At the beginning of the millennium Lego, Denmark’s most visible brand, was struggling. Kids were shifting away from its building blocks. Video games were huge. The digital world was leaving it behind.
To beat the competition, Lego joined them. It built its brand through digital ventures like The Lego Movie and a host of video game titles. Its value skyrocketed. Lego is now worth $7.1bn—the world’s 86th most valuable brand according to Forbes.
Elsewhere too, Denmark is beginning to compete in the digital world. Once a country with a reputation that it could build, but not scale, startups, a swathe of successes has emboldened its growing scene.
Trustpilot, Peakon, Momondo and Just Eat (now based in London) have buoyed entrepreneurs and investors alike. For Zenia Francker, CEO of coworking space Founders House, it was the recent unicorn valuation of CMS provider Sitecore that has excited him the most.
“You can really see how this has suddenly become the new standard role model and has raised the ambition level for all startups in Denmark,” he says.
“More exits and IPOs from Danish founders and key employees also create super angels with both experience and money, who in turn invest back into the community and push the new startups to strive for greater results,” adds Francker. “We see angels joining forces, like Lars Fløe, Founder of Sitecore, who has just started Nordic Makers using multiple investments from a group of prominent angels.”
Denmark’s 5.6m population puts it among Europe’s smaller nations. But its $58,207 per-capita GDP is one of the continent’s highest. Lifestyle magazine Monocle deemed Copenhagen the world’s most livable city in 2014. 2016’s World Happiness Report ranks Denmark the planet’s happiest nation.
“Copenhagen is the hippest “little big city” in the EU,” says Claire Marie Spackman, of club management firm Athliit. “You bike everywhere, it’s a multi-national city, quirky shops and cafes and super cultural happenings all the time. It’s beautiful in the summer and there are a lot of interesting communities here. All types of people live in Copenhagen.”
The Scandinavian country, which comprises the Jutland peninsula north of Germany and many islands, already has a global reputation for cool design and dark television dramas. With capital on a steep rise, it seems that startups will join that identity.
A swathe of exciting new coworking spaces have helped foster a ground-level-up attitude to tech business in Denmark, while capitalizing on the country’s reputation for toned-down cool.
#CPHFTW (Copenhagen For The Win) has been a big boon for local entrepreneurs. Found in 2013 it is an umbrella nonprofit for startups that covers the Øresund Region, which combines eastern Denmark (including Copenhagen) with Scania, a region of southern Sweden that includes Malmö, its third-largest city. Over 100 startups have joined the group.
This year #CPHFTW debuted the Copenhagen Tech Fest, which welcomed over 10,000 participants across the whole of September. Øresund is one of Europe’s growing tech hubs, and home to 300-400 startups. “The ecosystem’s growing, there are now lots of coworking spaces, meetups and more people involved in the scene in general—all of those things, provide the ground for more startups to grow,” oresundstartups.com editor Karsten Dappert recently told Index Ventures.
“A few years back, Danish tech startups realized that if we want to create a tech scene with international attention, we must step up and work for it actively,” Thomas Madsen-Mygdal, an initiator of #CPHFTW and CEO and co-founder of video marketer Twentythree, recently wrote. “That laid the groundwork for an unseen collaboration between over 100 of the most significant Danish startups, who are committed to put Copenhagen on the global tech map.”
Money, however, has been fixed mostly on big players: last year 65 investments totaling $273.53m were made. 84% of the money was put into just ten firms, with Trustpilot’s $73.5m round topping out the year by far.
This year funding has exploded. Q3 2016 brought 34 investments for a total $250.9m—almost as much as the entirety of 2015. It was the most cash-rich quarter Denmark has ever seen. It was skewed slightly by Unity Technologies’ massive $181m Series C round, led by Menlo Park’s DFJ Growth. But the remaining $70m still puts the country above Finland, Norway and Iceland.
Denmark’s robust education system is cited as a leading reason for its tech prosperity. Tuition for EU, EEA and Swiss students is free. For outsiders a year’s studies costs a maximum of $17,000. Marketing and sales vocations are well catered-for, says Spackman. But tech courses could do with an update.
“We have two students on our team—developers—who are planning to terminate schooling as their current development through the past six months has surpassed what they learn at school,” she says. “They are now better educated than their teachers.” Only 120 computer science graduates leave the University of Copenhagen, Denmark’s largest, each year. “That is far from enough,” says Casper Arboll, of Capdesk.
Capdesk, a shareholder management platform, was created on the grounds that it was illegal for Danish startups to raise financing online. “We wanted to tackle it in another way and that has led us on a journey to become the world’s preferred broker of unlisted shares,” says founder Casper Arboll. “We battled a lot with the government when starting in business—but always in a good tone. You can only move things if you sometimes cross the existing lines.”
Arboll adds that options are taxed today, rather than in the future: “It is a big issue to us because we want our employees to be partners in the business. Legislation like that is a barrier.”
A capital gains tax of 42% (the UK, for example, has a 0% capital gains rate) makes big exits tougher in Sweden. But mentorship, something that has hitherto been lacking, is on the up. And thanks to the successes of companies like Sitecore, more top-line investors are looking at Denmark as a way to make big money.
Capdesk is part of a Danish fintech wave that has, after years of speculation, begun to show its full potential. Other high-performing firms include Dansk Fakturabørs, Cardlay, Tradeshift and Lending, the largest lender in the Nordic region. Fintech led the country’s most recent quarter’s funding tree by far.
The government issued a clarion call to entrepreneurs in 2014 by reducing the cost of starting a business from $11,000 to just $0.14. This year’s Global Entrepreneurship Index ranked Denmark the highest country in Europe and fifth globally, moving two places from 2015.
But that’s only part of the story. As Nordic Startup Bits, a local tech portal, has reported, a separate poll, the Compass Ecosystem Survey, marks Denmark down on funding and startup skills. It did not make the global top 20. Most sources think that the biggest drawback to Denmark’s tech scene is its risk-averse culture. The country’s strong welfare system is a source of huge public pride. But it comes with a caveat that startups are often eschewed in favor of “safe” corporate gigs.
Tech, though, runs deep: C++ was invented in 1983 by Bjarne Stroustrup, then of Aarhus University and now a managing director at Morgan Stanley in New York. PHP and Ruby on Rails were also Danish inventions. With so many young Danes entering the tech ecosystem, it is surely a matter of time until that culture is added to.
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