Berlin has been Europe’s startup darling for years. But in 2012, Stockholm, which is home to successful tech companies such as Spotify, Mojang, and Klarna, decided it wanted the title back. So they called one of the few people in the world who has successfully built startup communities, Tyler Crowley.
"I went around and told folks, ‘Hey listen—we could change this place really quickly. It’s gonna look a lot different in a year and a half,’" says Crowley. "And they gave me funny looks."
A startup entrepreneur, Crowley has devised a not-so-secret recipe for creating startup neighborhoods from scratch. They are no match for the Silicon Valley mothership, or even New York City’s Silicon Alley (wherever that is on the map these days). But after building Silicon Beach in Los Angeles, and helping to establish the Silicon Roundabout in London in time for the 2012 Olympics, and now with STHLMTech growing fast, Crowley is someone a government can reliably call on to bring an entrepreneurial tech community to life.
There are four things that need to be in place in order to build a startup scene. The first is a venue that is cheap and central, where meetups can take place. The second is a monthly event where all of the startups gather. The third is an established hashtag everyone in the community can use to share photos and event info. And finally, a coworking space that is open 24/7 so that when an outsider lands in the city, they have a place to go and meet tons of people in the scene.
This recipe establishes a tech community and helps them market their accomplishments to the outside world, creating a narrative of a cohesive and collaborative local scene that journalists, politicians, and investors can follow.
Crowley arrived at the recipe after building Silicon Beach back in 2007. But that scene was built out of necessity.
Sequoia Capital and many other venture capitalists at the time wanted the companies they invested in to be based in Silicon Valley. Crowley was down in Los Angeles at Mahalo.com, a startup created by serial entrepreneur and dotcom veteran Jason Calacanis. When the company got the financial nod from Sequoia and others, Calacanis refused to move north.
Instead, they decided to build their own version of the Valley. After raising $20 million, Mahalo moved to Santa Monica and started hosting meetups in their office. The company needed developers, and hosting meetups was the best way to find them.
"So our strategy was to go on places like Meetup.com, get all the Python, Django, and Ruby developers and say ‘Hey, we’ve got an amazing venue in Santa Monica, we’ve got free parking, and I’ll throw in beers and pizza and a projector,’" Crowley says. "Within six to eight months, all the tech meetups were happening out of our offices every day around 6 p.m."
Once Mahalo filled their team quota of around 125 developers, the tech meetups started to get in the way of doing business. Luckily, a young couple had just opened a coworking space across the street and the Mahalo team convinced them to host the meetups as an open house of sorts to attract coworking space rentals. That coworking space, CoLoft, is still one of the biggest hubs of Silicon Beach startup interaction.
"It was a really organic process. We didn't know we were building Silicon Beach at the time," Crowley says.
Another piece of the startup scene fell into place soon after: Twitter. The social media titan had just launched in 2007 and the Silicon Beach community jumped on it. When more and more friends left L.A. for the Bay Area after securing funding, Crowley and his friends got fed up and used Twitter to fight back.
They started using a hashtag and posting photos of the nightly events taking place in L.A. Then someone started holding a monthly event, a get-together that aimed to bring everyone from the smaller niche events into one space. They started bringing guest speakers from up north too.
"It really got to the point where journalists at the L.A. Times needed to report on us," Crowley says. "TechCrunch put a dedicated person here, and once they got involved, then the politicians got excited and wanted to take credit for it."
Within a year there was a coworking space, a meetup venue, a monthly meetup, and a hashtag. Silicon Beach was off to the races.
A few years later, Crowley got a call from the U.K. Prime Minister's office. It was early 2010, and London had found out they'd be hosting the 2012 Olympics. They decided to hold it in the O2 Arena in Shoreditch, an area that happened to have a tech coworking space and the beginnings of a community. They'd just started hosting nightly events but hadn't jumped on the hashtag train, though they knew that branding was needed. The Prime Minister created a task force, and they looked around the world to see which startup scenes were catching fire. That’s when they noticed Silicon Beach.
A group of representatives came to L.A. for meetings with leaders of the scene to find the secret sauce. Crowley's name kept cropping up, so they asked him to dinner. By dessert, he’d given them the recipe. And London was willing to make a huge financial investment to speed up the organic process.
