Nordic Entrepreneurship Check 2016 Final report Nordic Entrepreneurship Check 2016 Technopolis Group Jari Romanainen, Jelena Angelis, Derek Jan Fikkers, Reda Nausedaite, Emma Ärenman, Karolina Henningsson, Katre Eljas-Taal, Johanna Vallistu,Frederic Maier, Kerli Müürisepp © Nordic Innovation 2016 Layout: Louise Jeppesen Coverphoto: FHinterior, LFA Nordic Innovation Stensberggt. 25 NO-0170 Oslo +47 47 61 44 00 www.nordicinnovation.org NORDIC ENTREPRENEURSHIP CHECK 2016 2 Nordic Entrepreneurship Check 2016 Final report Contents Introduction 9 Methodology 11 Overview of the entrepreneurship ecosystem in the Nordic region 17 The Nordic entrepreneurial ecosystem in numbers and volume 18 Policy context 21 Key support schemes 22 Government funding 22 Venture capital and private investors 22 Other support 26 Access to markets 27 Entrepreneurial culture 27 Future outlook 29 Observations concerning the role of specific actors 31 Unicorns 31 Business angels and venture capital funds 32 Accelerators, incubators, co-working spaces, and other entrepreneurial environments 33 Incubators 33 Accelerators 34 Co-working spaces 35 Other environments – the Nordic hackathon tradition 36 Crowdfunding platforms 36 Universities, public research and higher education institutes 38 Conclusion 39 Benchmarking of the Nordic countries with leading European entrepreneurial ecosystems 42 Definition and demarcation of the benchmarked ecosystems 43 Descriptions of the benchmark ecosystems 46 Cultural contexts 50 Venture capital and business angels in the benchmarked ecosystem 52 Key support schemes in the benchmarked ecosystems 58 The Nordic entrepreneurship ecosystem compared with the benchmarked countries 64 Observations based on overview and benchmarking 69 Features of the Nordic region 69 Culture 70 Education and training 72 Access to competences and workforce 73 Regulatory framework 74 Access to finance 74 Access to markets 76 Support mechanisms 77 Identified key challenges and barriers 78 Key challenges of the Nordic entrepreneurship ecosystems 81 Access to finance 82 Access to competences 84 Taxes (and other framework conditions) 86 Access to international markets 87 Fragmentation 89 Policy recommendations 91 Appendix 103 Appendix A Country case study Denmark 104 Appendix B Country case study Finland 118 Appendix C Country case study Iceland 131 Appendix D Country case study Sweden 142 Appendix E Country case study Norway 157 Appendix F Benchmark with Amsterdam 172 Appendix G Benchmark with Berlin 184 Appendix H Benchmark with London 194 Contents Tables and Figures Tables Table 1 Global Entrepreneurship Index 2016 ranking Top 15 European countries 18 Table 2 Examples of Nordic unicorn start-ups 32 Table 3 London unicorn start-ups 49 Table 4 London start-up funding (millions of USD) 57 Table 5 Key observations regarding access to finance in the Nordic countries 83 Table 6 Summary and categorisation of policy recommendations and how they address the key challenges 98 Figures Figure 1 Components of an entrepreneurial ecosystem with potential high impact on company growth over the next 3-5 years 12 Figure 2 Stages of innovative business development from idea generation into international growth 13 Figure 3 Number of enterprise entries in Denmark, Finland, Iceland, Norway and Sweden 2009 – 2015. Index: 2007=100 18 Figure 4 Percentage of the population in Finland, Norway, Sweden and Denmark who are involved in entrepreneurial activities, between 2009 and 2014 19 Figure 5 Country performance 20 Figure 6 Distribution of Amsterdam start-ups over the domains 46 Figure 7 Allocations of funds raised by Dutch venture capital private equity funds (totals over 2011-2014) 53 Figure 8 Sources of funds raised by Dutch venture capital private equity funds (2011-2014) 54 Figure 9 Position of the Amsterdam ecosystem in the regional distribution of VC and PE investments in the Netherlands (in mln €) 55 Figure 10 The funding sources used by start-ups in Germany: significant importance of own capital and friends and family 56 Figure 11 Access to venture capital: Berlin outperforms other German ecosystems 56 Figure 12 Source of funding for innovation in the UK and the USA (2013) 57 NORDIC ENTREPRENEURSHIP CHECK 2016 6 Figure 13 UK venture capital investments in 2007-2013 (millions of GBP/number of deals) 58 Figure 14 UK business angel investment by sector in 2012-2013 (millions of GBP) 59 Figure 15 Federal support funds for start-ups and for VCs 62 Figure 16 Country performance 65 Figure 17 How easy is it to find/recruit people with the desired competencies? Response in percentage 85 Figure 18 What could be done to improve access to competences (finding/recruiting skilled people)? 