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How can you create more jobs by improving conditions for startups in the Nordics?
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How can you create more jobs by improving conditions for startups in the Nordics?

| Text and photo: Björn Lindahl

“Not much time has been spent in the political debate in the Nordic countries on how jobs actually are created. A lot of other issues have had more than an ample hearing. But job creation is crucial for how our Nordic welfare models develop,” says Idar Kreutzer. He has looked at how to secure risk capital for Nordic startups.

Idar Kreutzer used to head the Nordic insurance company Storebrand. Now he is the Managing Director for Finance Norway, the industry organisation for the financial industry in Norway. The report on startups is part of a series of strategic reports commissioned by the Nordic Council of Ministers; Jorma Ollila has looked at the Nordic energy cooperation and Tine Sundtoft has looked at the environment and climate cooperation. 

The comment – as Kreutzer himself pointed out – could be seen as controversial. It came soon after he handed his report over to the ministers of cooperation at the start of the Nordic Council’s 70’s session in Oslo. 

No new Nordic Investment Fund

Yet the report was well received by the ministers of cooperation, according to Kreutzer. Perhaps because it does not entail any major new costs? One of Kreutzer’s 16 proposals is to not establish a new Nordic Investment Fund. The European Investment Fund EIFis enough, he reckons. 

Resources should instead be spent on helping new companies work together to present joint Nordic applications to the EIF. National funds that support newly started companies in individual Nordic countries should also have their mandates changed to allow them to finance projects across all of the Nordic region.

The good news in Idar Kreutzer’s report is that Nordic finance markets by and large function well.

“The Nordic region is attractive to foreign investors. There is a lot of competence here, and the region is one of the most digitalised in the world. Seen from elsewhere, the Nordic region is considered to be one single market with similar conditions, but there are still differences between the countries. If a Silicon Valley investor, for instance, has to understand five different tax regimes, this is an obstacle which creates added work,” says Idar Kreutzer.

The ordinary tech sector, with its different innovative and digital solutions that can reach the market in a relatively short amount of time, does not struggle to find risk capital. But other sectors have problems. 

“Startups in the clean, bio and heath tech sectors can struggle to find financing during their startup phase. This is because these products and solutions often are highly complex with long time horizons.“

A critical phase

Another critical phase is when a newly established company enters the market. The difference between a startup company and a scaleup company is that the latter has proven that it has commercially viable products.

“We propose targeted research into how to best provide political support and access to risk capital for newly established companies during this phase,” says Idar Kreutzer.

A difference between the goal and the means to reach it

Cleantech, which covers all technology that can help reduce climate gas emissions and energy consumption, is struggling the most when it comes to accessing capital.  

“Investments in cleantech peaked in 2010. The sector has struggled to attract capital ever since.

“If you look at this in the light of the common Nordic political goal for a greener economy, it ought to make you think, perhaps, that in the area where we really need growth there is – if not a ‘market failure’ – at least problem with access to capital, says Idar Kreutzer.  

How many green jobs do we not create because of that lack of capital?

“I couldn’t say. We have not researched this. But in Norway we talk about maybe having to create 25,000 new jobs every year for 40 years. That’s one million jobs by 2060. Some of these jobs will emerge in existing companies. But a large part must come through new businesses. That is why this is such a central issue.”

Facts
  • In 2007, just over seven billion euro was invested in Nordic startups. Then came the 2008 finance crisis, which saw investments fall by more than half, to three billion euro.
  • In 2017 the level was nearly back to where it had been before the crisis.
  • Around half of the investments were made in Sweden, where three billion euro were invested in 2017. This fell to one billion euro in 2019. 
  • In all of the Nordic countries there is a gap in the financing of newly established companies as they are entering the market. Surveys show that in Denmark the demand at that stage is one to five billion kronor, in Norway it is 20 million kronor while in Sweden the numbers vary from five to 50 million kronor. 
  • There are still major legislative differences between the Nordic countries. The taxation of stock optionsis an important issue for startups. Norway still has a high wealth tax rate, for instance. This makes it hard for smaller newly established companies that initially pay founders in stock options. As the company grows in value, the founders risk having to sell so many of their options in order to pay the wealth tax that they lose control over the company.

 

 

 

 

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