Meet Sweden, the unicorn factory chasing America in the AI race

Reading the media these days, you would be forgiven for thinking the technology, journalism, and investment communities were inadvertently wishing an AI ‘bubble’ into existence. Whether a bubble exists or not remains debatable, but the conversation itself has taken on a life of its own. Every article predicting the collapse of the NASDAQ increases investor nervousness, which leads to another article about the collapse of the NASDAQ, and so the world turns ad infinitum. 

Often the most effective insulation against market volatility is for the technology of the day to be ubiquitously woven into the fabric of society, such that it cannot lose value quickly. When there is a disconnect between people’s real-world experiences and the excitement felt on trading floors or in boardrooms, trouble can loom.

We can learn something in this regard from the world’s 89th most populous country: my native Sweden. In the 1990s, the Swedish government introduced a piece of legislation called Hem‑PC‑reformen (the Home‑PC reform), which aimed to put a computer in every house. This move is often credited as the starting gun for subsequent decades of technological progress and “punching above our weight.” This was not a corporate strategic manifesto or shiny new tech tool built by a CEO; it was a countrywide policy for all of us, designed to firmly cement a new technology into our lives.

Fast-forward to today, and Stockholm has the highest number of unicorns per capita of any city in the world outside of Silicon Valley. Sweden’s AI startups are soaring. Legora, which automates tasks for lawyers, is raising capital at a $1.8 billion valuation. Einride, the electric vehicle unicorn, recently announced $100 million to scale autonomous freight. The ‘vibe-coding’ platform Lovable, which helps people build apps with AI, is one of the fastest-growing businesses in the world. And last month, the enterprise technology company Workday acquired our own business, Sana, for $1.1 billion.

Not bad for a country with half the population of the state of New York, tucked away by the Arctic Circle. People keep asking how a nation like ours can achieve so much. Though there’s no secret sauce, there are a few essential ingredients.

The aforementioned Home‑PC reform was catalysed by winter darkness that can last 18 hours, meaning we Swedes spent hours at our computers experimenting within an early internet environment. 

That digitally literate generation then built world-beating technology companies. Skype was founded in 2003 to popularize video call technology. So was King, the maker of Candy Crush. In 2005, Klarna was born. 2006, Spotify. In 2009, Mojang laid the first blocks of Minecraft.

We Swedes are very proud of these success stories. They show us what is possible on the global stage. They have also provided huge liquidity moments for our ecosystem. Skype and Mojang were bought by Microsoft, Activision by King, all at multiple billion-dollar price tags. Spotify went public in 2018, and Klarna earlier this year. Each of these success stories created another group of millionaires, many of whom feel a duty to reinvest back into Sweden’s technology and startup sectors.

This flywheel effect has made our AI sector what it is today. Our scaleups stand on the shoulders of giants, within an environment conducive to business building. There is capital available for deserving entrepreneurs, often deployed by quality investment firms like EQT, Northzone, and Creandum. It is relatively easy to start a company here, and our stock options system incentivizes building businesses. Stockholm is home to both the engineering university KTH and the business school Handelshögskolan, with many founders securing degrees from both (alongside many successful entrepreneurs who ignore university entirely). We also have very high English language proficiency rates.

The government continues to play a crucial role, too. Sweden spends a higher proportion of GDP on Research & Development (3.57%) than any other European country. Any employee in Sweden can take six months off to start a business, a scheme known as tjänstledighet. And to mirror that successful PC Home Reform policy from the 90s, the Prime Minister this year supported a Swedish AI Reform scheme that makes agentic AI free for all civil servants, students, teachers, research institutions, and non-profits.

There are also aspects of our culture that help us build great companies. We are the country of Volvo and IKEA, of a Swedish design ethos known for blending function and form. Many software engineers I know here are passionate about aesthetics, meaning an app’s landing page is often treated with the same eye for detail as a Bruno Mathsson chair.

Finally, we are also a humble nation (he says while writing a piece about how great a nation we are!). Putting one’s head above the rest is typically frowned upon. Though this can have its societal drawbacks, it has helped foster a high-trust, low-ego environment in our technology. Information is freely shared between different organizations and entrepreneurs, in the knowledge that each Swedish AI success benefits all.

We still have our challenges, of course, ranging from the seemingly trivial (Scandinavian Airlines, please launch a direct flight to San Francisco) to the fundamental (we still rely on American investors for later-stage capital). 

But there is no denying that the Swedish approach to technology – broad and deep acceptance – is a useful tale for the rest of the world. If we are worried about the speed at which AI companies have increased in value, and when other economic metrics will catch up to prevent a bubble, we need to weave that technology into our daily lives.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

This story was originally featured on Fortune.com

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