"This is 100% Tyler," says Calacanis. "He came up with this system and made it work in both cities."
After the Olympics, and with Silicon Roundabout firmly rooted in place, Crowley hopped over to Stockholm to meet with some entrepreneurs. He found late-2012 Stockholm very reminiscent of late-2007 Los Angeles. Lots of people were working with their heads down in their own corners. Crowley got in touch with the Stockholm Business Development, the equivalent of the department he’d worked with in the U.K.
Crowley offered the recipe he’d used in the past, starting with a monthly meetup, STHLM Tech, and a hashtag. He spent 2013 building the scene, and by the end of the year, investors started waking up to Stockholm’s entrepreneurs. Companies like Lifesum, Tripbirds, and Wrapp have since attracted funding from investors in other parts of Europe as well as America.
"Klarna was the first top-level sponsor for STHLM Tech, and King as well. They deserve a lot of credit," Crowley says. "It’s really cool to see King and Klarna take a senior big brother level of responsibility."
Before You Start Your Own Scene…
The recipe’s success doesn’t depend on a single checklist of conditions. Every city is different, with some features built in and others that need to be made.
Stockholm had a pipeline of talent—a key ingredient that many other cities are missing, Crowley says. Los Angeles didn’t have the engineering talent, but they excelled in marketing. Scandinavian culture is much more communally focused, espousing humble productivity instead of raucous American-style self-promotion, a cultural attitude casually known as Jantelagen.
"Stockholm doesn’t know how to hype, and in a way it’s their downfall, but you have to give Stockholm time to shine," Crowley says. "It’s why Silicon Beach is about two years ahead, while Stockholm might surpass it purely from engineering talent. The Swedish let the product speak for itself."
Scandinavian engineers are widely lauded for perfectionism in functionality and design, which results in a standard of excellence and reliability. But that leads to long development cycles waiting to release a perfect product instead of the startup world’s iterative schedule.
There’s always the fear that a startup scene could crumble. King, which went public this past March, is now trading well below it’s original price and has not found a follow-up hit to Candy Crush Saga. But big IPOs from Swedish titans Spotify and e-commerce giant Klarna could float the whole scene and incentivize investment in other companies.
That’s really what it comes down to from a banker’s standpoint, Crowley says: what’s on the tree. And that Swedish cultural humbleness and engineer exactitude helps keep costs down. "Valuation is less in Sweden—they really only take what they need. Valuation is conservative. It’s really a benefit to the startup ecosystem," Crowley says.
While every startup scene looks to Silicon Valley for inspiration and competition, they need to develop their own DNA advantages to get out from under Palo Alto's shadow.
Los Angeles banks on being the entertainment capital of the world. It’s no coincidence that Hulu sprouted in L.A. While Silicon Valley had the intention of taking over Hollywood with technology, Crowley says, Hollywood is starting to have the upper hand. Studios are putting out content, and YouTube stars are working out of L.A., not San Francisco.
Crowley, who still shuttles between Stockholm and L.A., has also recently flown to Oslo and Copenhagen for casual discussions about growing startup scenes there.
Oslo’s challenge is that they have too much money, says Crowley. Thanks to extensive petroleum deposits in the soil, Norway doesn’t need technology, they don’t need to innovate—people come out of school and go right into oil. Tech is a risky bet, and the twilight of their oil economy is still distant. Oslo’s caution is historically justified: The dotcom bubble devastated Scandinavia, especially Sweden and Finland, whose telecom titans Ericsson and Nokia had invested heavily. For countries of 9 million and 5 million people respectively, this investment led to slow recovery. Only now are the Scandinavian governments beginning to warm to tech startups again.
Crowley has his eye on a few other places that have either developed a small scene or have governments interested in dumping money into the startup void. He’s been courted by Dubai, Qatar, and Abu Dhabi. But they have the same problems as Norway: a very dominant resource industry that detours new talent away from startup tech. And without a real tech precedent or ecosystem, the Middle East is really starting from scratch.
After Alibaba’s colossal IPO, four of the 10 most valuable Internet companies are now based in Asia, so China is next on Crowley’s list. "They have 150 cities in China with over a million people," he says. "Stockholm has about 1.5 million. China has 150 of those! The numbers are insane."