85 Figure 19 What could be done to improve exit opportunities? Response in percentage 87 Figure 20 Global Entrepreneurship Index of Nordic countries 91 NORDIC ENTREPRENEURSHIP CHECK 2016 7 Photo: Tobias Selnaes Markussen Tobias Photo: The Nordic countries are innovative econo- mies with a skilled and well educated population. Photo: SUP46 Photo: NORDIC ENTREPRENEURSHIP CHECK 2016 8 Introduction Nordic countries are among the most deve- loped economies in the world. However, they face several challenges, particularly due to globalisation. Multinational large industries are relocating their activities globally. The Nordic welfare model is under financial pres- sure. Nordic countries need to find ways to revitalise industries and to seek new sources of economic growth. The Nordic countries are innovative economies with a skilled and well educated population. Consequently, they find it natural to focus on new innovative com- panies seeking to grow on international markets. However, this is not without its challenges. The entrepreneurship culture has traditionally not been a strong fea- ture in the Nordic countries. It has been strengthened over the last decade, but is still behind the best performing countries. There are also significant systemic and competence challenges related to accelerating growth in young companies and to fully realise their global potential. Photo: Tobias Selnaes Markussen Tobias Photo: It is therefore not a surprise that policy makers in the Nordic countries today are focused on promoting high growth companies. These companies are thought to drive productivity growth, create new employment and increase innovation. In developing new technology solutions, start-ups and scale-ups are considered to have a significant role to play, partly because SMEs are known to foster innova- tion and be flexible in adapting to change. Subsequently, the Nordic countries have over the last decade been able to improve the entrepreneurship framework and the countries are good at starting new companies (above OECD average), which can be seen in the relatively high level of start-up activity. As noted, there are barriers for the successful development of companies (including start-ups and SMEs as well as larger companies). Main barriers to the development of high growth SMEs are, for example, market failures, access to foreign markets, and difficulties in recruiting qualified and skilled staff. As a result, public policy has an important role regarding market development. Access to public funding provides benefits for SMEs and start-ups, both regard- ing to undertake R&D, as well as to attract venture capital. Public investment can support product development as well as increase the investors’ confidence (by taking the early investment risks). NORDIC ENTREPRENEURSHIP CHECK 2016 9 This study focuses on mapping the Nordic entrepreneurship ecosystem and offers policy recommendations for strengthening the ecosystem through motivating companies to collaborate, export and innovate in order to increase the Nordic countries’ competitiveness. In the first section we describe the methodology we used for the analysis. The second section looks into the Nordic ecosystems on the basis of desk research – we analyse the ecosystems’ policy contexts, key sup- port schemes, cultural contexts, as well as key challenges and barriers identified in earlier studies. Country specific descriptions are provided in Annexes A-E. The third section complements the first section by discussing the role of specific actors in the entrepreneurship ecosystem. In the fourth section we benchmark the Nordic ecosystem against the leading European ecosystems – London, Berlin and Amsterdam. All country benchmarks are presented in Annexes F, G and H. The fifth section presents the main observations and conclusions based on sec- tions 2-4. The sixth section identifies and discusses further the key challenges in the Nordic entrepreneurship ecosystems. In the last section we present our policy recommendations for strengthening the Nordic entrepreneurship ecosystems. As a result of the study, main features of the Nordic entrepreneurial ecosystems are mapped and analysed. A comparison of Nordic ecosystems with some of the leading European ecosystems provide further insight into potential areas of improvement. A number of key conclusions are drawn and selected recommen- dations are given in order to increase Nordic collaboration and competitiveness. Photo: Tobias Selnaes Markussen Tobias Photo: Photo: Tobias Selnaes Markussen Tobias Photo: NORDIC ENTREPRENEURSHIP CHECK 2016 10 Methodology The aim of the study was to analyse the Nordic entrepreneurship ecosystem and recommend further activities to improve the ecosystem and collabora- tion on the Nordic level. We started with mapping the existing ecosystems in Finland, Sweden, Denmark, Norway and Iceland