How Sweden makes being a founder less risky

Starting a business is an inherently risky venture, but Sweden appears to have figured out how to mitigate some of those risks. Often ranked as one of the world’s most entrepreneurial countries per capita, Sweden boasts 42 unicorns, including Spotify, Klarna, and Northvolt – not bad for a country of just 10.5 million people! Despite its size, Sweden has managed to build an ecosystem that incentivises innovation, making it no surprise when a new unicorn emerges.

Sweden’s innovation successes rely in part on culture, however, the role of government policy should not be underplayed. For instance, a piece of 1997 regulation allows employees to take a leave of absence for up to six months to start a new business. While on leave, they will not receive a salary, but the assurance of being able to return to their previous job provides a critical safety net. The Act specifies that the business the employee is looking to start cannot directly compete with their employer’s, and employees cannot be terminated for requesting this leave.?

Sweden’s approach to promoting entrepreneurship highlights the importance of reducing personal risk to encourage business innovation. In a 2019 interview with NPR, Samuel Engblom of the Swedish Confederation of Professional Employees explained, “You can promote entrepreneurship by making it more profitable, but you can also promote entrepreneurship by making it less insecure.” Knowing that they can return to their previous employment if their venture does not succeed gives aspiring entrepreneurs the confidence to take a leap of faith.

The Swedish model raises an important question: how much more innovation could be unleashed if Britain adopted similar policies? As recently highlighted in The Times, the British tech sector is among the country’s most elite, with only 9% of tech sector employees coming from working class backgrounds. If more people had the security to pursue entrepreneurship, how many more innovative startups would we see in Britain?

Even without similar legislation, the underlying principles behind Sweden’s approach to encouraging entrepreneurship can still be adapted. Here are just a few ways how:

1. Making Strong Startup Hubs: For many years, local business support was provided through regional development agencies which were eventually abolished in favour of local enterprise partnerships (LEPs). Government support for LEPs is set to end this year, but the need for localised business support will continue.?
2. Leveraging Accelerators and Incubators: Accelerator and incubator programmes provide invaluable support to entrepreneurs, but they are costly to run and often rely on support from a university or public body. For entrepreneurs who are getting started, the support they provide can be critical to getting a new business off the ground.
3. Creating More University Spinouts: Some of the UK’s most exciting AI and life science startups have emerged from universities but more could be done to encourage entrepreneurial thinking among academics and researchers. Making it easier to win proof-of-concept funding for these projects would reduce the risks for both researchers and investors.?
4. Improving Access to Funding: In tech we’re often so focussed on raising equity investment that we forget there are other ways to fund a startup, such as bootstrapping. Working with Barclays Eagle Labs, we deliver the long-running Funding Readiness programme while our friends at OneTech run a Bootstrap School for entrepreneurs who want to self-fund their growth. What if this type of training were more widely available?

Even for a thriving tech sector like Britain’s, the Swedish approach to encouraging entrepreneurship has many valuable lessons. By focusing on policies that reduce insecurity and provide robust entrepreneur support networks, we can encourage anyone with a brilliant business idea to act on it.?