Incubation in Entrepreneurial Ecosystems

18. Sweden

Abstract

The case of Sweden is a leading example of a centralised policy approach to supporting and managing a national incubation system. Over many years, the National Incubator Programme has been effective in funding, steering and raising the capacity of Sweden’s incubators. This is achieved by supplementing grant funding with a range of capacity building and networking supports for incubators, as well as through the careful monitoring of processes and performance that ensures efficacy while maintaining incubators’ operational independence.

Overview of incubation system

Knowledge-based entrepreneurship has been a key driver of Swedish economic growth for decades, with incubators having played an important role in this over the past 20 years. There are approximately 40 business incubators in Sweden, most of which are sponsored by the longstanding National Incubation Programme (NIP) of Vinnova (the Swedish innovation agency). Swedish Incubators and Science Parks (SISP) is Sweden’s non-profit industry association for incubators and science parks and co-ordinates the NIP. SISP represents the NIP-supported incubators as well as 31 science parks. Together, these entities host over 5 000 companies with more than 70 000 employees.

While at least some incubators and accelerators are present in almost every region in Sweden, the overall regional distribution of incubators and accelerators is highly influenced by the presence of universities, and most of the startups in the pipelines stem from universities. Hence incubators tend to concentrate in larger cities, close to or within innovation hubs, taking advantage of agglomeration effects.

Sweden’s incubation system is highly specialised, and a majority of the activities in the country’s incubators and science parks are concentrated on supporting startups and scaleup firms in the ICT, digital, life sciences and health sectors, which are the industrial strongholds of the Swedish economy.

The services and facilities offered by incubators in Sweden typically include mentorship, coaching, funding, internationalisation assistance, and connections with ecosystem stakeholders. Over the past decade, Swedish incubators have evolved significantly. Services have increasingly been offered digitally, expanding their geographical reach. Startup internationalisation support has also been increased. Moreover, incubators are placing a growing focus on supporting ventures that embrace environmental responsibility or are led by women or other groups that are underrepresented in entrepreneurship.

Collaboration among incubators and between incubators and other actors in the entrepreneurial ecosystem has also increased. This has enabled more knowledge and resource sharing among incubators in Sweden. It has also allowed incubators to more effectively perform their “bridging” function of connecting their clients to other actors and resources in the entrepreneurial ecosystem, such as investors and research institutions.

Major policies for incubation

The National Incubator Programme (NIP) is the cornerstone of Sweden’s policy for supporting incubators. The aims are to: i). promote firm development through incubators and ii). support the development of national incubation capabilities. The programme was introduced in 2003 as a pilot initiative and became formally established in 2005. Vinnova – Sweden’s national innovation agency – took oversight of the programme in 2015, implementing a new approach that focused on startups with high growth and internationalisation potential. More recently the NIP has placed an emphasis on enhancing entrepreneurship access for all groups), as well as AI-assisted entrepreneurship, and entrepreneurship which helps achieve environmental objectives.

Every four years, Vinnova launches a call for funding with specific eligibility criteria. The application process is designed to allocate resources primarily to incubators who can demonstrate an ability to attract and support the most promising startups. Since 2020, the allocation of funding for each incubator has occurred in two stages:

• In stage 1, applicant incubators are evaluated in terms of their processes throughout the incubation process. Incubators are evaluated on how they attract and select new potential entrepreneurs and startups, how they design and execute formation courses, how they monitor startups, and how they evaluate and improve their internal processes. Moreover, incubators are measured against their capacity to support team development, encourage entrepreneurship, provide guidance in idea and business development, support the creation of commercialisation strategies, and provide access to customers, capital, and competence. The capacity to produce data and documentation that demonstrate the existence and application of well-defined processes is crucial. Insufficient documentation, however, does not automatically exclude an incubator, which can be put on a “conditional approval subject to revaluation” list.

