What if Scandinavian startups don’t need Y Combinator?

When The Exchange wrote about Sweden’s startup scene at the end of last month, we said we’d revisit the Nordics this week. Well, a promise is a promise.

But after spending hours watching YC’s Winter 2023 Demo Day pitches this week, we also couldn’t help but try to connect the dots: Are Scandinavian startups making waves at Y Combinator? Turns out, not really. And that’s actually interesting.

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Two: That’s the number of startups in YC’s latest batch with offices in Denmark, Norway or Sweden, according to data from the accelerator itself. And yet, these three countries create more than their fair share of startups compared to their larger European peers.

If you add up the fact that rival accelerators 500 Startups and Techstars have given up on their Stockholm programs, a pattern starts to emerge. Could it be that Scandinavian startups just don’t need international accelerators, thank you very much?

A number disconnect

That there were so few Scandinavian startups in YC’s latest batch could be casual. YC often insists it invests in founders, not ideas; presumably, this also implies that it doesn’t give a lot of thought to office locations. As a result, the number of startups from a specific country can vary quite a bit from batch to batch.

To get a better sense of Scandinavia’s representation at YC, let’s go beyond its latest batch and include all 4,197 startups in its directory. Out of these, 377 are based in Europe, but only 13 in Denmark, eight in Sweden and six in Norway.

A caveat: YC startups can be listed under multiple locations, and most of them are partially if not entirely remote. But this applies to all countries, so we are still comparing apples to apples if we say that Sweden, for instance, is underrepresented compared to France.

You may counter that Sweden has a much smaller population than France: 10.5 million versus 68 million. But when it comes to startups, we already noted that Sweden punches above its weight. According to Atomico’s State of European Tech report, it had 5,549 startups in 2022 compared to 20,168 in France.

Moreover, that 1:4 ratio doesn’t apply to unicorns: Per Dealroom, Sweden minted slightly more of these to date than France (38 and 36, respectively).

And yet, 63 French startups made it into YC so far compared to eight from Sweden.

What’s the difference, then? Perhaps that France seems to have cracked the YC recipe, in part due to a snowball effect. For instance, I noticed how several Demo Day pitches from French entrepreneurs mentioned connections to Y Combinator alum Algolia (U.S.-based but with French founders). In contrast, neither Klarna nor Spotify joined YC. Neither did Acast, Yubico or Zettle.

Just like Algolia’s former employees, several Klarna alumni also went on to create startups, such as Anyfin, Brite Payments and Checkin.com. But having worked for the BNPL unicorn doesn’t seem to get these founders on the YC course. So where else do they go?

No place like home

If Scandinavian startups don’t join YC, it’s perhaps because they don’t need to: They have plenty of rival options at home.

Indeed, our understanding is that one of the reasons that led Techstars to discontinue its Stockholm program after the current batch was that most participants were joining from other countries.

That’s not necessarily a problem, especially considering that one of its local managers’ goals was “to tell the world about how incredible the startup ecosystem is between 55° and 60° N.” But it seems to indicate that Swedish entrepreneurs weren’t flocking to the program.

“This [data point] makes me think that the Swedish accelerator ecosystem must be very competitive, making it difficult for accelerator programs to find good deal flow,” said Ilias Louis Hatzis, a CEO and startup mentor who had recently met the startups in Techstars’ latest Stockholm cohort.

“Sweden has a really large and longstanding tech scene,” said Ingrid Bonde Åkerlind, a principal at venture firm Oxx.

It is not just in Stockholm where founders can find support. There are several relevant universities, science parks and incubators in other parts of Svealand, but also in Götaland and Norrland, a 2022 report on Sweden’s tech ecosystem noted. “Sweden is littered with research and innovation hubs across the country,” the authors wrote.

“The Swedish ecosystem is made up of lots of hubs,” Nordic Node co-founder Johanna Holmström said. “Stockholm is the most ‘seasoned’ ecosystem in the Nordics, having produced groundbreaking tech and exits for many years.”

However, Holmström also argued in favor of looking at the Nordic region more broadly. “We are too small to be compared country by country, or indeed city by city.”

For most observers, Techstars’ move doesn’t change how anyone should feel about the Nordic startup scene.

“Stockholm continues to be a strong tech hub in Europe and is actually known for the simplicity to establish and run businesses rather than complexity,” Brightly Ventures managing partner Kerstin Cooley said. The Stockholm-based investor added that “the sentiment among local VCs is that a forthcoming downturn will not necessarily hurt the ecosystem too much.”

Talking to TechCrunch+ before it became clear that Techstars wouldn’t cancel its current cohort, Jonas Almeling praised the local ecosystem for rallying to help affected founders.

“It has been fantastic to see how people from all around the Nordics, and around the world, have been stepping up to support the founders caught in the middle of this disaster. It has been almost overwhelming. As the new head of Nordics at Seedrs/Republic, this is a great proof point of how strong the ecosystem is. […] If anything, this has made us even more committed to supporting founders and investors in Sweden and the Nordics.”

It is also worth noting that Techstars isn’t exiting the Nordics entirely. Talking to TechCrunch+ last week, Techstars CEO Maëlle Gavet remains “bullish” about Europe. That includes Oslo, where it runs a sustainability focused accelerator program in partnership with energy company Equinor. “We are really happy about it; it’s been going on for a few years with great traction and a great partnership.”

However, accelerators only go so far, and the best startups wouldn’t join any program that wouldn’t boost their funding momentum. That’s traditionally been one of the main appeals of YC. But again, maybe Scandinavian entrepreneurs don’t need this as much as other international founders. After all, Swedish fund EQT Ventures raised no less than €1.1 billion for its third fund.

Might this be enough for Nordics to build a less one-sided relationship with Silicon Valley than other countries? Maybe. “As we are now scaling up our operations in the Nordics, I am confident that the Nordics will become a leading private investor community and that our almost 3 million investors globally will find fantastic investment opportunities coming out of Sweden and the Nordics,” Almeling said.