For a country of just nine million residents, Sweden has an exceptionally vibrant venture capital industry. Sweden is the fifth largest country in Europe in terms of the number of currently active venture backed companies as well as in terms of the total amount of disclosed venture capital invested since the beginning of 2006.

The sector split of Swedish venture backed companies is fairly in line with that of the whole of Europe. However, Sweden does have a slightly higher proportion of IT and Healthcare & Life Sciences companies.

Swedish start-up companies from these two sectors which have recently received funding include:

In January 2008 Momail, a Stockholm-based free mobile email service provider, raised €3.7m from the Sixth Swedish Pension Fund, Bonnier Invest and a number of individual investors. Momail stated that the funds were to be used to open up new geographic markets and to enhance the company’s product.

Another Stockholm-based company, Tonium also received €3.7m in January 2008. The company, founded in 2005, received its second round of funding from Industrifonden, Via Venture Partners, Arvid Svensson and Ekstranda Media. The funding will be used to expand marketing efforts for its product, Pacemaker, a hand-held 120GB capacity DJ player which the company states is now ready to launch into the market.

Earlier this month, AstraZeneca spun out Albireo, a Gothenburg-based pharmaceutical company developing new treatments for gastrointestinal (GI) disorders. The company’s €18.5m accompanying funding round was led by Nomura Phase4 Ventures and also involved the Scottish Widows Investment Partnership and TVM Capital.

What are some of the reasons behind the vibrancy of the Swedish venture capital market?

Sweden is home to a number of large corporates including Ericsson, SEB and TeliaSonera, all based in Stockholm, as well as Volvo, based in Gothenburg. In addition, a number of international corporates have strong links with Sweden, including Ikea (originally founded in Älmhult), AstraZeneca (formed when Swedish company Astra AB merged with Britain’s Zeneca Group in 1999) and ABB (formed when Swedish company ASEA merged with Brown, Boveri & Cie of Switzerland). The operations of international corporates in Sweden help facilitate the creation of vibrant technology clusters across the country. Stockholm is the third largest European technology cluster in terms of the number of venture backed companies residing there, whilst Gothenburg is 13th, based on the same measure.

Sweden also benefits from good relations with its Scandinavian neighbours. For example, close economic ties with Finland allow Swedish technology companies to work together with corporates based there, led by the telecommunications powerhouse Nokia. Additionally, the geographic proximity of the developing Baltic States, particularly Estonia, allow Swedish companies easy access to the talented software engineers based in these countries. The Estonian technology economy was covered in a previous Essential Intelligence Weekly article ‘Go east: Eastern European venture capital in 2008’ (15/01/08).

The best example of inter-country cooperation in Scandinavian biotech is the Medicon Valley. The Medicon Valley is defined as the area between Copenhagen and the Swedish city of Skåne and is one of the leading biotech clusters in Europe. The area has a population of around 3.5m residents with 40,000 of these working in the life science sector, and 45,000 currently studying life science at one of the 12 universities contained within the Øresund University consortium.

What does the future hold for Swedish high-tech companies?

With the country’s demonstrated strength in the Healthcare & Life Sciences sector, Sweden is well positioned to benefit from the coming biotech revolution. However, the Swedish government is also trying to make sure that its country does not miss out on the coming Cleantech revolution. With one of the most progressive cleantech agendas in Europe, early decisions by the Swedish government mean that the majority of its electricity is now generated from non-fossil fuel sources, mainly nuclear and hydroelectric power. On top of this the government has pledged to fully replace its nuclear power plants with alternative renewable energy sources. In 2005 the Swedish government also announced that it would break its dependence on foreign oil within 15 years, with the long term aim of being the first oil free economy in the developed world. These initiatives should help Sweden take a leading position in the European Cleantech sector, just as it has done in the Healthcare & Life Sciences sector.

Adconion Media Group, the Germany-based online advertising network, has raised $80m (€53.9m) from Wellington Partners Venture Capital and Index Ventures. Adconion has built an advertising platform combining quality media, predictive optimisation and behavioural targeting to maximise the effectiveness of advertising campaigns, modifying ad placements to their most efficient locations based on real-time campaign results. The funding will be used for further expansion into Europe, the US and Asia, will be invested into the company’s behavioural targeting technology, and used to fund future acquisitions.

Wisair, the Israel-based fabless semiconductor company, has raised $24m (€16.1m) from new investors Susquehanna Growth Equity, Advent Venture Partners, Nikko antfactory, and Yasuda, and existing investors Apax Partners, Intel Capital, Vertex Venture, Broadcom Communications, and the Zisapel brothers of the RAD Group. Wisair develops Ultra Wideband (UWB) and wireless USB chipsets and reference designs for use in mobile devices, personal computing and consumer electronics. The funding will be used to accelerate the release of products with integrated wireless USB capabilities.

Arieso, the UK-based mobile telecommunications technology software developer, has raised $10m (€6.8m) series B funding from Oxford Capital Partners, Qualcomm Ventures, Top Technology Ventures, and Add Partners. Arieso provides network optimisation solutions which help network operators reduce costs. The investment will enable the company to continue its development in Europe and the US, and expand into Asia.

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YaData, the Israel-based developer of tools for customer segment discovery, has been acquired by Microsoft. Microsoft will use YaData’s technology to provide its advertisers with the ability to target their audience with more relevant advertising, and the tools will be deployed through Microsoft’s Advertiser and Publisher Solutions group. Terms of the deal were not disclosed.

Identum, the UK-based developer of email encryption technology, has been acquired by Japan-headquartered Trend Micro. Trend Micro provides network antivirus and internet content security software, and will incorporate Identum’s encryption technology into its existing products. Identum will be renamed as Trend Micro (Bristol) Ltd.

Optical Metrology Innovations, the Ireland-based supplier of process control and metrology tools, has been acquired by an undisclosed company operating in the semiconductor equipment market. Atlantic Bridge Ventures, a major backer of the company, reported a multi-million euro return from the sale.

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C-nario, the Israel-based digital signage company, has appointed Neil McGowan as president and chief operating officer, Americas. Mr McGowan was previously senior vice president of international markets for VeriSign Communications Services and has more than 20 years’ experience in the high-tech industry.

Mauna Kea Technologies, the France-based medical device company, has appointed Chris Tihansky as president of its new US-based subsidiary, Cellvizio. Mr Tihansky was previously president and chief executive of US-based Surgical Devices.

Mawell, the Finland-based health informatics company, has appointed Marcus Claus as director of operations. Mr Claus was previously chief executive of Sweden-based Brainpool, which Mawell acquired last week in order to become one of the strongest growth companies in the healthcare IT sector in the Nordic countries. Mr Claus will have overall responsibility for the customer process to support Mawell’s growth strategy.

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coComment, the Switzerland-based online service for keeping track of comments made on blogs and community sites, has informed Library House that it is looking to raise €5m in funding, starting in early Q2 2008 and closing in Q3 2008. The funding will be used for expansion, hiring more sales and business development staff, and setting up new offices. More technical staff will also be hired in order to develop new products, with the company hoping to double its headcount to 42 by the beginning of 2009.

BrainMarker, the Netherlands-based developer of an application that calculates and identifies biomarkers of diseases, has informed Library House that it is planning to seek further funding of between €700k and 2m in one to two years time, after the company has finished its research and development. This funding will be used for expansion into the global market. Dr Björn Crüts (managing director & co-founder) told Library House that the company expects to exit within the next five to eight years.

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