design as well, which is another important factor in today's technical companies”, says Pacal Denize, md of newly launched e-book platform Platify.

While Denize’s platform is just finding its feet in the market, foreign eyes and entrepreneurs have been busily sweeping up promising and successful Swedish companies.

In the past four months alone, Philips has paid 500 million kronor ($75 million) for mammography company Sectra Mamea, an unidentified buyer shelled out over one billion kronor ($157 million dollars) for a controlling stake in the 3D map outfit C3 Technologies, and two Swedish telecoms firms, Kreatel and Dream Park, indirectly became part of Google, following the search engine’s acquisition of phone giant Motorola.

The future then looks bright, whether it is for the domestic market or foreign suitors, the most important thing is that Swedes continue to be attractive.

“Staff are hard working and well educated and the companies they build often have very good technology which others, mainly in the US would like to get their hands on, so it is no wonder Sweden is attractive, says Alexander Has, another entrepreneur who sold up his IT operation System OK to an American Nasdaq-listed firm and went “back to his roots” when he launched coupon retail site letsdeal.se, with former business partner Lars Karlsson.

“We love Sweden and we wanted to work with some of the people we had been working with before,” he says.

He seems to be far from alone, which one would assume puts Swedes in a healthy position for the bumpy rise which may lay ahead.