• Incubators that meet Vinnova’s procedural standards are admitted to the national incubators network, receive Vinnova’s quality certification, and progress to stage 2 of the application process, where funding amounts are determined. During stage 2, incubators submit information on 15 startups from their portfolio. To obtain full funding (EUR 500 000 for four years), incubators must have a portfolio of at least 15 scalable companies. Below this level, funds are reduced proportionally, down to a minimum of EUR 30 000. The NIP prioritises knowledge-intensive startups with high scalability and innovation potential that are eligible for state aid and are operated and owned by highly committed founders. Among NIP-backed incubators, about half currently receive full NIP funding.

The NIP funding can only be used to finance services that directly benefit incubators’ startups. Incubators’ operational costs can be covered through other sources such as funds from regional or municipal authorities as well as applications to Vinnova’s smaller programme (open to both NIP and non-NIP incubators), which aims to finance collaborative initiatives among incubators on topics such as promoting women’s entrepreneurship or developing tools for AI-assisted entrepreneurship.

In addition to receiving funding, the incubators supported by the NIP receive an array of non-financial supports. These are principally delivered by Swedish Incubators and Science Parks (SISP), which is Sweden’s non-profit industry association for incubators and science parks. The organisation promotes collaboration between its members and Sweden’s leading universities, private sector actors, public organisations, and customers. It also constitutes a national hub for several programmes that support incubators, including innovation grants and various training initiatives. The NIP’s close collaboration with SISP helps the NIP to reach its target audience, thus bolstering its engagement efforts.

SISP runs activities in support of incubators on behalf of Vinnova, including:

• Peer reviews, which take place every three years and involve the management of the incubator under review as well as other incubators. The reviews are based on the European Quality Management Framework and result in an identification of strengths and weaknesses.

• Shared learning activities, involving CEOs, business developers and communication managers of the incubators and their client firms. Each year, there are two in-person and 12 online meetings.

• Joint development projects, which must involve at least three incubators.

The NIP has also created a network of Swedish and international ecosystem stakeholders in order to foster connections between Swedish and foreign incubators. Incubators can use this network to find additional funding (outside the NIP’s resources), engage in staff exchanges and collaborate with other international incubators. For instance, incubators can obtain educational scholarships to fund extended staff visits at the Nordic Innovation House in Silicon Valley.

Since its inception, the total budget allocated to the NIP is more than USD 200 million, with the programme having supported over 6 000 startups. Among these are a number of notable companies that have gone on to achieve considerable success internationally, including Apsis International, Klarna, Phoniro Systems, Smartshake, and Storytel.

Conclusions and lessons for other countries

Sweden’s policies in support of incubators provide a number of potential transferable lessons for policymakers internationally. The major support policy for the incubation system is the NIP, which provides grant funding that is complemented by a multi-faceted suite of other supports for incubators. The NIP is a public-driven, centralised approach to incubation, but with clear governance structures. Swedish incubators are thus public funded but managed independently from the central government. They can take different management approaches and continue obtaining public funding as long as they demonstrate high-quality processes and generate high-growth startups. The relatively long-term nature of the NIP-funding provides the incubators with a greater degree of funding security that in turn enables them to operate more strategically and effectively.

As noted, the scope of the NIP extends beyond that of a straightforward grant programme. The NIP places an emphasis on strengthening collaborations and partnerships among regional, national and international actors in the incubation system through peer reviews, shared learning activities, and joint development projects. The policy experience with the NIP also shows how the systematic documentation of processes and their implementation, as well as the measurement of results, is essential to maintaining high incubation standards, identifying areas for improvement and promoting results-based allocation of public funds.

Having Vinnova as the co-ordinator of all entrepreneurship and innovation policy helps to foster alignment between incubators and other actors in the entrepreneurial ecosystem. Indeed, the credibility of Vinnova within the wider entrepreneurial ecosystem is key to unlocking the quality-assurance and reputational benefits than incubators can derive from participation in the NIP. SISP’s (the member organisation of incubators and science parks in Sweden) role as the co-ordinator of the NIP also helps to ensure that the programme is aligned and integrated with the wider system.