Investors searching for the ideal place to funnel their venture capital might be surprised to find that Sweden is home to a tech startup community that could easily rival Silicon Valley. In fact, Stockholm is rapidly becoming one of the largest IT hubs in the world. Home to successful tech startups such as Candy Crush and Spotify, Stockholm clearly has what it takes to launch companies with potential. Given that IKEA, Saab and Volvo came from Sweden, it really shouldn't come as much of a surprise that the Swedes know how to launch a company into the stratosphere.

Inspiration Behind Innovation

But what exactly is causing tech to take Sweden by storm? One of the reasons that tech startups find it so easy to get started in Sweden is the country's high taxes combined with its generous education system. Along with free schooling, Swedish students also receive a stipend to attend university. As a result, students are able to graduate from superior universities without facing the mountain of debt of their American counterparts.

Entrepreneurs have also come to recognize that there tend to be fewer risks associated with starting a business in Sweden than in other countries. In fact, individuals who invest privately in startups are even eligible to receive tax deductions. To make matters even easier for would-be startups, there are numerous safety nets in place to provide entrepreneurs with income protection that helps to further reduce the risk of launching a company. (For more, see Top 5 Most Successful Swedish Entrepreneurs.)

Although a low-risk environment and practically no-cost education system are certainly enough to support innovation, Sweden also boasts a few other advantages when it comes to tech startups. One of the most important of these benefits is extremely fast Internet. The broadband technology in Stockholm makes it incredibly easy for citizens to stay connected to the rest of the world, a critical factor for any potential startup.

There is also something about Swedish culture that tends to support a strong tech startup community. Regardless of whether you head up a major enterprise or are just starting out, everyone in Sweden seems to be capable of coming together for the common good. That lack of awareness of status or class also translates to business, providing a firm foundation for free-thinking that fosters innovation.

Rapidly Evolving Tech Startup Scene

So many startups now call Stockholm home that it has earned a reputation as one of the most prolific tech hubs in the world. While Silicon Valley easily has the largest number of billion-dollar startups, or unicorns, in the world – 53 to be exact – Stockholm is able to lay bragging rights to five startups with a billion dollar valuation a piece. That might not sound like much in comparison, but considering that the number of unicorns drops off rapidly after Silicon Valley, Stockholm's fourth place ranking is quite impressive. Even New York has only produced seven startups with a value of $1 billion or more, and London can only lay claim to three. (For more, see Are High Valuations in Silicon Valley Over?)

Investors have certainly taken notice of Sweden's ability to produce high-valued tech startups. During the third quarter of last year alone, Swedish startups managed to pull in an impressive $94 million in funding. Not all of the investors pouring money into Swedish startups hail from Sweden, either. Venture capitalists from around the world are recognizing the potential offered by startups launched in Sweden, particularly in Stockholm, and appear anxious to get in on the action. Consequently, the Swedish tech scene is currently one of the most electrifying in the world, with an ever-increasing number of startups vying for attention and funding.

Despite the dizzying level of competition, there appears to be no end in sight for either innovation or funding. Companies such as iZettle, Mojang and Klarna have all managed to bring in multi-million dollar rounds of funding within the past year alone. Mojang, the brains behind Minecraft, pulled off one of the most high-profile deals in recent history when Microsoft (MSFT) swept in with a purchase price of $2.5 billion. (For more, see An Overview of Businesses Owned by Microsoft (MSFT).)

Over the last five years, Nordic tech exits have managed to generate an average of $2.9 billion annually, with approximately 50% coming from Sweden alone. Considering the country's rather modest population of less than million people, that is a feat that should not be taken lightly.

Startups Cover the Spectrum

Currently, the fastest growing startup in Sweden is Freespee. The service is able to convert consumer voice interactions into data and could prove to be a valuable asset for companies interested in leveraging Big Data into analytics for improving customer relations. Tictail, an e-commerce platform that targets individuals who do not understand the ins and outs of e-commerce, is another notable Swedish startup. Despite the fact that it has a fairly vague business concept, Tictail has already managed to gain approximately 60,000 boutiques and retailers.

Truecaller, another Sweden-based startup, is looking to bring digital innovation to the old-fashioned telephone directory by allowing users to manage personal contacts and search for businesses. Whenever a request is made for a user's number, the user is notified and can choose whether to approve or decline the request. An identification layer is also included to inform users of a caller's identity as well as whether the call is made from a mobile or landline. The firm is growing rapidly in size, reporting a twofold increase in searches in just six months. Skype founder Niklas Zennström’s Atomico is a prominent investor.

Magine, which taps into consumers’ desire to watch their favorite television programs from any location at any time without cable or a set-top box, is taking the entertainment industry by storm. (For more, see The 4 Best Ways to Cut the Cord.)

The Bottom Line

The tech scene in Sweden is booming, with an ever-growing number of new startups being launched on a near daily basis. As more companies mature and gain success, they seem to perpetuate a snowball effect, encouraging more entrepreneurs to join the space. As a result, the startup scene in Sweden is currently one of the most exciting in the world, providing both inventors and investors with a mature ecosystem that appears to have no limits.

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