Sweden’s strong startup game risks overregulation, Sweden’s startup scene says.
Sweden's tech sector is booming, but it faces a paradox: as government officials ask startups what support they need, many founders tell them to step back and deregulate.
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This tension came into focus at Stockholm's Techarena event, where Deputy Prime Minister Ebba Busch urged the Nordic nation's startups to "tell us what you need."
Speaking to Euronews Next from the stands of the Strawberry Arena, Tobias Bengtsdahl, a general partner at VC firm Antler, had a direct response: "Get out of the way."
“One of the things [the government] does right at the moment is not doing too many things,” said Bengtsdahl.
“I've been vocal about what the Swedish government and European Commission can do in terms of startups and tech: Please don’t do anything. Please deregulate.”
As of January 2026, Sweden has found itself - once again - in the middle of a tech boom, this one even bigger than Swedish tech’s first wave in the 2010s, which produced Spotify and Klarna. In 2025, artificial intelligence (AI) startups in Sweden raised nearly $1 billion (€843 million), as companies that were barely two years old, such as AI vibe-coding startup Lovable, became household names.
In many ways, Sweden’s new founders were born to take this outsized role in the global AI boom. In the 1990s, the Swedish government provided tax incentives for companies to give their employers PCs and invested millions in high-speed internet.
It was a Swede, Niklas Zennström, who in 2003 launched Skype with a Danish co-founder, Janus Friis.
“Skype raised a lot of capital and started to show the way that you don't have to be a little shitty company in a small, backwards country like Sweden. You can actually build something that's meaningful,” said Pär-Jörgen Pärson, a partner at venture capital firm Northzone.
The first tech wave
Swedish tech’s first wave is usually dated to the years immediately following the financial crisis, when three Swedish companies - Spotify, Klarna and gaming giant King - began to hit their stride. Tech talent poured into Stockholm, and companies like Spotify - which went public in 2018 - couldn’t hire fast enough. But that was a double-edged sword, said Pärson.
“These big companies like Klarna and Spotify basically sucked up all the talent, and there was a little bit of a slump for a while. But something really changed post-COVID-19, and when generative AI hit the market. There was a new breed of founders: many of them had been with these big companies, learned the ropes, seen what strong processes looked like,” he said.
Hence, the view among those like Bengtsdahl is that Sweden’s government would be best to leave Sweden’s startups to it. The new crop of founders that came up through Skype, Spotify, and Klarna and more recently AI company Sana Laba, which was acquired last year by the American HR giant Workday in a $1.1bn deal, Europe’s largest ever AI acquisition, are a force unto themselves.
Further deregulation, though, is a key demand. Many founders complain that they cannot hire the people they need fast enough: Sweden is a small country with a limited talent pool, and with startups such as AI legal tech Legora, now worth $1.8 billion, effectively doubling in size from week to week, a major roadblock is the country’s immigration system.
“They're not making it easy,” said Omid Ekhlasi, the founder of Techarena. “It's a bit easier, but it's not easy. You still have to go through the process of ensuring that no one in Sweden can do the job - and then when they get here, there are so many rules and regulations.”
He cites examples of employees at companies for two years on very high salaries being refused visas and returned to their home countries because they missed insurance payments, and other technicalities that make it difficult for new migrants to settle. Sweden recently increased the minimum requirement for nationality from five years to eight.
“It is a huge problem for Sweden. We shouldn't be a closed country. It will not be good for us in the long run,” he said.
Sweden’s government is led by the Christian Democrats, Busch’s party, but partnered with the Swedish Democrats, a far-right, anti-immigration party that has risen to prominence since the influx of refugees in 2015. Busch herself is on the record as criticising multiculturalism in Sweden. She did not respond to emailed questions.
The bureaucracy challenge
Sweden isn’t alone, of course, in introducing restrictive visa rules that are criticised by business. US President Donald Trump’s controversial crackdown on H1B visas, for example, is expected to push more talent towards European nations such as Sweden, despite the challenges. It is also fair to say that the minimum salary thresholds recently raised by the Swedish government will not impact skilled migrants working in the tech sector.
European-wide bureaucracy is also a challenge that Sweden’s fastest-growing startups are having to deal with. Tandem Health founder Lukas Saari told Euronews Next that expansion into multiple European markets has been extremely complicated when it comes to incentive schemes and employee equity, an essential part of remuneration in the tech sector.
“We've spent half a year working with a bunch of lawyers from different firms just to understand how we can offer stock options in various countries - and it's just such a waste of time. Typically, the answer that you arrive at is that there are no good options for doing it,” he told Euronews Next.
The much-touted EU Inc initiative, designed to make cross-border operations easier for startups, is a bright spot on the horizon, he said.
“I see it being incredibly important to building pan-European winners, and ending the knee-jerk reaction of every company to think: I start in Sweden and then I go to the US,” Saari said.
“Just imagine if it were way easier to start companies, register businesses, hire people, fire people, raise capital all across Europe as opposed to it being very nationally bound,” said Oscar Höglund, co-founder of Swedish startup Epidemic Sound, which reached unicorn status in 2021, and acquired Song Sleuth, an AI music recognition startup, in 2025.
Höglund told Euronews Next that he is confident that those changes are coming. I mean, it's optimistic but I think that's a big part of being an entrepreneur, right? Being an optimist.”
But the EU must deregulate too, said Bengtsdahl. The AI Act, he argued, was imposed too early and will hold European startups back. He also said Europe’s data rules, GDPR, already do.
“Europe needs to have a think about what's a reasonable balance. I’d like to see Europe come to the stage that the US is at now. Independence, resilience, sovereignty,” he said.
“Instead of hindering innovation, shouldn't we talk about how we get Mistral to become 10x better?” he said, referring to the French AI company that builds LLMs. He also said the same could be said about data centres that are “actually owned by us, not owned by someone else.”
